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POLITICIANS, PARTY PREFERENCES Summary: Newspapers in the Former Yugoslav Republic of Macedonia have published the results of opinion polls, indicating the relative popularity of politicians, political parties, and attitudes toward the political system. The 22-23 January edition of the Skopje newspaper VECER in Macedonian published on pages 6-7 the results of an opinion poll conducted by the "BriMa" agency in November 1993. According to VECER, 1,036 respondents were classified by age and residence, but the paper did not explain the methodology or give the margin of error. For the purpose of comparison, the paper cited the results of an unidentified poll made in May 1993. The approval/disapproval ratings, in percent, for ten Macedonian politicians were: November 1993 May 1993 Kiro Gligorov, President of the Republic 76/15 78/13 Vasil Tupurkovski, former Macedonian 50/36 43/37 official in Federal Yugoslavia Ljubomir Frckovski, Interior Minister 50/42 42/43 Stojan Andov, Parliamentary Chairman 48/41 48/39 Branko Crvenkovski, Prime Minister 46/41 44/38 Vlado Popovski, Defense Minister 41/41 36/37 Stevo Crvenkovski, Foreign Minister 40/43 No Data Given Petar Gosev, Democratic Party leader 34/53 40/42 Todor Petrov, Independent parliamentarian 32/53 No Data Given Nikola Popovski, Social Democratic 29/46 32/42 Party parliamentarian VECER noted that President Gligorov's very high approval rating of 90 percent among those over age 65 fell off to a still high 70 percent among respondents between 18 and 24. Residents of Skopje ranked the politicians in a slightly different order from the ranking given by the whole sample: Gligorov, Tupurkovski, Frckovski, Andov, Gosev, Branko Crvenkovski, Vlado Popovski, Petrov, Nikola Popovski, and Stevo Crvenkovski. The results of a series of opinion polls conducted by the Agency for Public Opinion Research and published "exclusively" by the Skopje weekly PULS newspaper, confirmed Gligorov's substantial lead in popularity among political figures. According to the 31 December 1993 issue of PULS (pages 16-18), the agency gathered the data by means of telephone interviews with 300 residents in the Republic of Macedonia during 20-24 December. PULS also provided data from surveys made in March, June, and September for comparison. Some of the following percentages are approximate values that were derived from the graph published by the paper: March June September December Kiro Gligorov 87 82.33 89.33 89 Stevo Crvenkovski 54 65 49 63 Stojan Andov 61 62 60 61 Branko Crvenkovski 56 60 54 53.5 Ljubomir Frckovski 35 45 48 50 Petar Gosev 50 31 52 49.53 Jovan Andonov, Deputy Prime Minister 39 39 50 37 Vlado Popovski 18 25 36 35 Kiro Popovski, Deputy Chairman, Parliament 26 27 33 32 Ante Popovski, leader of MAAK (Movement for All- Macedonian Action) 29 32 32 indistinct Jane Miljovski, Minister without Portfolio -- 23 31 24 Vladimir Golubovski VMRO-DP (Internal Macedonian Revolutionary Organization-Democratic Party) leader -- 30 25 23 Nevzat Halili Party for Democratic Prosperity official 38.33 38 18 18 Lj upco Georgievski VMRO-DPMNE (Internal Macedonian Revolutionary Organization-Democratic Party for Macedonian National Unity) official 18 10 16 17 Dosta Dimovska VMRO-DPMNE official -- 11 17 16 On pages 6 and 7 of its 15-16 January issue, VECER also published the results of a November 1993 survey on party preferences. "BriMa," working with the Gallup organization, interviewed 1,036 people. Question: "If elections were held today, for which party would you vote?" (all numbers are percentages) SDSM (Social Democratic Alliance of Macedonia) 22.8 VMRO-DPMNE 11.2 Democratic Party (DP, led by Petar Gosev) 6.3 Socialist Party 3.3 Liberal Party (LP) 3.2 Workers Party 2.9 PCERM (Party for the Full Emancipation of Romanies in Macedonia) 1.8 Democratic Party of Turks in Macedonia 0.8 MAAK 0.3 Another party 4.0 Undecided 18.6 Would not vote 6.6 VECER noted that some parties fared better in certain cities than their overall scores indicate. For example, the DP was about twice as popular in Skopje as elsewhere, getting 12.1 percent in the capital; the VMRO-DPMNE was more popular in Bitola, getting 15.7 percent, than in the remainder of the country; and the LP in the Bregalnica area got the support of 10.6 percent, substantially higher than the 3.2 percent support it received overall. Question: "Do you have confidence in the following parties?" (all numbers are percentages) Yes No Do Not Know SDSM 28 51 21 VMRO-DPMNE 15 72 14 LP 19 59 22 PDP-NDP* 20 73 7 *Party for Democratic Prosperity-People's Democratic Party The poll clearly indicated that Macedonians have little confidence in any of the parties currently active in the country. Respondents were also asked whether it would be good for the country to have elections sooner than scheduled; 62 percent agreed, 20 percent disagreed, and 18 percent did not know. These findings were correlated with party preferences, producing the following results: Of those who would vote for the SDSM, 54 percent wanted elections soon, while 34 percent were against early elections. However, 80 percent of VMRO-DPMNE supporters favored elections soon, as did 79 percent of LP supporters and 71 percent of DP supporters. While 80 percent of those surveyed thought that a person should vote (14 percent did not agree), only 40 percent thought that it was very important which party won the elections and 27 percent thought it was somewhat significant. (AUTHOR: GALYEAN. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, BALKANS BRANCH AT (703) 733-6481) ELAG/25 February/POLCHF/EED/DEW 28/2023Z FEB

