Japanese Relations with Vietnam, 1951–1987 9781501718892

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JAPANESE RELATIONS WITH VIETNAM: 1951-1987 Masaya Shkaishi

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Masaya Shiraishi

JAPANESE RELATIONS WITH VIETNAM: 1951-1987

M"MiI P*HB Southeast Asia Program 120 Uris Hall Cornell University, Ithaca, New York 1990

C 1990, Cornell Southeast Asia Program ISBN 0-87727-122-4

Typeset by Coraleen L. Rooney

CONTENTS

Acknowledgments

ix

Introduction

1

Chapter 1

THE PERIOD PRIOR TO 1973 1. 2. 3. 4. 5. 6. 7. 8. 9.

2

3 4 6 14 20 25 31 33 38

JAPANESE ATTITUDES TOWARD VIETNAM FROM 1973 TO 1975 1. 2.

3

Prewar Relations The San Francisco Peace Treaty Japanese Economic Expansion and Southeast Asia War Reparations to the Saigon Government Economic Relations with South Vietnam during the 1950s and Early 1960s Japanese Asian Policy in the Mid-1960s Economic Relations with South Vietnam during the Late 1960s and Early 1970s The Vietnam War and Japan Unofficial Relations with North Vietnam before 1973 Normalization of Diplomatic Relations with North Vietnam Japanese Position between Two Vietnams

43 46

JAPANESE ATTITUDES TOWARD VIETNAM FROM 1975 TO 1978 1. 2. 3. 4. 5.

Change of Regimes in the South and Japan’s New Policies Economic Aid to Postwar Vietnam Economic Relations after 1975 Japanese Motivation for Promoting Relations with Vietnam Japan between ASEAN and Indochina and the Fukuda Doctrine

v

51 53 58 69 73

4

JAPANESE POLICY TOWARD VIETNAM AFTER 1978 1. 2. 3. 4. 5. 6. 7.

Increasing Tension in Indochina and the Japanese Position Indochina Conflicts and Japan Japanese Suspension of Economic Aid to Vietnam Japanese Support for the ASEAN Position Concerning Cambodia Japanese Policy Concerning Indochinese Refugees Recent Trends in Governmental Relations Recent Trends in Cultural and Commercial Relations

75 79 84 87 89 94 98

CONCLUSION

101

NOTES

105

BIBLIOGRAPHY

139

LIST OF ABBREVIATIONS

163

vi

LIST OF TABLES AND CHARTS Tables 1

Japanese Trade and US Aid for Japanese Imports, 1945-1951 2 Special Procurements by the United States, England, and France in Japan, 1950-1957 3 Japanese Income from ICA-based Procurements, 1952-1961 4 Japanese Trade by Areas, 1930-1950 5 Japanese Trade with the Far East and Southeast Asia, 1934-1953 6 Japanese War Reparations and Equivalent Aid to Asian Countries 7 Contents of Japanese Grants (War Reparations) to South Vietnam 8 Japanese Trade with the French Currency Zone (including Indochina), 1949-1950 9 Japanese Trade with the French Currency Zone, 1949-1953 10 Japanese Trade with Indochina, 1950-1956 11 Japanese Exports to South Vietnam through the ICA (AID) Funds, 1956-1963 12 Japanese Trade with Vietnam, Cambodia, and Laos, 1956-1960 13a Japanese Trade with South Vietnam, 1956-1974 13b Japanese Exports to South Vietnam, 1956-1974 13c Japanese Imports from South Vietnam, 1956-1974 14 Japanese Economic Profits due to the Vietnam War, 1965-1968 15 Official Japanese Aid to South Vietnam, 1960-1975 16 Foreign Aid to South Vietnam, 1960-1974 17 Japanese Trade with North and South Vietnam, 1960-1976 18 Japanese Trade with North Vietnam, 1956-1975 19 Visitors from and to North Vietnam, 1968-1974 20 South and North Vietnam's Trade, 1960-1976 21 Vietnam’s Production and Imports of Foodstuffs, 1976-1981 22 Vietnam's Balance of Payments, 1976 23 North Vietnam's National Budget (Revenues), 1955-1963

vii

7 7 8 10 12 15 19 21

21 23 24 24

26 27 28

32

34 36

40 41 45

54 54 56 57

24 25 26 27 28 29a 29b 29c 30 31 32

Unified Vietnam’s National Budget, 1976-1977 Communist Countries’ Economic Assistance to Vietnam, 1955-1980 Vietnam's Investment for the Second Five-Year Plan, 1976-1980 Noncommunist Countries’ Economic Assistance to North and Reunified Vietnam, 1971-1977 Vietnamese Trade with Major Countries, 1974-1976 Japanese Trade with Vietnam, 1973-1987 Japanese Exports to Vietnam, 1973-1987 Japanese Imports from Vietnam, 1973-1987 Japanese Commercial Loans to Vietnam, 1977 and the First Half of 1978 Japanese Commercial Contracts signed with Vietnam, 1978 Japanese 4 Billion-Yen Grant to Vietnam, 1978

57 58 59 60 63 64 65 66 67 68 69

Charts 1 2

Japanese War Reparations in Total Japanese Trade with North Vietnam, 1956-1975

viii

17 42

ACKNOWLEDGMENTS

I started writing this paper in late 1985. Since then, various people have helped me in various ways. First I would like to record my debt to Profs. Nguyen Due Nhuan and Georges Boudarel, who urged me to work on this topic. Special thanks are also due to Profs. Jun'ichiro Shinbo, Tadashi Mio, Masahiko Ebashi, Yasuhiro Yamada, Tetsusaburo Kimura, Motoo Furuta, Fumio Goto, Kenji Tomita, Roger Downey, David Wyatt, Prof, and Mrs. Pierre Brocheux, and Dolina Millar. I would like to express the most gratitude to Prof. George Kahin and Dr. Audrey Kahin, who encouraged me to finish this paper and made arrangements to publish it as a monograph of the Southeast Asia Program, Cornell University.

ix

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INTRODUCTION

Since the end of World War II, Japanese relations with Vietnam have fluctuated as the situation in the Indochina peninsula has changed. Although Japan is situated outside the sphere where the changing situation in Indochina has a direct influence, Vietnam is a part of Southeast Asia in which Japan has a special interest. Japan desires that all of Southeast Asia should be stable and thus is seriously concerned about Indochina, for since World War II Indochina has been the most unstable area in the western Pacific and a stage of fierce power games where major outside forces have contended. Japan has maintained her security policy in accordance with US strategy in the western Pacific. During the 1960s and 1970s, Japan was not a direct participant in the warfare in the Indochina peninsula. She was, however, indirectly involved, by providing rear bases for the US forces and supplying money to the anti-Communist governments in and around Vietnam. As the Vietnam War escalated, many Japanese, especially left-wingers and antiwar activists, increasingly worried about Japan's involvement in it Vietnam and the Vietnam War were the subjects of many demonstrations, meetings, statements, and pamphlets. To these Japanese, the Vietnam War was not remote. Vietnam led to a boom in Japanese journalism. It could sell. Daily newspapers and monthly magazines devoted a great deal of space to news, reports, and discussions of Vietnam; television reports were frequent and books on Vietnam occupied the most conspicuous places in bookstores. When the Vietnam War came to an end, however, and especially after the Vietnamese occupied Cambodia and the Chinese took "punitive action" against Vietnam, the Vietnam boom was over. Most writers and journalists quickly forgot about Vietnam. The capricious mass media lost interest. Many left-wingers and antiwar activists, confused and embarrassed by unanticipated developments in Indochina, also lost their zeal. Japanese leaders in the government and in business showed some enthusiastic interest in Vietnam in the mid-1970s, but it was not long-lasting. Since 1979, official Japanese relations with Vietnam have been at a very low ebb. The future depends on whether or not there is a major change in the Indochina situation. 1

2

Japanese Relations with Vietnam

This monograph offers an introductory overview of the history of Japanese relations with Vietnam since the end of World War DL There has been no overall study of this topic in Japanese or any other language. But these relations need to be examined, for better understanding of the international circumstances surrounding Vietnam and the Japanese role in the complicated postwar maneuvering in Southeast Asia. The first chapter, after referring briefly to prewar relations between Japan and Vietnam, mainly discusses the period from 1951 to 1973, when Japan had diplomatic relations with the anticommunist governments but no official relations with the Democratic Republic of Vietnam (DRVN). The second chapter discusses the period from 1973 to 1975, when Japan normalized her relations with Hanoi but continued her relations with the Saigon government, not recognizing the Provisional Revolutionary Government (PRO). The third chapter deals with the period after the Saigon government collapsed. At this time Japanese relations with the Communist government in Vietnam seemed promising, but this lasted only until 1978. The fourth chapter concerns the period from 1978 to 1987. The situation in Indochina is now changing rapidly. It appears that the Indochina conflict has entered the final stage, which is likely to continue for a few more years. I have, therefore, decided not to include the most recent events in this discussion. The period from 1988 on should be dealt with separately on another occasion. In the conclusion, however, I will very briefly suggest some possible developments in Japanese attitudes concerning Vietnam and Indochina.

CHAPTER 1 THE PERIOD PRIOR To 1973

1. Prewar Relations The Japanese have a relatively long history of contacts with the Vietnamese. In the sixteenth and seventeenth centuries, many Japanese sailors and merchants visited Vietnam, which was then ruled by the Trinh family in the north and the Nguyen family in the south. Some Japanese even settled in the nihon machi or Japanese quarter in Tourane (presently Da Nang) and Faifo (Hoi An). The Shogunate rulers corresponded with their counterparts in Hanoi and Hue. The Japanese maritime and commercial advancement toward Vietnam and other Southeast Asia countries was, however, stopped when the Tokugawa government adopted a policy of seclusion in 1635.1 It was only after the Meiji Restoration in 1868 that the Japanese resumed contacts with Vietnam. In the 1880s and especially during the 1884-1885 Sino-French War, while Vietnam was being colonized by the French, some Japanese became concerned about the " Annamese" fate and published articles and books about it.2 After the 1904-1905 Russo-Japanese War, Phan Boi Chau came to Japan, seeking Japanese support for his nationalist cause. He started a movement to invite Vietnamese youth to study in Japan. Although some Japanese supported his movement, the Japanese government, signing a treaty with the French in 1907, clearly demonstrated willingness to respect its official relations with the colonial masters of the "Annamese."3 From that time until the late 1930s, although the Japanese maintained some contacts with Vietnamese nationalist elements, their official policy was to respect the French suzerainty of Indochina and to keep and develop commercial relations with French Indochina.4 During those years, some Japanese moved to Indochina. The first Japanese settlers were karayukisan or prostitutes and their pimps. Some of them later became hotel managers and small shopkeepers.5 Then came petty merchants, who mainly dealt with goods imported from Japan. It was only after World War I that big Japanese firms established branches in Hanoi or Saigon. In 1920 and 1921 respectively, the Japanese government opened consulates in Haiphong and Saigon.6

3

4 Japanese Relations with Vietnam Early in the 1940s, Indochina became a focal point of international politics in the western Pacific. Its geopolitical location was crucial for Japan. It was an access route to southern China where the Japanese were fighting. A substantial amount of materials was sent to Chiang Kai-shek's China through Indochina. It was also an indispensable stepping-stone for their future advancement to the rest of Southeast Asia. The outbreak of World War II in Europe and the German occupation of France gave an opportunity to Japan; she forced the French authorities to admit Japanese troops to the northern half of Indochina in September 1940 and the southern half in July 1941.7 When the Japanese started the Pacific War with the slogan ofdaitoa kaiho or the liberation of Greater East Asia, they would have preferred to maintain the status quo (seihitsu hoji) in Indochina, that is, to let the existing French colonial administration keep operating. Although they nourished some clandestine or quasi-clandestine relations with the indigenous nationalist elements, Japanese official policy was to respect French sovereignty in Indochina, so long as they could get necessary collaboration from the French. However, as the war situation worsened for the Axis powers both in the Pacific and in Europe, the Japanese increasingly worried about a possible "betrayal" by the French in Indochina and finally carried out an antiFrench coup de force in March 1945. Japan gave nominal independence to the three Indochinese kingdoms but virtually took over the colonialist function from her predecessor. The Japanese management of the Indochinese economy was much more harsh than that of the previous masters, partly because of the wartime conditions and partly because of their systematic despoiling of human and natural resources. The local population suffered severely. Many people in the northern provinces of Vietnam, which were damaged by successive natural calamities in 1944-1945, died of starvation.8 Japanese rule in Indochina ended when Japan lost the war. Thousands of Japanese, most of them soldiers, returned to their war-torn homeland in 1945 and 1946. The period of largescale Japanese presence in Indochina was thus over. 2. The San Francisco Peace Treaty In September 1951, six years after the Japanese surrender in World War II, Japan signed a peace treaty in San Francisco with forty-eight nations. Among the signatories were the French-sponsored Bao Dai government, as well as the Laotian and the Cambodian governments. No representatives from the Ho Chi Minh government attended that conference; they were not invited.9 The San Francisco treaty, which was to be validated in April 1952, was very important for the Japanese, since it officially put an end to the military administration of Japan by the Allied forces and gave her the status of an independent nation, thus permitting her to return to the world society.10 At this historic moment, Japan normalized relations with the Bao Dai government, while neglecting the existence of the Ho Chi Minh government. This was the commencement of a Japanese policy toward Vietnam which lasted until 1973. This Japanese policy toward Vietnam was a part of her foreign policy framed by US world politics. American policy toward Japan after 1945 was one of demilitarization and democratization. The Americans wanted to make Japan a small country militarily as well as economically, so that she would never again become a disturbing factor in the western Pacific. To that end, the United States took various steps, among them, purging war-criminal suspects from offices (koshoku tsuiho), drafting a new constitutional framework, and dissolving big

Period Prior to 1973

5

financial combines (zaibatsu kaitai). The United States even intended, as war reparations, to remove much Japanese industrial equipment and transplant it in other Asian countries. By 1948, however, the Americans modified their policy, putting more emphasis on making Japan a pivotal anti-Communist stronghold in East Asia. They made this decision in light of their severe confrontation with the USSR in Europe, the imminent Chinese Communist victory in Asia, and the prevailing left-wing movements in Japan. After the Communists' final victory in mainland China (1949) and especially after the outbreak of the Korean War (1950), America's policy toward East Asia rapidly took on a strongly anti-Communist shape. Japanese domestic and external policies were rigidly fixed by this new American policy. With Japan then under their de facto military administration, the Americans applied a "red purge" policy against Japanese left-wing activists and suppressed labor movements. They also encouraged Japanese economic and military reconstruction so that Japan would become an important counterbalance to Communist China.11 It was in this context that the United States urged Japan to sign a peace treaty in San Francisco. This treaty was concluded without the participation or agreement of the USSR, China, India, Burma, or revolutionary Vietnam.12 Japan thus made a comeback to the domain of international politics without the recognition of influential Communist and neutralist countries. Japan later signed bilateral peace treaties with India (1952) and Burma (1954) and a joint statement with the USSR (1956), thus being permitted to become a member of the United Nations in 1956. Japan did not establish an official relationship with mainland China, but signed a peace treaty with Chiang Kai-shek's Taiwan in 1952.13 In 1951, right after the conclusion of the peace treaty in San Francisco, Japan also signed a security treaty with the United States. This treaty gave the United States a legal basis to continue maintaining her military forces in Japan after the ratification of the San Francisco peace treaty, which officially ended the Allied occupation of Japan. Thus Japan was definitely to be a part of the American anti-Communist strategic network in the western Pacific. The basic framework of this American policy in East Asia did not change for more than two decades, and Japanese policy was essentially shaped within this framework. Japan's attitude toward Vietnam was not an exception. In line with the San Francisco treaty, Japan opened diplomatic relations with the Bao Dai and then the Ngo Dinh Diem governments. The Bao Dai government ratified the San Francisco treaty on May 8 and deposited it with the US government on June 18,1952. On January 10,1953, the three Indochinese states gave notice to the Japanese government, through the French ambassador, that they agreed to establish diplomatic relations and admit the opening of Japanese legations. However, the Bao Dai government postponed the actual opening of legations until the conclusion of a warreparations agreement. The interim agreement concerning reparations was initialed in September 1953, as we shall see later. The Japanese Foreign Ministry finally received Vietnamese written consent to exchange ministers on June 22, 1954, i.e., shortly after the conclusion of the Geneva Agreement. The first Japanese minister, Akira Konagaya, was appointed in February 1955. The first Vietnamese minister, Nguyen Ngoc Tho, assumed office in March 1955. The legations were soon raised to the status of embassies; Konagaya and Tho were promoted to ambassadors in March and June 1955, respectively.14 In the meantime, the Japanese government continued to neglect the revolutionary government led by Ho Chi Minh.