INTRODUCTION This guide is intended to help users of Foreign Broadcast Information Service (FBIS) translations assess the value and reliability of media sources in the countries or regions of the former Yugoslavia. It provides key information about the media of Bosnia-Herzegovina, Croatia, The Former Yugoslav Republic of Macedonia, Slovenia, and the Federal Republic of Yugoslavia (incorporating Serbia and Montenegro). Wherever possible, an at tempt has been made to identify affiliations or reliably reported connections between media sources and governmental or communal leadership groups. All media identified in this guide are monitored by FBIS, but in some cases, due to wartime conditions, receipts have been irregular and the information provided in the guide may be incomplete. Characterizations, where provided, are based on FBIS analysis of editorial content. Entries are grouped by region, and, within regions, by category: publications, radio, television, and news agencies. The "sourcelines" cited at the beginning of each entry are the descriptors used by FBIS to identify media sources of FBIS translations. Sourcelines are composed of three elements--the place of origin of the medium, its name, and the language it uses. BOSNIA-HERZEGOVINA PUBLICATIONS JAVNOST Sourceline: Pale JAVNOST in Serbo-Croatian Translation of name: The Public Masthead caption: "Weekly Information Newspaper of the Republic of Srpska" Type of publication: Weekly newspaper Day of publication: Saturday Publisher: Javnost Newspaper Publishing Enterprise Address: 71000 Pale Chief editor: Jovan Janjic Founded by and represents the views of the People's Assembly of the self-styled Republic of Srpska, led by Radovan Karadzic; printed in Belgrade by the Politika publishing enterprise. RADIO MOSTAR CROATIAN RADIO HERZEG-BOSNA Sourceline: Mostar Croatian Radio Herzeg-Bosna in Serbo-Croatian Station identification: "This is Croatian Radio Herzeg-Bosna" Monitored by dial-up phone feed; represents the views of the leadership of the self-proclaimed Croatian Republic of Herzeg-Bosna in Bosnia-Herzegovina. PALE RADIO Sourceline: Pale Srpski Radio-Televizija Studio Sarajevo Radio in Serbo-Croatian Station identification: "Serb Radio-Television First Program Radio, Studio Sarajevo" Principal frequencies: 1242, 1395 kHz; FM: 88.7, 89.9, 91.7, 92.5, 92.8, 101.7, 102.3, 106.2 MHz Hours of operation: Newscasts observed at 0600 GMT and 1600 GMT Broadcasts from Pale, the administrative center of the self-proclaimed Serb Republic in Bosnia-Herzegovina. Employs mainly former Radio Sarajevo journalists, who fled Sarajevo after the outbreak of war. Uses transmitters and relays once used by Radio Sarajevo, principally on FM and mediumwave frequencies. Represents the views of the Serb leadership of the "Republic of Srpska" in Bosnia-Herzegovina. First heard on 27 December 1992. FBIS does not monitor television from this source. SARAJEVO RADIO Sourceline: Sarajevo Radio Bosnia-Herzegovina Network in Serbo-Croatian Station identification: "Radio Bosnie-Hercegovine" or "Radio Bosnie-Hercegovine Studio Sarajevo" Other languages: English (some newscasts broadcast in English) Principal frequencies: 612, 6889.27 kHz upper sideband Hours of operation: 0400-2400 GMT Monday-Friday; 24 hours Saturday-Sunday Operated by the Bosnian Government, led by President Alija Izetbegovic; represents the views of the predominantly Muslim authorities. At 1900 GMT the radio carries the audio portion of the main Sarajevo Television newscast. The station has experienced frequent outages over the past two years because of the fighting in and around Sarajevo but has not been off the air for more than a few days. CROATIA PUBLICATIONS BIH EKSKLUZIV Sourceline: Split BIH EKSKLUZIV in Serbo-Croatian Translation of name: Bosnia-Herzegovina Exclusive Masthead caption: "So That You Do Not Forget Your Homeland" Type of publication: Weekly newspaper Day of publication: Friday Publisher: Una Press Address: Postanski Pregradak 431, 58000 Split Director/Chief editor: Ahmed Bosnic Target readers are Bosnian refugees in Croatia. Concentrates on reports of fighting in Bosnia-Herzegovina, crimes allegedly committed by Serbs, some foreign affairs. DANAS Sourceline: Zagreb DANAS in Serbo-Croatian Translation of name: Today Masthead caption: "Croatian Political Weekly" Type of publication: Weekly magazine Day of publication: Tuesday Publisher: Maximal-Peko Address: Slavonska Avenija 4, 41000 Zagreb Director: Boris Ivin Peko Chief editor: Hloverka Novak-Srzic This magazine, originally a publication of the government-owned Vjesnik publishing enterprise, changed its name from DANAS to NOVI DANAS in July 1992 after being privatized. Publication of NOVI DANAS was suspended in September 1992, after only eight issues, some of which were sharply critical of the government. It reappeared as DANAS on 8 January 1993 under the ownership of a new private company, led by Director Peko. Chief editor Novak-Srzic, a former Zagreb television journalist, has been described by the Zagreb weekly GLOBUS as a Croation Democratic Community (HDZ) stalwart. While generally supportive of the government, DANAS has occasionally come under attack by some government figures for articles deemed unfairly critical of the authorities. GLAS SLAVONIJE Sourceline: Osijek GLAS SLAVONIJE in Serbo-Croatian Translation of name: Voice of Slavonia Masthead caption: "The War Edition" Type of publication: Newspaper Days of publication: Monday-Saturday Publisher: Medija centar "Glas Slavonije" Address: Hrvatske Republike 20, Osijek Director: Karlo Karacic Chief editor: Vladimir Vazdar Regional daily that reflects the strongly Croatian nationalist views of the leadership of Slavonia; also carries foreign news and commentaries. GLASNIK Sourceline: Zagreb GLASNIK in Serbo-Croatian Translation of name: The Herald Masthead caption: "Herald of the Croatian Democratic Community" Type of publication: Weekly magazine Day of publication: Monday Publisher: Hrvatska Demokratska Zajednica Address: Trg Hrvatske Velikana 4, Zagreb Chief editor: Zdravko Gavran Party weekly with its editorial office located in Croatian Democratic Community (HDZ) headquarters. Authoritatively represents HDZ views, contains reports and commentaries on domestic and foreign affairs as well as reports on party affairs and interviews with party figures. GLOBUS Sourceline: Zagreb GLOBUS in Serbo-Croatian Translation of name: The Globe Masthead caption: "National Weekly" Type of publication: Weekly newspaper Day of publication: Friday Publisher: Globus International Address: Marticeva 22, Zagreb Director: Zdravko Jurak Chief editor: Denis Kuljis Independent, privately owned newspaper that features interviews, reports, and articles on domestic and foreign issues. It is known for its provocative, sometimes sensationalist style, and for investigative journalism. It frequently publishes results of polls on the popularity of Croatian parties and leaders. HRVATSKI VOJNIK Sourceline: Zagreb HRVATSKI VOJNIK in Serbo-Croatian Translation of name: Croatian Soldier Masthead caption: "Gazette of the Croatian Ministry of Defense" Type of publication: Biweekly magazine Day of publication: 1st and 15th of the month Publisher: Croatian Ministry of Defense Address: Zvonimirova 12, Zagreb Chief editor: Brigadier Ivan Tolj Supplement: HRVATSKI ZRAKOPLOVAC (Croatian Airman) Carries reports on the activities of the Croatian Army, reviews of new weapons and interviews with military and political leaders. NEDJELJNA DALMACIJA Sourceline: Split NEDJELJNA DALMACIJA in Serbo-Croatian Translation of name: Weekly Dalmatia Type of publication: Weekly newspaper Day of publication: Wednesday Publisher: Slobodna Dalmacija--Novine, Novinsko-Nakladnicke Djelatnosti Address: Ulica Ivana Gundulica 23, Split Chief editor: Miroslav Ivic Carries reports and commentaries on domestic and foreign issues by prominent journalists and politicians; shares much of its writing staff with the daily SLOBODNA DALMACIJA. NOVI LIST Sourceline: Rijeka NOVI LIST in Serbo-Croatian; Rijeka TJEDNI NOVI LIST on Sunday Translation of name: New Newspaper; Weekly New Newspaper Masthead caption: "NOVI LIST Was Founded by Frno Supilo on 2 January 1900" Type of publication: Newspaper Days of publication: NOVI LIST on Monday-Saturday; TJEDNI NOVI LIST on Sunday Publisher: Novi List Address: Zvonimirova 20/a, Rijeka Director: Zdenko Mance Chief editor: Veljko Vicevic Under the ownership of a private company, led by Director Mance, this formerly government-owned newspaper has established its independence from government influence. The paper has adopted a generally nonpartisan editorial policy critical of both the government and opposition parties. SLOBODNA DALMACIJA Sourceline: Split SLOBODNA DALMACIJA in Serbo-Croatian Translation of name: Free Dalmatia Masthead caption: "The First Private Croatian Daily" Type of publication: Daily newspaper Publisher: Slobodna Dalmacij a--Novine, Novinsko-Nakladnicke Djelatnosti Address: Ulica Hrvatske Mornarice 4, Split Director: Ante Busic Chief editor: Dino Mikulandra In the early days of President Tudjman's government, the paper maintained an independent editorial policy and was frequently sharply critical of the authorities. It has become less critical of the government since the spring of 1993, when government-controlled institutions bought a controlling interest in the paper during a "privatization" process and replaced most of its management. VECERNJI LIST Sourceline: Zagreb VECERNJI LIST in Serbo-Croatian Translation of name: Evening Newspaper Masthead caption: "Independent Newspaper" Type of publication: Newspaper Days of publication: Daily Publisher: Vecernji List Address: Slavonska Avenija 4, 41000 Zagreb Director: Branko Lovric Chief editor: Branko Tudjen Tabloid format; largest circulation Croatian daily. Generally supportive of the government. VJESNIK Sourceline: Zagreb VJESNIK in Serbo-Croatian; Zagreb NEDJELJNI VJESNIK in Serbo-Croatian Translation of name: Herald; Sunday Herald Masthead caption: "Croatian Political Daily" Type of publication: Newspaper Days of publication: VJESNIK on Monday-Saturday; NEDJELJNI VJESNIK on Sunday Publisher: Novi Vjesnik Address: Slavonska Avenija 4, 41000 Zagreb Director: Davor Perkovic Chief editor: Kresimir Fijacko Leading Croatian paper, regarded in Zagreb as the paper of record. Provides broad national coverage, including interviews with prominent politicians, commentaries, and international news. Generally supportive of the government. RADIO ZAGREB RADIO Sourceline: Zagreb Radio Croatia Network in Serbo-Croatian Station identification: "Radio Croatia, Zagreb Studio" Other languages: English (Several brief newscasts daily in English) Principal frequencies: 594, 774, 1125, 1134, 1143, 5025, 6150, 9830, 13830 kHz Hours of operation: 24 hours Croatian Government-funded domestic and international radio services. Newscasts almost always represent the views of the Croatian Government and the ruling Croatian Democratic Community (HDZ). TELEVISION ZAGREB TELEVISION Sourceline: Zagreb HTV Television in Serbo-Croatian Station identification: "Croatian Television" Hours of operation: Monday, Thursday 0810-0000 GMT; Tuesday, Wednesday 0810-0045 GMT; Friday 0810-0300 GMT; Saturday, Sunday 0825-0015 GMT Director: Branko Lentic Government-funded television service. Main newscasts almost always represent the views of the Croatian Government and the ruling Croatian Democratic Community (HDZ). Other public affairs broadcasts have occasionally been criticized by government officials for their editorial content. NEWS AGENCIES HINA Sourceline: Zagreb HINA in Serbo-Croatian Translation of name: HINA is an acronym for "Croatian Press Agency" (Hrvatska Informativna Novinska Agencija) Other languages: English Official press agency of the Republic of Croatia, founded in 1991. Extensively quoted by Croatian radio, television, and press. THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA (FYROM) PUBLICATIONS FLAKA E VELLAZERIMIT Sourceline: Skopje FLAKA E VELLAZERIMIT in Albanian Translation of name: Flame of Brotherhood Type of publication: Newspaper Days of publication: Sunday, Wednesday, Friday Publisher: Nova Makedonija Address: Mito Hadzivasilev Jasmin, 91000 Skopje Director: Pande Kolemisevski Chief editor: Abdulhadi Zylfiqari Newspaper of the Albanian minority in FYROM; concentrates on reports about the Albanian community, but also reports on other events in FYROM and occasionally Kosovo and Albania. Although a part of the Nova Makedonija publishing company, which publishes the country's major Macedonian-language newspapers (see below), the newspaper follows a staunchly independent editorial policy that is often sharply critical of the Slavic Macedonian political parties. NOVA MAKEDONIJA Sourceline: Skopje NOVA MAKEDONIJA in Macedonian Translation of name: New Macedonia Type of publication: Newspaper Days of publication: Daily Publisher: Nova Makedonija Newspaper Publishing Enterprise Address: Mito Hadzivasilev Jasmin, 910O0 Skopje Director: Pande Kolemisevski Chief editor: Georgi Ajanovski Flagship newspaper of the Nova Makedonija publishing company; like other newspapers in the company, appears to set its editorial policy independently. Generally supportive of President Kiro Gligorov, but frequently critical of the coalition government. Covers domestic and foreign news, with greater emphasis on the former. Tends to give more extensive coverage to the Liberal Party than to other Macedonian parties. The paper of record in Skopje. ODBRANA Sourceline: Skopje ODBRANA in Macedonian Translation of name: Defense Type of publication: Magazine Dates of publication: Six times yearly Publisher: Macedonian Defense Ministry Address: Ulica Orce Nikolov, 91000 Skopje Chief editor: Aleksa Stamenkovski Carries articles on politics, social issues, military affairs, reviews of weapons. PULS Sourceline: Skopje PULS in Macedonian Translation of name: Pulse Masthead caption: "Independent Weekly" Type of publication: Weekly newspaper Day of publication: Friday Publisher: Nova Makedonija Address: Mito Hadzivasilev Jasmin, 91000 Skopje Director: Pande Kolemisevski Chief editor: Vasil Mickovski Carries articles, commentaries, and interviews on domestic and foreign affairs; sometimes critical of the government. Style suggests that the paper is aimed at intellectuals. VECER Sourceline: Skopje VECER in Macedonian Translation of name: Evening Type of publication: Newspaper Days of publication: Monday-Saturday Publisher: Nova Makedonija Address: Mito Hadzivasilev Jasmin, 91000 Skopje Chief editor: Stojan Nasev Popular, tabloid-style newspaper; coverage sometimes borders on sensationalism but occasionally carries investigative reports that hint at government corruption. RADIO SKOPJE RADIO Sourceline: Skopje Radio Macedonia Network in Macedonian Station identification: "You are listening to the daily chronicle of the national channel of Radio Macedonia" Other languages: Bulgarian Principal frequencies: 810, 1242, 1485 kHz Hours of operation: 24 hours Reflects the views of the FYROM Government. NEWS AGENCIES MIC Sourceline: Skopje MIC in English Translation of name: MIC is an acronym for "Macedonian Information Center" (Makedonski Informativen Centar) Type of publication: Fax/modem news digest Days of publication: Monday-Friday Publisher: Macedonian Information Center Address: Orce Nikolov 28, 91000 Skopje Director: Saso Ordanoski The Macedonian Information Center is affiliated with the World Macedonian Congress, a non-party, non-governmental organization whose stated aims are "to assist the Republic of Macedonia in its economic, scientific, and technological development and in the promotion of Macedonian culture in Europe and throughout the world." The MIC news digest was first issued on 1 October 1993. MILS-NEWS Sourceline: Skopje MILS-NEWS in English Translation of name: MILS is an acronym for "Macedonian Information and Liaison Service" (Makedonski Centar Za Informacii I Vrski) Type of publication: Fax/modem news digest Days of publication: Monday-Friday Publisher: Macedonian Information and Liaison Service Address: 91000 Skopje Director: Ljupco Naumovski MILS is the international bureau of the Australian-Macedonian Society and is supported by the Ilenden Foundation. SLOVENIA PUBLICATIONS DELO Sourceline: Ljubljana DELO in Slovene Translation of name: Labor Masthead caption: "Independent Newspaper for Independent Slovenia" Type of publication: Newspaper Days of publication: Monday-Saturday Publisher: CZP Delo Address: Dunajska 5, 61000 Ljubljana Chief editor: Tit Dobersek Editorial content includes diverse viewpoints. Covers domestic and international affairs extensively; carries many commentaries and interviews. DNEVNIK Sourceline: Ljubljana DNEVNIK in Slovene Translation of name: Daily Type of publication: Newspaper Days of Publication: Monday-Friday Publisher: Dnevnik Address: Kopitarjeva 2, 61000 Director: Ada Gorjup Chief editor: Zlatko Setinc Generally supports the views of social-democratic parties and occasionally moderate liberal parties. Devotes more attention to domestic than international affairs, using press agency dispatches for the latter; also carries commentaries and interviews. MLADINA Sourceline: Ljubljana MLADINA in Slovene Translation of name: Youth Type of publication: Weekly magazine Day of publication: Tuesday Publisher: Mladina DTP Address: Resljeva 16, 61000 Ljubljana Director: Andrej Poznic Chief editor: Robert Botteri Unaffiliated political weekly, which has uninterruptedly voiced opposition views regardless of which parties have formed the government. OSLOBODJENJE Sourceline: Ljubljana OSLOBODJENJE (Europe Edition) in Serbo-Croatian Translation of name: Liberation Masthead caption: "European Weekly Edition" Type of publication: Weekly newspaper Day of publication: Irregular Publisher: Oslobodj enj e (Saraj evo) Address: Dunajska 5, 61000 Ljubljana, Slovenia Director: Salko Hasanefendic Chief editor: Midhad Plivcic A weekly produced in Slovenia, summarizing the views of the daily edition of OSLOBODJENJE, published in Sarajevo. The daily edition (not regularly distributed outside Sarajevo) is produced by a multi-ethnic staff, which has stayed together despite the Bosnian civil war. SLOVENEC Sourceline: Ljubljana SLOVENEC in Slovene Translation of name: The Slovene Masthead caption: "Newspaper for Politics, Economics, Culture, and Religion" Type of publication: Newspaper Days of publication: Monday-Saturday Publisher: Slovenec Ltd. Address: Dunajska 9, Ljubljana 61000 Director: Janez Obreza Chief editor: Jani Virk Promotes the views of the center-right Christian Democratic Party, the Democratic People's Party, and Liberal Democratic Party. Focuses on domestic issues; primarily uses press agency reports to cover international affairs; carries some commentaries and interviews. RADIO LJUBLJANA RADIO Sourceline: Ljubljana Radio Slovenia Network in Slovene Station identification: "Radio Slovenija, First and Second Program" Principal frequencies: 918, 7215, 9720, 15105 kHz Hours of operation: 24 hours Generally reflects views of the Slovene Government. FEDERAL REPUBLIC OF YUGOSLAVIA KOSOVO PUBLICATIONS BUJKU Sourceline: Pristina BUJKU in Albanian Translation of name: The Peasant Masthead caption: "Periodical for Social Issues in the Countryside" Type of publication: Newspaper Days of publication: Issued five to six times per week; no regular days Publisher: Rilindja Enterprise Address: Pallati i Shtypit, Pristina Chief editor: Behlul Jashari BUJKU was formerly a publication for peasant farmers. Since the banning of the Albanian-language daily RILINDJA in 1990, it gradually become a current affairs publication concentrating on Kosovar, Yugoslav, and world politics. Has supported the rights of Kosovo Albanians. Employs a number of former RILINDJA journalists. RADIO PRISTINA RADIO Sourceline: Pristina Radio Pristina Network in Albanian Principal frequencies: 1413, 1539 kHz Hours of operation: 0400-2305 GMT Operated by the Serbian Radio and Television Network; carries largely the same material as Belgrade radio. TELEVISION PRISTINA TELEVISION Sourceline: Pristina TVP Television Network in Serbo-Croatian Station identification: "Pristina Television" See entry under Belgrade RTB Television Network, page 28. NEWS AGENCIES KOSOVA DAILY REPORT Sourceline: Pristina KOSOVA DAILY REPORT in English Type of publication: Faxed news digest Days of publication: Monday-Friday Publisher: Democratic Alliance of Kosovo Address: 38000 Pristina Digest of news reports on Kosovar affairs prepared by the Democratic Alliance of Kosova, the largest Albanian opposition party in Kosovo. MONTENEGRO PUBLICATIONS MONITOR Sourceline: Podgorica MONITOR in Serbo-Croatian Translation of name: Monitor Masthead caption: "Montenegrin Independent Weekly" Type of publication: Weekly magazine Day of publication: Friday Publisher: Montenegropublic, Podgorica (privately owned) Address: Ulica 19 Decembra Broi 19, 81000 Podgori ca Director: Miodrag Perovic Chief editor: Esad Kocan Independent magazine that publishes commentaries, interviews, articles. Frequently critical of Serbian, Montenegrin, and Federal Republic of Yugoslavia officials. POBJEDA Sourceline: Podgorica POBJEDA in Serbo-Croatian Translation of name: Victory Masthead caption: "Founded by the Montenegrin Assembly" Type of publication: Newspaper Days of publication: Monday-Saturday Address: Bulevar Revolucije 11, 81000 Podgorica Director/Chief editor: Nikola Ivanovic Reflects the views of the government of Montenegro. TELEVISION PODGORICA TELEVISION Sourceline: Podgorica TVCG Television Network in Serbo-Croatian Station identification: "Montenegro Television" See entry under Belgrade RTB Television Network, page 28. SERBIA PUBLICATIONS BORBA Sourceline: Belgrade BORBA in Serbo-Croatian; Belgrade NEDELJNA BORBA in Serbo-Croat ian Translation of name: Struggle; Sunday Struggle Masthead caption: "Independent Political Daily" Type of publication: Newspaper Days of publication: BORBA on Monday-Friday; NEDELJNA BORBA (Saturday-Sunday edition) on Saturday Publisher: Borba Address: Trg Nikole Pasica 7, 11000 Belgrade Director: Dusan Mijic Chief editor: Slavko Curuvija Staunchly independent, nonpartisan newspaper, recently taken over by a new private owner. Contains broad coverage of domestic and foreign affairs; frequently critical of the government of President Slobodan Milosevic and federal authorities. DUGA Sourceline: Belgrade DUGA in Serbo-Croatian Translation of name: Rainbow Type of publication: Biweekly magazine Day of publication: Every other Saturday Publisher: Beogradski Izdavacko-Graficki Zavod Address: Bulevar Vojvode Misic, 11000 Belgrade Director/Chief editor: Ilija Rapaic Independent biweekly that carries political and social commentary as well as articles focusing on popular culture. Regularly carries a column of political commentary written by Mirjana Markovic--Milosevic's wife--that often criticizes the Serbian nationalist cause. EKONOMSKA POLITIKA Sourceline: Belgrade EKONOMSKA POLITIKA in Serbo-Croatian Translation of name: Economic Policy Type of publication: Weekly magazine Day of publication: Monday Publisher: Ekonomska Poli tika Address: Trg Nikole Pasica 7, 11001 Belgrade Director/Chief editor: Milutin Mitrovic Carries articles, statistics, and interviews on economic and business affairs; has criticized the economic policies of the Serbian Republic and the federal government. INTERVJU Sourceline: Belgrade INTERVJU in Serbo-Croatian Translation of name: Interview Type of publication: Weekly magazine Day of publication: Friday Publisher: Politika Address: Cetinjska 3-III, 11001 Beograd Chief editor: Dragan Vlahovic Independent news weekly; carries interviews with prominent politicians, as well as articles and commentary on political, economic, and social issues. NIN Sourceline: Belgrade NIN in Serbo-Croatian Translation of name: NIN is an acronym for "Weekly Information Newspaper" Type of publication: Weekly magazine Day of publication: Friday Publisher: NIN Address: Cetinska 1, Belgrade Director/Chief editor: Dusan Velickovic Independent news weekly; generally supports moderate Serbian nationalism; often criticizes the policies of the Serbian Government; also frequently critical of the Bosnian Government and both the Croatian Government and the Bosnian Croats. POLITIKA Sourceline: Belgrade POLITIKA in Serbo-Croatian Translation of name: Politics Type of publication: Newspaper Days of publication: Daily Publisher: Poli tika Address: Makedonska 29, 11000 Belgrade Director: Hadzi Dragan Antic Chief editor: Bosko Jaksic Independent newspaper; flagship daily of the Politika publishing company and the paper of record in Serbia. In 1992 Director Minovic, an erstwhile Milosevic stalwart, surrendered control over policy to the newly independent Politika editors. Politika, although critical of the regime between mid-1992 and the summer of 1993, has since adopted a more pro-government stance. POLITIKA EKSPRES Sourceline: Belgrade POLITIKA EKSPRES in Serbo-Croat ian Translation of name: Politics Express Masthead caption: "Evening Newspaper" Type of publication: Newspaper Days of publication: Daily Publisher: Politika Address: Makedonska 29, 11000 Belgrade Director: Zivorad Minovic Chief editor: Mile Kordic Tabloid-style newspaper; although independent, generally supports the Serbian Government and its policies; strongly supports Serbian nationalism. SRPSKA REC Sourceline: Belgrade SRPSKA REC in Serbo-Croatian Translation of name: Serbian Word Masthead caption: "Free Newspaper" Type of publication: Biweekly magazine Day of publication: Monday Publisher: Free Journalists Address: Brankova 13-15, 11000 Beograd Chief editor: Bogoljub Pejcic Newspaper of the Serbian Renewal Movement; its editorial stance is strongly oppositionist and Serbian nationalist. VECERNJE NOVOSTI Sourceline: Belgrade VECERNJE NOVOSTI in Serbo-Croatian Translation of name: Evening News Masthead caption: "Daily With the Largest Circulation in the Federal Republic of Yugoslavia" Type of publication: Daily newspaper Publisher: Izadavacko Preduzece Novosti Address: Trg Nikole Pasica 7, Beograd Chief editor: Radisav Rade Brajovic A tabloid that strongly supports the Serbian Government and Serbian nationalism. VOJSKA Sourceline: Belgrade VOJSKA in Serbo-Croatian Translation of name: Army Type of publication: Weekly magazine Publisher: Federal Ministry of Defense Address: Bircaninova 5, Belgrade Acting chief editor: Stanoje Jovanovic Changed name from NARODNA ARMIJA on 1 June 1992; military weekly magazine targeted at commissioned and noncommissioned officers; strongly supportive of the Milosevic regime and the Serbian nationalist cause in Bosnia-Herzegovina and Croatia. VREME Sourceline: Belgrade VREME in Serbo-Croatian Translation of name: Time Type of publication: Weekly magazine Day of publication: Monday Publisher: Vreme Address: Narodnog Fronta 45/VII, 11000 Belgrade Director: Ivan Mrdjen Chief editor: Dragoljub Zarkovic Current affairs weekly that pursues a staunchly independent editorial policy; often sharply critical of the Milosevic regime and the varieties of nationalism espoused in the Balkans. RADIO BELGRADE RADIO Sourceline: Belgrade Radio Beograd Network in Serbo-Croat ian Station identification: "Serbian Radio and Television -- Radio Belgrade First Program" Principal frequencies: 684, 7200 kHz Hours of operation: 24 hours Reflects the view of the regime of President Slobodan Milosevic, although not as tightly controlled as is Belgrade television. Provides news from Yugoslavia, former Yugoslav republics, other countries. TELEVISION BELGRADE TELEVISION Sourceline: Belgrade RTB Television Network in Serbo-Croat ian Other Studios: Novi Sad TVNS Television Network in Serbo-Croa t i an Podgorica TVCG Television Network in Serbo-Croa t i an Pristina TVP Television Network in Serbo-Croa t i an Station identification: "Radio Televizija Beograd" and "Serbian Radio and Television Satellite Program" Hours of operation: 0715-0030 GMT (Monday-Friday); 0730-0015 GMT (Saturday-Sunday) Newscasts: 1830 GMT, 2130 GMT (daily) and 1600 GMT (Monday-Friday); 1630 GMT (Saturday); 1255 GMT (Sunday) Under tight control of Milosevic regime; fully utilized for the promotion of the Socialist Party's ideas and policies. Many broadcasts are also relayed to Serb-populated regions of Bosnia-Herzegovina and Croatia. FBIS monitors only the satellite transmission of this station, which is carried six hours daily (1700-2300 GMT wintertime) and is a compilation of broadcasts prepared by the studios of the Serbian Television Network--Belgrade, Novi Sad, and Pristina--and the Podgorica (Montenegro) television studio. NEWS AGENCIES SRNA Sourceline: Belgrade SRNA in Serbo-Croatian Translation of name: Serbian Republic News Agency (Srpska Novinska Agencija) Identification: "Belgrade 9840. News by the SRNA agency." A recorded telephone message service, established to "provide news on the situation in Bosnia-Herzegovina to the citizens of the Federal Republic of Yugoslavia, especially the refugees from Bosnia-Herzegovina." Represents the views of the leadership of the so-called Republic of Srpska in Bosnia-Herzegovina. TANJUG Sourceline: Belgrade TANJUG Domestic Service in Serbo-Croatian; also Belgrade TANJUG in English Translation of name: TANJUG is an acronym for "Telegraphic Agency of New Yugoslavia" (Telegrafska Agencija Nove Jugoslavije) Principal frequencies: 5112 kHz (Serbo-Croatian); 7996, 13440 kHz (English) Hours of operation: Serbo-Croatian monitored 24 hours daily; English monitored 0500-240O GMT Monday-Friday and 0800-2100 GMT Saturday and Sunday Government-funded radioteletype news service for the domestic press (in Serbo-Croatian) and for international audiences (in English). Reflects views of the Milosevic regime. VOJVODINA PUBLICATIONS MAGYAR SZO Sourceline: Novi Sad MAGYAR SZO in Hungarian Translation of name: Hungarian Word Type of publication: Newspaper Days of publication: Thursday and Saturday Publisher: The FORUM Newspaper and Book Printing Industry Public Enterprise Address: Vojvode Misica 1, 21000 Novi Sad Director: Gyula Gobby Feher Chief editor: Sandor Balint Formerly a daily, the paper has been published twice a week since late 1993, when it was cut back because of financial problems. While MAGYAR SZO has been the main outlet for the views of the Hungarian minority's only significant political organization, the Democratic Community of Vojvodina Hungarians (DZVM), in late 1993 some DZVM officials accused the paper of reducing its coverage of the organization and of showing more support for the democratic Serbian opposition than for the DZVM. TELEVISION NOVI SAD TELEVISION Sourceline: Novi Sad TVNS Television Network in Serbo-Croatian Station identification: "Novi Sad Television" See entry under Belgrade RTB Television Network,page 28. Comments and queries regarding this media guide can be directed to Chief Analyst, Europe/Latin America Group, at (703) 733-6120. Comments and queries concerning the World Media Report series can be directed to Media Assessment Branch, Global Issues Group, at (703) 733-6131. FBIS Media Guides are disseminated electronically to U.S. Government offices that are regular FBIS sof t-copy customers, and as a hard-copy publication to all U.S. Government subscribers who regularly receive the corresponding geographic Daily Report. Copies of this guide (FBIS MEDIA GUIDE: THE FORMER YUGOSLAVIA, Document Number: WMR 94-001, Publication Date: 17 February 1994) and subscriptions to FBIS Media Guides are available free of charge to government offices from Requirements and Dissemination Branch, Foreign Broadcast Information Service, P.O. Box 2604, Washington, DC 20013-2604, Fax: (703) 733-6042. For additional information or assistance, call FBIS at (202) 338-6735. Electronic customers may also request copies or subscriptions to the hard-copy version by sending a message to the router RUCWAAB/FBIS RESTON VA//ATTN RDB//. GIG/28FEB94/OSD/PF 01/0305z Mar

SUMMARY Pyongyang's response to the latest South Korean proposal for resumption of inter-Korean talks seems to reflect an effort by the North Korean regime to score polemical points against the South and its ongoing preference for negotiating with Washington over Seoul on the nuclear issue. END SUMMARY Apparently violating a recent DPRK-U.S. agreement, Pyongyang countered Seoul's proposal for a 1 March working-level contact with a later date, a counterproposal that seemed aimed mainly at gaining some perceived polemical advantage over Seoul. According to Pyongyang radio on 1 March, Pak Yong-su, North Korean chief delegate to the proposed working-level talks, sent a telephone message to his Southern counterpart proposing a meeting on 3 March. Pyongyang's attempt to delay the North-South meeting for two days seemed to violate an agreement it had reportedly reached with Washington for resumption of high-level DPRK-U.S talks. The 25 February agreement, announced by Pyongyang radio on 28 February, specified 1 March as the date the following will take place "simultaneously": + Seoul will announce its decision to discontinue this year's running of Team Spirit and Washington will announce its consent to Seoul's decision. + The International Atomic Energy Agency will start nuclear inspections in the North to ensure continuity of safeguards. + Inter-Korean contacts will start at Panmunjom to discuss exchanging of special presidential envoys. + Pyongyang and Washington will announce resumption of high-level bilateral talks to take place on 21 March in Geneva. Pyongyang's Motives In proposing a later date for North-South contacts, Pyongyang may have been showing its concern about appearing to cave in to pressure on the issue of nuclear inspections and its continued reluctance to deal with anyone but Washington on the nuclear issue. In the latest attempt to portray Seoul as irrelevant on the nuclear issue, the party paper Nodong Sinmun in a 28 February commentary ridiculed ROK President Kim Yong-sam for allegedly acting "as if he receives U.S. reports on DPRK-U.S. talks" and "as if he controls the talks" (Pyongyang radio, 28 February). Kim creates this impression, the commentary added, even though "he is not even qualified to join the talks." Pyongyang's reluctance to engage Seoul in anything of substance was also evident in the sheer contempt for President Kim North Korea expressed in commenting on Kim's 25 February press conference commemorating the first year of his presidency. Departing from its past practice of avoiding extreme personal attacks on South Korean leaders during periods of inter-Korean dialogue, the North Korean news agency KCNA on 27 February heaped abuse on President Kim, calling him, inter alia, a "traitor," a "puppet," and a "political mountebank," accusing him of "arch crimes of flunkeyism, treachery, fascism, repression," and promoting national "division and confrontation," and of plain "stupidity." KCNA went on to claim that Kim's remarks about the probable absence of nuclear arms in the North and his proposal for an inter-Korean summit constituted a de facto admission that his "criminal" policy "against the North" had been wrong. The party paper Nodong Sinmun on 28 February similarly ridiculed Kim's "preposterously absurd remarks" (Pyongyang radio). DPRK-U.S. Talks In sharp contrast to its reluctance to meet with Seoul, Pyongyang was upbeat about the prospect of upcoming talks with Washington. Although monitored Pyongyang media have not commented on the news of the upcoming high-level bilateral talks, Ambassador Ho Chong, deputy chief of North Korea's mission to the United Nations, was depicted in South Korean media as being optimistic about the eventual outcome of the negotiations. In an interview with the Seoul daily Hangyore Sinmun (28 February), Ho termed it "fortunate" that Washington, "although belatedly," withdrew "unjustified preconditions" to resumption of the high-level talks, thus paving way for "a package solution" of "not only the nuclear issue, but also other issues now standing in the way of diplomatic normalization. Implications Pyongyang's contrasting media treatment of Washington and Seoul indicates that the North Korean leadership continues to prefer the United States as partner for nuclear negotiations and is inclined to limit talks with the South to the minimum required to fulfill preconditions to resumption of high- level talks with Washington. (AUTHOR: YIM. QUESTIONS/COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM, (703)-733-6534.) EAG/BIETZ/jf 1/1717Z MAR

The following summaries highlight information from articles that appeared in the Algiers French- and regional Arabic-language press in January and February. Liamine Zeroual's Image Favorable A report in the Arabic-language Doha (Qatar) daily AL-SHARQ of 3 February states that the public views newly elected President Liamine Zeroual as a very shrewd and experienced military man who can return Algeria "to the days of Boumedienne." According to the report, Zeroual is seen as the man who can end the confrontation between the Islamists and the nationalists since he effectively pushed for dialogue and reconciliation when he was defense minister. Zeroual reportedly considers nationalism inseparable from Islam as part of his new national order: "Zeroual goes back to the origins of the Algerian revolution when nationalism embraced Islam during the battle for independence. In the sixties the two diverged. Nationalism embraced socialism and Islam was marginalized. When socialism failed, Islam came back forcefully." Zeroual has reportedly created a positive image through his efforts as defense minister to deal in a positive manner with both the (Islamic Salvation Front) FIS and the regime. As a result, FIS leader Rabah Kebir says his party anticipates that Zeroual will change policy, but not necessarily replace government officials. According to the report, Kebir's statement indicates that the FIS is becoming more flexible and wants to undertake serious dialogue with authorities, particularly in light of the communications that took place before and after the National Dialogue in January. Influx of Refugees in the South Provokes Concern French-language Algiers daily EL WATAN of 10 and 23 January has reported that Algerian Tuareg frustration and anger is growing in Tamanrasset because of the high number of illegal foreigners (mainly from Niger, Mali, and Ghana) who reportedly outnumber Algerians in the region. The Tuaregs hold these foreigners responsible for increasing crime rates, attacks against tourists, and drug trafficking which weakens the economy and creates a security problem in the region. Hadj Moussa Akhmokh, a prominent Tuareg authority, says a 1992 plan to improve regional security was unsuccessful and that "the situation has become worse." In December, for example, the two national firms National Company for Mining Research (SONAREM) and Center for Energy Research (CREM) were looted and several vehicles were stolen. In addition, customs officials from Tamanrasset were kidnapped by a group of individuals armed with Kalashnikovs, robbed, and taken to Niger where they were manhandled before being released. According to Hadj Akhamokh, the more recent kidnapping of 18 Tuaregs (10 Algerians and eight Malians) set a "serious" precedent and was the "last straw." Citizens planned a peaceful march to demonstrate their anger and to attract the attention of authorities until Hadj Akhamokh convinced them to postpone the march. Hadj Akhmokh stated the Tuaregs have responded to his appeal, but that they are "impatient," and are waiting for the government to take control of the situation. According to Hadj Akhamokh, smuggling is also a serious problem. He faults local police for participating in the corruption and allowing it to continue. Food shipments intended for the local population are being purchased and resold for twice the price across the border, including milk which has been unavailable in the markets for "months." According to Hadj Akhmokh, "smuggling has grown to proportions that the Tuaregs can no longer tolerate. To starve the people is to push us to revolt." (See FBIS FOREIGN MEDIA NOTE FB PN 93-151 "Regional Census Prompted by Security, Economic Concerns," 8 April 1993, and NEAR EAST SOUTH ASIA REPORT 93AFO622B "Illegal Immigrants in South; Census Unreported," 12 May 1993 p 11 for additional reporting on this subject.) 'Terrorists' Exert Pressure; Press, Lifestyle Threatened EL WATAN of 16 January reported that "terrorist threats" have promoted a climate of fear in the town of Meftah, "imposing a life style that has nothing to do with Algerian society." According to the report, Meftah and Medea have become towns which immerse themselves more and more in Islamic, even "fundamentalist," tendencies. For example, the article stated that tracts posted throughout Meftah threaten that women who do not wear the hijab and who wear Western style clothes will "have to deal with us." In addition threats have been made against beauty salons, Moorish baths, and cassette vendors. "Fundamentalists" have also attacked the press, declaring it "unsuitable reading." EL WATAN reported in three articles from 16 to 18 January that newspaper vendors and bookstores in Blida, Medea, ChIef, and El Khemis were no longer selling newspapers. According to EL WATAN of 16 January, national publications, particularly those of the independent press, have suddenly disappeared from the shelves due to "terrorist threats." One citizen reported, "Don't use my name, but I am afraid to tell you that tobacco shops and bookstores are scared to death. They are convinced that if they continue to sell newspapers there could be serious reprisals." EL WATAN of 17 and 18 January reported that vendors have denied the threats, blaming distributors for failing to deliver the newspapers. Nonetheless, security services have ordered merchants to sell newspapers or be shut down. Citizens Reportedly Buying Visas An article in the French-language daily ALGER REPUBLICAIN of 19 January recounted the frustrations of dozens of Algerians trying to obtain French visas. Given the evening curfew, many spend the night in nearby hotels or in the elevators or hallways of neighboring buildings. According to the report, lines can begin as early as 4 a.m., causing citizens to resort to purchasing a place in line for 500-1000 dirhams, depending on the position in line and the time it is purchased. In the words of one citizen, "It is a real stock exchange." The French consulate reportedly closed for two days and suspended issuing visas in an effort to set up a new system whereby visa requests would be handled through the mail. (QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, AFRICA/LEVANT BRANCH AT (703) 733-6408) ENEAG/01 Mar/POLCHF/ECONF/TOTF/NEASA Division/jf 1/2129Z MAR

SUMMARY Russian officials have tried to minimize the impact on U.S.- Russian relations of the arrest of Aldrich Ames and his wife on charges of spying for the USSR and Russia against the United States. Joined by Russian media commentators, they have criticized the involvement of high-level U.S. officials in publicizing the case, saying that the case involves normal espionage activity that all countries pursue. In addition, Russian media across the political spectrum have viewed U.S. handling of the incident as evidence of a U.S. desire to marginalize Russia's international role. END SUMMARY In their initial public statements on the Ames case, Russian officials have consistently tried to minimize the incident's impact on U.S.-Russian relations. They have decried the publicity given to the case by high-level U.S. officials, saying that incidents such as the Ames case should be handled by intelligence agencies without involving officials at higher levels: -- According to ITAR-TASS on 24 February, Foreign Minister Andrey Kozyrev said that it would be better to let the intelligence services handle the case and "not to politicize or ideologize the situation." He emphasized that it is important for the United States and Russia to continue to "cooperate and not to attach undue, hypertrophied significance to this case." After the Russians expelled a U.S. Embassy officer in retaliation for the U.S. expulsion of a Russian Embassy official in Washington, Kozyrev reiterated these views and claimed Moscow "had to resort" to a reciprocal expulsion but this process of "reciprocity" should be eliminated, "the sooner the better" (ITAR-TASS, 28 February). -- A 25 February Foreign Ministry press statement sniped at U.S. handling of the case, criticizing "attempts by the special services to drag the political leadership into their mutual relations," and noted that there are "appropriate channels" that can be "brought fully" into use to deal with such cases. The statement said that if, as reported, the investigation of Ames had begun ten months ago, "this was sufficient time for us to be contacted directly" and for U.S. officials to "share their anxieties with us before making them public" (ITAR-TASS, 25 February). -- Russian Foreign Intelligence Service (FIS) officials refused to comment directly on Ames, but expressed surprise that the United States made such an outcry over actions FIS officials described as common practice for all intelligence services. FIS director Yevgeniy Primakov had "no comment" on the case (ITAR- TASS, 23 February). FIS press spokesman Yuriy Kobaladze noted that declining to comment on such allegations is the general practice among intelligence services and stressed "there is nothing new or sensational here in the fact that countries engage in intelligence activities" (Moscow radio, Russian TV, 23 February). He went on to claim that neither the United States nor Russia had "ever pledged to curtail intelligence activity" and that Washington has "been very active" in intelligence activity in Russia and the other newly independent states. Breaking ranks, at least temporarily, with other officials, Mikhail Kolesnikov, chief of the Russian General Staff, acknowledged Ames' links to Russia but later retracted this admission. A 26 February ITAR-TASS report quoted Kolesnikov as saying "Ames worked in the UnitedStates for Russia" but nonetheless claiming that he had "inflicted no direct damage" on the United States. On 28 February, however, Kolesnikov stated that the General Staff and its intelligence service "have no information on any links" between Ames and Soviet or Russian intelligence agencies. According to ITAR-TASS, Kolesnikov went on to claim that "U.S. media misinterpreted" his 26 February statement (ITAR-TASS, 28 February). Russian Media Russian media across the political spectrum indignantly criticized U.S. handling of the case and speculated, sometimes on the basis of comments by unnamed officials, that the United States had ulterior motives in timing the public exposure of Ames. Some commentators said that U.S. officials had exposed the case now because they wanted to create a pretext to reevaluate U.S.-Russian relations in the wake of the recent slowdown of reform in Russia, while others alleged that the United States wanted to take the gloss off Russia's diplomatic success in brokering a compromise over Sarajevo. Media commentary, even in publications like Izvestiya, a strong supporter of Russian efforts to integrate with the West, supported the Russian government position and criticized the United States: -- A 24 February article in Izvestiya remarked on what it saw as the "hypocrisy" of U.S. reaction to the Ames case, since, it claimed, Russia "has no less right to secret operations in the United States than America has to espionage in Russia." A 25 February article on the case headlined the question "Why Is Washington Making a Fuss?" and cited "competent sources" as speculating that the Ames' arrest was an attempt to put Moscow in its "place" after Russian diplomacy in Bosnia for the first time in recent years "cast the United States in a secondary role." -- A 25 February article in the government newspaper Rossiyskaya Gazeta worried that the Ames case is being given "political overtones" reminiscent of the 1960 U-2 incident, which triggered a sharp downturn in U.S.-Soviet relations. The article claimed that "certain forces" in the United States were trying to "exaggerate this affair" because they are unhappy with the new Chernomyrdin government and with Yeltsin's Bosnia initiative, which had "thwarted the hawks' attempt to resolve the Serbian question through air strikes" and had "suddenly and very sharply" increased Russia's "political weight in the international arena." The article concluded, however, that both the U.S. and Russian presidents were demonstrating a "well-balanced approach" and expressed hope that political relations between the two countries would not be aggravated. -- A 25 February article in the Defense Ministry's newspaper Krasnaya Zvezda cited several theories advanced by unnamed "experts" to explain the U.S. "ballyhoo" over the case. The article claimed U.S. intelligence agencies wished to get even after the exposure of more than 2O foreign intelligence agents, including U.S. spies, in the last year. An article on 26 February charged that the "fuss" over the "routine event" of a double agent's exposure is taking on an "increasingly hysterical character" in the United States, claiming with obvious sarcasm that "Langley believes that only [its agents] have the right to carry out intelligence activity." Prominent Krasnaya Zvezda observer Aleksandr Golts, in a commentary published on 1 March, implicitly took issue with this analysis, however, claiming instead that it is Russia's newly demonstrated foreign policy independence that has "driven Washington berserk." Golts contended that the United States is publicizing the Ames case because Russia's efforts to "implement an active foreign policy course" with its "successful initiative in the Balkans" had put the United States "on the sidelines" after it had become accustomed to "feeling that it is the only world leader, the only superpower." He concluded by advocating the "vital necessity" of a "partnership" with the "rules of conduct. .. the same for everyone. -- The independent pro-reform newspaper Segodnya, in a 24 February article, warned that the Ames case would revive the "old outcry" that the "Russians cannot be trusted." The article linked the case to Yeltsin's Bosnia initiative, particularly his proposal for a summit on the issue. Claiming that Yeltsin's summit proposal would be "inconvenient" for Western leaders, the article implied that the Ames "scandal" had been whipped up to "remove the Russian initiative from the agenda." A 1 March article cited unnamed sources as saying that Russian security services "are not interested in arousing passions," but that "influential U.S. forces" are hoping to "impose a time-out" for the United States to reexamine its policy toward Russia. -- In an interview published in the 26 February edition of the labor-oriented newspaper Trud, retired KGB Major General Boris Solomatin, citing examples of other spy cases where there was no official outcry, bitterly ascribed what he called Washington's "inappropriate reaction" to the Ames affair to U.S. "imperial thinking" about Russia. Lamenting that Russia had been "transformed" from an equal power whose intelligence services could work against those of the United States to one which now "has to ask permission to do so," Solomatin complained that the U.S. attitude is "we can, you cannot" because "we have the money" and "you have an outstretched hand." Contending that the United States had not given much thought to the possible consequences when it "embarked on this scandal," Solomatin claimed that now, when Russians see that the "big bucks" spent on intelligence are "working," they will recognize the importance of intelligence and begin to "organize it properly." Implications The pains taken by Russian officials to play down the Ames affair and to minimize its effect on U.S.-Russian relations clearly indicate Moscow's desire to keep the relationship on a firm footing. However, the indignant reaction on the part of both officials and the media to the U.S. handling of the case, as well as the sensitivity displayed toward perceived attempts to relegate Russia to a marginal role in diplomacy or intelligence activities, indicates that Moscow will continue to assert itself when it feels that the United States is trying to take unfair advantage. (AUTHOR: BELLINGER. QUESTIONS AND/OR COMMENTS PLEASE CALL CHIEF, ANALYSIS BRANCH, RUSSIA DIVISION, (703) 733-6070.) ENEAG/BLOUGH/ta 02/1835z mar