6

Japanese Relations with Vietnam

3. Japanese Economic Expansion and Southeast Asia Economic development has been the biggest national target in postwar Japan, one aim which all Japanese have agreed on, at least until quite recently. Postwar Japan had to start from ashes. Everything was lacking there. The people needed food, medicine, and other basic necessities. Coupled with a strong memory of wartime economic difficulties, their bitter experience in the postwar period pushed them to work hard so that they would never be starved again. The Japanese, who had been forced to sacrifice personal interests to the war cause before 1945, now began pouring their energies into economic pursuits. Most of them also had a strong hatred for the prewar and wartime militarism and felt that they should concentrate their efforts on peaceful activities. Further, having a sense of inferiority to the United States and other Western developed countries, a sense partly resulting from their defeat in the war, the Japanese regarded economic development as a new source of national pride. International circumstances also encouraged this economy-first orientation. Many countries, especially those which had been colonized or occupied by the Japanese, had a very strong fear of a revival of Japanese imperialism and expansionism. Japan could not be a military giant any more. Japan thus had no choice other than to be an economic power, which might be more tolerated by neighboring countries. In addition, her foreign policy as regards security was fixed by the US strategy in the western Pacific. Japan put herself under the US military umbrella. The Japanese had little opportunity to alter the basic policy in this dimension and furthermore no need to worry seriously about security problems. They were thus able to concentrate their energy on economic matters. The postwar Japanese economic development was fueled chiefly by US support, especially at the beginning. For the decade after the end of World War II, Japan could not have managed her economy without US aid. Because of the wartime destruction and postwar disorder, Japan could not produce enough to sustain her population, which was swollen by repatriates from battlefields and ex-colonies and a mass of children born during the "baby boom." Japan had very little to export, while she needed to import a great deal. The total amount of her exports from September 1945 to December 1950 was merely $1,865 million, while that of imports was as much as $3,388 million; the deficit was $1,523 million. This red-ink economy was barely sustained by US aid, which totalled $1,954 million during the same period (see Table 1). In other words, Japan relied for nearly 60 percent of her imports on American taxpayers. The economic authorities scornfully characterized this situation as "stilts economy" (takeuma keizaf).15 In addition, Allied forces, mostly US troops, stationed in Japan spent a substantial amount of money in local currency, which contributed to the increase of job opportunities and income in foreign exchange.16 Although US aid for Japanese imports decreased after 1950, the United States instead spent huge amounts in Japan during the early 1950s for military special procurements related to the Korean War. From 1950 to 1956, Japan's income from these special procurements was $4,586.6 million (Table 2), while the total income in foreign exchange during the same period was $15,819.7 million.17 For Japanese economic development, special procurements were much more important than financial aid for imports, which had just meant a supply of American products to Japanese consumers. The special procurements directly encouraged Japan's domestic economy, because the United States gave business to Japanese industrialists. Thus, Japan entered the "Korean War Boom."18

Period Prior to 1973

7

Table 1 Japanese Trade and US Aid for Japanese Imports: 1945-1951 (in millions of dollars) Imports

Exports

Deficit

US Aid

Sept. 1945-Dec. 1946 1947 1948 1949 1950 1951

305.6 523.5 684.2 904.8 969.9 1641.0

103.3 173.6 258.3 509.7 820.2 1354.0

202.3 349.9 425.9 395.1 149.7 287.0

192.9 404.4 461.0 534.8 360.8 159.9

Total

5029.0

3219.1

1809.9

2113.8

Sources: The figures for 1945-1950 are from Tsusho Hakusho 1951, pp. 55-57. The figures for 1951 are from Tsusho Hakusho 1952, p. 12.

Table 2 Special Procurements by the United States, England, and France in Japan, 1950-1957 (in millions of dollars) US

British -

French -

Total

1950 1951 1952 1953 1954 1955 1956 1957

148.9 584.7 806.5 785.8 575.3 545.1 591.2 549.1

17.7 23.7 20.7 11.4

3.9

. 3.0 6.8 2.5 -

-

-

148.9 591.7 824.2 812.5 602.8 559.0 595.1 549.1

Total

4586.6

84.4

12.3

4683.3

7.0

Sources: Tsusho Hakusho 1954, pp. 36-37; 1955, pp. 48-49; 1957, p. 60; 1958, IR p. 14. Notes: The US and British procurements include those spent for the occupation troops in Japan. The US procurements also include those for purchasing products shipped to third countries. The French procurements were mainly spent for their war efforts in Indochina.

8

Japanese Relations with Vietnam

The boom stopped when the war came to an end. Nevertheless, the Japanese economy had profited considerably by then. Furthermore, Japan continued to get a substantial amount of US money through Marshall Aid Plan (MAP [later MSA]) and ICA funds, with which the United States purchased Japanese products to be sent to third countries, especially South Korea and Indochina (Table 3). Thus Japan was a beneficiary of the international situation in the western Pacific. The area experienced two wars in the first half of the 1950s. The United States became increasingly concerned about the stability and security of the region and decided to inject a huge amount of dollars for military buildup and the economic upholding of anti-Communist countries, especially South Korea and Indochina. As Japan was located near those countries and had the capacity to produce what was demanded, many contracts were awarded to Japanese firms.19 US financial assistance in the 1940s and special procurements in the 1950s thus significantly contributed to Japanese economic recovery and development. The Japanese could not count on them for very long, however. The Americans had stopped financial assistance for Japan's imports by the early 1950s. And special procurements were very unstable by their nature. Demands, whether in the form of services or products, fluctuated both in items and quantities, depending on US strategic necessities. The Korean War boom was short-lived. As

Table 3 Japanese Income from ICA-Based Procurements, 1952-1961 Income Destinations (%) (in millions South South Year of dollars) Vietnam Korea 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961"

16.2 19.5 16.3 70.6 124.2 128.3 101.3 111.4 147.3 74.0

42 46 44 39 36 25 20

22 25 30 27 33 28 36

Metal goods

Textiles

30 12 23 14 25 23

19 37 37 33 21 21 15

Items (%) Chemi- Machi- Nonmetal cals nery goods

16 16 17 13 33 24 23

16 12 14 14 20 18 28

12 13 11 7 8 11

Sources: Tsusho Hakusho 1956, pp. 46-49; 1957, pp. 58-60; 1958, IR, pp. 14-16; 1959, IR, pp. 10-12; 1960, IR, pp. 10-11; 1961, IR, p. 3; 1962, IR, pp. 2-3. Notes:

(-) (*) (**)

Not available. Three Indochinese states. The AID fund.

Among chemical products, the most important was chemical fertilizer. Among non-metal products, the most important was cement. In addition to the MAP (MSA after 1957)and ICA funds, there were also some other US resources for purchasing Japanese products as aid for third countries.

Period Prior to 1973

9

for the 1CA-based procurements, the United States started moving toward a "buy-American" policy and finally decided to stop purchasing from Japan in December I960.20 Even during the 1940s, the Japanese economic authorities, as well as the American administrators, had already emphasized the necessity of Japan's establishing an independent economy (keizai jiritsu).21 It was during the mid-1950s, however, that the Japanese fully recognized its urgent necessity. Documents published by economic and diplomatic authorities repeated the following argument: Japan, whose natural resources and available capital were so limited, should increase production and accumulate capital progressively through external trade. Japanese industry needed foreign markets to export its products to; it also needed to import natural resources (and foods) from abroad. Economic and diplomatic authorities thus regarded economic diplomacy (keizai gaiko) as the most important task to undertake for the time being.22 When Japan got political independence in April 1952, her international economic activities were strongly restricted by various legacies of World War II. Japan had yet to be admitted to various international organizations that had been established by the Allied countries. She was not a full participant in the world economic system. She needed to negotiate bilaterally with many countries to conclude or renew trade and navigation treaties, which had been abolished or suspended during the course of military conflicts. But many countries, including some influential European countries, were very skeptical about Japanese economic and diplomatic activities, which had been quite notorious in the prewar period. Many Asian countries still had fresh memories of the Japanese occupation. Participation in various international organizations was of decisive importance for Japan, to promote the nation's prestige in world society and to proceed with her economic diplomacy. As for the United Nations (UN), Japan signed a joint statement and normalized diplomatic relations with the USSR, which had a right of veto in the Security Council, and she was thus permitted to be a UN member in 1956, as mentioned earlier. Equally important were various economic organizations. Japan became a full member of the UN Food and Agriculture Organization (FAO) in July 1952, the International Monetary Fund (IMF) and the International Bank of Reconstruction and Development (the World Bank) in June 1954, and finally the General Agreement on Tariffs and Trade (GATT) in September 1955.23 Thus Japan succeeded in obtaining full membership in the major international organizations by the mid-1950s. However, Japan needed also to develop bilateral economic relations with other countries. In the prewar period, Japan had two important economic partners: the United States and Asia. From 1930 to 1939,51 percent of Japan's exports went to Asia and 30 percent to North America, while 46 percent of her imports came from Asia and 29 percent from North America. This basic pattern in foreign trade did not change in the postwar period. Although at the start, Japan traded almost exclusively with North America (75 percent of exports and 98 percent of imports from August 1945 to December 1946), trade with Asia increased by the early 1950s (see Table 4)." Economic relations with the United States were not a major problem for Japan. The United States directly and indirectly encouraged Japan's postwar economic recovery and development, providing financial resources in various forms. She was the first country to sign a trade and navigation treaty with Japan (April 1953). The United States also strongly supported admitting the Japanese to various international organizations, while the Commonwealth countries and France tended to be reluctant to accept Japan.

10 Japanese Relations with Vietnam Table 4 Japanese Trade by Areas: 1930-1950 (%)

Asia

North South America America

Europe

Africa

OceaniaPacific

Exports to: 1930-1939 Sept. 1945-Dec. 1946 1947 1948 1949 1950

50.6 23.6 66.0 51.7 52.4 46.4

30.2 75.0 11.7 26.2 17.5 25.6

1.2 0.1 1.0 0.6 3.8

9.6 0.9 14.3 12.2 14.0 11.6

6.4 5.0 7.7 11.4 8.9

2.0 0.5 2.9 1.2 4.1 3.7

45.9 2.4 6.1 14.6 18.6 31.9

29.1 97.5 91.9 65.9 65.0 48.5

0.5 12.3 0.7 4.0

15.3 0.1 3.2 3.2 7.1 4.1

2.4 2.8 4.8 2.8

6.8 0.1 1.2 3.8 8.7

Imports from:

1930-1939 Sept. 1945-Dec. 1946 1947 1948 1949 1950

Source: Tsusho Hakusho 1951, p. 78.

The real problem was how to establish and expand economic relations with Asian countries. Among these countries, the most important for prewar Japan had been China (including Taiwan and Manchuria) and Korea. For several years after the end of World War II, however, mainland China was in chaos because of the civil war; when the civil war came to an end, the country came under Communist rule. Japan still had a strong desire to keep as good commercial relations as possible with Communist China, but the outbreak of the Korean War in 1950 interfered. The Western countries decided to apply strong economic sanctions against China, which sent troops to North Korea. Then, until the early 1970s, Japanese economic relations with China were severely restricted by the regulations of the China Committee (CHINCOM), by the US anti-Chinese policy, and by Taiwan's strong opposition. Japan managed to continue some commercial relations with China, on the basis of the principle of separating economic matters from political ones (seikei bunri). However, those relations were so fluctuating and modest that Japan could not expect much from them. The situation in Korea also disappointed Japan. After the cease-fire, the Seoul government headed by Lee Sung-Man applied a stiff anti-Japanese policy. The two countries did not normalize relations until the mid-1960s. Nor could Japan expect good relations with North Korea, which was under Communist rule.

Period Prior to 1973

11

Thus Japan lost her best prewar economic partners in Asia. In the mid-1930s, China had accounted for 17 percent of Japan's total exports and 12 percent of her imports, whereas in 1951, the percentages dropped to 0.4 and 1.0 respectively. Korea accounted for 17 percent of exports and 14 percent of imports in the mid-1930s, but 1.1 and 0.3 in 1951 (see Table 5). Japan had to seek other countries as commercial partners in Asia; the Southeast Asian countries were the most likely candidates. Japan's commercial relations with those countries (including Hong Kong) in the mid- 1930s accounted for 11 percent of her exports and 7 percent of her imports: the percentages increased in 1951 to 26 and 13 respectively (Table 5). Japan needed to encourage this trend, and she tried to do so, as we shall see.25 This Japanese intention was quite in accordance with US policy in the western Pacific. The Americans also wanted Japan to establish economic interdependence with non-Communist countries in Southeast Asia. As we have seen, they wished Japan to be an important counterbalance to Communist China. They realized that Japan needed Asian markets for her economic development. But the Communist countries in East Asia which used to be the biggest partners for prewar Japan should be excluded. Japan should be given other markets. Japanese economic cooperation with non-Communist countries in Southeast Asia would furthermore contribute to the development of stability in the region, which was strategically very important in the US containment policy against China.26 At this juncture in the mid-1950s, Japan started economic diplomacy in earnest toward Southeast Asia. In 1957, a year after Japan was admitted to the United Nations, the Ministry of Foreign Affairs published the first issue of its blue paper in which it emphasized the importance of economic diplomacy, especially toward Asian countries.27 This paper pointed out three basic principles on which Japan should base her foreign policy: (1) she should respect the United Nations as a pivotal institution in promoting world peace and harmony; (2) she should develop harmonious relations with "liberal democratic countries"; and (3) she should act positively as a member of Asia. Of these three principles, however, the first was, according to the blue paper, rather idealistic and still far from reality. In order to assure the nation's security and contribute to the maintenance of the world peace, Japan should, therefore, follow the second principle; she should strengthen her ties with countries in the Western camp vis-a-vis the Communist bloc and put herself under the US security umbrella. As an Asian country, she should respect the third principle, so as to contribute to the promotion of regional peace and prosperity. The blue paper articulated three important tasks to undertake for the time being: (1) a "good neighbor" policy toward Asian countries; (2) economic diplomacy; and (3) readjustment of US-Japanese relations. About the importance of promoting good-neighbor relations (zenrin yuko kankef) with Asian countries, the blue paper said: "Our country geographically belongs to the same region [as other Asian countries]. Furthermore, we have a strong psychological attachment connected to racial and cultural affinity with them. For these reasons, we have the abovementioned principle to act as a member in Asia. Developing good-neighbor relations with these countries is our first important task for the time being." About economic diplomacy (keizai gaiko), the blue paper said: "Our country, which follows the principle of pacifism, has only one possible choice for improving the living conditions of 90 million inhabitants in four small islands, developing the economy, and

Table 5 Japanese Trade with the Far East and Southeast Asia:* 1934-1953 Average for 1934-1936

Exports

1950

% Total**

]

928.4

100.0

India Pakistan Burma Ceylon • Malaya Singapore Brit. Borneo Hong Kong Philippines Thailand Indochina Indonesia Subtotal

74.7

8.1

4.4 0.5 16.5 0.1 13.7 13.2 10.8 1.1 41.7 176.7

0.5 *

China S. Korea Taiwan Subtotal Imports India Pakistan Burma Ceylon Malaya

]

820.2

100.0

27.4 14.9 33.1 13.9 7.4 32.1 0.5 62.2 27.5 52.6 7.6 105.4 384.6

2.1 1.2 2.6 1.1 0.6 2.5 * 4.9 2.2 4.1 0.6 8.3 30.2

4.6 2.7 3.3 0.7 9.5 41.0

19.6 18.1 38.0 75.7

2.4 2.2 4.6 9.2

5.8 14.8 50.6 71.2

0.4 1.1 3.7 5.2

0.6 40.8 60.7 102.1

3.2 4.8 8.0

4.5 106.8 61.0 172.3

0.4 8.4 4.8 13.5

969.9

100.0

2044.3

100.0

2028.2

100.0

2409.6

100.0

17.8 39.0 17.7 0.2 39.1

1.8 4.1 1.8 * 4.1

52.4 102.5 30.6 1.5 58.7

2.6 4.6 1.4 0.1 2.9

73.0 82.4 29.8 2.3 54.3

3.6 4.1 1.5 0.1 2.7

75.1 108.0 50.2 2.2 50.4

3.0 4.4 2.0 0.1 2.0

18.3 16.9 6.4 41.6

950.9

100.0

93.5

9.8

0.7

% 1274.8

6.5 2.2 5.2 0.3 5.7 34.2

169.5 156.5 59.7 385.7

*

1272.9

% 100.0

36.7 117.8 21.2 17.3 11.6 51.5 0.7 80.7 19.6 36.4 8.5 59.8 461.8

1.5 1.4 1.2 0.1 4.5 19.1

0.7 6.5

1354.5

1953

1952 % 100.0

51.7 117.0 18.1 17.4 11.6 56.6 0.2 61.6 36.9 45.2 9.7 128.4 554.4

20.3 55.6 16.3 7.1 4.4 13.7 0.2 53.3 18.3 42.6 2.1 46.3 280.2

1.8 *

1951 % 100.0

2.5 6.8 2.0 0.9 0.5 1.7 *

3.8 8.6 1.4 1.3 0.9 4.2 *

2.9 9.2 1.6 1.3 1.8 4.0 * 6.3 1.4 2.9 0.6 4.7 36.2 *

Aboutheimprancfgd-ls(zyk)w

TableS. Continued Exports

Average for 1934-1936

1950

Total"