SUMMARY Using his decree power to reorganize the media bureaucracy, Russian President Boris Yeltsin has consolidated his control over the broadcast media and attenuated the influence of the other branches of government and the cabinet. At the same time he has taken the first step in what is likely to be a far reaching, if reversible, reduction of the state's role in television by giving a private television company access to Russia's 4th television channel. The reorganization appears to signal that longtime close Yeltsin adviser Mikhail Poltoranin, who once shaped Yeltsin's media policy, no longer enjoys the President's confidence in this area. END SUMMARY In a series of edicts dating from 5 December, Yeltsin has effected a complete restructuring of state media structures and shuffled key media personnel consolidating his authority over state television, expanding private access to television broadcasting, and creating a potentially powerful new media arbitration court (see box 1). Begin Box 1 Yeltsin Decrees Changes in Media Structures In a series of edicts issued from 5 December to 4 January, Russian President Boris Yeltsin reorganized state television, created a new media oversight body, and made major changes in key media posts: --A 5 December edict "On the Directors of VGTRK [the All-Russian State Television and Radio Company--RTV]" reappointed Oleg Poptsov and Anatoliy Lysenko as chairman and general director respectively of RTV (Sobraniye Aktov Prezidenta i Pravitelstva Rossiyskoy Federatsii, 27 December 1993). --A 22 December edict "On Improving State Management in the Mass Information Sphere" abolished the Ministry of the Press and Information and the Federal Information Center (FIC), created the Russian Federation Committee for the Press and the Federal Service of Russia for Television and Radio Broadcasting, and appointed Boris Mironov to head the former and Aleksandr Yakovlev the latter (Rossiyskiye Vesti, 24 December 1993). --A second 22 December edict "On Setting Up the 'Efir' Russian State Television and Radio Engineering Center Holding Company and the 'Golos Rossii' Russian State Radio Broadcasting Company" consolidated state control over the the national television broadcast infrastructure (Rossiyskiye Vesti, 24 December 1993). --A third 22 December edict "On Utilizing Moscow Television's Eighth Frequency Channel and its Dissemination Network" granted an independent television production company, NTV, access to Russia's 4th channel (Rossiyskiye Vesti, 24 December 1993). --A 29 December edict "On the Court of Appeals for Information Disputes Under the President of the Russian Federation" which is linked explicitly to articles 29 and 80 of the new constitution granting citizens the right to "freedom of mass information" and making the president the guarantor of that freedom created a new arbitration body under the president to resolve disputes over television coverage and access (Rossiyskaya Gazeta, 10 January). --A 4 January edict officially relieved Mikhail Poltoranin of his duties as head of the FIC (ITAR-TASS, 4 January). End Box 1 President's Role Strengthened Several aspects of the reorganization strengthen the president's powers over the broadcast media. The new television and radio service under Yakovlev will be subordinate to the president, while the edict appointing Poptsov to head RTV extends Yeltsin's appointment powers to an area once held by the Supreme Soviet Presidium. The creation of 'Efir' consolidates state control over the television broadcast infrastructure under a presidential appointee, and the new information appeals court gives the president a potentially great advantage over the other branches of government in determining the political slant and content of television programming. Profile Lowered By giving the new press committee and broadcast service sub- cabinet rank and moving out Mikhail Poltoranin and Vladimir Shumeyko, two favorite targets of his opponents, Yeltsin appears to be attempting to move the media and media policy away from the front lines of the political struggle. Poltoranin, as chief of the now defunct Federal Information Center (FIC), and Shumeyko, as head of the now abolished Ministry of the Press and Information both held ministerial rank but neither of the heads of the new bodies has ministerial rank or cabinet status. New Bodies' Powers The reorganization gives the new broadcasting service the preeminent role in regulating broadcast media, eliminating overlapping responsibilities that existed under the former structures. From the FIC the broadcast service inherits the functions of "coordinating" state policy for television and radio, assisting in the provision of "objective" information to domestic and international audiences on Russian political and economic issues, and participating in the process of drafting legislation on the broadcast media. From the Press and Information Ministry the service inherits responsibilities for implementing state television and radio broadcasting policy and for television and radio licensing and registration. The service also has authority to administer government financing and subsidies for national and regional television (Rossiyskiye Vesti, 24 December 1993) but its authority has been severely circumscribed by the Ministry of Finance (see box 2). The 22 December edict names the Committee on the Press the legal successor to both the Ministry of Press and Information and the FIC but does not elaborate its functions in detail. It presumably will assume the FIC and press ministry functions that relate specifically to the press. The edict does explicitly establish that the committee will administer government financing and subsidies, formerly a prerogative of the press ministry. Begin Box 2 Finance Ministry Cuts Television Budget On 1 February Nezavisimaya Gazeta reported that acting Finance Minister Sergey Dubinin had recently "notified representatives of Ostankino and Russian Television . . . of a 50 percent cut in financing." The decision, if not amended, could have a devastating impact on both the television companies and the Ministry of Communications which broadcasts the television signals and depends heavily on state television for its own revenues. Russian Television General Director Anatoliy Lysenko predicted that the funding cuts could force transmitter shutdowns and lead to the "loss of the broadcasting network on a large territory of Russia" (Komsomolskaya Pravda, 29 January). It is not clear if the ministry's decision to slash funding is a first step in a policy of reducing state ownership, as Yakovlev and others have advocated, or if state television simply served as a convenient target of opportunity in the finance ministry's struggle to control the money supply. End Box 2 Poltoranin Routed Aspects of the reorganization strongly suggest that Poltoranin, once the most influential figure in the Yeltsin administration in shaping media policy has suffered a startling defeat at the hands of his rival for influence Shumeyko. According to Yuriy Baturin, Yeltsin's security adviser and a co-drafter of the existing law on the mass media, Yeltsin, Shumeyko, and Prime Minister Viktor Chernomyrdin jointly agreed to the terms of the 22 December edict "On Improving State Management in the Mass Information Sphere" (Izvestiya, 29 December 1993). That edict provided for separate commissions to liquidate the Press Ministry and the FIC but appointed Shumeyko to head both. Poltoranin also appears to have lost a battle over the edict granting NTV access to channel 4, a move which he reportedly opposed. Despite his removal as FIC head, Poltoranin will continue to be involved in media policy- -possibly even in opposition to Yeltsin--as head of the Committee on Information Policy and Communications in the State Duma (ITAR- TASS; Rossiyskiye Vesti, 19 January). But, for the first time since before Yeltsin was elected president, (See Note 1) Poltoranin will not have the authority to directly influence the administration's media policy or to advise the president in an official capacity. (Note 1) With the exception of a brief hiatus from 25 November 1992 when he stepped down as Minister of the Press and Information to 25 December 1992 when he was appointed head of the newly created Federal Information Center. Poltoranin was appointed Minister of the Press and Information 10 July 1990 by the RSFSR Supreme Soviet. Yakovlev's Vision for Television Yeltsin's appointment of "the father of glasnost" and former close Gorbachev adviser Aleksandr Yakovlev to head the new broadcasting service sends ambiguous signals about his intentions regarding the broadcast media. Yakovlev once served as the head of the CPSU Central Committee's propaganda department and yet has been credited as the architect of the glasnost strategy to liberalize the Soviet media. Although he has a reputation as a reformer he does not appear to advocate westernization of Russia or unrestricted freedom for the media. In an Izvestiya interview (24 December) following his appointment, Yakovlev stated that he would refrain from "influencing" subject matter but rather play a "strategic" role as Ostankino chairman. At the same time, however, he expressed hope that the company will be able to fulfill its role in society "without succumbing to extremes" and on another occasion he spoke of increasing "the share of Russian programs" as a "counterweight" to foreign productions, and criticized excessive sex and violence--generally attributed to foreign influence--on television (RRIA, 2 February). He has also apparently agreed recently to introduce a new weekly program on Ostankino in which Head of the Presidential Administration Sergey Filatov will "explain" presidential edicts (Mayak Radio, 31 January). Yakovlev's appointment may signal future reductions in the state's role in television. He has asserted that there "must be one state television company" which would operate without paid advertising instead of the four companies (See Note 2) that exist now (RIA, 2 February). This goal appears to go hand-in-hand with the recent decision of the finance ministry to cut funding (see box 2) and may indeed become the ultimate solution to the state's difficulty financing state television at current levels. Realization of Yakovlev's goal of having one non-commercial state television company could also provide a financial shot in the arm to non-state television since it would become the only vehicle for television advertising. (Note 2) The four are Ostankino, RTV, Channel 4, and the St. Petersburg Channel. Yakovlev's Deputy Valentin Lazutkin, a longtime television professional who appears to share Yakovlev's views on reducing the state's role in television has been appointed as Yakovlev's deputy. With Yakovlev taking a "strategic" approach to his chairmanship, Lazutkin, who has spent nearly 30 years in television, and served as first deputy chairman at Ostankino until his recent promotion will presumably run day-to-day operations at Ostankino. Asked in a recent interview published in Izvestiya, (21 January) about his opinion on the recent change in leadership, he expressed the "hope" that "we need not fear that Ostankino's airspace will be turned into the political property of a particular party, which happened under the former chairman." He also noted that he was "untroubled" by the recent decision to grant the private production company NTV access to the fourth channel (discussed below), though he did criticize the fact that access to the channel was not granted on a "competitive" basis. And finally, discussing his concept of the future of state-run television, Lazutkin said there "should be one powerful Russian company which is . . . part of the state structure" and he advocated transforming Ostankino into a company aimed at foreign audiences (including Russian-speaking viewers in the CIS). NTV Gains Broadcast Access In what may be the first step towards realizing Yakovlev's vision of decreasing the number of state television companies, Yeltsin granted television broadcasting rights on channel 4 to an independent company, NTV. The 22 December edict "On Using Moscow Television's Eighth Frequency Channel and its Dissemination Network" states that NTV will receive 58 hours of weekly broadcast time as an "experiment" aimed at "developing non-state television." NTV has been broadcasting a nightly news program, Segodnya, and a weekly newsmagazine, RItogi, to viewers of the St. Petersburg channel, which has a potential audience of about 70 million viewers, and will continue to do so. The significance of the edict for NTV does not appear to be that it increases potential audience size since the two channels have significant audience overlap but that it secures a measure of independence from St. Petersburg Television. Most importantly the NTV edict affirms Yeltsin's support for the idea of independent television following an apparent tug-of-war within the administration. Yeltsin first issued the edict on 22 November but suspended it the next day (ITAR-TASS, 22 November 1993; 23 November 1993). On 22 December Yeltsin reissued the edict in almost identical form except that the new version tasked the government with reviewing the issue of "state participation" in the ranks of the founders, making this text even more privatization-oriented than the original. Control of TV Infrastructure In the reorganization, Yeltsin reaffirmed that the state will retain its monopoly of the broadcast infrastructure, at least for the present. The edict of 22 December "On Setting Up the 'Efir' Russian State Television and Radio Engineering Center Holding Company and the 'Golos Rossii' Russian State Radio Broadcasting Company" created the Efir holding company, whose assets include much of the state's broadcasting infrastructure. Efir will be partially privatized, with employees receiving some shares, but the edict stipulates that the state will retain ownership of a controlling interest for three years. The edict does not specify, however, what the state will do with its controlling interest after three years. The edict appointed Lazutkin to serve as chairman of Efir's board of directors. Baturin criticized the creation of Efir (and the reorganization in general) which he claims "increases the state's control over the mass media" and even "to a certain extent threatens freedom of the press" (RIzvestiya, 29 December 1993). Noting that "all central television channels are broadcast" through Efir, Baturin asserted that independent television companies will "remain non- state only in formal terms." Control over RTV The reorganization also serves notice that the other major national television company, RTV, will remain under Yeltsin's and Yakovlev's control. Control of the company had been a prolonged point of contention between the President and the former Supreme Soviet. In a demonstration of his authority over RTV, Yeltsin re-appointed the current chairman and general director, Oleg Poptsov and Anatoliy Lysenko, by the edict of 5 December. Formerly, according to Russian Television's Statute, the right of appointment to these posts was held by the Supreme Soviet Presidium (Sobrianiye Aktov Pravitelsta RSFSR, No 6, 1991). Poltoranin Admirer To Head Press Body The 22 December edict reorganizing the media structures appointed Boris Mironov, former head of the Rossiya Publishing House and apparent close friend and admirer of Poltoranin as chairman of the new Committee on the Press. According to a profile of Mironov from Obshchaya Gazeta, Mironov had previously worked for Komsomolskaya Pravda and with Poltoranin when the latter served at Pravda. Mironov reportedly also served for "several days" as chief editor of Rossiyskaya Gazeta but was removed prior to or shortly after publication of the paper's inaugural issue in November 1990 (Obshchaya Gazeta, 14-20 January; Rossiyskaya Gazeta, 6 November 1993). According to Rossiyskaya Gazeta's current chief editor, Natalya Polezhayeva, Mironov was removed "on the personal orders" of then Supreme Soviet Deputy Chairman Ruslan Khasbulatov. New Media Watchdog Created Yeltsin's establishment of the Court of Appeals for Information Disputes under the president appears to be an attempt to preempt the new parliament from "interfering" in media policy as did its predecessor (Rossiyskaya Gazeta, 10 January). The court is a successor to the Information Arbitration Court that was created during the recent parliamentary election campaign to ensure fair media coverage with largely the same membership, including chairman Anatoliy Vengerov. During the campaign, Vengerov and the court demonstrated a degree of independence from Yeltsin by ruling that campaigning against the draft constitution was permissible, explicitly opposing Yeltsin's stated position that sought to prohibit such campaigning (ITAR-TASS, 1 December 1993; Izvestiya, 27 November 1993). The court's powers include the authority to resolve disputes over the distribution of airtime among parliamentary factions. It is also charged with ensuring "objectivity and authenticity" in news reporting and the "principle of pluralism" in radio and television programming, and may issue warnings regarding potential violations of the media law, a power it inherited from the defunct Ministry of the Press and Information. Despite the court's record of independent action, the edict makes it dependent on the president stipulating that it "is not part of the system" of Russian Federation federal courts, and the new body's statute gives the president the power to appoint and fire its members (Rossiyskaya Gazeta, 3 February). Prospects Yeltsin has crafted a reorganization of Russian media structures that seems simultaneously to open the door to relinquishing direct control over increasing amounts of broadcast airtime while maintaining presidential control over the main facilities of state television and the process of media oversight. The new parliament may challenge Yeltsin for control of at least some media--there is already talk among deputies of reasserting control over Rossiyskaya Gazeta which the dissolved Supreme Soviet controlled (Nezavisimaya Gazeta, 5 January). Yeltsin is likely to strongly resist such attempts and may invoke his enhanced constitutional authority to do so. He may also calculate that more western-style media independence is the best way of ensuring that the media keeps supporting reform and stays out of his opponents' grasp. At the same time economic reality as manifest by the recent one-day widespread broadcast blackout and the Finance Ministry's decision to cut television funding by 50 percent will likely encourage him to move towards granting more and more air time to independent television companies as he has done with NTV and channel 4. (AUTHOR: CRIMMINS. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, RUSSIA ANALYSIS BRANCH, (703) 733-6064.) ENEAG/BLOUGH CS 3/0050z mar

SUMMARY Syrian media reacted to the massacre in Hebron by intensifying criticism of the Israel-PLO Declaration of Principles (DOP) and the PLO itself and reviving more hostile anti-Israel rhetoric reminiscent of the years preceding the current peace negotiations. At the same time, despite the Arab suspension of bilateral peace talks with Israel and the use of Syrian media to question the benefits of resuming them without further Israeli concessions, Damascus has taken pains to signal its commitment to the overall peace process. END SUMMARY Syria's closely controlled media have portrayed the 25 February massacre as a direct product of the DOP, implying that the event serves to vindicate Syria's opposition to the agreement. In this context, the media have stepped up criticism of the PLO leadership for signing both the DOP and a subsequent document on its implementation, which was concluded in Cairo on 9 February. A Damascus radio commentary declared that the "massacre must be directly or indirectly laid at the door of the Oslo and Cairo agreements and whatever other pact may follow." It criticized "Palestinian negotiators" for having "forgotten Israel's crime- ridden track record" and being "too trustful and unsuspecting, thereby facilitating" the killings in Hebron (26 February). As reported by Damascus radio the following day, an editorial in the daily Al-Ba'th called the massacre "the end result" of "the flawed and lame agreement" concluded between Israel and "the Palestinian negotiators." Moreover, in a revival of the volume and virulence of media criticism of the PLO that followed the signing of the DOP in September, Syrian media have given substantial coverage in the wake of the massacre to anti-PLO statements by hardline Damascus- based Palestinian groups. For example: --The official news agency SANA quoted Popular Front for the Liberation of Palestine-General Command leader Ahmad Jibril as implicitly threatening the lives of 'Arafat and other mainstream PLO leaders (See Note 1). Calling the massacre a "fruit of the Gaza-Jericho agreement," Jibril declared that "the determination of our Palestinian Arab people and Arab and Islamic nation will punish those who conceded our sanctities, territories, and history" (27 February). (Note 1) Jibril's threatening statement echoed his declaration on 30 September that "'Arafat's fate will be no better than that of French General Petain during World War II" (Damascus radio). --Damascus radio, reporting on a "mammoth popular demonstration" in the Palestinian camp al-Yarmuk organized by the hardline factions, quoted Islamic Jihad Movement Secretary General Fathi al-Shaqaqi as calling the massacre "a continuation of the liquidation plot embodied in the Gaza-Jericho accord" (28 February). Anti-Israel Vitriol Syrian media have also reverted to the kind of virulent anti- Israel rhetoric that was a staple of Syrian commentary in the past but had been used with less regularity at least since the start of the current peace process in October 1991. Thus, commentaries in the wake of the massacre have very frequently favored the term "Zionists" and "Tel Aviv rulers" over "Israel" and "the Israeli government." Claiming that the Hebron bloodbath was simply the most recent of a long series of Israeli massacres- -alleged to have included the 27 February church bombing in Lebanon (for example, Damascus radio, 27 February)--the commentaries have declared bluntly that the killings are consistent with the nature of Zionism and demonstrate the impossibility of Arab-Israeli "coexistence." Several commentaries in the daily Tishrin, as reported in same-day broadcasts by Damascus radio, followed in this vein: --On 26 February an editorial claimed that the Hebron massacre "proves the impossibility of coexistence between Arabs and Israelis resulting from the fascist Zionist rancor against the Arabs." --An editorial the following day declared that, through the recent massacre, "Zionism is addressing a message that it has not changed . . . its racist and aggressive colors." --An editorial on the 28th claimed that "Zionism and racism . thrive on rivers of blood" and referred to Israel as "this racist Nazi Zionist ghoul." Commitment to Peace Process, But ... Nevertheless, Damascus has taken pains to emphasize commitment to the peace process, while using the media to question the utility of resuming the now-suspended talks in the absence of significant concessions by Israel--a tack it has taken during previous disruptions in the negotiations. The Damascus radio announcement of the suspension of bilateral peace talks in Washington by Syria, Lebanon, and Jordan was quick to cite a Syrian spokesman as having "confirmed statements by U.S. officials that this step does not mean an end to the whole peace process that began two years ago" (28 February). Two subsequent media commentaries that referred to the suspension of talks also took pains to convey that the suspension is temporary and to stress that Syria remains committed to the peace process. Damascus radio, affirming that "the Arabs are advocates of true peace," declared that "the suspension of talks will not harm the peace talks, especially since only a few days are left before the conclusion" of the current session (1 March). And the daily Al-Ba'th on the same day followed up mention of the suspension of talks by adding that the Arabs are not "terminating the peace efforts" but are "in effect telling the sponsors of the peace process to wake up to their responsibilities" (Damascus radio). At the same time, some editorial commentary has cast doubt on the usefulness of negotiations under current conditions and called on Washington to play a more vigorous role in pressing Israel for concessions (See Note 2). For example, Damascus radio declared that "talking about peace in light of the serious Zionist escalation and Israel's continued refusal to withdraw from the occupied territories or halt settlement activities is a waste of time," adding that "it is, indeed, absurd." The commentary concluded that "there is no purpose or meaning in holding any peace talks that are not based on a clear Israeli commitment to implement the UN Security Council resolutions and withdraw from the occupied Arab territories" (28 February). As reported by the radio, a subsequent editorial in Al-Thawrah asserted that "salvaging the peace process and the stalled peace talks requires the application of all sorts of pressures on Israel to make it honor the relevant international legitimacy resolutions and conventions, respect human rights, dismantle settlements, disarm settlers, and return to the Arabs all their territories and rights" (2 March). (Note 2) Such expressions of doubt, and even the conditioning of resuming the talks on Israeli concessions, have appeared periodically in Syrian media commentary since the beginning of the peace process. For example, an editorial in Tishrin last November declared that "any resumption of the peace talks"--which had not then convened since before the signing of the DOP--must be preceded by a clear and public Israeli commitment to the peace process and its principles, especially full withdrawal from the Arab territories" (Damascus radio, 20 November 1993). Several weeks later, however, Damascus announced its intention to return to the peace talks, without any public commitment from Israel on the issue of withdrawal (Damascus radio, 9 December 1993). Implications Although Damascus is probably hoping that the attack will scuttle the DOP, Syrian media's anti-PLO attacks and shrill, hostile rhetoric on Israel will likely subside, though not disappear, if peace negotiations are brought back on track. Moreover, in raising claims that coexistence is impossible, Syrian media took care to rule out coexistence not between Israel and the Arab states but between "Israelis and Arabs" --presumably in the occupied territories. By such behavior, Syria has ensured that the door remains open to the eventual resumption of the peace talks. (AUTHOR: BROWN. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, NEAR EAST ANALYSIS BRANCH (703) 733-6094.) CS 3/0119z mar

This Foreign Press Review series focuses on economic issues in Egypt. The information is summarized from Egyptian or Arabic- language expatriate publications. The hardcopy version of this Foreign Media Note contains 1 cartoon with caption. $35 Million Tourism Publicity Campaign in the Works The Tourism Ministry is planning to launch a $35 million advertising campaign this year to attract tourists and to "offset Egypt's declining tourism income." Tourism Minister Dr. Mamduh al- Biltaji, who pointed out that last year's campaign was no more than $3.1 million, said that this year "the ministry's departments are devoted to drawing up two programs for stimulating Egyptian tourism." The overseas program seeks to increase foreign demand and, as al-Biltaji said, restore Egypt's "place in new and traditional markets" by endeavoring to "allay fears caused by recent terrorist operations against tourists and by foreign media exaggerations of these acts." He also said that the ministry has begun thorough inspections of its overseas tourism offices "in light of new developments." Under the motto "Tourism is the engine of development driving Egypt's economy," the domestic program "aims at raising tourism awareness among Egyptians, making them realize that they have a direct stake in promoting tourist activity." The ministry "intends to spend the earmarked funds for advertising on television networks and tourist magazines in Europe and the United States." (London AL-HAYAH 19 Jan 94) Minister Announces Plans to Expand Tourism Market Dr. Mamduh al-Biltaji announced ministry goals to "open new tourism markets" in the Far East and South Africa following a meeting with the president of South Africa's Union of Tourism Companies. He added that Cairo had agreed to hold a general assembly for the South African union this September. The minister also confirmed plans to run "an additional flight between Seoul and Cairo effective this month to handle increasing tourism activity from Korea and the Far East to Egypt." (Cairo AL-AHRAM AL-DUWALI 17 Jan 94) Governor Unveils 1994 Banking System Goals Central Bank Governor Isma'il Hasan affirmed that "banks will play a larger role in the capital market in order to stimulate the stock market by promoting bond protection, establishing investment funds, and encouraging companies to explore the securities market for long-term financing." He added that mid and long-term government securities will be issued to provide these firms with "new capital which will yield some success in terms of liquidity, security, and rising profitability." All of this, he said, will be tied to equipping bank employees in Egypt and abroad with "the latest banking industry skills" through bank institute vocational programs conducted last year for 3,414 employees. The governor mentioned these and other generally defined goals during his discussion of 1993 banking achievements. (Cairo Al-AHRAM AL- IQTISADI 17 Jan 94) "World's Second Largest Defense Electronics Firm" To Develop Communications System French electronics firm Thomson-CSF has agreed to "design and install a state-of-the-art radio communications system in Egypt" at an approximate cost between 3O and 7O million francs. The company's commercial director, Jean Madi Lafakiyuri, said that the project, "considered to be the first of its kind in Egypt," will comprise three stages: "the first covers the Greater Cairo area; the second, Alexandria and the northern Cairo district; and the third, southern Egypt." Once completed, the system, Lafakiyuri said, "will be used in urban projects, as companies, banks, and police departments will be allowed to use it, and for air traffic control purposes." He also said that "the increased cost of this project will be covered by the protocol signed by Egypt and France, as was done previously when Thomson-CSF installed the same system in Portugal, Switzerland, Turkey, and Morocco." (London AL-HAYAH 19 Jan 94) Meat Importers, EC Middlemen Flood Market with "Spoiled" Meat Centrist opposition daily AL-WAFD criticized Egyptian meat importers and distributors, labeling them "the mafia", and EC meat distributors for deals that are resulting in the saturation of local markets with "sizeable quantities of overpriced frozen meat available from European storage facilities that has expired or is near its expiration date", thereby exposing Egyptian consumers to a range of health hazards. The newspaper's two-part investigative report on this subject published on 23 and 24 January included comments from Egyptian health officials and meat industry representatives. According to AL-WAFD, this "spoiled" meat is said to frequently exceed international standards fdr fat content and is available at extremely low cost to local importers, and, consequently "the meat is sold at from LE 7 to LE 10 whereas the import cost is only LE 1." Due to the profit margin available from sales to Egypt, European distributors and Egyptian middlemen are reportedly mounting a campaign against the Egyptian Government "to pressure the Egyptian government into raising the fat content of imported meat from 2O percent to 35 percent; in other words, for every 1000 kgs of meat, the fat content is 350 kgs." AL-WAFD continues, "This pressure by distributors extends even to EC officials, to the point that one official has threatened to halt meat shipments to Egypt." In an effort to circumvent government controls, importers reportedly further conceal the fat content of foreign meat imports by selling the meat piecemeal, thereby invalidating import certificates. Egyptian health experts interviewed by AL-WAFD expressed concern about the illnesses that can result from the consumption of such meats, ranging from heart disease to salmonella. They said that the availability of this meat will have a direct impact on the public's health. Of particular concern is the plethora of factories producing inexpensive luncheon meats primarily from frozen imported meat. Health officials pointed not only to the spoilage of this meat but also to the carcinogenic additives used by local companies to retard it. Further compounding this problem is the storage issue: "Egypt's biggest problem is an inadequate number of refrigeration units to store meat and retard bacterial growth in butcher shops and meat suppliers' facilities." Industry experts also maintained that factories and shops must comply with existing standards and specifications; however, they acknowledged that "the first step is to guarantee the quality of imported meat." While Egypt reportedly has procedures in place to guarantee the quality of imports upon arrival, elimination of the "meat mafia" requires "enforcement of (existing) food laT?s." AL- ? WAFD has asked the ministers of health and industry to "confront the demands of the distributors" and wondered whether "the health and manufacturing agencies will carry out their role." (Cairo AL-WAFD 23, 24 Jan 94) Suez Canal Bridge Planned President of the Suez Canal Agency Muhammad 'Izzat 'Adil announced that an agreement had been concluded with Minister of Transportation Sulayman Mitwalli to begin construction of a bridge over the Suez Canal to further development in the Sinai and ease the growing transit traffic in the area. At present the bridge will not include a railway bed due to technical difficulties. The four-lane bridge will be at least 60 meters high. Japanese officials have been contacted for some technical assistance on this project. (London AL-HAYAH 27 Nov 93) Foreign Staffing Restrictions Lifted According to an official from the Power and Employment Ministry, restrictions on foreign businesses that limit employment of foreign employees to 10 percent of the total office manpower are being lifted. The new measures reportedly will also apply to small enterprises and to family businesses. The stated purpose of the change is to encourage foreign investors to develop projects in Egypt and create more job opportunities overall (Cairo MENA 8 Feb 94) Minister Comments on Privatization Program, Employment Speaking before the People's Assembly Economic Affairs Committee, Dr. 'Atif 'Ubayd, minister of the public business sector and minister of state for administrative development and environmental affairs, commented on the privatization program and emphasized that "there will be no rush to sell public sector companies so that workers' rights may be protected." Under the current program, "revenue from the sale will be used to reform the company's financial structures, settle bank loans, and reinvest the remaining funds." Reportedly, the sale of public sector companies to foreigners will adhere to certain specifications, intended to stimulate the aquisition of new technology, increase exports, and develop employment opportunities. Dr. 'Ubayd stated: "We need 700,000 job opportunities annually in order to eliminate unemployment in seven years. This requires investments totalling 14 billion pounds, which the government cannot provide except through privatization." He further cited the example of the Pepsi Cola and Coca Cola companies where "the net worth of the companies was around 27 million pounds, but they were sold for 500 million pounds." Dr. 'Ubayd emphasized that the government would not "rush to sell" and that that "there will be no monopolies under the policy of privatization" and that "the government will not monopolize any industry of which it retains ownership." Dr. 'Ubayd added that "the public sector's overall capital reached 8.4 billion pounds last year which represents the net worth of companies where the state is a 36 percent shareholder." According to this report, 314 of these companies are in the public sector, exclusive of insurance, banking, and military industry companies, whose overall debt is 53 billion pounds. (Cairo MENA 9 Feb 94) (QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, AFRICA/LEVANT BRANCH AT (703) 733-6408) ENEAG/03 Mar/ECONF/NEASA Division/CB 03/2038z Mar

Beijing Rejects Political Compromise, Plays Down Economic Threats SUMMARY PRC authoritative media have reacted strongly to the Hong Kong Legislative Council (Legco)'s adoption of the first stage of Governor Christopher Patten's democratic reforms and to a Hong Kong government "White Paper" on the contents of the aborted 1993 China-British talks, ruling out further negotiations with the British and reaffirming China's previous decision to dismantle any political institutions based on Patten's reforms after 1997. At the same time, in an apparent effort to reassure foreign investors and avoid actions that could jeopardize the European Community's support for Beijing's GATT application, PRC media have portrayed senior Chinese leaders as backing away from recent threats to retaliate against British firms. END SUMMARY Beijing's rejection of further negotiations with Britain over Hong Kong's political future was authoritatively conveyed by a spokesman of the Hong Kong and Macao Affairs Office of the State Council on 24 February and reaffirmed by a Foreign Ministry spokesman the same day. The Chinese were reacting to the passage by Legco on 24 February of the first stage of Patten's political reforms and Patten's announcement the same day that he would formally submit the remainder of his reforms to Legco on 9 March and would publish a White Paper on the contents of the 17 rounds of talks with the PRC in 1993 on Hong Kong's political future (Hong Kong Asia television, 24 February). Asserting that Beijing would make good on its previous threats to terminate negotiations and dismantle political institutions established without Chinese consent if Legco adopted Patten's proposals, the Foreign Ministry spokesman declared that "the door of the negotiations has been closed by the British side" and "the framework of the political system" established by Legco "cannot last beyond June 30, 1997." Responsibility for "the disruption of cooperation between China and Britain" on this issue, he said, "rests entirely with the British" (Xinhua, 24 February). Signaling Beijing's determination to accelerate plans to establish its own institutions to govern Hong Kong after the takeover, Premier Li Peng declared on 25 February during a session with members of the Preliminary Work Committee (PWC)--a group established last summer under the National People's Congress to prepare for the Hong Kong transition--that the "PWC's burdens and responsibilities have become even heavier and greater" and called upon the members to "work harder and make even greater contributions to Hong Kong's long-standing stability and prosperity" (Xinhua). Similarly, Lu Ping, director of the State Council Hong Kong and Macao Affairs office, warned that the British were "trying to mislead Hong Kong people" by "spreading the view" that the Hong Kong government based on Patten's reforms "will not be terminated after 1 July 1997" and called for "speeding up the working pace of the PWC" (Zhongguo Xinwen She, 26 February) Countering the White Paper In an apparent effort to bolster its political support in Hong Kong, the PRC also mounted a media campaign to discredit the British White Paper's version of the 1993 talks, first attacking its credibility and Patten's motives, then issuing its own version of the talks on 28 February (Xinhua). Zhang Junsheng, deputy director of Xinhua's Hong Kong branch, said in a 24 February interview that Britain's "unilateral move" to publicize its version of the negotiations was intended to "deceive Hong Kong people and mislead public opinion" (Xinhua). On 28 February, a Chinese Foreign Ministry spokesman, commenting on a lengthy Foreign Ministry version of what he claimed were the "facts" concerning the talks, asserted that Patten's decision to publish the White Paper was "designed" to "shirk its responsibility for the rupture of the talks" (Xinhua, 28 February). In the text of the document, publicized by Xinhua that day, Beijing reiterated its position that the "core of the controversy" was not about "whether democracy should be promoted" as claimed by the British but "whether international commitments should be honored." Economic Reprisals Played Down Despite the current political deadlock between the Chinese and British over Hong Kong's political future, Beijing has, at least for now, backed away from its recent threats of economic reprisals against British firms and signaled its interest in longterm British investment. For example, backing away from Minister of Foreign Trade and Economic Cooperation (MOFTEC) Wu Yi's 28 January warning that the British Government's "uncooperative attitude" on Hong Kong "is likely to affect Sino- British trade ties" (Xinhua, 28 January), PRC Vice President Rong Yiren was depicted by Xinhua on 24 February as cautiously optimistic about the prospects for British investment opportunities in China. In a meeting that day with the chairman of the prominent British multinational company John Swire and Sons, Rong reiterated Beijing's contention that Britain's "uncooperative approach" was to blame for the "current difficulties on the Hong Kong issue," but he went on to emphasize that both China and the British firm were "confident" about the economic prospects of Hong Kong and China and to observe that Swire "had been enlarging its business" in the region. Xinhua portrayed the British chairman as "willing" for his company to engage in "long-term investment in Hong Kong and the Chinese mainland." Further suggesting a return to a more conciliatory approach on economic relations, top Chinese officials have assured foreign investors and the Hong Kong business community that its uncompromising attitude on political reforms in Hong Kong will not adversely affect economic ties. For example, Vice Premier Zhu Rongji reaffirmed China's commitment to the territory's capitalist system after the takeover during a 25 February press conference in Tokyo when he "reiterated" that China "will not change the system in Hong Kong after 1997" (Xinhua, 25 February). He went on to reassure the business community that "the Chinese Government will continue to protect the interests of foreign- funded firms" in Hong Kong. Beijing's efforts to play down prospects of retaliation against British firms may be linked in part to China's desire for continued European Community (EC) support for its membership in GATT. PRC media used the recent visit to Beijing of EC Trade Commissioner Leon Brittan to provide an upbeat assessment of EC backing for China's application to GATT. Xinhua of 28 February reported that Brittan, at a joint news conference with MOFTEC minister Wu Yi that day, announced that it would be "economically beneficial" for "China and the whole world" to have China in GATT. Suggesting Beijing's efforts to avoid any overt threats of economic reprisals, PRC media were not observed to carry Western media accounts that EC Commissioner Brittan--in a response to Wu Yi's assertion during the press conference that the political row with Britain could affect economic ties--warned sharply that retaliation against British firms would be "completely unacceptable" to Europe (London Daily Telegraph, 1 March). Implications Beijing's refusal to compromise on Patten's political reforms and determination to proceed with the establishment of a shadow government in preparation for restructuring Hong Kong's legislative institutions after 1997 reflects both Beijing's drive to ensure total political control over Hong Kong after the takeover and the acute sensitivity of China's ageing leaders to perceived threats to China's "sovereignty," including political pressure on senior leader Deng Xiaoping who has staked his reputation on reclaiming Hong Kong from its colonial past. At the same time, China's decision to return to a more conciliatory approach on economic relations likely reflects efforts to avoid jeopardizing EC support for its GATT membership, and may signal a leadership view that, given the failure of economic reprisals to deter Legco from passing democratic reforms and Patten from submitting his remaining proposals for a vote, Hong Kong's stability is best served by maintaining strong ties to the British business community. (AUTHOR: SIMON. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, CHINA ANALYSIS TEAM, (703) 733-6097.) EAG/BIETZ/PF 05/0105z Mar