928.4

% 100.0

Singapore BrikBorneo Hong Kong Philippines Thailand Indochina Indonesia Subtotal

14.0 3.2 0.7 7.7 1.5

1.5 0.3 0.1 0.8 0.2

24.7 157.0

China S.Korea Taiwan Subtotal

102.1 134.4 89.4 325.9

4.4

0.5 2.6 16.5 11.8 14.1

9.4

35.3

820.2

0.3 3.9 0.6 22.5 43.5

1951 % 100.0 * 0.4 * 2.3 4.5

13.4 199.6

0.1 1.4 20.5

39.5 16.1 37.9 93.5

4.1 1.7 4.0 9.8

1.6

1354.5

4.1 9.0 5.9 49.6 51.0

2.9 54.8 423.0 20.8

7.1 53.0 80.9

1953

1952 % 100.0

1272.9

% 100.0

0.4 0.2 0.3 2.5 2.5

6.7 17.2 6.8 51.2 62.5

0.3 0.8 0.3 2.5 3.1

13.0 21.6 7.9 62.7 84.7 14.7 48.8 539.3 29.7

0.7 2.1 20.3

27.5 418.3

4.7

0.2 1.4 20.6

1.0 0.3 2.6 3.9

14.9 20.2 63.8 98.9

0.7 1.0 3.1 4.8

1274.8

8.6 64.0 102.3

% 100.0

0.5 0.9 0.3 2.5 3.4

0.6 2.0 22.4

1.2 0.3 2.6 4.1

Source: Tsusho Hakusho 1954, pp. 14-15. * Negligible. + The area of Southeast Asia here includes both Southeast and South Asia. ++ The total amount of Japanese trade with all the countries.

a LO

14 Japanese Relations with Vietnam nourishing national power: that is to make a peaceful advance toward overseas countries. As a consequence, the second important task of our foreign policy is economic diplomacy which aims to promote economic relations in accordance with the necessity of our nation's economy." After discussing the importance of economic diplomacy in general terms, the blue paper specifically pointed out the vital necessity of developing economic relations with Asian countries. "Asian countries have economically close and interdependent relations with our country. Most of them are newly independent nations, which have not made sufficient economic development, although they have enormous natural resources. In this respect, our country, with developed technology and industry, has a good opportunity to cooperate with them. Furthermore, if these countries succeed in economic construction through our collaboration . . . , then not only will their economy develop, but their economic relations with us will also expand. It is indeed accurate to argue that our country cannot have economic development without prosperity and peace in Asia." 4. War Reparations to the Saigon Government In the second half of the 1950s, Japan signed a series of war reparations treaties: with Burma in November 1954, the Philippines in May 1956, Indonesia in January 1958, and finally with South Vietnam in May 1959. Laos and Cambodia abandoned the right to demand reparations; but as a substitute, Japan agreed, in October and March 1959 respectively, to provide them with economic and technical aid (Table 6). As for Thailand, which was not under Japanese occupation during World War II, Japan did not pay reparations, but agreed to make a payment for the liquidation of special wartime yen (the original agreement was signed in July 1955 and a revised agreement in January 1962).28 The fourteenth article of the San Francisco peace treaty said that Japan had an obligation to pay reparations to the countries which the Japanese troops had occupied during the Pacific War.29 Japan applied this principle not only to the signatories of the treaty but also to countries which normalized diplomatic relations through other arrangements. However, the real intention of the Japanese was not simply to fulfill their moral obligation. Beyond this, they wanted to utilize the payment of war reparations as a good opportunity to expand Japan's economic influence over neighboring countries, namely non-Communist countries in Southeast Asia. The Japanese government clearly realized that war reparations would make a great contribution to the country's economic expansion: through them, Japan could overcome some difficulties with which her economy was faced. During the early 1950s, as we have seen, the Japanese economic authorities repeatedly pointed out various problems concerning the nation's economy. Having lost prewar colonies and stable markets in East Asia and many industrial facilities, Japan relied too heavily on economic relations with the United States, in the form of economic aid, special procurements, and trade. In order to redress this situation, there was no other choice but to expand economic relations with Southeast Asian countries. There were many obstacles, however. The biggest problem was that, without concluding reparation treaties, the Japanese could not sufficiently proceed with economic diplomacy toward Southeast Asian countries. During the early 1950s, Indonesia and the Philippines refused to ratify the San Francisco treaty in order to express their dissatisfaction with Japan's delay in paying reparations. For the same reason, the Bao Dai government in Vietnam also postponed the actual opening of legations,

15

Period Prior to 1973 Table 6 Japanese War Reparations and Equivalent Aid to Asian Countries (in millions of dollars) Reparations Equivalent Subtotal (grant) grant Philippines Burma South Korea Indonesia South Vietnam Thailand Singapore Malaysia Micronesia Cambodia Laos Total

550 200

550 340

250 50 400 16.6

26.7 8.16 8.16 5.84

223.08 39 26.7 8.16 8.16 5.84

495.86

1,507.94

716.6

140

300

223.08

39

4.2 2.8

1,012.08

Loan (1)

300

Loan (2)

Total

800 390 200

8.16

4.2 2.8

500 623.08 55.6 26.7 16.32 8.16 5.84

4.2 2.8

208.16

2,432.7

Sources: Various documents of the Foreign Ministry and MITI. Cited from Yamakage 1985, p. 139. Notes: Amounts based on concluded agreements. Besides the figures listed above, the Japanese aid to North Vietnam (28 million dollars) and Mongolia (17 million) should be regarded as equivalent to reparations, although the Japanese government did not publicly include them in such a category. Loan (1) was to supplement war reparations (grant). Loan (2) was to supplement the equivalent grant

as we have seen. War reparations were thus a necessary precondition for Japan's future economic activities in Southeast Asia. A second factor was that Southeast Asian countries, most of which were newly independent, had plans for developing light industry of their own. For that purpose, they wanted to import capital goods while trying to restrict the import of consumer goods. Japan, however, had traditionally been an exporter of light industrial products, although she had developed her own heavy industry since the prewar period. Indeed, during the late 1930s and the early 1940s, the Japanese economy experienced a sort of structural transformation. Because of wartime necessities, more and more emphasis was put on the heavy industrial sector. Although it had been seriously damaged by US air attacks during the last years of the Pacific War, the Korean War boom during the early 1950s helped to restore it Japanese heavy industry had long had a weakness, however; its products cost much more than those of other countries. The cost problem was not perceived as serious until

16 Japanese Relations with Vietnam the early 1950s. In the prewar period, the Japanese government and military purchased the products regardless of their high prices, and during the Korean War boom, the Americans did the same because of urgent military needs. As the boom waned, though, Japanese heavy industry was losing its generous patrons. It had to seek new customers, not only in the domestic market but also abroad. It would be to Japan's advantage to export heavy industrial products, because they had more value added than light industrial products, and therefore their exportation could contribute more to the increase of national income and economic independence. Japanese industrialists needed to try to lower the cost of their heavy industrial goods by introducing new equipment and a new production system. But it would take time. For the time being, they wanted to export heavy industrial products however high the prices might be. This was another important reason for Japan's war reparations policy. Another obstacle to trade with Southeast Asia was that these markets were still under the strong influence of the European countries that had colonized them. Southeast Asian buyers were not familiar with products, especially heavy industrial products, made in Japan. Much worse, most of Southeast Asian countries suffered from a shortage of foreign currencies. Even if they had wanted to purchase from Japan, they did not have enough financial resources. Still another obstacle was that Japan had lost efficient tools for commercial activities abroad. Large prewar trading companies had been disbanded; their worldwide networks of branches and communication systems had gone.30 To solve these problems, war reparations were the most convenient means. Japan could export heavy industrial products, regardless of their high prices, as reparations to countries which were not familiar with Japanese products and did not have sufficient financial resources to purchase them. Indeed, reparations were not paid in cash, but in Japanese products and services. When Japan concluded reparations treaties, she also signed loan agreements. Those loans were not paid in cash either. The Foreign Ministry frankly argued31 that cash payment would be an unbearable burden to the Japanese economy and would wither its vitality; therefore loans and reparations should be paid in services and products. In other words, those were a sort of tied aid. The products thus provided were mostly capital goods. The Foreign Ministry pointed out two reasons for this. First, payment in consumer goods would diminish the existing commercial trade; therefore it should be avoided. Japan could and actually did export consumer goods on a commercial basis; these exports were very important income sources. If Japan had paid reparations in these products, then Japanese commercial exports would have diminished. This would have had a bad effect on Japan's balance in international accounts. And second, providing capital goods as reparations would effectively encourage the recipient countries' economic development As a consequence, Japan could expect further expansion of commercial relations with those countries. Thus, the Japanese government planned to use war reparations to meet the nation's economic necessities. Japanese enterprises especially in the heavy industrial sector, needed a new project initiated by the government to encourage their further development. In this respect, war reparations were ideal, for both the government and the enterprises. The government transferred a part of national revenues in domestic currency to Japanese firms and companies, which in turn provided products and services to Southeast Asian countries. The government did not have to spend its foreign currency to fulfill its international obligations, while companies could export their heavy industrial products without worrying about their low competitiveness in international markets. Moreover, reparations were not paid all at once,

Period Prior to 1973

17

but continuously for successive years: reparations to Burma for ten years, Indonesia for twelve years, the Philippines for twenty years, and South Vietnam for five years (see Chart 1). This means that, for more than a decade, the government utilized money collected from taxpayers to create a very stable and assured demand for Japanese products. As anticipated, war reparations paved the way for future Japanese economic penetration into the recipient countries. Products and services provided as reparations stimulated demand for more goods from Japan. This was especially true in the case of capital goods. Japanese companies sent people to Southeast Asian countries to negotiate and carry out commercial and/or construction contracts. Thus they got firsthand information about Southeast Asia and also established important connections with influential people and organizations in those countries. In sum, Japanese industrialists made an important entry into Southeast Asian markets, and trading companies got a golden opportunity to revitalize commercial activities there.32 Japan's reparations policy was very consistent with American intentions. Japan excluded Communist countries from the list of recipients; she agreed to pay reparations only to the countries with which she had signed a peace treaty or otherwise normalized diplomatic relations. The United States fully understood that, for further economic development, Japan, as an important counterbalance against Communist China, should establish economically interdependent relations with non-Communist Asian countries.33 Moreover, Japan's conclusion of reparations treaties was coincident with the United States' full-scale involvement in Southeast Asia, which started around the time of the Geneva Conference in 1954. Japan thus took her first postwar steps of economic expansion into Southeast Asia within the framework of the US strategy in the western Pacific. The reparations policy applied to Vietnam clearly reflected this strategic framework. Here again, Japan signed a treaty only with the Saigon authorities, while neglecting the Hanoi government. The latter made strong protests.34 In Japan too, strong criticism came from opposition parties and from people trading with North Vietnam. They argued it was unfair that Japan should pay reparations only to South Vietnam, where the people had suffered from the

Chart 1. Japanese War Reparations in total Source: Keizaikyoryoku Hakusho 1967, p. 81. The figures are based on scheduled amounts prescribed in the concluded agreements.

18 Japanese Relations with Vietnam Japanese occupation much less than the northerners had. They criticized the Japanese government for paying a huge amount of reparations to South Vietnam whose wartime damage had amounted to just "three chickens" (niwatori sanba), and they insisted that Japan should not forget her responsibilities for the damage caused by the famine in the northern provinces of Vietnam during the last years of the Pacific War.35 In the national Diet, opposition parties, especially socialists, raised various questions concerning the reparations agreements. Although the government could not give persuasive answers to them, the Liberal Democratic Party (LDP) decided to discontinue deliberations in the Committee of Foreign Affairs and forced a vote through the general assembly of the House of Representatives at dawn on November 27,1959, while opposition parties refused to attend. The House of Councilors recognized the agreements on December 23. Thus the leading party, headed by Premier Kishi, did not listen to the criticism at home and abroad, and finally obtained ratification from the national Diet, where it was in the majority.36 The Japanese government signed the reparations agreements with the Saigon government on May 13, 1959. They went into effect on January 12, I960.37 Japan was to provide a 39 million-dollar grant over five years: 10 million annually for the first three years and 4.5 million for each of the remaining two years. It was to be divided as follows: 27.8 million was for the construction of the Da Nhim hydroelectric power plant; 7.5 million for consumer goods (this was actually to be used for the Saigon government to raise a fund in local currency necessary for the Da Nhim project); 2 million for other projects at the discretion of the Saigon authorities; and 1.7 million for expenditures of the South Vietnamese delegation in Tokyo in charge of reparation affairs. The basic loan agreement was signed on the same day. Japan was to provide $7.5 million within three years and later on, another loan of $9.1 million for five years, to start five years after the validation of the reparation treaty (i.e. 1965). The detailed agreement concerning the first loan was concluded between the Japan Export-Import Bank and the Saigon authorities in November 1960. Japan was to provide it by January 11,1963, and South Vietnam was to repay it over seven years after a three-year deferment, with interest as low as that of the World Bank (5.75 percent). With this Japanese loan, the Saigon government would purchase products to be used in and around the Da Nhim plant38 Most of the grant and loan were thus to be spent for the Da Nhim project (Table 7). This project was a part of the second South Vietnamese five-year economic plan, which startedin 1962. The project would include a dam (3 8 meters high and 1.5 kilometers long) and a hydroelectric power plant to produce 160 thousand kilowatt/hour electricity, to be supplied mainly to Saigon-Cholon for the time being, but in the future to the Cam Ranh industrial zone, which was planned as part of the third five-year plan. With the construction of this plant, it was expected that the price of electricity would be cut in half.39 Well before the conclusion of the reparations treaty, a Japanese consulting company, the Nihon Koei, had already started to investigate the Da Nhim project, at the request of the Saigon authorities. In the course of negotiations between the two governments, Kogoro Uemura, one of the leaders of the Keidanren (Federation of Economic Organizations), an elitist organization of top Japanese management, led the Japanese delegation to Saigon. Japanese business circles thus not only supported the government's reparations policy but actively pushed it forward. Later, the Nihon Koei was assigned to supervise the project, and many Japanese manufacturers as well as construction companies made commercial contracts with the Saigon government40

Period Prior to 1973

19

Table 7 Contents of Japanese Grants (War Reparations) to South Vietnam Million Dollars

Million Yen

%

2,780

(10,008)

71

Category B (Consumer goods and other products)

750

(2,700)

19

Category C (Mission and Source: Baisho

170

(612)

4

Category D (Other products and services)

200

(720)

5

3,900

(14,040)

100

Category A (Da Nhim project)

Total

Source: Baisho Mondai Kenkyukai 1963, p. 240. Note: Amounts based on the concluded agreement

The initial Da Nhim construction, which began in April 1961, was finished in January 1964, and the power plant started to operate, with a capacity of 80 thousand kilowatt/hour production. Construction for another 80 thousand kilowatt/hours was completed at the end of 1964. The 7.5 million-dollar loan mentioned above was provided to South Vietnam by the Import-Export Bank on July 11,1964, and used to purchase Japanese products related to the Da Nhim plant (and the Saigon substation). The $2 million granted for other projects was spent as follows: about 1.7 for the construction of factories to manufacture paper, malleable cast iron, veneer board, and electric appliances; the rest for irrigation works, a preparatory survey of the My Thuan bridge project, and salvage works.41 Implementation of the second loan ($9.1 million) was delayed and finally cancelled. According to the original agreement, it was scheduled to start in 1965. However, this agreement would lose its validity ten years after ratification. From time to time, Japan and South Vietnam had negotiations concerning it, and they almost decided to use it for a urea fertilizer plant, the My Thuan bridge construction, the Da Nang port reform, and other projects. As the civil war escalated in South Vietnam, however, they could not concretize any of these plans, and the ten-year validity term expired. In January 1970, they renewed the term for five more years, but this expired in January 1975.42 The Da Nhim power plant, which was completed in 1964, did not meet a good fate either. After May 1965, revolutionary forces often attacked electric transmission equipment and