Hanoi Finds New Outlet for Surplus Labor Judging by a 1 March VNA report, Hanoi has found new opportunities for employing its surplus labor in Libya. According to VNA, 100 Vietnamese workers left Hanoi on 28 February to fill jobs in Libya under a "construction contract" signed by Vietnam's overseas construction company VINACONEX and South Korea's Dong Ah Consortium. These 100 laborers, VNA said, are the "first batch" of a 2,000-person contingent of construction workers and overseers who will be sent to Libya in 1994 to work on a man-made river project. These workers will join the 1,500 Vietnamese workers already working in Libya under a contract between VINACONEX and Dong Ah Consortium. Hanoi has routinely sent workers overseas in order to relieve its unemployment problem and to help pay for needed goods. (AUTHOR: HEBBEL. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM, (703) 733-6534.) EAG/BIETZ/ta 07/2051z mar

SUMMARY Apparently responding to domestic pressures to demonstrate more balance in the country's foreign policy, Russian Foreign Minister Andrey Kozyrev used his late January visit to China to press Beijing to greatly expand and deepen the Sino-Russian relationship and forge a "constructive partnership" between the two countries. For its part, Beijing, concerned about the unsettled Russian political situation, appeared reluctant to embrace Kozyrev's initiative, suggesting instead a more modest expansion of bilateral ties. END SUMMARY Visiting China from 26 to 29 January, Kozyrev--the first high- ranking Russian visitor to Beijing since the mid-December elections in Russia--not only reaffirmed Moscow's intention to maintain its relationship with Beijing but also called for significantly expanding those ties and creating what he called a "constructive partnership" between the two countries. Introducing this initiative at a press conference on 26 January, Kozyrev said a "constructive partnership" between the two countries would mean a "qualitatively higher-level" of bilateral ties (ITAR-TASS, 26 January). Expanding on this theme in a speech the following day to China's People's Institute of Diplomacy, the Russian foreign minister portrayed the new relationship as a multifaceted one (ITAR-TASS, 27 January). Beijing and Moscow, he indicated, should cooperate in solving the "new problems" in Asia, focusing on the "danger" from the proliferation of nuclear weapons and missile technologies, the question of access to the resources of the Pacific Ocean, and the problems caused by an "upswing of religious nationalism" in Afghanistan and Tajikistan. Kozyrev went on to underscore the importance of cooperation in these areas, saying that the failure to make "joint efforts" to resolve these problems would result in a "very explosive" situation. In addition to cooperation on regional problems, Kozyrev suggested that his constructive partnership would lead to greater Sino-Russian cooperation in the international arena, particularly in the UN Security Council on problems such as peacekeeping operations in Tajikistan and nuclear weapons on the Korean peninsula. Economic Relations and High-Level Visits Kozyrev also pressed his Chinese hosts to raise the level of economic relations between the two countries, saying, in a press conference on 28 January, that the constructive partnership "presupposes" a transition to a "higher level and more stable" forms of economic cooperation (ITAR-TASS, 28 January). In particular, he pointed to the need to change the "form" of cross- border contacts from "petty commercial dealings to large joint projects." Elaborating on the economic aspect of his constructive partnership, Kozyrev, in remarks aired by Moscow's Mayak radio on 31 January, said that Russia would "cOunt on" Chinese support in getting Russia "included" in plans for regional economic cooperation. In addition, he noted that Russia was "very interested" in participating in modernizing those Chinese industrial enterprises which were originally set up by Moscow and was "ready" to participate in major economic development projects like the Three Gorges hydroelectric project. Finally, Kozyrev suggested that his constructive partnership proposal demands increasing the number of high-level contacts between Moscow and Beijing. At his 28 January press conference, he claimed that this aspect of his initiative had already been accepted, saying that his visit had "mapped out a program" of exchanges which would be capped by a visit to Moscow by PRC President and Chinese Communist Party General Secretary Jiang Zemin. Moscow's Positive Assessment Moscow was upbeat in assessing the results of Kozyrev's visit. Commenting on Kozyrev's 27 January meeting with PRC Foreign Minister Qian Qichen, for example, Galina Sidorova, Kozyrev's political adviser, claimed that the two ministers had agreed to continue a "progressive and constant exchange of views and visits at summit and high-levels" (ITAR-TASS, 27 January). She noted that Jiang Zemin would visit Moscow in the "third quarter" and that his visit would be preceded by trips to Beijing by Russian Premier Viktor Chernomyrdin and to Moscow by Foreign Minister Qian. She noted that the two sides had indicated their "readiness" to continue negotiating their border problems and had "decided" to maintain the "status quo" on the border after it had been demarcated. She also claimed that the two foreign ministers had expressed their "mutual interest" in further developing "constructive cooperation" in the military-technical sphere. A 29 January ITAR-TASS report on the visit was even more positive in assessing the results of the Kozyrev-Qian talks. It said that the foreign ministers had "confirmed their mutual desire" for the development of political, trade, economic, and military cooperation and pointed to the need to raise the level of Sino- Russian relations. According to ITAR-TASS on the 31st, Kozyrev was also upbeat in assessing the results of the visit in remarks while made on route to Moscow. He claimed that with the visit China and Russia had established "new relations characterized by normal cooperation" and that the relationship now contained "elements of geostrategic mutual understanding." He also portrayed Beijing as receptive to his proposal for a constructive partnership, claiming that Chinese leaders had been "very balanced and positive in principle" in their response to his initiative. Cautious Chinese Reaction Reflecting China's longstanding wariness about dealings with Moscow as well as its concern about the unpredictable political situation in Russia, Beijing was considerably more circumspect in its treatment of Kozyrev's visit and his suggestion that the two countries rapidly expand their relationship. Reflecting Beijing's desire for a slower pace of development of bilateral relations, Qian, according to a 27 January Xinhua account of his meeting with Kozyrev that day, underscored the importance of "maintaining and developing long-term, good neighborly, friendly, mutually beneficial, and cooperative relations" between the two countries, but did not repeat Kozyrev's optimistic predictions of a rapid expansion of ties. While Qian, in response to Kozyrev's call for "summit" meeting between the leaders of the two countries "this year," said that China attaches "importance" to maintaining "dialogue and contacts" between the leaders of the two countries, he seemed to dismiss the idea, pointedly noting that documents signed during Russian President Boris Yeltsin's 1992 visit to China as still being carried out "step by step." Judging by Xinhua accounts of their 28 January meetings with Kozyrev, Li Peng and Jiang Zemin also counselled a more moderate approach to developing bilateral ties (28 January). Li, for example, was reported by Xinhua as telling Kozyrev that the "correct" policies agreed to during Yeltsin's 1992 visit should be "adhered to for a long period." Turning to economic matters, he suggested that the two sides need to "proceed from reality" and "explore new ways" of bilateral cooperation. Jiang similarly seemed to advocate a more cautious approach, telling Kozyrev that bilateral relations are "developing steadily" and noting that China's "firm and unwavering" policy is to "maintain and develop long-term and steady good neighborly and friendly" relations with Russia. Like Qian, Jiang also expressed reservations about Kozyrev's proposal for a summit meeting this year. According to Xinhua, Jiang, in response to Yeltsin's invitation to visit Russia, merely "expressed the hope" that the visit "can be materialized at an appropriate time." However, the Xinhua report on Li Peng's meeting with Kozyrev did indicate that Beijing would accept a visit to Beijing by Chernomyrdin, noting that Li "invited" the Russian premier to visit China. Further underscoring Beijing's more circumspect approach to the relationship, Chinese media reporting on the visit gave short shrift to Kozyrev's proposal for a constructive partnership, failing to report his 27 January speech to the People's Institute of Diplomacy outlining the initiative. In addition, Xinhua accounts of Kozyrev's meetings with Qian on 27 January and with Jiang Zemin the following day did not indicate that Kozyrev had presented his proposal to them during the talks (27, 28 January). While the 28 January Xinhua report on Kozyrev's meeting with Li said that the Russian foreign minister had stated that in today's "turbulent world" the "constructive partnership" between the two sides should be "enhanced and reach new heights," it did not indicate that Li made any response to Kozyrev's initiative. Prospects Despite Chinese concerns about the Russian political situation, Beijing and Moscow are likely to continue expanding their relationship. However, Beijing, anxious to avoid any entanglements or fallout from the unsettled political situation in Russia, will remain cautious as it proceeds in developing those ties. Beijing will continue respond positively to Moscow's desire for greater economic cooperation. In addition, the inclusion of Deputy Defense Minister General Boris Gromov as a member of Kozyrev's delegation suggests that military cooperation will remain a key part of the Sino-Russian relationship. (AUTHOR: HEBBEL. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, CHINA ANALYSIS TEAM, (703) 733-6097.) EAG/BIETZ/ta 07/2057z mar

A 26 February VNA report on a conference on the anti-malarial effort in Vietnam's northern provinces suggests that Hanoi has made considerable progress in overcoming what the media two years ago had indicated was a serious malaria problem. According to VNA, all three targets of Vietnam's anti-malaria program for 1993 were met as the death rate dropped by 30 percent, the number of malaria sufferers fell by nearly 20 percent, and the number of malaria epidemics decreased by 84 percent compared to 1992. VNA reported particular progress in combatting malaria in Vietnam's central highlands--which the report said was "one of the worst affected areas " --noting that the death rate in that region had fallen by "50 percent." Despite the progress, VNA noted that Hanoi is planning to intensify its efforts in combatting malaria in 1994. According to VNA, the government will allot 60 billion dong for the 1994 anti-malaria campaign--an increase of 10 billion dong over 1993- -in hopes of reducing the mortality rate by 30 percent and the number of malaria outbreaks by 20 percent in comparison to 1993. (AUTHOR: HEBBEL. QUESTIONS AND/OR COMMENTS, PLEASE CALL, CHIEF, ASIA DIVISION ANALYSIS TEAM, (703) 733-6534.) EAG/BIETZ/ta 07/2101z mar

SUMMARY Pyongyang has made a point of reminding Washington that linking the resumption of bilateral high-level talks to the exchange of special envoys by North and South Korea could jeopardize ongoing international nuclear inspections. The North continues to signal its reluctance to engage the South in any substantive dialogue beyond the bare minimum required for the convening of the DPRK- U.S. talks. END SUMMARY To draw attention to Pyongyang's stance, Vice Foreign Minister Kang Sok-chu, head of the North Korean delegation to last summer's high-level talks with the United States, took the unusual step of issuing his own "press statement"(SEE NOTE) on 4 March. Kang's statement claimed that there were no preconditions stipulated in the 25 February DPRK-U.S. agreement for resumption of bilateral talks. The statement, carried in full by KCNA and Pyongyang radio the same day, also complained that Washington is using the exchange of envoys and IAEA inspections as preconditions for suspension of Team Spirit and the convening of high-level North Korea-U.S. talks, set for 21 March in Geneva. (NOTE: A press statement is typically issued in the name of a Foreign Ministry spokesman. This is only the second time Kang has been observed to issue a press statement of his own. Kang issued a press statement last November calling for a "package solution" to resolve the deadlocked nuclear issue (Trends of 17 November 1993, pages 15-17)--a step that eventually led to the 25 February agreement.) Focusing on the special envoys issue, Kang claimed in his 4 March statement that the 25 February agreement only mentioned resumption of working-level contacts to discuss the topic and not realization of the exchanges. His statement also implied that any U.S. insistence that the envoy exchange precede resumption of high-level talks could jeopardize IAEA inspections. Reiterating Pyongyang's depiction of Seoul as irrelevant to discussions of the nuclear issue, Kang contended that the South has neither "political wherewithal" nor "authority" to discuss the nuclear issue. Implying that the North will agree to exchange envoys on non-nuclear issues only, Kang claimed that "only when" the South stops the "unjustifiable act" of trying to push its way into the discussion of the nuclear issue and makes a "clear switch" toward seeking national unification can the exchange of special envoys take place. Kang said that "reintroducing unjustifiable preconditions"--conditions that he claimed the United States had tried but failed to include in the 25 February agreement--can been seen only as "an element capable of destroying the full implementation" of the agreement. In a 7 March followup commentary, the party paper Nodong Sinmun similarly cautioned Washington against creating "artificial difficulties" by setting preconditions. The commentary urged a "strict observance" of unspecified "principles" set forth in last June's DPRK-U.S. joint statement (KCNA, 7 March). Inter-Korean Dialogue In line with Pyongyang's posture, North Korean media have characterized the "fourth" inter-Korean working-level meeting on the exchange of presidential envoys, held on 3 March, as having made no progress. The North Korean chief delegate introduced two new demands (Pyongyang TV, 3 March) in addition to the previously raised issues of 1) stopping all "nuclear exercises" and 2) renouncing the "international cooperative system" (Pyongyang TV, 25 October 1993)--that is, seeking cooperation with the United States and Japan to apply pressure on Pyongyang on the nuclear issue, with attendant references to UN-imposed sanctions. The two new conditions are that Seoul: + Call off its effort to bring in Patriot missiles. + Withdraw "remarks" that it will not "shake hands" with the North, an oblique reference to the remarks South Korean President Kim Yong-sam made last June. Also suggesting that the North Korean leadership is not quite ready to engage the South in serious discussions, Pyongyang media have continued their harsh personal attacks on ROK President Kim. The latest attack came in a 4 March KCNA dispatch criticizing the remarks made by Kim to Seoul radio, which, according to KCNA, showed that Kim is a "heinous traitor" and a "dyed-in-the-wool flunkeyist." The only sign so far that Pyongyang does not want to totally foreclose the avenue of dialogue for now is the fact that the North Korean chief delegate at the 3 March meeting refrained from directly naming President Kim in his remarks at the talks, as reported by North Korean media. Background The idea of exchanging presidential special envoys was first advanced by the North last May to deal with "all issues" related to national unification, most likely as a fall back position on the eve of the first round DPRK-U.S. nuclear talks, then slated for 2 June. Subsequently, after much wrangling, three preliminary meetings were held to discuss procedural matters and agenda. However, on the eve of a fourth working-level contact, scheduled for 4 November, the North called off the meeting to protest remarks by the South Korean defense minister, who, Pyongyang claimed, had hinted at the possibility of a preemptive strike against North Korean nuclear facilities (Yonhap, 3 November 1993). Moreover, even while reluctantly agreeing to the latest round of inter-Korean contacts, Pyongyang has still maintained that the nuclear issue must be resolved bilaterally between the DPRK and the United States. Implications Although couched in tough language, Kang's warning against "preconditions" did not rule out the possibility that envoys may be exchanged before 21 March. In fact, Pyongyang's stance may be designed to test Washington's resolve to stand behind Seoul as the latter navigates the waters of inter-Korean dialogue. Therefore, while Pyongyang's hardened stance at the North-South talks may represent posturing for bargaining, its continued personal attacks on ROK President Kim suggests that the North is still reluctant to reach any agreement of substance with the South at present and is proceeding with inter-Korean talks solely to meet requirements for the resumption of high-level DPRK-U.S. talks. (AUTHOR: YIM. QUESTIONS/COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM, (703)-733-6534.) EAG/BIETZ/ta 07/2145z mar

SUMMARY Russian President Boris Yeltsin is carrying out yet another reorganization of his presidential apparatus, this time clearly to help him expand presidential power vis-a-vis parliament and the cabinet. The new constitution pushed through by Yeltsin after disbanding the Supreme Soviet gives the president more control over the cabinet and the rest of government, and the current reorganization is being justified by the need to expand his staff to exercise these expanded powers. The strengthening of the president's apparatus and especially his analytical and policy making staff is important for the prospects for reform since with a unsympathetic parliament and a less reformist cabinet, reform policies more than ever depend on a strong president. END SUMMARY Since December Yeltsin has been creating new agencies directly subordinate to the president, adding new assistants, expanding the Security Council structure, and now is preparing an edict to reorganize and strengthen his "Administration" (the presidential staff). Although he has apparently not yet signed the edict, the reasons for the reorganization and its main features are being widely reported in the press. Administration leaders have claimed that the main reason for the reorganization is that because of the president's increased powers under the new constitution, he requires a bigger staff to help him initiate policies and run more of the government. Administration Leader Sergey Filatov told ITAR-TASS on 15 February that the additional presidential powers in the new constitution necessitate reorganization of the Administration and that a new economic analysis service, finance and budget directorate, and international department are being created to help the president stay "well informed" on the economy, budget, and tax policy. Nikolay Medvedev, head of the Administration's Directorate for Work with Territories and Presidential Representatives, also stated that the Administration was to be reorganized to bring it into line with the new constitution (Segodnya, 19 January). Reports of an impending reorganization of the Administration began to appear in early January (Kuranty, 5 January; Georgiy Satarov to ITAR-TASS on 5 January; Segodnya, 6 January; Nikolay Medvedev to Segodnya, 19 January). Filatov told ITAR-TASS on 21 January that Yeltsin would probably sign a decree reorganizing the Administration the next week. Over three weeks later, the decree had not appeared but he again told ITAR-TASS on 15 February that Yeltsin would sign the decree in a few days. On 19 February he told Interfax that Yeltsin had the proposals for the reorganization on his desk. Split Between Filatov and Ilyushin The delay was apparently caused by disagreements over two rival plans presented by the two main groups in Yeltsin's personal staff--the Administration led by Filatov and Yeltsin's assistants and advisers led by First Assistant to the President Viktor Ilyushin. Segodnya reported on 6 January that Filatov favored a plan worked out by his first deputy, Sergey Krasavchenko, which concentrated analysis in a single center in the Administration, while Ilyushin backed a plan worked out by members of the Presidential Council to expand the role of presidential assistants, giving them their own analytical staffs outside the Administration. Moscow News (4-10 February) also reported that Filatov and Ilyushin were pushing rival plans and said that Yeltsin had not yet chosen which to accept. Kommersant-Daily on 10 February reported that a compromise plan had been worked out, making Ilyushin "for the first time officially equal in status" to Filatov and strengthening the group of personal assistants, but accepting most of Filatov's proposals regarding the Administration's structure (see box on "Reorganization of Administration"). News reports of the disagreements apparently prompted Filatov and Ilyushin to appear together on the television news program "Itogi" on 20 February to deny that there had been disagreements and to declare that they have "a joint, agreed on version" of the Administration reorganization, which divides functions between the Administration and assistants. This compromise arrangement would appear to heighten the potential for conflict between the already competing parallel structures of the Administration and staff of assistants by making them even more independent, rival power bases. Other Recent Changes Yeltsin's effort to strengthen presidential structures has been evident since December in the addition of more personal assistants to his staff, his assumption of control over more key government agencies, the creation of new organs under the president, and the strengthening of the Security Council's commission structure. New Assistants Yeltsin has added two new reform-minded assistants (pomoshchniki) to his present four, who were less involved in policy, at least publicly: --He created a new post of national security assistant and named outspoken reformer Yuriy Baturin to it on 6 January (Ostankino TV, ITAR-TASS, 6 January). Baturin explained to Interfax (7 January) that he would coordinate the activities of the intelligence, counterintelligence, and other security services. He had joined Yeltsin's staff as an assistant on legal and political matters in June (Sobraniye Aktov Prezidenta i Pravitelstva Rossiyskoy Federatsii, 7 June 1993, page 2400) on condition that he could continue to speak out publicly (Novaya Yezhednevnaya Gazeta, 7 July 1993). --Sociologist Georgiy Satarov, who as a Presidential Council member has often voiced sharp opinions to newsmen, was named assistant to the president on 8 February (Russian TV, ITAR-TASS, 8 February; Rossiyskaya Gazeta, 9 February), and he explained in a 12 February Ostankino TV interview that he will handle presidential ties with the Federal Assembly and parties and public organizations and constitutional questions. He has occasionally riled Yeltsin with his public remarks (See Note 1) and told Rossiyskiye Vesti (12 February) that he feels Yeltsin wants him to continue to speak out independently and offer differing opinions. (Note 1) In October, while Yeltsin was visiting Japan, Satarov suggested presidential elections be held simultaneous with parliamentary elections, undercutting Yeltsin's stand and prompting Yeltsin to publicly threaten to fire him (Obshchaya Gazeta, 15-21 October 1993). Control Over Power Ministries Yeltsin has assumed more control over some key cabinet ministries and other government agencies, clearly strengthening his power over the most sensitive security and communications agencies to protect himself against potential challenges. His 10 January edict "On the Structure of Federal Organs of Executive Power" listed 10 agencies which henceforth will be "subordinate to the president of the Russian Federation on questions put under him by the Russian Federation Constitution or in accord with legislative acts of the Russian Federation": the Ministries of Defense, Internal Affairs, and Foreign Affairs, the Main Directorate for Protection, the Foreign Intelligence Service, the Federal Agency for Government Communications and Information, the Federal Border Service, the Federal Counterintelligence Service, the Federal Service for Television and Radio Broadcasting, and the State Archive Service (Rossiyskaya Gazeta, 12 January). New Presidential Organs In recent weeks Yeltsin has created a number of new organs directly under the president, expanding the already cumbersome structure run directly by the president. In some cases it is not clear if they add to his political- power, but for some reason the president considered it necessary to put them under his direct control rather than under the cabinet or elsewhere in the government. In addition to creating the Federal Counterintelligence Service and the Federal Border Service specifically under the president in mid and late December: --On 31 December Yeltsin issued an edict creating a Judicial Chamber for Information Disputes (Sudebnaya Palata po Informatsionnym Sporam) under the president (Rossiyskaya Gazeta, 10 January), which apparently can be used to strengthen the president's control over the media. According to ITAR-TASS, it will be able to decide matters such as allotment of radio and television coverage to the parliament and can warn media if they violate the Law on the Mass Media. Chairman Anatoliy Vengerov said that the chamber will enforce constitutional provisions on information rights and assist the president in protecting freedom of the press (ITAR-TASS, 5 January). The new constitution "guarantees the freedom of mass information" (article 29) and declares the president "the guarantor" of the constitution and the rights and freedoms of citizens (Rossiyskaya Gazeta, 25 December 1993). --On 18 January Yeltsin created a new post for conducting his dealings with parliament--the president's plenipotentiary representative in the Federal Assembly (polnomochnyy predstavitel prezidenta v Federalnom Sobranii--Rossiyskaya Gazeta, 20 January) and named legal specialist Aleksandr M. Yakovlev to the post (Rossiyskaya Gazeta, 25 January). --On 12 February Yeltsin created a "Directorate of the Federal State Service of the president" (Upravleniye Federalnoy Gosudarstvennoy Sluzhby Prezidenta) under his Cadre Policy Council (Rossiyskaya Gazeta, 18 February). It is to supervise the new civil service. --On 16 February Yeltsin created a Public Chamber (Obshchestvennaya Palata) under the president. Its statute calls it a "consultative organ" to provide feedback from the public to help in preparing presidential decisions and indicates it will be made up of representatives of parties, enterprises, religious denominations, trade unions, and other organizations. It is to be "coordinated" by Yeltsin's personal assistant Lev Sukhanov (Rossiyskaya Gazeta, 19 February). It held its first meeting on 19 February (ITAR-TASS, 19 February). --On 17 February Yeltsin created a Committee for Information Technology Policy (Komitet po Politike Informatizatsii- -Roskominform) subordinate to the president and cabinet to oversee creation of federal computerization systems, along with the Federal Agency for Government Communications and Information (ITAR-TASS, 19 February; Rossiyskaya Gazeta, 23 February). --On 25 February Yeltsin created an Expert Legal Council (Ekspertno-Pravovoy Sovet) under the president--another consultative, part-time body. It will be chaired by State-Legal Directorate Chief Ruslan Orekhov and a Moscow lawyer, Igor Bezrukov (ITAR-TASS, 25 February; Rossiyskaya Gazeta, 2 March). Security Council Expansion The president's Security Council, second only to the cabinet as a highlevel executive body, has become more active, with new commissions being formed under it and those created earlier being activated. Although a 1 February Yeltsin edict (ITAR-TASS, 1 February) dropped economic officials (the ministers of the economy and finance) in listing the new membership of the Security Council--appearing to remove economic questions from its purview--the expansion of the council's working commissions, including one on economic security, appears to broaden its activities, rather than reduce them. A 3 March Kommersant-Daily article argued that the role of the Security Council may increase substantially since it is the best organ for Yeltsin to use to govern, given the independence of the cabinet under Premier Viktor Chernomyrdin and the lack of a reformist majority in the Duma. --An Interdepartmental Commission on Information Security was created by a Yeltsin decree on 18 December. The new commission held its first meeting on 13 January and began working on its "main task"--working out state policy for information security (ITAR-TASS, 13 January). --The council's Interdepartmental Commission for Defense Security held its first meeting on 29 December. Its chairman is First Deputy Defense Minister Andrey Kokoshin and members include deputy ministers of the economy and internal affairs, deputy chief of staff, and the border guards commander (ITAR-TASS, 29 December). --The first meeting of the council's Interdepartmental Commission on Economic Security was held on 10 January, under Chairman Andrey Zverev, concurrently head of the economic department of the cabinet (Nezavisimaya Gazeta, 11 January). --The first meeting of the council's Interdepartmental Commission for Public Security was held on 18 January, chaired by Deputy Internal Affairs Minister Aleksandr Kulikov (ITAR-TASS, 18 January). --Yeltsin on 31 January signed an edict outlining the duties of the Security Council's Scientific Council--defining priorities for scientific research in the security sphere--and naming Vice President of the Academy of Sciences V. Purimov chairman (Mayak Radio, 31 January; Rossiyskaya Gazeta, 3 February). Yeltsin had created the council with a 1 November decree (Rossiyskaya Gazeta, 3 February). Implications With a hostile parliament and a cabinet led by an apparently loyal but less reformist Premier Chernomyrdin, Yeltsin appears to be building up presidential structures that, aided by stronger presidential powers in the new constitution, will enable him to press reform policies on his own. His expanding group of specialists, analysts, and policy-oriented assistants may enable him to develop more effective policies and establish better control over the government, more effectively competing with an assertive Duma or cabinet. He has, however, reorganized his presidential structures before, for example, bringing Filatov in to strengthen his Administration in early 1993, and his staff's effectiveness still appears to leave something to be desired. Moreover, by perpetuating parallel structures--the Administration led by Filatov and the staff of assistants under Ilyushin--the new reorganization preserves great potential for competition and conflict within the presidential apparatus. Box Reorganization of the Administration Although Yeltsin has apparently not yet signed an edict reorganizing the whole Administration, the features of such a reorganization have been described in accounts and charts published in Segodnya on 9 February and Kommersant-Daily and Novaya Yezhednevnaya Gazeta on 10 February, and several edicts reorganizing parts of the Administration have already appeared (abolishing the Directorate for Information Resources in early February, creating a Finance-Budget Directorate on 28 February, and creating a Directorate for Information Supply on 3 March). According to these accounts, the new structure of the Administration aims to: --Improve analysis by combining the present three analytical centers and a newly created "Situation Room" (Situationnaya Komnata) into one "Analytical Service" (Analiticheskaya Sluzhba), which will probably employ on a fulltime basis many of the present part-time presidential analysts (Kommersant-Daily, 10 February). According to the 6 January Segodnya, the poor performance of the present analytical centers during the December election--in analyzing voters' attitudes, predicting the outcome, and analyzing the results--was one of the reasons for the Filatov and Ilyushin reorganization proposals. --Improve economic and foreign policy expertise, probably to make the president less dependent on the cabinet for advice on these issues. The reorganization adds a "Service of Economic Analysis" (Sluzhba Ekonomicheskogo Analiza), a "Finance-Budget Directorate" (Finansovo-Byudzhetnoye Upravleniye), and an "International Department" (Mezhdunarodnyy Otdel). Presidential Administration Structure Old1 Present Leader New2 Leader (Rukovoditel) of the Administration Filatov First deputy Krasavchenko Deputy Volkov Voykov3 Analytical Center Analytical Service for General Policy Rakitov (combines centers) for Socioeconomic Policy Filippov Situation Room (new) for Special Presidential Center for Presidential Programs Malyshev Programs Main Directorate for Special Programs of the President Directorate for Planning Directorate for Planning and Implementing Special and Implementing Program Special Programs Service for Economic Analysis (new) Finance-Budget Directorate4 (new) International Department (new) State-Legal Directorate Orekhov State-Legal Directorate Center for Operational Center for Operational Information Remizov Information Department for Letters Department for Letters and Reception Mironov and Reception Directorate for Information Directorate for Supply Resources5 Kupriyanovskiy of Information (new)6 Archive Korotkov Archive Library Library Library of Moscow Kremlin (new) Publishing House Bunin Publishing House Control-Oversight (not in new charts) Council under leader7 Surkov Control Directorate8 Ilyushenko State Control Directorate Directorate for Work with Directorate for Work with Territories and Presidential Territories Representatives9 Medvedev Department for Ties with Parties and Public Organizations (new) Organizational Department Chernov Organizational Department Directorate for Cadres Rumyantsev Directorate for Cadres Directorate of Affairs 10 Borodin Directorate of Affairs Directorate for Handling Directorate for Handling Work11 Work Department for Secret Work12 (new) Directorate of Federal State Service (new) First Assistant Ilyushin First assistant Assistants Sukhanov Assistants Korabelshchikov Ryurikov Baturin (new) - Satarov (new) Speech writers Group of Speech Writers13 Press secretary Kostikov Press secretary Press service Krasikov Press service Chancery14 Semenchenko Chancery Protocol Service Protocol service Security Service Korzhakov Security Service of President Main Directorate for Protection Presidential Representatives Presidential Council Presidential Council 1 Based on the 22 February 1993 presidential edict outlining the structure of the Administration after the early 1993 reorganization. (See the Trends of 24 March 1993, pages 6-15.) 2 Based on the 10 February Kommersant-Daily and Novaya Yezhednevnaya Gazeta accounts and charts. (This structure is provisional since it has not yet been confirmed by Yeltsin.) 3 On 10 February Andrey Voykov was appointed head of the State Duma's apparatus by the Duma's council (ITAR-TASS, 11 February). Yeltsin relieved him of his Administration post on 22 February (ITAR-TASS, 22 February). 4 A Finansovo-Byudzhetnoye Upravleniye was created by a 28 February Yeltsin edict, with Igor Moskovskiy as head and with 30 employees (Rossiyskaya Gazeta, 2 March). It is to supply the president with information, analysis, and recommendations on questions of finances, budget, insurance, prices, credits, and money (ITAR-TASS, 28 February). 5 The Upravleniye Informatsionnykh Resursov was abolished and its remnants transferred to the Federal Agency for Government Communications and Information under the president (Segodnya, 9 February; Kommersant-Daily, 10 February; Radio Rossii, 21 February). Yeltsin fired Vasiliy Kupriyanovskiy as head of the directorate for "critical failure in performing his duties" (ITAR-TASS, 22 February). A 24 February Izvestiya article on the abolition of the directorate suggests that the communications agency had pushed this move to eliminate a competing information center. According to the article, the directorate disseminated information to localities using a modern computer system and now the agency will control this system. 6 Yeltsin signed a 3 March edict creating a Directorate for Supply of Information and named Petr Filippov (head of the present Analytical Center for Socioeconomic Policy) to head it (ITAR-TASS, 4 March). With 40 employees, it is to work with the press and television and analyze information coming from regions, according to a 3 March Moskovskiy Komsomolets article. 7 The Kontrolno-Nablyudatelnyy Sovet that operated directly under Administration Leader Filatov is not included in the wiring diagrams in Kommersant-Daily and Novaya Yezhednevnaya Gazeta and apparently will disappear. 8 Ilyushenko told Izvestiya (15 February) that the Kontrolnoye Upravleniye's work was to monitor activities of central and local officials and report wrongdoing to the president. On 26 February Yeltsin removed Ilyushenko and nominated him for prosecutor general (Rossiyskaya Gazeta, 1 March). 9 The president's representatives-in oblasts are dropped from the title of the Directorate for Work with Territories and Presidential Representatives and placed directly under the president along with presidential assistants, according to the Kommersant-Daily and Novaya Yezhednevnaya Gazeta wiring diagrams. 10 Upravleniye Delami. 11 The Upravleniye Deloproizvodstva sends out presidential edicts and handles the mail, according to a 6 March 1993 Nezavisimaya Gazeta article. 12 Otdel Sekretnogo Deloproizvodstva. 13 Gruppa Spichrayterov. 14 Kantselyariya. End Box (AUTHOR: HAHN. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ANALYSIS BRANCH, RUSSIA DIVISION, (703) 733-6070.) ENEAG/BLOUGH/ta 07/2130z mar

SUMMARY After publicly protesting his exclusion from important deliberations on nationality affairs and threatening to resign his post as Minister of Nationality Affairs and Regional Policy, Sergey Shakhray appears to have halted and even reversed his political decline following the December elections. After losing deputy premier status in the recent cabinet reorganization, Shakhray appears to have rebounded by means of a presidential decree giving him special status as a member of the Government Presidium. Although the decree appears to mark at least Shakhray's partial return to President Boris Yeltsin's good graces, he continues to split with the president on major issues such as the recent amnesty for Yeltsin's opponents, suggesting the apparent reconciliation may be short-lived. END SUMMARY A presidential decree dated 12 February elevated newly reappointed (See Note 1) Minister of Nationality Affairs and Regional Policy Sergey Shakhray above the status of rank-and-file Russian government ministers, announcing that he would be included in the Government Presidium (Rossiyskaya Gazeta, 15 February). According to the Council of Ministers press service, Shakhray will be the only "regular" minister attending the weekly meetings of the Presidium--which also includes Premier Viktor Chernomyrdin and his four deputies--as a "full member" (Kommersant-Daily, 15 February) (See Note 2). Shakhray had made inclusion in the Presidium a condition of his acceptance of the ministerial port folio on 20 January. After being offered the portfolio, Shakhray reportedly said that he would accept only if the Nationality Affairs and Regional Policy Ministry were made directly subordinate to the premier and he as minister were included in the Presidium (Interfax, 19 January). (Note 1) Shakhray was previously chairman of the Russian Federation State Committee for Nationality Affairs and Regional Policy, which was changed into a ministry in the post-election cabinet reshuffle. See the Trends of 26 January 1994, pages 16- 22, for a summary of changes to the cabinet. (Note 2) On 15 February ITAR-TASS reported that Economics Minister Aleksandr Shokhin--also a leader of Shakhray's Party of Russian Unity and Accord (PRES)--is a member of the Presidium. Shakhray had held the nationalities portfolio and the rank of deputy premier until Chernomyrdin reorganized the cabinet, reducing the number of deputy premiers and redistributing their responsibilities. The reshuffle decreased the number of deputy premiers from six to four, and the remaining deputy premiers were given more responsibilities (Mayak Radio, 31 January; ITAR-TASS, 15 February). Following the reorganization, Chernomyrdin signed a decision tasking First Deputy Premier Oleg Soskovets with the coordination of the activities of 15 ministries, state committees, and departments (ITAR-TASS, 15 February). Chernomyrdin's reshuffle also assigned each of the deputy premiers oversight over specific areas of social and economic policy but did not explicitly assign the nationalities portfolio to any of them, suggesting that Shakhray will have considerable latitude in this area. End of Eclipse Recent media commentary on Shakhray's situation interpreted the decree as a victory for him, ending a period in which his influence on nationality affairs was visibly declining. Following his demotion from deputy premier to minister in the cabinet reshuffle (ITAR-TASS, 20 January), an article in the 25 January issue of Moskovskiy Komsomolets reported that nationality affairs were being handled by other officials, leaving Shakhray out of the loop on important developments: --Deputy Premiers Yuriy Yarov and Aleksandr Zaveryukha had been given joint jurisdiction over nationality affairs, and Shakhray was now complaining that he was being used as a "front" instead of being "the man in charge" of regional policy. --Chernomyrdin had met with Chechen Republic Deputy Premier Mairbek Mugadayev in disregard of "Shakhray's directive" not to treat representatives of the Chechen Government as leaders of an independent republic. --Shakhray had complained tHhat government officials invited him "to study" Tatarstan's draft "Treaty on the Mutual Delegation of Authority and Terms of Reference" only after he expressed in an Interfax interview his bewilderment at not being included in the treaty negotiations. Other media reports also noted that Shakhray appeared to be losing influence. According to Interfax (21 January), "well- informed" sources within the government had said that Shakhray had been "virtually debarred" from handling regional issues. Kommersant-Daily reported that before he was elevated to the Presidium, Shakhray had been complaining to journalists that urgent problems such as Tatarstan and Chechnya were being handled without his involvement. Shakhray was also apparently excluded from a 20 January telephone conference with the heads of administration of "a number of regions" discussing preparations for upcoming local elections. According to Rossiyskaya Gazeta (21 January), Presidential Administration Leader Sergey Filatov led the conference and Yarov participated. Background to Eclipse Shakhray appeared to overcome what the Moskovskiy Komsomolets article called his "rather dubious status" by threatening to refuse to accept reappointment to the nationalities portfolio. Interfax (21 January) quoted Shakhray as saying that if "vital issues of regional and nationality policies" continue to be dealt with "without participation of the government member responsible for these issues . . . , I will not be able to work in the cabinet." Shakhray's eclipse from nationality issues and his loss of the deputy premier post were probably retaliation by Yeltsin for Shakhray's limited support of the president and his reform team at crucial moments before and during the December election campaign. Yeltsin disdained Shakhray's establishment of the Party of Russian Unity and Accord (PRES) for splitting his reform team and contributing to the reformers' December national election defeat by splitting the vote. (Although Yeltsin avoided direct association with any party during the national election, he had been perceived as favoring Russia's Choice "in spirit" (Mayak Radio, 16 October 1993)--inasmuch as many of his close associates formed the party and actively promoted his reforms.) During the October 1993 crisis, Shakhray pushed for compromise and simultaneous presidential and parliamentary elections rather than fully supporting Yeltsin's decisions. Shakhray had also undermined Yeltsin's authority at a preparatory regional conference by openly disagreeing with Yeltsin's decision to urge the voluntary dissolution of local soviets (Interfax, 6 October 1993). Outlook Shakhray's special status as a member of the Presidium puts him on a par, in effect, with the deputy premiers and probably allows him, as he had demanded, to report directly to Chernomyrdin on nationality affairs. The arrangement may also facilitate the division of labor among the deputy premiers, allowing the cabinet to make fuller use of Shakhray's experience in nationality affairs and freeing the others to concentrate on priority economic issues. With Shakhray apparently positioning himself as a future presidential candidate and staking out positions opposed to Yeltsin on key political issues--most recently on the issue of amnesty for Yeltsin opponents arrested in 0ctober (Interfax, 28 February)--Shakhray's apparent return to influence in the cabinet may not last long. (AUTHOR: NERO. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ANALYSIS BRANCH, RUSSIA DIVISION, (703) 733-6070.) ENEAG/BLOUGH/GSP 08/2114z MAR