20 Japanese Relations with Vietnam cables. The power plant was forced to stop operation, thus becoming miser's gold buried in the ground.43 5. Economic Relations with South Vietnam During the 1950s and Early 1960s Well before the ratification of the San Francisco treaty, Japan had already started to trade with Indochina, as with many other countries. Before the conclusion of the 1954 Geneva Agreement, however, the three French-sponsored states in Indochina, as part of the French Union, did not have much economic autonomy. Japanese commercial relations with them were regulated through arrangements between Japan and France, although the Indochinese account was kept separate from the account for the rest of the French Union. Japan and France concluded a financial agreement in May 1948 and a trade agreement in June 1949; their commercial transactions were conducted through annual and extra negotiations.44 In any case, during the first years after World War II, Japanese external economic relations were almost exclusively with the United States. Japan's most important trade problem in this period was how to import rather than export. She had to import food, edible salt, medical supplies, fertilizer, petroleum for fishing boats, and other indispensable goods. These subsistence materials amounted to nearly 70 percent of her total imports. Japan also needed fuel and raw materials to keep existing industrial facilities operative. Japan did not have enough foreign currency to purchase these materials on a normal commercial basis, but had to be financially supported by the Americans. Almost all of these goods were imported from the United States.45 Japanese trade with Indochina was thus very limited in scale during the 1940s. Japan mainly exported luxury and little-processed items, such as raw silk and tea to Indochina, while importing materials of vital necessity, such as anthracite coal and salt. Japan therefore tended to buy more than sell. Indochina did not have a large demand for Japanese luxury products. As a consequence, Japan's capacity to purchase Indochinese merchandise was also very limited, within the agreed-upon trade framework. Indeed, Japan had to reduce imports from Indochina in 1950 so as to make up the previous year's trade deficit (Tables 8 and 9).46 As the economy recovered from the war, however, the main concern of the Japanese turned to the exportation of their industrial products and the importation of foreign materials necessary for producing them. Now Japan needed to expand commercial relations with other countries besides the United States. The Americans would not buy all of the Japanese products to be exported. Furthermore, materials imported from the United States cost much more than those from nearer countries, because of transportation charges. The cost problem became especially serious when the United States stopped financial support for Japanese imports; Japan had to purchase cheaper materials on a commercial basis. Another important factor was that Japanese commercial relations with most foreign countries were based on bilateral financial and trade arrangements. The basic principle of arranged trade was to keep the balance of imports and exports on each side as even as possible. In order to increase exports Japan, therefore, had to increase imports, and vice versa.47 From 1951 on, the structure of Japanese trade with Indochina changed drastically from that in the previous years (Tables 9 and 10). First, Japan increased the exportation of industrial products (steel materials from 1951 on and machinery from 1952 on), while luxury and littleprocessed items lost their relative importance among her exports. Second, Japan now tended to sell more than buy. Indochina's demand for Japanese industrial products increased at a much higher rate than Japan's demand for Indochinese raw materials and foodstuffs. The

Period Prior to 1973

21

Table 8 Japanese Trade with the French Currency Zone (including Indochina), 1949-1950 (in thousands of dollars) Mar. 1949-Feb. 1950

Mar.-June 1950

July-Dec. 1950

Exports

7,714

(12,500)

4,460

(--)

8,914 (12,920)

Imports

16,279

(13,000)

3,551

(--)

2,636

(6,300)

Source: Tsusho Hakusho 1951, p. 104. Notes: Figures in parentheses are those scheduled by the Franco-Japanese agreement. There was no agreement between March and June 1950.

Table 9 Japanese Trade with the French Currency Zone, 1949-1953 (in thousands of dollars) 1949

1950

1951

1952

1953

Exports

na

32,976

42,588

26,117

na

18,485

28,185

11,775

na

4,802

5,882

6,719

757

2,024

9,689

8,521

7,623

11,677

na

36,651

22,471

61,192

na

21,751

8,652

27,296

na

6,983

9,133

19,233

2,917

4,686

14,663

8,757

Total French Metropole Overseas Territories

]

Indochina

8,000

Imports Total French Metropole Overseas Territories Indochina

3,324

]

8,353 1,602

Sources: Keizai Hakusho 1950, p. 274; Tsusho Hakusho 1953, p. 176; 1954, p. 138.

22 Japanese Relations with Vietnam years 1953 and 1954 were exceptions. Japan made large-scale purchases of rice from Indochina and therefore her imports exceeded her exports. After 1955, however, Japan stopped importing rice because she achieved self-sufficiency. The general tendency then was that Japan exported much more than she imported. This tendency remained unchanged after Japan started trading separately with the three non-Communist countries in Indochina in 1955. Further, when the northern part of Vietnam was separated from the non-Communist zone, the latter lost its most important export to Japan, anthracite.48 Another major change in the pattern of Japan-Indochina trade was caused by the new situation in Indochina. As the Geneva agreement was concluded in 1954, Indochina's international economic status changed. A year earlier, at the request of the French, Indochinese trade was excluded from the next-year schedule for trade between the French Union and Japan. The French made this request because their relations with Indochina had not been regulated. In December 1954, the French signed a new economic agreement with the three Indochinese states and transferred the right of foreign exchange control to them. Now the three states had more autonomy in external economic activities, and Japan started to trade separately with them. They still had special tariff relations with France, and their local currencies were linked with French francs, but this would change in two years. In the meantime, the Franco-Japanese financial agreement rapidly lost its importance in Japan's trade with the Indochinese states. In December 1956, Japan and France finally agreed upon a new financial arrangement and abolished the existing account settlement for Indochina. Now Japan applied a new settlement in US dollars with South Vietnam and Cambodia and in English pounds and/or French francs with Laos.49 Having increased exportation of industrial products to Indochina, Japan now sold much more than she bought. How could Japan sustain this export excess? Political and strategic circumstances concerning the Indochina peninsula significantly assisted the Japanese. During the first half of the 1950s, the French purchased Japanese industrial products for the economic recovery of war-torn Indochina. Japan also received a total of $12.3 million from French special procurements between 1953 and 1955; almost all of this was spent for Indochina.50 When the French began to withdraw from Indochina, Japan found another patron, the Americans. In 1954 and especially 1955, the United States started allocating a substantial amount of the 1C A funds to the three non-Communist states in Indochina. Japan became one of the biggest beneficiaries of this, especially from 1956 to 1958, when more than 90 percent of Japan's exports to South Vietnam were financed by ICA funds (Table 11). With the increase of US aid to Indochina, Japan significantly expanded her exports to that region. Accordingly, she also imported more products from Indochina, especially raw materials and foodstuffs, although the increase of imports was much slower than that of exports (Table 12).51 By the late 1950s, however, US economic aid to Indochina through ICA funds decreased. Besides, at the end of 1960, the United States decided to apply a buy-American policy to the implementation of ICA-based aid. Japan could no longer expect much from ICA-based trade. Furthermore, the Saigon government gradually restricted the importation of light industrial products so as to protect domestic factories. Because of all these factors, Japanese authorities in those years expected that commercial relations between Japan and Indochina would rapidly wither. Japanese exports to South Vietnam did significantly decrease in 1958. This trend was reversed again, however, in the succeeding years.52

23

Period Prior to 1973 Table 10 Japanese Trade with Indochina, 1950-1956 (in thousands of dollars) 1950

1951

1952

1953

1954

1955

1956

2,024

9,689

8.521

7,623

12,926b

36,781

64,954

443 173

723 26 16 2,070 1

na 4,935 828 2,384 4,654

na 17,793 3,115 735 11,445

na

na na 2,677 na (4,301) (709) 1,419

na na 1,719 na (964) (1,717) 496

Exports Total

286 Tea 192 Cotton textiles na Cotton yarn 1,055 Raw silk na Rayon/staple fiber textiles 0 Wood pulp 0 Wrapping paper 12 Steel materials na Machinery (Sewing machine) (Electric machines) na Ceramic ware Monosodium glutamate na Rubber tires na and tubes na Cement

a

286 121

na 0 na

41 43 na 919 na

na 1,980 na

2,001 2,275 1,092 189

na 825 1,125 2,729

na 1 432 1,985

na

110

446

na

na

94

385

na

na

na na

na na

na na

4 1

1,021 2,619

2,730 4,003

14,663

14,534e

5.5041

13,553

5,267 445 592 7,918 192

f

3,530 446 283 0 846

8,132 294 na na 4,151

na

c 592 3,965 (1,707) (892) 710

Imports Total Coal Salt Scrap iron Rice Maize

1,602 745 666 na na na

2,917

2,758 0 49 na na

4,686d 3,110 0 880 0 na

3,698 3708 365 9,094 509h

Sources:TsushoHakusho 1952, p. 96; 1953, p. 178; 1954, pp. 139-40; 1955, p. 159; 1956, pp. 226-27; 1957, pp. 294-95. Notes: na-figures not available. The following show discrepancies in the sources. * [1953]: 41, [1954]: 592. [1955]: 12,926, [1956]: 12,927, [1957]: 12,928 c [1955]: 592, [1956 and 1957]: 371. d [1953]: 4,686, [1954]: 4,680. ' [1955]: 14,534, [1956]: 14,535, [1957]: 14,536. f [1955]: 3,698, [1956 and 1957]: 4,423 « [1955]: 370, [1956 and 1957]: 457. h [1955]: 409, [1956 and 1957]: 511. '[1956]: 5,504, [1957]: 5,506. b

24 Japanese Relations with Vietnam

Table 11 Japanese Exports to South Vietnam Through ICA (AID) Funds, 1956-1963 (in million of dollars) 1956

1957

1958

1959

1960

1961

1962

1963

Total exports

53.3

57.1

39.5

52.7

61.5

65.7

60.1

33.3

Exports through ICA*

55.8** 56.5

39.1

40.0

37.2

14.8

3.8

0.3

Sources: Tsusho Hakusho 1958, pp. 234-35; 1959, pp. 240-41; 1961, pp. 247-48;1962, pp. 248-49; 1963, pp. 245-47; 1964, pp. 260-61. Notes: * 1956-1960: ICA, 1961-1963: AID ** Sic. Table 12 Japanese Trade with Vietnam, Cambodia, and Laos, 1956-1960 (in thousands of dollars) 1956

1957

1958

1959

1960

53,253 9,425 2,262 14

57,063 11,679 4,679 na

39,535 8,414 1,358 na

52,653 9,360 2,180 na

61,490 31,861 2,381 na

1,576 0 329 294 3 87

5,168 797 553 503 106 2,654

1,258 0 106

2,417 546 1 419

4,757 412

327 468

1,124 914

4,050 0 3,705 10

3,978 0 3,321

1,352 457 265

0

0

8,420 323 5,663 8

7,916 7,704

na na

na na

3,393 281 1,495 0 na na

Exports

South Vietnam Cambodia Laos North Vietnam Imports South Vietnam

Rice Maize Salt Rubber Scrap iron

Cambodia

Rice Maize

Laos North Vietnam

Coal

257

90 486

68

622

Sources: Tsusho Hakusho 1957, pp. 294-95; 1959, pp. 220-26; 1961, IR. pp. 244-49.

na na

Period Prior to 1973

25

When Japan could no longer make easy profits from ICA-based trade, she instead found another financial resource, the US special procurements (APA basis) from the US headquarters in Japan. With this money, Japan could export her products, mainly automobiles, to South Vietnam in 1959 and 1960. In addition, the South Vietnamese themselves purchased Japanese machinery and other items, such as fertilizer, necessary for developing domestic industry and agriculture.53 The APA-based export trade from Japan was short-lived. B ut Japanese exporters got a new patron, this time their own government, which paid war reparations (and related loans) to South Vietnam from 1961 to 1964. Japan's exports were sustained by this arrangement, especially in 1961 and 1962, when the major part of the reparations was actually paid.54 From 1963 to 1965, Japanese exports finally waned. Although Japan still paid war reparations in 1963 and 1964, the amount was greatly reduced. Japan could not carry out the promise to provide another loan to South Vietnam, due to the unstable conditions there caused by the civil war. For a few years, Japanese exporters had no generous patrons to fuel their commercial activities. But this was merely a short recess.55 The trend was reversed once more in 1966, a year after the United States became directly involved in the Vietnam War. The Americans started contributing a huge amount of dollars to South Vietnam. As a consequence, South Vietnam came to possess sufficient foreign currency to pay for imports. She had enough money, and furthermore she needed more foreign products than before. Because of the war, her domestic economy was increasingly paralyzed. Her efforts to develop domestic industry and stimulate domestic output of consumer goods and agricultural products were suspended. South Vietnam became a consumer society that imported most necessary goods with US financial support56 Japanese commercial relations with South Vietnam from 1966 to 1975 were carried on within this framework (Tables 13 a, b, and c). 6. Japanese Asia Policy in the Mid-1960s Japanese state officials and business leaders made a clear decision in the late 1940s and the 1950s to lead Japan in a direction consistent with American intentions. While consolidating political, military, and economic ties with the United States and rearming herself on a limited scale under the strategic framework established by the San Francisco treaties, Japan devoted most of her energy to reconstructing and developing her economy. In the domain of Asia policy, Japan complied with the American strategy of containing communism by developing official and financial relations exclusively with non-Communist countries, while neglecting China, North Korea, and North Vietnam.57 The US containment policy hampered the development of Japanese economic relations with mainland China, but Japan also obtained significant benefits from the US policy in the western Pacific. The conflicts in Korea and Indochina provided the Japanese economy with significant opportunities. The United States also encouraged the Japanese to establish economically interdependent relations with non-Communist countries in Southeast Asia. American money supported the export of many industrial products to neighboring countries. The Japanese government itself also provided financial resources to industry, particularly in the form of war reparations. During the 1940s and the 1950s, Japan was rather a passive beneficiary of international circumstances created by the US Pacific strategy. However, by the mid-1960s, as her

26 Japanese Relations with Vietnam Table 13a Japanese Trade with South Vietnam, 1956-1974 (in thousands of dollars)

1956

1957

1958

1959

1960

1961

1962

Exports

53,253

57,063

39,535

52,653

61,490

65,714

60,066

Imports

1,576

5,168

1,258

2,417

4,757

2,849

3,932

1963

1964

1965

1966

1967

1968

1969

Exports

33,297

34,077

36,656

138,086

174,586

198,963

223,156

Imports

6,035

6,743

6,542

5,386

4,576

2,719

3,309

1970

1971

1972

1973

1974

Exports

146,073

149,370

104,673

86,451

104,491

Imports

4,554

4,190

13,839

29,107

30,692

Sources: Tsusho Hakusho 1957, pp. 294-95; 1958, IR. pp. 234-35; 1959, IR. pp. 225-26; 1960, JR. pp. 240-41; 1961, IR. pp. 248-49; 1962, IR. pp. 249-50; 1963, IR. pp. 247-48; 1964, IR. pp. 261-63; 1965, IR. pp. 292-93; 1966, IR. pp. 294-95; 1967, IR. pp. 312-13; 1968, IR. pp. 303-4; 1969, IR. pp. 294-95; 1970, IR. pp. 298-99; 1971, IR. pp. 324-25; 1972, IR. pp. 32526; 1973, IR. pp. 368-69; 1975, IR. pp. 327-28.

Period Prior to 1973

27

Table 13b Japanese Exports to South Vietnam, 1956-1974 (in thousands of dollars)

Total

Food stuffs

Fuel4

Textiles

Other Nonlight metallic indusmineral trial Chemical Metal products productsb products goods Machinery

1956

53,253

805

393

31,452

4,575

2,897

2,252

3,819

3,650

1957

57,063

267

333

32,540

5,962

3,944

3,507

2,925

4,693

1958

39,535

959

444

23,917

5,367

1,490

2,632

1,486

2,175

1959

52,653

919

426

19,336 4,080

2,399

6,206

2,135

15,808

1960

61,490

635

190

26,488

5,395

2,341

3,996

3,135

18,256

1961

65,714

624

226

29,813 2,385

3,447

3,664

5,765

17,854

1962

60,066

458

121

16,547

1,705

3,983

2,871

6,704

27,671

1963

33,297

394

124

14,614

839

3,018

3,138

1,779

9,386

1964

34,077

261

130

14,052

761

3,622

2,421

1,912

10,901

1965

36,656

711

304

19,852

1,180

3,153

1,882

2,654

6,724

1966

138,086

1,345

460

45,943 4,070

8,208

8,209

6,227

63,521

1967

174,586

1,566

762

30,517 4,147

6,190

5,315

5,769

119,872

1968

198,963

12,620

956

31,767

4,543

7,197

4,115

8,415

128,908

1969

223,156

11,037

1,577

32,235

4,729

7,536

7,744

9,465

148,483

1970

146,073

3,730

967

13,922

4,444

6,568

4,304

8,179

103,503

1971

149,370

6,226

988

27,530

3,827

5,844

7,022

10,885

86,795

1972

104,673

6,681

663

33,975

2,250

8,164

5,276

8,212

39,129

1973

86,451

4,994

712

13,302 2,810

8,813

6,719

14,396

34,618

1974

104,491

3,324

4,006

3,878

21,335

19,006

12,763

32,405

6,393

Sources: Ibid. Notes:

*195 6-1959 raw materials including fuel. !956-1961 rubber tires/tubes and paper.

b

Figures in the latest statistical table are used; they are not always identical with those in earlier tables.

Table 13c Japanese Imports from South Vietnam, 1956-1974 (in thousand of dollars)

Total

1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974

1,576 5,168 1,258 2,417 4,757 2,849 3,932 6,035 6,743 6,542 5,386 4,576 2,719 3,309 4,554 4,190 13,839 29,107 30,692

Food stuffs Subtotal

110 563 492 760 313 1,844 966 767 972 813 227 208 90 520 5,440 3,370 12,858

Maize

Rice

Fishery products*

329 553 106 1 68 12 0 -

0 797 0 546 412 736 0 1,154 535 0 -

639 241 0 962 747 194 200 81 513 5,433 2,702 10,901

Sources: Ibid. * 1972-1974 frozen shrimp/lobster and cuttlefish. b 1962 copper scrap and brass/bronze scrap.

Raw materials Rubber Subtotal 3 106 90 327 1,124 166 1,528 2,129 2,631 3,040 2,758 3,020 2,162 2,016 1,055 1,107 1,260 1,101 1,293

1,038 1,816 4,059 1,862 3,375 3,960 5,348 5,388 3,795 3,604 2,387 2,949 2,663 3,191 7,835 21,410 15,831

Salt

Silica sand

Scrap iron

Other scrap metalb

Timber

Other

294 503 257 419 622 177 186 271 267 299 0 0 -

0 0 334 568 666 937 1,447 779 0 0 113 117 -

87 2,654 486 468 914 280 138 55 221 284 91 -

0 128 125 191 414 168 311 155 550 274 3 9 1 6 2 67 483 1,150 1,369 911 2,480 127

0 0 52 510 5,424 16,896 12,926

. 38 208 227 244 231 399 387 619 159 105 152 1,801 479 564 -

-

Period Prior to 1973

29

economy expanded, Japan began to play a more active role in the domain of international economy. Japan tried, on the one hand, to become a full member of the group of Western developed nations. On the other hand, she wanted to have closer economic relations with neighboring countries in Asia. Japan succeeded in concluding trade and navigation treaties with England in 1962 and with France and the Benelux countries in 1963, the countries which had applied a discriminative economic policy against Japan based on GATT Article 35. In 1964, Japan joined the Organization for Economic Cooperation and Development (OECD), while making herself an IMF Article 8 nation. Her foreign trade turned from import to export excess in 1965. She also completed the construction of the Tokyo-Osaka shinkansen (bullet train) railway and held the Tokyo Olympic games in 1964. The Japanese regained the self-confidence which they had lost for twenty years after the end of World War II. Japan began to play a more active role in the Asian economy by givirig substantial aid, mainly in the form of loans, to East and Southeast Asian countries in 1965.5*ln that year, one of the most important in the postwar history of the western Pacific, the situation in the region entered a new stage, which inevitably involved Japan and Indochina as well as other countries. First, Japan finally succeeded in normalizing diplomatic relations with South Korea, whose government under Lee Sung-man had been hostile to Japan and whose people maintained strong and decades-long anti-Japanese feeling as a legacy of the forty-year Japanese colonial domination. In spite of strong opposition and criticism in both countries, the Sato and the Park Chung Hee governments signed a basic treaty and other agreements in June 1965. With the conclusion of this treaty, a serious gap in the US-Japanese strategical framework for the Far East was filled. The reconciliation between Seoul and Tokyo also allowed Japanese economic power to come into play in Korea. At the start, Japan promised to provide a 300 million-dollar grant and a 200 million-dollar loan, virtually equivalent to war reparations, to South Korea. Rapid increase of trade and investment followed. The Park government welcomed this influx, because it had decided to develop the nation's economy quickly with Japanese and American assistance.59 Second, a big change took place in Indonesia as well. The Sukarno regime, which had been strongly anticolonialist, collapsed in October 1965 and was replaced by anti-Communist military men, who adopted a new policy to promote economic development with Western aid. Japan, which had maintained good relations with the Sukarno government since the payment of war reparations, rapidly adjusted to the drastic change and became a leading investor and creditor for the new government60 Thus, at the very moment when the Japanese economy needed more area to expand, both South Korea and Indonesia simultaneously opened their doors to Japanese economic penetration. The third important development in Asia during 1965 was, of course, direct American involvement in the Vietnam War. The Japanese government under Premier Eisaku Sato officially declared its support for US efforts in this war and permitted US forces to use their bases in Japan as rear bases.61 The Japanese economy profited substantially from this war. While direct US military expenditures were not so important for the already expanded economy as the Korean War boom had been in the 1950s, Japan profited economically in a more indirect way: through investments in and trade with neighboring countries where the United States spent a huge amount for military needs and as aid, both military and economic.62 Although Japanese private investments in South Vietnam were almost nonexistent (because

30 Japanese Relations with Vietnam Japanese companies were afraid of South Vietnam's political and military instability),63 Japan's exports to that country suddenly greatly increased in 1966 (see Table 13). Thus Japan increased her economic presence in her neighboring countries, rapidly intensifying commercial and financial ties.64 Japan also played an important role in establishing and maintaining several regional and international organizations in the western Pacific: the Ministerial Conference for Economic Development of Southeast Asia, the Asian Development Bank (ADB) and the Asian and Pacific Council (ASPAC). It is not a mere coincidence that all of these organizations came into existence in the same year, 1966. Their simultaneous emergence was closely connected with the developments in Asia that we have discussed. In the ADB, an international bank, Japan wanted to play a leading role. She became one of the biggest financiers, together with the United States. The Ministerial Conference was first held in Tokyo in April 1966. This was the first international meeting initiated by the Japanese government after the end of World War II. Japan invited all the Southeast Asian nations except North Vietnam to come to this meeting. ASPAC was organized at the strong initiative of South Korea, with South Vietnam, the Philippines, Malaysia, Thailand, Taiwan, South Korea, Japan, Australia, and New Zealand participating. South Korea intended to rally all the antiCommunist countries in the western Pacific, especially those which directly supported the USSouth Vietnamese war efforts in Indochina. Japan, however, worried about South Korea's undisguised political intentions, tried to attach more economic than political and strategical significance to ASPAC.65 With her participation in these organizations, Japan clearly demonstrated her willingness to play a major role in promoting economic cooperation in the western Pacific. Japan especially expected the Ministerial Conference for Economic Development of Southeast Asia, which she sponsored and presided over, to become a major agent in promoting regional economic cooperation. And indeed, the Ministerial Conference agreed on various joint programs in successive meetings from 1966 to the early 1970s.66 To recapitulate, during two decades after the end of World War II, Japan, utilizing favorable conditions, became a major economic power in Asia. She not only developed bilateral relations with each country of East and Southeast Asia, but also played a vital role in establishing regional organizations. These Japanese maneuvers were, generally speaking, welcomed by the United States, which expected Japan to undertake financial responsibilities in the western Pacific, a region which was of increasing strategical importance to the Americans as the conflict in Indochina escalated.67 Japan explicitly revealed her economic ambitions; she had also an implicit intention to contribute to the consolidation of the US political and strategical framework in the region. Although Japan tried to restrain South Korea from going too far politically in organizing ASPAC, she agreed that they should have some regional organizations to rally nonCommunist countries. Indeed, when she organized the Ministerial Conference for Economic Development of Southeast Asia, Japan excluded North Vietnam from the list of invited countries. Japan also supported the US war efforts in Vietnam. And in 1965, the Japanese government had decided not to permit the Export-Import Bank's loans to mainland China, while starting to provide a substantial amount of loans to Taiwan and South Korea. As a result, Beijing's attitude toward Tokyo rapidly cooled.68 Non-Communist countries in Southeast Asia did not necessarily welcome Japanese intentions wholeheartedly either. Although Japan was eager to have the ADB headquarters in

Period Prior to 1973

31

Tokyo, Southeast Asian countries were afraid that Japan would have too strong an influence over the organization, and the main office was finally situated in Manila. As for the Ministerial Conference, among the nine non-Communist Southeast Asian countries which received invitations from Japan, those holding a neutralist policy were reluctant to participate. Burma did not attend at all, and Indonesia and Cambodia joined the first meeting merely as observers, although Indonesia, which expected more financial support from Japan, became a full member in the following year.69 Southeast Asian countries, on the one hand, counted on Japanese economic power, but, on the other hand, worried about Japanese economic influence and implicit political intentions. The Japanese economic role in the region was intensified after the Guam doctrine was officially declared by President Nixon on July 25,1969. By then the US overcommitment to the Vietnam War was provoking strong protests at home and a financial crisis. To cope with these serious problems, Nixon proposed the " Vietnamization" of the war and the shrinkage of American military and financial burdens in the western Pacific. As a part of this new policy, the United States expected Japan to take on more financial responsibilities in that region.70 7. Economic Relations with South Vietnam During the Late 1960s and Early 1970s While Japan, as an important rear base for the US forces in Vietnam, received American special procurements in the 1960s, these US military expenditures were not as decisive for the Japanese economy as those during the Korean War boom in the 1950s. The nation's economy had expanded, and the US procurements were a relatively small addition. Japan's main economic profits from the Vietnam War came indirectly. The United States contributed a huge amount of money, through military and economic aid and special procurements, not only to South Vietnam but also to neighboring anti-Communist countries, especially those which sent troops to South Vietnam or allowed US bases in their territory. With the influx of the US money, those countries enjoyed an economic boom, from which Japan profited. Japan increased investments in and trade with those countries (Table 14).71 In South Vietnam, as we have noted, Japanese non-official investments were almost nonexistent, since Japanese companies were afraid of the political and military instability there. However, Japan's exports to South Vietnam suddenly jumped in 1966 and continuously increased until 1969. Between 1970 and 1974, those exports diminished to some extent, but the annual amount was still three or four times as much as the 1965 level, except for 1973 (see above, Table 13).72 In the early 1970s, Japanese financial assistance to South Vietnam increased. During the latter half of the 1960s, after the completion of war reparation payments, the Japanese had given very little aid to Vietnam, except for technical aid based mainly on the Colombo plan and emergency aid on a humanitarian basis. As we have noted, the Japanese could not carry out the 1959 promise to give an additional loan, due to the war.73 After the announcement of the Guam doctrine by President Nixon in 1969, however, Japan increased both grants and loans to South Vietnam. The grants were mainly used for three major projects: the reconstruction of the Cho Ray hospital, the restoration of the Da Nhim power plant, and the building of the Bien Hoa orphan vocational center. The loans were used for the construction of power plants and other projects (Tables 15 and 16).74 Japan's aid to South Vietnam brought some profits to a few Japanese companies, but its economic effect was very limited both in quantity and quality. Japanese aid to other Asian countries was, generally speaking, either to develop the indigenous industry, so that Japan

32 Japanese Relations with Vietnam Table 14 Japanese Economic Profits due to the Vietnam War, 1965-1968 (estimations in millions of dollars)

1965

1967

1966

Estimation by Sanwan Bank (January 1968)

20

150-160

160-270

Indirect profits

450

1,050

970

Total

470

1,200-1,230

1,150-1,200

Direct procurements

Estimation by Nomura Sogo Institute (February 1968) Direct procurements

16.0

147.0

200.0

Indirect profits

79.6

831.7

1,169.3

Total

95.6

978.7

1,369.3

Estimation by Ninon Kangyo Bank (February 1968) Direct procurements

50

180

220

Indirect profits

90

530

650

140

710

870

Total

Estimation by Ministry of International Trade and Industry (October 1968)

1966

1967

1968

Direct procurements

134

162

260

Indirect profits

344

347

546

Total

478

509

806

Source: T. Yamamoto 1984, p. 113.

Period Prior to 1973

33

could export heavy industrial products en masse, or to exploit natural resources which Japan could import for her own heavy industry. The Japanese aid policy had thus shifted to that of development aid.75 In contrast, the modest Japanese aid to South Vietnam was oriented toward repairing the war-torn society. It was motivated by political and strategical factors rather than purely economic reasons. This does not mean that Japanese leaders did not see any economic potential in Vietnam. For instance, Japan participated in the comprehensive survey project on the lower Mekong basin, which was initiated in 1957 by a committee of the four concerned countries (South Vietnam, Cambodia, Thailand, and Laos), with the collaboration of ECAFE and other organizations; Japan had sent the first investigation team as early as January 1959,76 In the late 1960s, the Lilienthal report (1969), a joint US-South Vietnamese study concerning postwar reconstruction and investment, also interested the Japanese;77 and as peace talks progressed in Paris between the United States and North Vietnam, they started thinking of a huge postwar project for the economic reconstruction of Indochina. And, in the early 1970s, some Japanese firms invested in South Vietnam so as to be in a good position in the competition for future gains.78 8. The Vietnam War and Japan From August 1945 to 1987 Japan had nineteen prime ministers. Among them, three have been regarded as unyielding hawks both in foreign and domestic policies: Nobusuke Kishi, Eisaku Sato, and Yasuhiro Nakasone. Kishi was the first postwar Japanese prime minister to visit Taipei and Saigon while in office (1957).79 His pro-Taiwan and anti-Beijing policy finally pushed the Chinese government to stop all commercial and cultural relations-which had been carried on according to the principle ofseikei bunri (separation of political matters from economic ones)-between the two countries. The Kishi administration also signed a war reparations treaty with the Saigon government in 1959, despite Hanoi's strong denunciations and despite domestic criticism, as has been mentioned above. It was also during his term in office that Japan concluded a revised security treaty (anpo kaitei joyaku) with the United States (January 1960). Anti-anpo movements arose like flood tides. In 1959 and especially 1960, Japanese society was in political turmoil. Kishi's party forced the vote for ratification of the security treaty by calling a police squad into the national Diet80 Sino-Japanese relations improved after Kishi resigned from office, but worsened again during the premiership of Kishi's younger brother, Sato. The Sato administration normalized diplomatic relations with South Korea and started giving substantial aid to that country and Taiwan. It also officially declared its support for the US war efforts in Vietnam. Sato himself visited Saigon in October 1967, thus demonstrating his sympathy for the South Vietnamese government81 The Sato administration's foreign (and domestic) policies provoked strong criticism and protest movements among left-wingers, students, intellectuals, and grass-root activists. There had been strong protests against the renewal of the US-Japanese security treaty in 1960 and against the conclusion of the Seoul-Tokyo agreement in 1965. In the second half of the 1960s, the Vietnam War issue became a major target of leftists and students. Socialists, Communists, and trade unions frequently organized meetings and demonstrations against the Japanese and the US Vietnam policy. Leftist parties also brought up related questions in the national Diet.82

34 Japanese Relations with Vietnam Table 15 Official Japanese Aid to South Vietnam, 1960-1975 A. Grants (based on concluded agreements) (in millions of yen) Date of conclusion of agreements January 12, I9601

April 18, 1970 October 17, 1970 October 2, 1971 November 26, 1971 December 24, 1971 February 9, 1973 August 22, 1973 August 22, 1973 October 3, 1973 February 13, 1974 March 30, 1974 March 30, 1974 July 4, 1974 August 19, 1974b January 28, 1975b January 28, 1975 June 9, 1970

Objects [War reparations] Da Nhim hydroelectric power plant Paper board plant, veneer board plant, etc. Merchandise (household electric appliances, paper products, etc.) Expenditures for the Vietnamese mission in Japan to control reparation affairs [Ordinary grants] Houses and clinic for war sufferers constructed in Saigon Restoration of the Da Nhim plant -idOrphan vocational training center (construction) Medical equipment for the Cho Ray hospital Orphan vocational training center (extension) Medical equipment for the Cho Ray hospital Restoration of electric transmission between Da Nhim and Saigon Houses and farming tools for war sufferers Equipment for the orphan vocational center Medical supplies, house-building materials for war sufferers Restoration of electric transmission between Da Nhim and Saigon (grant in service) Medical equipment for the Cho Ray hospital Cho Ray hospital (construction of the main building) Cho Ray hospital (construction of the annex) Medical and other supplies for the Cho Ray hospital [Kennedy Round food aid program] Agricultural products

Amount 9,949 1,185 2,700 206 240 300 688 220 200 272 100 288 500 90

5,000 42 540

4,100 500

100< 360

Period Prior to 1973

35

Table 15. Continued B. Loans (in millions of yen) Date of agreements

Objects

Annual interest (%)

repayment termb (years)

Amount agreed

Amount contracted

May 13, 1959" Da Nhim hydroelectric power plant

5.75

10

(3)

2,700

2,700

December 16, Diesel-electric power plant in 1970 Saigon

6.00

10

(3)

1,620

1,620

September 18, Thermoelectric power plant in 1971 Can Tho

3.00

25

(7)

5,760

5,220

Expansion of telecommunication system in Saigon

3.00

25

(7)

2,030

2,030f

November 29, Electric-transmission wire 1973 be-tween Da Lat and Cam Ranh

3.00

25

(7)

1,070

1,070

March 30, 1974

Merchandise (1)

2.75

30

(10)

8,250

8,250

March 30, 1975

Merchandise (2)

2.75

30

(10)

9,000

-*

February 26, 1972

Source: Keizaikyoryoku Hakusho 1977, pp. 368-69. a

Date of the effectuation of the war reparations treaty. The grant was executed from January 12,1960 to January 11,1965. b Date of the agreement, which was concluded when the building was officially transferred to the Vietnamese authorities after the completion of construction. c The grant was not actually provided; the agreement lapsed without fulfillment. d Figures in parentheses are years of deferment. c Loan agreement concluded simultaneously with the war reparations (grant) agreement. f The loan was suspended, because construction was stopped. 8 The loan was not actually provided; the agreement lapsed without fulfillment.

Table 16 Foreign Aid to South Vietnam, 1960-1974 (in millions of dollars)

United States

19601967

1968

2,174.1

448.0

1972

1973

449.0

418.0

428.0

540.0 (64.0)

403.0 (112.0)

587.0 (216.0)

3,273.0 (392.0)

5,447.1

54.6 (28.2)

92.8 (42.1)

137.1

na

26.7 (0.5)

45.6

19.7 (-2.6)

56.7

2.9

2.9

29.5

29.5

10.5

10.5

3,476.9

5,755.8

1974

44.3

-

0.3

-0.2 (-1.5)

8.6 (4.5)

11.5 (3.8)

18.0 (7.1)

West Germany

18.9

-

7.0

-

8.4 (1.1)

(-o.i)

6.3

5.0 (-0.5)

France

37.0

-

1.5

2.9 (-0.2)

3.3

1.8 (-1.8)

6.1

4.1 (-0.6)

Holland

-

-

-

0.4

1.8

0.5

0.2

na

Australia

-

-

1.9

2.7

3.8

4.9

6.6

Canada

-

-

1.8

2.1

2.2

2.2

2.2

462.4 (65.9)

427.7 (118.9)

567.5 (431.3)

446.4

2,278.9 (-1.7)

448.0 (5.5)

Total 1960-74

1971

Japan

Total

19681974

1970

1969

457.3 (242.7)

9.6 na 667.6

Sources: Keizaikyoryoku, Hakusho for each year. Cited from Ebashi and Yamada 1978, p. 238. Notes: Amounts refer to aid actually disbursed. Loans are in parentheses, -indicates South Vietnam's repayment of loans. The figures between 1960 and 1967 do not distinguish grants and loans. The totals seem to include amounts not only from the listed countries but from other countries as well.

-

Period Prior to 1973

37

A group of intellectuals established \h&Beheiren (Citizens' League for Peace in Vietnam) in April 1965. It became a very active organization, absorbing various grass-roots movements all over the country. Huge mass meetings and demonstrations were organized. Various volunteer groups were engaged in movements to help American deserters in Japan, to stop US tanks being shipped out of the Sagamihara repair factory, and the like.83 Intellectuals, students, housewives, and other groups published many statements in books, pamphlets, magazines, and newspapers; many of them had their own periodicals (so-called "minicommunication" media). The Beheiren in Tokyo also had its own periodical, Shukan Anpo (Weekly Anpo), started in June 1969.84 The Beheiren movement was quite new in its style and organization, which the old-leftists had not effectively managed, and it became a forerunner of later citizens' movements in the 1970s. New-leftists, whose movement culminated in nationwide student riots in the late 1960s, also played an important role in antiwar campaigns. New-leftist groups emerged in Japan during and after the 1960 anii-anpo (security treaty) movement, rallying intellectuals and students who were dissatisfied with the existing leftist parties' policies and programs, and developed during the 1965 movement against the Seoul-Tokyo pact. Through a series of violent demonstrations against Premier Sato's visits to Saigon in October and to the United States in November 1967 and against the entry of the US nuclear-powered aircraft carrier Enterprise into Saseho port in January 1968, new-leftists drew the people's attention to the Sato government's policy supporting the US war efforts and the Saigon regime. They also criticized Japanese economic expansion in South Korea, Taiwan, and Southeast Asia, arguing that, relatively independent of US influences, Japan had become an imperialist country. The new-leftists, for instance, actively participated in a campaign against the fourth meeting of ASPAC held in Kawana (in the Shizuoka prefecture) in June 1969.85 Not only political activists but also the Japanese people in general were quite critical of US war efforts in Vietnam. According to Asahi Shinbun 's public opinion research in August 1965, 94 percent of the interviewees were aware of the Vietnam War and 75 percent were against the US bombing of North Vietnam.86 The various antiwar movements were finally linked in campaigns against the Sato government's policy concerning the automatic continuation of the revised security treaty with the United States in 1970 and the US retrocession of the Okinawa (Ryukyu) islands without removing the US military bases in 1972.87 At the height of these antiwar movements among the Japanese, a group of South Vietnamese students also set up an organization of their own, Beheito (Association of Vietnamese in Japan to Fight for the Peace and Reunification of Vietnam), in 1969.88 The Vietnam War became one of Japanese journalism's most popular topics. As early as 1965, featured articles on the war sold well. For instance, the Iwanami Publishing House printed 120 thousand copies of a special issue of the monthly Sekai entitled "The Vietnam War and Japanese Opinion," which were sold out in a day in many bookstores. The Asahi Shinbun Company's illustrated weekly printed more than 300 thousand copies of a special issue "Vietnam under War Fire" (Asahi Gtirafu, March 10,1965). The monthly Bungei (published by Kawada Shobo) sold 100 thousand copies of the September 1965 issue, a feature edition on Vietnam.89 Many journalists visited Vietnam, not only the South but the North as well. Their reports on Vietnam appeared in newspapers, magazines, and books, and on television, having a

38 Japanese Relations with Vietnam tremendous influence on public opinion. Generally speaking, they were critical of the US war efforts and the Japanese government's attitude, and were sympathetic to the National Liberation Front (NLF) in South Vietnam and the Democratic Republic of Vietnam (DRVN) in the North.90 Despite this strong and widespread criticism, the Japanese government under Premier Sato did not change its policy. Within the framework of the US anti-Communist strategy in the western Pacific, the government supported the US war efforts and maintained close relations solely with South Vietnam, while officially neglecting the presence of the DRVN.91 9. Unofficial Relations with North Vietnam Before 1973 Official neglect of North Vietnam by the Japanese government did not mean that Japan had no commercial and other relations with that country. Right after the conclusion of the 1954 Geneva Agreement, several Japanese trading companies started to deal with North Vietnam. In the beginning, trade was conducted indirectly through an intermediary, either Czechoslovakia or France. In August 1955, Japanese companies established the Kin'yokai (Friday Club), which later became the Nichi-Etsu Boekikai (Japan-Vietnam Trade Association). In May 1965, its representatives succeeded in signing the first nonofficial trade protocol in Hanoi. The Japanese government did not yet authorize direct trade, and therefore trade was conducted via Hong Kong. In March 1958, the second protocol was concluded, and in June the Japanese government issued a license for the first time to trade directly with North Vietnam. In 1959, in protest against the Kishi government's decision to sign a war reparations treaty with the Ngo Dinh Diem government, the North Vietnamese refused to renew the trade protocol. They did not actually interrupt commercial relations with Japan, however, but instead maintained them without a written agreement. The amount of trade between the two countries actually tended to increase in the early 1960s, mainly because the North Vietnamese started their first five-year economic plan. In March 1962, a North Vietnamese commercial delegation visited Japan for the first time. Finally in August 1963, after a five-year interruption, North Vietnam's Chamber of Commerce signed a new trade protocol with the Japan-Vietnam Trade Association. In the mid-1960s, the US bombardment of and economic sanctions against North Vietnam largely curtailed trade between Japan and North Vietnam. The Japanese government refused to issue visas to a delegation from North Vietnam in May 1964 and banned exportation of various items which were, according to the Japanese authorities, able to contribute to the military consolidation of North Vietnam. When, in 1968, the United States stopped bombardment against the North and started peace talks in Paris, the prospect changed. A North Vietnamese commercial delegation was allowed to enter Japan in June 1970, after a six-year refusal by the Japan government to accept any delegation of this kind. Between 1968 and 1972, however, the amount of trade between the two countries fluctuated greatly, because the United States resumed air attacks against the North in 1970 and in 1972.92 In brief, despite the Japanese government's hesitation or obstructions and despite American pressure, commercial relations with North Vietnam continued without interruption, thanks mainly to the efforts made by Japanese private companies belonging to the Japan-Vietnam Trade Association93 and by North Vietnamese authorities. Yet this commercial relationship

Period Prior to 1973

39

was always modest in scale and fluctuated according to the development of the Vietnam War (Tables 17 and 18; Chart 2). Some human and political connections on a nongovernmental level were always maintained between the two nations. Members of leftist parties, especially the Japan Communist Party (JCP) and leaders of labor unions and antiwar movements often visited North Vietnam. A member of the JCP's central committee and correspondents of its organ Akahata (Red Flag) were stationed in Hanoi. Political delegations from the North very often tried to enter Japan; many of them were refused by the Tokyo government, but some were permitted to enter.94 ThzNihon-Betonamu Yuko-kyokai (Japan-Vietnam Friendship Association) played a vital role in these human and political relations between the two nations. Established in 1955, it rallied Communists and their sympathizers as well as nonpartisans. It was generally speaking under the JCP's influence and control. Besides promoting nonofficial relations between the two nations, the association also very actively organized and participated in antiwar movements and propaganda for the DRVN and the NLF and against the policies of the US, Japanese, and South Vietnamese authorities. It has also published a monthly organ, Nihon to Betonamu (Japan and Vietnam). Additionally, the Japan Committee to Support the Vietnamese People was established in 1965 under the JCP's initiative. With the participation of the Japan-Vietnam Friendship Association and other pro-Communist organizations, the Committee started a fund-raising campaign for North Vietnam.95

Table 17 Japanese Trade with North and South Vietnam, 1960-1976 (in thousands of dollars)

Year

South

1960 1%1 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 (1-8)

61,490 65,714 60,066 33,297 34,077 36,656 138,086 174,586 198,963 223,156 146,073 149,370 104,673 86,451 104,491 38,575 48,449*

Exports North 5,950 4,587 3,353 4,317 3,371 3,853 5,649 1,816 2,444 7,259 5,020 3,746 3,048 4,429 20,394 42,973 118,795

Total

South

Imports North

67,440 70,301 63,419 37,614 37,448 40,509 143,735 176,402 201,407 230,415 151,093 153,116 107,721 90,880 124,885 81,548 167,244 108,117 (-8.4%)

4,757 2,849 3,932 6,036 6,743 6,542 5,386 4,576 2,719 3,309 4,554 4,190 13,839 29,107 30,692 14,505 8,970*

10,196 12,696 12,954 10,254 9,842 11,456 9,650 6,685 6,107 6,015 6,317 11,586 2,539 7,627 30,194 26,697 39,906

Source: MTTI's statistics. Cited from Ebashi and Yamada 1978, p. 411. - indicates minus. * Total up to August 1976. The amount after September is added to that of the North.

Total 14,953 15,545 16,886 16,290 16,585 17,998 15,036 11,261 8,826 9,324 10,871 15,776 16,378 36,734 60,886 41,202 48,876 50,787 (+74.4%)

South

Balance North

56,733 62,865 56,134 27,261 27,334 30,114 132,700 170,010 196,244 219,847 141,519 145,180 90,834 57,344 73,799 24,070 39,479

-4,246 -8,109 -9,601 -5,937 -6,471 -7,603 -4,001 -4,869 -3,663 1,244 -1,297 -7,840 509 -3,198 -9,800 16,276 78,889

Total 52,487 54,756 46,533 21,324 20,863 22,511 128,699 165,141 192,581 221,091 140,222 137,340 91,343 54,146 63,999 40,346 118,368 57,330

InAugst195,JapecomiblhdK'yk(FrCu)w

Period Prior to 1973 41 Table 18 Japanese Trade with North Vietnam, 1956-1975 (in thousands of yen) Year

Exports

Imports

(%)

(%)

121,829

Total

(%)

1956

138,960

1957

1,366,920

983.6

1,491,587

1224.3

2,858,507

1096.0

1958

1,665,360

121.8

1,313,439

88.0

2,978,799

104.2

1959

1,853,640

111.8

1,729,800

131.7

3,583,440

120.2

1960

2,363,760

127.5

2,719,720

157.2

5,083,480

141.8

1961

1,812,240

76.6

3,592,937

132.1

5,405,177

106.3

1962

1,350,720

74.5

3,247,640

90.3

4498,360

85.0

1963

1,761,840

130.4

2,593,080

79.8

4,354,920

94.7

1964

1403,000

85.3

2,843,860

109.6

4,346,860

99.8

1965

1,566,432

104.2

4,124,027

145.0

5,690,459

130.9

1966

1,991,306

127.1

3,474,053

84.2

5,465,359

96.0

1967

653,898

32.8

2,406,632

69.2

3,060,530

55.9

1968

879,784

134.5

2,198,702

91.3

3,078,486

100.5

1969

2,613,363

297.0

2,165,387

98.4

4,778,750

155.2

1970

1,807,205

69.1

2,274,047

105.0

4,081,252

85.4

1971

1,264,894

69.9

4,075,820

179.2

5,340,714

130.8

1972

938,706

74.2

782,024

19.1

1,720,730

32.2

1973

1,189,915

126.7

2,063,918

263.9

3253,833

189.0

1974

6,049,337

508.3

8,735,367

423.2

14,784,704

454.3

19,269,619

318.5

8,198,371

93.8

27,467,990

185.7

1975

*

Source: Nichi-Etsu Boetikai 1976, p. 70. % indicates the ratio to the previous year. * The 1975 data includes trade with South Vietnam.

260,789

42 Japanese Relations with Vietnam

Chart 2. Japanese Trade with North Vietnam, 1956-1975 Source: Nichi-Etsu Boekikai 1976, p. 71.

CHAPTER 2 JAPANESE ATTITUDES TOWARD VIETNAM FROM 1973 TO 1975

1. Normalization of Diplomatic Relations With North Vietnam The conclusion of the Paris peace accords in January 1973 opened a new epoch in Japanese policy toward Indochina. Some earlier signs of change in international politics in the western Pacific had appeared in the late 1960s: the British withdrew their armed forces from Singapore and Malaysia in 1967, and the United States decided to diminish its military presence in Southeast Asia in 1969. Non-Communist countries in Southeast Asia, seeking a new balance, wanted to readjust their relations with Communist countries and first made overtures to the USSR. Shortly after that, China began approaching neighboring countries in Asia in order to recover from the serious diplomatic setbacks suffered during the cultural revolution.96 Yet Japanese leaders at that time were not very sensitive to this new current. Japanese relations with neighboring countries had always been tuned to US politics and strategy. So long as the United States did not make any remarkable changes in its policy toward Asian communism, Japanese leaders tended to be conservative also with regard to their policy toward Asia. In June 1971, the United States surprised Japanese leaders by announcing Nixon's plan to visit China, which was carried out the following February. The so-called "Nixon shock" overturned the decades-long framework of Japanese policy toward Asia. The Sato administration, which faithfully continued Kishi's anti-Beijing and pro-Taipei policy, could no longer cope with the changing situation. Sato resigned from office in 1972. A new government under Premier Kakuei Tanaka quickly changed the policy and hastily started moving toward normalization of diplomatic relations with China.97 Thus by the time the Paris peace accord was signed, the international circumstances surrounding Japan and Southeast Asia had totally changed. In due course, many antiCommunist regional organizations lost their reason for existence. The Southeast Asia Treaty Organization (SEATO), which was set up at American initiative in September 1954, decided at the New York meeting in September 1973 to stop its military functions and finally declared its dissolution in September 1975. Even before that, in November 1972, Pakistan officially resigned from this organization. The Asian and Pacific 43

44 Japanese Relations with Vietnam Council (ASPAC), which was established on the initiative of South Korea, met the same fate. In March 1973, Malaysia retired from this, while normalizing relations with Beijing and Hanoi. ASPAC itself made a decision to suspend its activities at the standing committee's meeting at Bangkok in June 1973. The Ministerial Conference for Economic Development of Southeast Asia, which was established on Japanese initiative, also eventually became inactive, and in 1975, Singapore sabotaged the organization of the scheduled annual conference. Various attempts by extraregional forces to rally anti-Communist countries in Southeast Asia were thus doomed to failure.98 Instead Southeast Asian non-Communist countries preferred to consolidate their own regional organization, the Association of Southeast Asian Nations (ASEAN), which was established in 1967 without the participation of any extraregional countries." In sum, with the US-Chinese reconciliation and the conclusion of the Paris peace accords, the decades-long strategic framework that the United States had sustained with Japanese cooperation ceased to exist. Now Japanese leaders felt the urgent necessity to seek a new policy in Asia. Moreover, in early 1974, when Prime Minister Tanaka made an official tour of Southeast Asia, he encountered strong criticism from the local population, especially in Thailand and Indonesia. By then, the Japanese economic presence in Southeast Asia was very conspicuous. Japan had very important economic interests in that region, but she now had to appease the Southeast Asian reaction against her.100 To cope with this new situation, the Japanese leaders began to adopt new policies toward Asia. First, they moved toward normalization of relations with Asian Communist countries (except for North Korea). Second, they attached more importance to Asia in their foreign policy. Third, they recognized ASEAN as an organization which was to play a key role among Southeast Asian non-Communist countries in encouraging regional cooperation.101 The basic idea behind these new policies was that Japan should contribute to the creation of a new equilibrium and to the promotion of stability in Asia. Japanese leaders regarded this as their country's responsibility; they felt that Japan should and could play a role in the Asian world, mainly by using her economic power.102 However, the Japanese also had another motive: to secure and expand economic gains in the region. For that purpose, Japan wanted East and Southeast Asia to be as stable as possible. She also wanted to have better relations with Communist countries, which were always potential markets.103 At this juncture, the Japanese government started approaching the Hanoi government. In February 1972, the chief of the first Southeast Asia section in the Foreign Ministry, Kazusuke Miyake, made an unofficial visit to Hanoi. He made another trip in April 1973. Negotiations in Paris started between the two governments in July 1973. On September 21, the two ambassadors in Paris signed an agreement to establish diplomatic relations. Thus Japan became the sixty-second country to recognize the Hanoi government104 In the meantime, mutual visits of delegations increased both in quantity and quality (see Table 19). The Japanese government gradually relaxed restrictions on the entry of North Vietnamese delegations invited by Japanese Communists, Socialists, and other organizations for political purposes. The government also gave entry permission to North Vietnamese economic and cultural delegations. An economic delegation composed of thirteen persons (including the secretary general of the Prime Minister's Cabinet; and the vice-president of the National Commission of Economic Planning) came to Japan in March 1972 upon the invitation of the Japan-Vietnam Trade Association. It was the first large-scale delegation that

Attitudes from 1973 to 1975 45 Table 19 Number of visitors to and from North Vietnam, 1968-1974 Japanese to North Vietnam* 1968 1969 1970 1971 1972 1973 1974

37 50 76 92 67 109"

100

North Vietnamese to Japan

48° 7 7 20 30 42 37

Source: Waga Gaiko 1972, p. 120; 1973, p. 138; 1974 vol. 1, p. 272 1975, p. 190. * Numbers of visas issued. b

From January to September.

c

All of these persons were involved in cultural activities, including forty-five in a dance troupe.

Japan had ever admitted from North Vietnam. During the one-month stay, the delegation visited various factories and companies and also made contact with Gaimusho (Ministry of Foreign Affairs) high officials. In December 1972, two North Vietnamese students arrived in Tokyo. This was the Japanese government's first attempt to accept students from countries which it had not officially recognized. In April 1973, four engineers came to Japan for a two-month stay; and in June 1973, a group of agricultural experts visited for six months. After Japan officially recognized the Democratic Republic of Vietnam (DRVN) in September 1973, Hanoi sent a seven-person delegation from the Patriotic Front headed by Hoang Quoc Viet. This delegation, which had been invited by the Japanese Socialist and Communist parties and four other organizations, visited Japan from October 31 to November 10,1973, and attended various political meetings. Hoang Quoc Viet also met Foreign Minister Ohira on November 9 through arrangements made by the Socialist leader, Tomomi Narita. A five-person delegation from the Vietnamese national assembly came in May 1973 at the invitation of an intraparty group of their Japanese counterparts. And an eight-person economic mission visited in March 1975; this was the first delegation that the Hanoi government officially sent to Japan (the 1972 economic delegation was nonofficial). In July 1973, the Tokyo government admitted a Vietnamese delegation including both DRVN and South Vietnam's Provisional Revolutionary Government (PRG) members. This delegation was invited jointly by the Japan-Vietnam Friendship Association and the Japan

46 Japanese Relations with Vietnam Committee to Support the Vietnamese People. The PRO members were permitted to enter with DRVN passports.105 From Japan a four-person delegation from the national Diet, consisting of Communist and Socialist members, went to Hanoi in June 1973 upon the invitation of the North Vietnamese national assembly standing committee. A two-person Socialist delegation followed in August 1973 and a Communist one of six persons in March 1974. A delegation of labor unions also went in August 1973.106 In October 1973 a joint delegation of the Japan-Vietnam Friendship Association and the Japan Committee to Support the Vietnamese People was invited by the Vietnam-Japan Friendship Association. In November 1973, a delegation of intellectuals and researchers visited North Vietnam to study archeological sites. The delegation, headed by Seicho Matsumoto (a famous novelist), met Premier Pham Van Dong in Hanoi on November 30. A delegation headed by the mayor of Kamakura also went to North Vietnam in November 1973 to see cities and towns damaged by US air attacks. These mutual visits and the emergence of a new perspective on the Indochina situation finally led to the formation of an interparty organization in the national Diet to promote friendly relations with North Vietnam. As early as March 1972, under the initiative of Kan'ichi Nishimura, a Socialist councilor who had visited Hanoi in January-February 1972, fifteen Diet members of the five parties (the Liberal Democrat, Democratic Socialist, Komei, Socialist, and Communist Parties) and the councilors' Niin Club organized a preparatory committee to establish the national Diet members' Reunion concerning Vietnam (Betonamu Mondai Giin Konwa-kai). The Communists soon left it, however, reasoning that it included the Liberal Democrat Party (LDP)'s hawks. In April 1972, the Reunion started, as an interparty gathering of voluntary members excluding Communists. In December 1972, Nishimura went to Hanoi again to arrange mutual visits of the national Diet delegations. In early 1974, an executive committee to welcome the North Vietnamese national assembly delegation was composed of voluntary members of the five parties (including Communists) and the Niin Club. At the invitation of this committee, a Vietnamese delegation, headed by Tran Danh Tuyen, President of the Vietnam-Japan Friendship Association and Minister of Resources, visited Japan in May. After the reception of this delegation, the Japanese members decided in June 1974 to disband the Reunion and organize the national Diet members' League for Japan-Vietnam Friendship (Nihon-Betonamu Yuko Giin Renmei). The League was formally started in February 1975; it included all the Diet members of the Niin Club and the Socialist, Communist, and Komei Parties, as well as voluntary members in the LDP and the Democratic Socialist Party. Among the LDP participants were Tokuma Utsunomiya, Yoshio Sakurauchi, Takeo Kimura, and Kazuo Shioya. The League elected Sakurauchi, then secretary general of the LDP, to be its chairman. The League had three aims: (1) promotion of friendly relations with the DRVN and contribution to her postwar reconstruction; (2) observance of the Paris peace accord; and (3) recognition of the PRO.107 2. Japanese Position between Two Vietnams Japanese foreign policy had thus changed drastically in the direction of reconciliation with Asian Communist countries. Japan now had official relations with all Asian countries except North Korea. This change was not thorough in the case of Vietnam, however, since there remained several problems which had not been satisfactorily resolved, even with the conclusion of the

Attitudes from 1973 to 1975 47 Japan-North Vietnam agreement of September 1973 to normalize diplomatic relations. The problems were (1) the status of the PRO; (2) Japanese war reparations to North Vietnam; and (3) transportation of weapons and munitions from the US bases in Japan to South Vietnam. The first two issues were especially important Both Tokyo and Hanoi desired a quick agreement to establish official relations; therefore they bypassed those problems with a tacit understanding that they would have detailed negotiations later on. Tokyo was eager to have a quick agreement for normalization of relations because many other Western countries, while keeping diplomatic relations with Saigon, had already normalized relations with Hanoi. Japan should not lag behind, especially if she wanted to be one of the leading countries in the postwar reconstruction in Indochina. Hanoi also wanted to have a quick agreement, because it would be a big gain in diplomatic competition with the Saigon government108 Before the conclusion of the September 1973 agreement, both Tokyo and Hanoi seemed to be rather flexible in their attitudes concerning the above problems. For instance, Foreign Minister Ohira suggested in the national Diet on February 2 and 27,1973, that the government was not ignoring the problem of war reparations to North Vietnam and that it was fully aware of the fact that the Saigon government did not control the whole territory of South Vietnam. On the other side, \heNhan Dan chief editor said to Japanese journalists on February 6 and in early June 1973 that Japan's relations with the Saigon government would not hinder the normalization of relations with Hanoi and that Hanoi did not consider Japan's formal recognition of the PRO a precondition. As for the problem of war reparations, Truong Chinh suggested to a Japanese Communist and Socialist delegation on June 8, 1973, that Hanoi would accept economic aid in the form of a grant if the content was reasonable.109 Thus, the Tokyo government was very optimistic when it concluded the September 1973 agreement. It judged that Japan could maintain the official position that the Saigon government was the unique legal government in the South, while treating the PRO in a more or less ambiguous manner, not officially recognizing it but also not regarding it with hostility. Japan could also maintain the official position that she had already paid war reparations to the Vietnamese people through the Saigon government, while providing Hanoi with a reasonable amount of economic aid without referring to reparations. On September 21,1973, when the Gaimusho's bureau of public information and cultural affairs published documents concluded with the North Vietnamese, it also made a statement "Our country has maintained the position that the government of the Republic of Vietnam is the one and only legitimate government in South Vietnam. This position will not alter at all by the establishment of diplomatic relations with the Hanoi government." On the same day, the Tokyo government also made it clear that it was prepared to provide North Vietnam with a 20 million-dollar (5 billion-yen) grant for the fiscal year 1973 if Hanoi officially requested it. This amount would balance the aid promised to South Vietnam (a 20 million-dollar grant and a 30 million-dollar loan) for the same year.110 Things did not develop according to Japanese expectations, however. An early sign of this appeared when the September 28,1973 issue of the Nhan Dan, the Lao Dong Party's organ, cited Japanese Communists' opinions concerning Japan-Vietnam relations. And the Hoang Quoc Viet delegation, which came to Japan in October-November 1973, publicly complained that the Japanese government had recognized the Saigon government but had not recognized the PRO government and that Japan had given war reparations to the Ngo Dinh Diem government but nothing to North Vietnam where the Japanese fascists had forced two million persons to die of starvation. The delegation also insisted that the Japanese government should make efforts "consistent with reason" to develop bilateral relations. The delegation signed a

48 Japanese Relations with Vietnam joint communique with their Japanese host organizations, in which they repeated Hanoi's position. The full textof the communique was quoted inNhanDan on November 18,1973.111 Japan and North Vietnam started negotiations in Vientiane concerning the opening of embassies, but they did not reach an agreement before the end of the Vietnam War.112 As for the status of the PRO, there were some differences of opinion among the Japanese authorities. In March 1973, Minister of Justice Isaji Tanaka affirmed in the national Diet that the government would permit PRG members to visit Japan, but Foreign Minister Ohira and Vice-Minister Hogan were very negative about this.113 Generally speaking, the Japanese government was very prudent about the entry of PRG persons into Japan, since this would provoke Saigon. However, the Tokyo government also felt it necessary to show its good faith to the DRVN. The government was unable to solve this dilemma before April 1975. Indeed, when Tokyo admitted the joint delegation of the DRVN and the PRG in July 1973, the Saigon authorities criticized it and even suggested economic retaliation against Japan, although the PRG members visited Japan with DRVN passports.114 Therefore, the Japanese government was very cautious about permitting PRG members' entry and rejected most of their applications except for two other cases.115 It seems that Japan rejected most of the PRG delegations in order to avoid Saigon's strong protest, but admitted a few delegations so as to appease the DRVN. In general, however, Tokyo's attitude was not inconsistent with that of Saigon. After the conclusion of the peace accords in Paris in January 1973, the Saigon government made it clear that it would recognize the Hanoi government in the North, yet as far as the South was concerned, the PRG should not be legitimate. In July 1973, Saigon proposed the simultaneous affiliation of the two Vietnams to the United Nations; with the Saigon government representing the South. Saigon maintained the position of letting any foreign country have a diplomatic relationship with the DRVN, but of immediately rupturing diplomatic relations with those which recognized the PRG. Thus the official Japanese policy toward the PRG was in general accordance with Saigon's intention to fix the division of the nation.116 Saigon also wanted Japan not to provide North Vietnam with aid except on a humanitarian basis.117 Saigon made this requirement when Japanese leaders in politics, business, and bureaucracy started discussing participation in the large-scale project of Indochina's postwar reconstruction.118 Saigon was afraid that Japanese aid to North Vietnam would intensify the latter's economic and military strength. In this regard, Japan might have displeased Saigon if she had given a 20 million-dollar grant to North Vietnam as had been originally planned. Fortunately for the Saigon government, Tokyo and Hanoi did not reach a concrete agreement about this Japanese offer before the end of the Vietnam War. Thus, while Japan gave a huge amount of emergency aid to South Vietnam, Cambodia, and Laos, she only provided North Vietnam with a modest amount of humanitarian aid through the Red Cross.119 While diplomatic negotiations with Hanoi were stagnant, commercial relations developed significantly after 1973. The year 1972 had been the worst year since 1957 in terms of trade, because of the US blockade of the Tonkin gulf. Yet after the Paris peace agreement, the situation rapidly improved. In April 1973, after a one-year interruption, Japan resumed the importation of Hon Gay coal. In August, Japanese ships, which had been stopped since April 1965 because of the crewmen union's refusal to go to Vietnam, were put in service to carry anthracite coal from Hon Gay. In November 1973, the first North Vietnamese ship, which also brought Hon Gay coal, entered a Japanese port. Anthracite had been the most important item among Japanese imports: after the oil crisis, its demand increased in the Japanese market,

Attitudes from 1973 to 1975 49 because the price of kerosene rose too high. By the end of 1973, the C. Ito group, as well as the Nissho-Iwai group, had started negotiations with the Hanoi authorities concerning oil exploration of the Tonkin gulf. Japanese exports also increased. The amount of trade with North Vietnam (the total of imports and exports) jumped to 5 billion dollars in 1974 and 7 billion in 1975 (see Tables 17and 18). Hanoi was interested not only in Japanese commodities but in technology as well. In 1973, North Vietnam asked Japanese companies (the Shimizu Kensetsu and the Mitsui group) to draw up plans for a six-story hotel in Hanoi (the project estimated at 5 billion yen: $ 19 million). In 1974, Hanoi also negotiated with the Hitachi Zosen Company about the purchase of a set of phosphatic fertilizer plants (15 billion yen: $50 million). The president of Hitachi himself visited Hanoi and met Pham Van Dong and other leading persons in November. After returning to Tokyo, he persuaded the Tokyo government to permit a deferred-payment plan financed by the Export-Import Bank. The government with new Premier Miki agreed in early 1975.120 With the prospect of a further development of trade, the need for scientific and technical exchanges between Japan and North Vietnam increased. In May 1973, a nongovernmental Association for Japan-Vietnam Scientific and Technical Exchanges (Nihon-Betonamu Kagakugijutsu koryu-kyokai) was established in Tokyo. The Association sent a mission to Hanoi in May 1974 and signed an agreement with the Vietnam Scientific and Technical Association concerning the promotion of technical exchanges. The Japan External Trade Organization (JETRO), a semigovernmental organization to promote international trade and investment, also decided in September 1973 to expand its activities with North Vietnam as well as North Korea and Mongolia121 On the other hand, Japan's trade with South Vietnam tended to shrink in the years 19721975, although her economic aid rapidly expanded and her investment became more active (see Tables 13 and 17).122

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CHAPTER 3 JAPANESE ATTITUDES TOWARD VIETNAM FROM 1975 TO 1978

1. Change of Regimes in the South and Japan's New Policies In April 1975, Phnom Penh and Saigon fell to Communist forces. The collapse of the two anti-Communist regimes in Indochina took place more quickly than most Japanese had imagined possible.123 With the fall of these regimes, the Japanese policy of supporting the antiCommunist governments in the region came to an end. On April 24 one week before the fall of Saigon, Tokyo decided to suspend its aid to South Vietnam.124 On April 30, when the Saigon government fell, it owed $50 million to the Japanese government125 Several joint ventures in which Japanese firms participated were ultimately confiscated and nationalized by the PRO.126 The Tokyo government quickly accepted the fait accompli. It recognized the PRG as the successor of the previous Saigon government on May 7, 1975, a week after the change of regimes.127 One of the reasons for this promptness seems to have been that about 200 Japanese, including embassy personnel, remained in the South, and the Japanese authorities had to protect them through contacts with the new Saigon government.128 The Japanese embassy in Saigon thus continued its consular function, although Ambassador Hiroshi Hitomi, who remained in Saigon after the change of regimes, finally left the country on June 27,1975. Tokyo did not send a new ambassador to Saigon; and in March 1976, with the prospect of the imminent reunification of Vietnam, the Japanese embassy at Saigon officially ceased all of its functions, while maintaining the proprietorship of the embassy's land and buildings.129 Many Japanese who had worked for and with the old regime eventually left the country.130 Japan's official relations with North Vietnam made remarkable progress in 1975. Immediately after the conclusion of a basic agreement regarding normalization of relations in September 1973, the Gaimusho (Ministry of Foreign Affairs) sent two officials to the embassy in Vientiane, where they were to prepare for the establishment of a new embassy in Hanoi. The Tokyo government expected to open the embassy in the spring of 1974. However, as we have mentioned, events did not develop so smoothly. The Japanese and the North Vietnamese embassies in Vientiane continued negotiations for the mutual opening of embassies, and in August 1974, the Gaimusho sent Nishiyama, councilor of the embassy in Vientiane, and Inoue,

51

52 Japanese Relations with Vietnam assistant chief of the first Southeast Asia section in Tokyo, to Hanoi. However, the two governments did not reach an agreement One of the problems was war reparations. Hanoi insisted on Japan's payment as a necessary condition for opening embassies, but Tokyo refused, arguing that Japan had already paid them through the Saigon government. Yet the two governments seem to have soon reached an agreement that Japan should provide economic aid but without referring to reparations. The most controversial issue then was the amount and contents of the aid. Japan had already decided by September 1973 to provide a 5 billion-yen grant. It seems that Hanoi demanded more. As for the contents, Japan was not willing to include materials which Hanoi might use for military purposes. Negotiations were prolonged. In early 1975,.however, the two governments agreed in principle that Japan would give more than 11.3 billion yen ($39 million), that is, the amount of war reparations paid to the Ngo Dinh Diem government, and that Hanoi would send a governmental delegation to discuss the contents of the 5 billion-yen grant which Japan had already declared she would pay. The Vietnamese delegation, headed by the acting director of the first Asia department of the Foreign Ministry, arrived in Tokyo on March 18 and stayed till April 4,1975. It was reported that the North Vietnamese made concessions with regard to Japanese terms about the contents and that the two parties had nearly signed an agreement. However, during the delegation' s stay in Tokyo, the situation in Indochina drastically changed. The Japanese government judged it not wise to conclude the agreement under such circumstances, because it was afraid of the United States' and Saigon's disapproval. Therefore Tokyo deliberately slowed down the negotiations. The North Vietnamese delegation left Japan with empty hands. After returning to Hanoi, the delegation denounced the Japanese lack of sincerity on April 9. When the old regime in Saigon collapsed, Tokyo had no more reason to worry about its displeasure. The problem concerning the status of the PRO was automatically settled as well; the PRO became the sole authority in the South. A high Gaimusho official (the director of the Asia bureau) stated on May 25, 1975, that the Gaimusho had already proposed new negotiations, since Japan now did not have to worry about the contents of the grant. On June 13, a new series of talks started in Vientiane between Hanabusa, chief of the first Southeast Asia section, and the councilor of the Vietnamese embassy in Laos. Japan offered a 12 billionyen grant, while Vietnam demanded 14.5 billion yen. They soon reached a compromise, which they initialed on October 1. Japan would provide an 8.5 billion-yen grant for the fiscal year of 1975 and tacitly agreed to pay another 5 billion-yen grant for the next year. Three Gaimusho personnel, who had been waiting in Vientiane, went to Hanoi on October 8 to prepare for the opening of the embassy. In the meantime, the Cabinet meeting in Tokyo officially decided the amount of the grant for fiscal 1975. The Gaimusho sent Suganuma, ambassador to Laos, and Ito, new chief of the first Southeast Asia section in Tokyo, to Hanoi. On October 11,1975, six months after the fall of Saigon, Suganuma and the Vietnamese viceminister of foreign affairs signed agreements concerning the grant and the opening of embassies. The Japanese embassy was immediately opened in Hanoi by Charge d' Affaires Imagawa. The Cabinet in Tokyo appointed Hasegawa as the first ambassador to Hanoi at the January 30 meeting. The Vietnamese charge d'affaires, Tran Due Tue, arrived to open the embassy in Tokyo on January 9. They used the building of the former Saigon government's embassy, which had been taken care of by the Cuban embassy since the fall of Saigon. Thus, the basic arrangements necessary for further development of diplomatic relations were accomplished.131

Attitudes from 1975 to 1978 53 2. Economic Aid to Postwar Vietnam Diplomatic relations between Japan and North Vietnam made remarkable progress after the change of regimes in the South; financial relations also made a big advance. As we have noted, on October 11, 1975, when Japan and North Vietnam agreed upon the mutual opening of embassies, Japan also signed an agreement to give North Vietnam a grant of 8.5 billion yen (about $28 million) for the fiscal year 1975. This grant was used for purchasing Japanese products such as trucks, railroad-cars, bulldozers, and other items necessary for Vietnam's postwar reconstruction. On September 14,1976, Japan also signed a further grant amounting to 5 billion yen (about $17 million) to reunified Vietnam. This grant was combined with Danish aid to construct a cement factory at Hoang Thac. Thus the total of the two-year aid amounted to about $45 million, which was approximately equivalent to the amount of Japan's war reparations to the Saigon government two decades earlier (a 39 million-dollar grant and a 16.6 million-dollar loan).132 Accordingly, Japan's trade with Vietnam, especially exports, rapidly expanded. In 1976, Japan became Vietnam's second biggest trading partner next to the USSR. Japanese exports increased because Vietnam needed so much for her urgent postwar reconstruction. Vietnam also had to purchase Japanese materials and parts to supply former Japanese factories in the South.133 For these imports, Vietnam of course utilized the grant provided by the Japanese government. Yet the amount of her imports from Japan ($167 million in 1976) greatly surpassed the value of the grant ($28 million). Vietnam's exports to Japan, on the other hand, amounted to only $49 million. The deficit was financed by aid from other countries (an estimated $20 million) and by Vietnam's own reserves.134 The financial drain was very serious for Vietnam. The Vietnamese trade pattern had been one of chronic excess imports in both the South and the North, due to the wartime conditions. The Vietnamese authorities tried to reduce the deficit after the end of the war. They drastically cut South Vietnam's consumption imports. As a result, the South's imports fell from $1,300 million in 1974 to $500 million in 1975. On the other hand, they encouraged exports. As a consequence, the deficit was greatly reduced in 1975 and 1976 (see Table 20).135 However, Vietnam was still far from eliminating her trade imbalance, since she could not stop purchasing a huge amount of items necessary for her economic recovery and further development, and, at the same time, her exporting capacity still remained rather low. This problem became more acute when the Vietnamese government started the second five-year plan in 1976. The plan was very ambitious: over five years, the government expected to invest 30 billion dong (about $7.5 billion), to result in an annual increase in GNP of 14 to 15 percent and a growth in industry of 16 to 18 percent. According to the World Bank, Vietnam's reliance on imports was estimated, in 1976, to be 11 percent of her GNP, and the ratio of imports over total investments to be 20 percent for the agricultural sector and 40 to 50 percent for the industrial sector.136 Consequently, in order to accomplish the ambitious fiveyear plan, Vietnam had to purchase more and more foreign products. In addition, Vietnam's agriculture was still incapable of supplying sufficient foodstuffs for her population, which was increasing at a high rate.137 In the latter half of the 1970s, Vietnam had to import 1.24 to 2.10 million tons of foodstuffs annually, at a cost of roughly $275 to $38 million, according to foreign observers' estimates (see Table 21).138 To make up for the deficit stemming from foreign trade, Vietnam had to use her foreign currency reserves. Yet her reserves were very limited. They fell from $379 million (the total

54 Japanese Relations with Vietnam Table 20 South and North Vietnam's Trade, 1960-1976 (in millions of dollars)

1960

1970

1971

1972

1973

1974

1975

1976

80 127 -47

118 256 -138

80 246 -166

57 232 -175

90 316 -226

135 445 -310

150 490 -340

200 650 -450

86 240 -154

10 496 -486

15 805 -790

24 743 -719

62 97 776 1,286 -714 -1,189

53 550 -497

30 150 -120

166 367 -201

128 752 -624

95 1,051 -956

81 975 -894

152 232 1,092 1,731 -940 -1,499

203 1,040 -837

23 80 -570

North Vietnam Exports Imports Balance South Vietnam Exports Imports Balance Total Exports Imports Balance

Sources: 1960,1970,1974-1976: TonanAjiaYoran 1977,pt. l,p.49.1971-1973: IMF. Cited from Ebashi and Yamada 1978, p. 251. Table 21 Vietnam's Production and Imports of Foodstuffs, 1976-1981

Foodstuffs Production (million tons) Paddy Production (million tons) Foodstuffs Imports (volume) (million tons) Foodstuffs Imports (value) (million US$)

1976

1977

1978

1979

1980

1,351

1,289

1,290

1,373

1,400

1,500

1,200

1,125

1,004

1,100

1,000

1,350

124

167

168

210

141

275

331

259

384

278

Source: Kimura 1984, p. 130.

1981

Attitudes from 1975 to 1978 55 of the North and the South) in 1974 to $120 million at the end of 1976.139 Vietnam could not resolve this financial problem by herself. Table 22 displays the Vietnamese balance of payments for 1976, as an example. From this table, calculated by foreign observers, it is evident that most of the deficit was financed by $250 million in foreign grants, $200 million in loans, and $30 million in credits for deferred payment. In other words, foreign countries' money sustained as much as two-thirds of Vietnam's payment for imports, transportation, and insurance. The Vietnamese economy would have been bankrupt without this foreign assistance. After receiving nearly $500 million from abroad, Vietnam still had to finance $20 of the deficit from reserves. The importance of foreign aid to the Vietnamese economy is also evident in Tables 23 and 24. It is clear that foreign aid has been an indispensable component of the Vietnamese budget. In brief, foreign aid and commercial loans played a vital role in the Vietnamese economy. Prior to 1975, South Vietnam had been financially supported by Western countries, among which the United States had been the major supplier (95 percent of the total foreign aid) (see Table 16);140 and North Vietnam had been sustained mainly by Communist countries, of which the USSR and China had been the most important (see Table 25).141 Yet after 1975, several new factors emerged. One of them was the cessation of US financial support to South Vietnam. Another big factor was the ambitious five-year plan that the Vietnamese authorities initiated. According to their expectations, Vietnam would receive about 15 billion dong ($3.8 billion) in foreign aid, amounting to nearly half of the economic plan's total investments (see Table 26).142 To help out, other Communist countries promised to provide much more financial support than before (see Table 25). Yet, among them, China, which was supposed to be the second biggest supporter, showed an increasingly negative attitude toward Vietnam.143 The United States, which had stopped aid to South Vietnam, was not willing to give new aid to liberated Vietnam,even though Washington had promised, during the course of the peace talks in Paris, to provide about $3 billion. The United States refused to keep this promise because, according to the Americans, North Vietnam, in conquering the South by armed force, had violated the conditions of the Paris accords.144 Under these conditions, aid from Western countries other than the United States was very important. Sweden had started helping North Vietnam in 1968 and France in 1973.145 Among the other non-Communist countries, Japan was the most significant potential source, and she actually gave grants totally $45 million for the years 1975-1976 as a virtual payment of war reparations (see Table 27). Yet after having provided this aid, Japan did not agree to any further assistance to Vietnam, because she claimed that the government of reunified Vietnam, which had absorbed the PRO, a legal successor of the former Saigon government, should assume responsibility for the debts of about $50 million owed by that government to the Japanese government. Japan and Vietnam did not reach an agreement on this issue until 1978. In the meantime, however, Japanese city banks provided commercial loans, either in German marks or Japanese yen, so that Vietnam could continue to purchase Japanese products in 1977 and 1978, as we will see later. On April 28, 1978, the two governments finally signed a new agreement, according to which Vietnam should pay back the former Saigon government's debts to Japan. In return, the Japanese government promised to provide grants over four years to total 16 billion yen (about $55 million), roughly equal to the amount of the above-mentioned debts. The Japanese government would also provide low-interest loans through the Japan International Cooperation

56 Japanese Relations with Vietnam Table 22 Vietnam's Balance of Payments, 1976 (estimated in millions of dollars) Receipts

-250

Current balance Trade Exports (FOB)

Payments

(430)

290 720

Imports (FOB) Invisible trade

(70)

Transportation and insurance (net)

70

Interest payments Touristic income

negl. negl.

(250)

Transfer Grants Remittance from abroad

250 negl. +230

Capital balance Loans from abroad (net) Credits for deferred payment (net)

200 30

Overall balance Source: Cited from Ebashi and Yamada 1978, p. 259.

-20

Attitudes from 1975 to 1978 57 Table 23 North Vietnam's National Budget (Revenues), 1955-1963

1961

1962

1963

100.0

100.0

100.0

100.0

62.2

82.2

82.6

79.7

79.5

(6.5)

(25.0)

(52.2)

(56.9)

(54.3)

(56.0)

(Taxes)

(49.3)

(34.0)

(28.5)

(23.9)

(23.9)

(22.1)

(Others)

(4.7)

(3.2)

(1.5)

(1.8)

(1.5)

(1.4)

Foreign aid (grants and loans)

39.5

37.8

17.8

17.4

20.3

20.5

1955

1957

100.0

100.0

Domestic revenues

60.5

(Enterprises)

Total revenues

1959

Source: Vietnam Handbook, Nauka, Moscow, 1960. Cited from Ebashi and Yamada 1978, p. 100.

Table 24 Reunified Vietnam's National Budget, 1976-1977 (in millions of dong)

1976 Total revenues

(%)

1977

(%)

8,975

(100.0)

8,950

(100.0)

Domestic revenues

6,002

(66.9)

7,150

(80.0)

Foreign aid (grants and loans)

2,652

(29.5)

1,800

(20.0)

320

(3.6)

-

Others Total expenditures

9,275

8,950

Source: Information from the Vietnamese Ministry of Finance and thE World Bank. Cited from Ebashi and Yamada 1978, p. 101. Notes: Figures for 1976 are those executed. Figures for 1977 are those planned.

58 Japanese Relations with Vietnam Table 25 Communist Countries' Economic Assistance to Vietnam, 1955-1980 (estimated on the basis of promises, in millions of dollars) 1955-1964

1965-1975

1955-1975

1976-1980

China

352

1,491

1,843

1,500

USSR

440

1,778

2,218

2,666

East Germany

253

253

233

Poland

184

184

107

Hungary

167

167

167

102

102

133

Bulgaria

98

98

127

Rumania

40

40

30

3

3

12

Czechoslovakia

201*

Cuba

*

201

Total

993

4,116

5,109

4,978

Average per year

(99)

(374)

(243)

(996)

Source: Cited from Ebashi and Yamada 1978, p. 278 * indicates that breakdown of the amount for each country is unknown.

Agency (JICA) to amount over two years to 20 billion yen ($70 million). For the first year of this assistance project, 1978, Japan supplied 4 billion yen in grants and 10 billion yen in loans.146 Thus one obstruction to the development of economic relations between the two countries was finally cleared away. 3. Economic Relations after 1975 Even before the fall of the Saigon government, Japanese leaders both in the administration and in business had started to develop contacts with the Vietnamese authorities in Hanoi. In

Table 26 Vietnam's Investment for the Second Five-Yar Plan, 1976-1980 (in billions of dong)

1976

(%)

1977

(%)

1978

(%)

1979

(%)

1980

(%)

Total

(%)

Total investment

4.2

(100.0)

5.0

(100.0)

7.0

(100.0)

8.7

(100.0)

10.1

(100.0)

35.0

(100.0)

Investment by the state

3.6

(85.7)

4.2

(84.0)

6.0

(85.7)

7.5

(86.2)

8.7

(86.1)

30.0

(85.7)

0.6

(14.3)

0.8

(16.0)

1.0

(14.3)

1.2

(13.8)

1.4

(13.9)

5.0

(14.3)

From foreign aid

2.1

(50.0)

2.1

(42.0)

3.1

(44.3)

3.6

(41.3)

4.3

(42.6)

15.0

(42.9)

From home accumulation

2.1

(50.0)

2.9

(58.0)

3.9

(55.7)

5.1

(58.6)

5.8

(57.4)

20.0

(57.1)

Investment by collective and private sectors Resources

Sources'. 1976-1977: National Bank of Vietnam; 1978-1980: Estimation by the World Bank. Cited from Ebashi and Yamada 1978, p. 123. Notes: Figures for 1976 are those executed; figures for 1977 are those planned. For both cases, figures are those reported by the National Bank of Vietnam. Figures for 1978-1980 are those estimated by the World Bank.

NorthVienam'slBudg(Rv),195-63

Table 27 Noncommunist Countries' Economic Assistance to North and Reunified Vietnam, 1971-1977 (estimated on the basis of promise, in millions of dollars)

1971 Japan France Sweden Denmark Finland Norway Holland Switzerland Italy Australia India Algeria Iraq UN organizations Total

15.3

15.3

1973

-

8.8+13.7* 27.5

18.9 -

-

1972

+

2.3

-

-

21.2

2.4 8.3 3.9 49.1+24.3*

1974

1975

-

28.0 9.1+67.6* 66.2

8.1+18.9* 45.1 19.5+31.8* + 0.3+8.0* 2.4 8.3 0.8 3.0 7.7 82.2+37.5*

0.8+3.3* 34.2 23.644.1* 0.4 0.3 3.0 34.5 191.3+81.5*

1976

1977

17.0 6.9447.8* 8.1+127.9* 74.6 82.6