Continuing to call for the creation of a Greater Serbia, Bosnian Serb leaders have rejected joining the Bosnian Muslim-Croatian federation announced in Washington on 1 March. In an interview published in Der Spiegel on 7 March, Bosnian Serb "President" Radovan Karadzic sharply denounced the Muslim-Croat federation and the confederation between Bosnia-Herzegovina and the Republic of Croatia. Insisting that the Serbs could accept only "an independent Serbian state" or unification "with all other Serbs in one state," he asserted that only "political illiterates could expect" the Bosnian Serbs to live in a "Croatian-Muslim state." Suggesting that his remarks to Der Spiegel were a definitive statement of policy, both Belgrade television and the Yugoslav press agency Tanjug gave prominent treatment to quotations from the interview (Belgrade TV, 7 March; Tanjug, 8 March). At the same time, while unanimously expressing their opposition to signing on to the Washington agreement, Bosnian Serb leaders have not opposed the idea of Muslim-Croatian union. However, they insist that such a union must not threaten what they define as Serbian interests. Momcilo Krajisnik, president of the Bosnian Serb assembly, described the idea of a federation or confederation with the Croats and Muslims in one Bosnian state as "out of the question." While Krajisnik evinced skepticism that a Muslim-Croatian federation could survive, he did not reject the idea out of hand (Tanjug, 5 March). Bosnian Serb "Foreign Minister" Aleksa Buha said that the Serbs would never "return to any sovereign and integral Bosnia-Herzegovina." While declaring that he would not oppose a Muslim-Croatian union as long as it did not constitute a threat "against" the Serbs, nevertheless he speculated that the federation was intended to "create a firm negotiating--and possibly military--bloc" opposed to Bosnian Serb interests (Tanjug, 6 March). Nikola Koljevic, a vice president of the so-called Republic of Srpska in Bosnia-Herzegovina, who earlier suggested that the Serbs would continue to seek the union of "all Serbian lands" with "Mother Serbia" despite the Washington agreement (Vecernje Novosti, 3 March), more recently has praised the agreement as a "pragmatic move" in the "direction of peace." He suggested, however, that the Serbs would enter into negotiations on the agreement only in the unlikely event that UN sanctions against Belgrade were lifted (Tanjug, 8 March). (AUTHOR: NASH. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF ANALYST, ELAG, (703) 733-6120) ELAG/GILISON/GSP 08/2136z MAR

A January 1994 press report lists the current and previous assignments of high-level Mongolian People's Revolutionary Party (MPRP) and government leaders. Of the 27 leaders listed, only one has retained his MPRP position and one his ministerial assignment. Nineteen are now serving as State Great Hural and Constitutional Court members or in the government or academic community. Four have retired, one is unemployed, and one is in Poland. The following list of 27 former Mongolian party and government leaders cites their previous positions and their current assignments: L. RINCHIN -- Previous: MPRP CC member and director of the MPRP CC Foreign Relations Department; Current: Retired Y. LOSOLSUREN -- Previous: MPRP CC member and director of the MPRP CC General Department; Current: Originally assigned prorector of the State and Social Studies Academy; now unemployed G. DASHDZEBEG -- Previous: MPRP CC member and director of the MPRP CC Science, Education and Health Department; Current: Deputy minister of health L. DAMDINJAB -- Previous: MPRP CC member and director of the MPRP CC Department of Education; Current: Retired R. TSAGAANHUU -- Previous: MPRP CC member and director of the MPRP CC Department of Agriculture; Current: State Great Hural Member S. BOLD -- Previous: Director of a MPRP CC department; Current: Originally assigned chairman of the Mongolian Olympic Committee; gone to Poland L. MOLOMJAMTS -- Previous: MPRP CC member, director of the MPRP CC Department for Administrative Organizations, and former minister of defense; Current: Instructor at the National Military School N. JANTSAN -- Previous: Director of the MPRP CC Department of Administration; Current: Member of Constitutional Court L. TUDEB -- Previous: MPRP CC member,editor of the Party and Government newspaper UNEN, and chairman of the Mongolian Committee of Journalists; Current: Member of MPRP Guidance Council; continues to be editor of UNEN newspaper C. SEREETER -- Previous: MPRP CC member and director of the MPRP CC Department of Science, Education and Health; Current: Retired N. TOGTOH -- Previous: MPRP CC member and director of MPRP CC Construction, Transportation and Communications Department; Current: People's Great Hural member T. GURBADAM -- Previous: MPRP CC member and director of MPRP CC Industry; Department; Current: Originally assigned ambassador to the Soviet Union; now unemployed G. ADIYAA -- Previous: MPRP CC secretary; Current: Director of MONTSAME Foreign Communications Department D. MUJAAN -- Previous: Director of the MPRP Industry Department; Current: Director of the Administration of the President's Office of Mongolia T. GOTOB -- Previous: Secretary of the Presidium of the MPR People's Great Hural; Current: Retired B. CHIMED -- Previous: Director of the People's Great Hural Department for State Organization; Current: State Great Hural member D. SAARAL -- Previous: Director of the Administative Office of the MPR Council of Ministers; Current: Director of the Consular Office in Hohhot, China B. PUREB -- Previous: Director of the Organization and Instruction Department of the Council of Ministers; Current: Director of the Militia Administration B. SHARABSAMBUU -- Previous: Minister of Trade and Procurement; Current: Trade Representative's Office specialist at the embassy in Russia U. MABLET -- Previous: Minister of geology and mining industry; Current: Director of the State Mineral Resources Reserves subordinate to the Government J. HURTS -- Previous: --; Current: State Great Hural member O. JAMBALDORJ -- Previous: Minister of Justice and Arbitration; Current: Research worker at the State Rights Institute of the Academy of Sciences S. GUNGAADORJ -- Previous: Minister of Agriculture; Current: Ambassador in North Korea T. GOMBOSUREN -- Previous: Minister of Foreign Relations; Current: Minister of Foreign Relations B. SUMIYAA -- Previous: Minister of Culture; Current: Adviser to the minister of culture D. MOLOMJAMTS -- Previous: Minister of finance; Current: Mongolian Bank president C. TSERENNADMID -- Previous: Minister of health; Current: Department head at the AUUIS (expansion not known) (UG No 2 11-2O January 1994 p 5) (AUTHOR: MIAB/CISD. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, MILITARY/INTERNATIONAL AFFAIRS BRANCH, CIS DIVISON, (703) 733-6375.) ENEAG/O8 MAR/POLCHF/CIS DIVISION/sdj 09/0037Z mar

I. DIPLOMATIC Consular Representatives--Trieste citizen Aldo Kolleoni, chairman of the Italian-Mongolian Friendship Society, was named Mongolian consular representative in Italy and Kuo Shiyu Mongolian consular representative in Hong Kong. (ARDYN ERH 12 Sep 92 p 1) II. ECONOMIC Border Crossings--The number of vehicles from Germany, Hungary, Czechoslovakia, and Russia arriving at the Altanbulag Customhouse border point increased dramatically in late summer 1992. The usual processing time for vehicles at this border point was reported to be one week. (ARDYN ERH 4 Sep 92 p 3) By order of the minister of finance, effective 1 March 1994, changes will be made in the priority of work at aymag and local custom bodies. The order provides for special attention to vehicles crossing the state border. (Ulaanbaatar MONTSAME 17 Feb 94) Mongolian Construction Workers in Russia--Mongolian workers have beenemployed under contract at large Russian construction trusts since November 1990. As of 1 July 1992, 481 construction workers were employed in Ulaan-Ude, Irkutsk, Bratsk, and Chita, and 25 in the vicinity of Khabarovsk. The monthly wages of these workers, who contract for one to three years in Russia, averaged 4,500-10,000 rubles. (ARDYN ERH 2 Sep 92 p 1) International Selenge Bank--The Joint Mongolian-Buryat International "Selenge" Bank, which began operations in September 1992 in Ulaanbaatar, has the following objectives: expanding finance-credit and trade-economic, scientific and technical cooperation between the two countries, supporting joint enterprises, augmenting the opportunities to compete in markets, organizing free zones, and bringing the services of the bank closer to the organizations and citizens. (ARDYN ERH 5 Sep 92 p 1) III. EDUCATION Mongolian State University--In 1992 some 2,200 students participated in more than 40 specialized programs at the nine faculties and education-research institutes of the Mongolian State University. More than 300 scholar-instructors and research workers were employed in the 45 departments and 12 education-research laboratories, centers and sectors. During the first session 620 individuals were enrolled in 31 specialized programs. (ARDYN ERH 1 Sep 92 p 2) "Maharashi Vedic" University Branch--T. Sumiya, member of the commission concerned with organizing branches of the International Maharashi Vedic University, announced that the commission was considering opening a branch at the Mongolian State University. (ARDYN ERH 1 Sep 92 p 2) Economic Law Training in Germany--A group of lawyers, under the joint sponsorship of the Mongolian Democratic Party and the Konrad Adenauer Fund,spent ten days in Germany to study the basics of the economic laws of market economy countries. Participants included Mongolian Democratic Party members D. Dorligjab, D. Battulga, and 0. Ochirjab, lawyers A. Amarsanaa, J. Chinbat, and N. Rinchindorj, who was affiliated with the State Great Hural Seal Office. (ARDYN ERH 1 Sep 92 p 2) IV. SCIENTIFIC Earthquake in Omnogobi Aymag-- On 31 August 1992 an earthquake occurred at 1626 Ulaanbaatar time 170 kilometers northeast of Dalandzagad City in Omnogobi Aymag. The intensity approximated 5 on the Richter scale. (ARDYN ERH 1 Sep 92 p 2). Federation of Laboratories--Delegations representing the 11 largest laboratories in Ulaanbaatar agreed to organize the Federation of Laboratories for the purpose of assisting in the coordination of the work performed in laboratories throughout the country, raising the scientific and technical level of research work, exchanging information, and improving the supply of materials and cadres. O. Dorjrentsen, director of the Central Geology Laboratory, was named head of the organizing group. (ARDYN ERH 1 Sep 92 p 2) Mongolian Medical University--The Mongolian Medical University, founded in 1942 as the medical faculty of the Mongolian State University, became an independent institute in 1961 and a Medical University in 1990. During this period almost 10,000 persons completed their training. In 1992 almost 3,000 students studied at this university and 300 scholars and professors served as instructors. Students are trained as physicians, pediatricians, oral specialists, pharmacists, and public health managers. Russia, China, Italy, and the United States have established relations with the university. Students from Russia, Czechoslovakia, Bulgaria, Laos, Cambodia, Vietnam, Ethiopia, China and India were enrolled here in the 1992 school year. (ARDYN ERH 30 Sep 92 p 2) Institute of Technology--The Institute of Technology, subordinate to the Ministry of Science and Education and the Academy of Sciences, participated in the 1992 National Chemistry, Biology and Mathematics Competition. The first classes of this institute had an enrollment of 30 students. The curriculum was patterned after that of the Massachusetts Institute of Technology. The primary goal of this institute was identified as follows: to train science cadres to achieve the same training and research level attained among the students educated in highly developed countries and to acquire sufficient ability to conduct research work immediately after graduation. B. Chadraa, vice president of the Academy of Sciences and academician, was identified as the director of this institute. (ARDYN ERH 5 Sep 92 p 1) V. BIOGRAPHIC ADIYAA, G.--President of the Federation of Mongolian Trade Unions (ARDTh ERH 4 Sep 92 p 1) BAYASGALAN, N.--Director of the Animal Husbandry Policy Department of the Ministry of Food and Agriculture (ARDYN ERH 5 Sep 92 p 2) BUYAN-ERDENE, M.--Director of the Mongolbank Control Office (ARDYN ERH 4 Sep 92 p 1) DABAASUREN, T.--Responsible secretary of the State Harvest Commission (ARDYN ERH 5 Sep 92 p 2) GANBAATAR, G.--Director of the.Transport Department of the Mongolian Civil Air Transport Cooperative (ARDYN ERH 5 Sep 92 p 2) GANBOLD. C.--President of the Federation of Mongolian Peace and Friendship Organizations (ARDYN ERH 4 Sep 92 p 1) GANSUH, D.--Assistant director of the State Geodesy and Cartography Office and candidate (ARDYN ERH 5 Sep 92 p 3) JAMBAA, Y.--General director of the Impeks Supply Cooperative for Various Commodities. ((ARDYN ERH 4 Sep 92 p 3) JAMBAL, G.--Medical University rector and professor (ARDYN ERH 30 Sep 92 p 2) MANALJAB, T.--Director of the Transportation Office of the Ministry of Roads, Transportation, and Communications (ARDYN ERH 8 Sep 92 p 1) OYUUNGEREL, J.--General director of the Petroleum Import Cooperative (ARDYN ERH 4 Sep 92 p 2) SANUNDAGBA,C.--Colonel; deputy chairman of the All Military Special Court (ARDYN ERH 1 Sep 92 p 3) SHUURAB, I.--Assistant director of the Institute for Management and Development (ARDYN ERH 9 Sep 92 p 3) SORONDZON, J.--Director of the Joint Mongolian Russian Secondary School for Russian Language Training in Ulaanbaatar (ARDYN ERH 5 Sep 92 p 1) TOMOR, PUREBIYN--Died on 22 August 1992 following an illness; born in 1932 in the territory of Nomgon Somon, Omnogobi Aymag; completed primary school, the Technical School for Finance and Economics, and the Moscow City International Relations Institute; worked since 1953 as an inspector, deputy chairman of the board, chairman of the Board of the State Bank, deputy director of the International Investment Bank in Moscow and vice president of the Academy of Sciences; recipient of the Order of the Gold Star, and the Distinguished Labor and People's Anniversary Medals; obituary concluded with the listing of the following organizations: Board of Directors of the State Bank and members of the President's Office of the Academy of Sciences (ARDTh ERH 1 Sep 92 p 4) TOMORBAATAR, D.--Deputy minister of fuel and power (ARDYN ERH 9 Sep 92 p 2) ULAAN, C.--Director of the National Development Office (ARDYN ERH 4 Sep 92 p 3) (AUTHOR: MIAB/CISD. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, MILITARY/INTERNATIONAL AFFAIRS BRANCH, CIS DIVISION, (703) 733- 6375.) ENEAG/08 MAR/POLCHF/CIS DIVISION/sdj 06/0033Z mar

The following is the fourth of a series of editorial reports on political Islam in Egypt. These reports include summaries of all articles, reports, interviews, commentaries and other islamic affairs items that were published in the Cairo Arabic-language weeklies 'AQIDATI, AL-NUR, AL-SHA'B, and AL-USRAH AL-'ARABIYAH. This review covers the "January 1994" issue of AL-NUR, indicating that the paper is apparently now published monthly, rather than weekly, as only this and the Muslim Hegira date of 23 Rajab 1414 appear on the front page. Contents of this issue include the following: Saudi Shura Council Opening Highlighted Anti-Islamic Claims Against Ministry Upheld News in Brief Islamic Insurance Rules Discussed Certifying Islamic Interpreters Death for Apostates Dictated by Islam Shaykh 'Abd-al-Rahman Defended Islamic "Subversives" Beware Saudi Shura Council Opening Highlighted AL-NUR Board of Directors Chairman al-Hamzah Di'bis wrote, in a lengthy factual two-page report, about the inauguration of the Shura Council in Saudi Arabia to which he was invited. His report described the scene and covered the speeches delivered by the chairman of the Shura Council and the Custodian of the Two Holy Mosques King Fahd Bin-'Abd-al-'Aziz. Anti-Islamic Claims Against Ministry Upheld Reporters Muhammad Hilmi and Ahmad Mustafa underscored views of a number of ulema, supporting the "serious charges" leveled by People's Assembly member Jalal Gharib 25 December against the minister of culture that the ministry, through its publications and cultural functions, "encourages deviation and spreads anarchy and vice in Islamic society." News in Brief The General Assembly of the General Federation of Doctors "has strongly rejected, for the third time, invitations by the Israeli Health Ministry and Ben-Gurion University to conduct joint medical research." (page 1) "Three People's Assembly members have called for legislation to combat terrorism, which is threatening the country's security." (page 1) News from the Islamic world. (page 2) Issues of Islamic jurisprudence, individual interpretation, and Islamic economy. (page 4) Cultural and literary issues. (page 6) Letters and other contributions by readers. (page 7) An announcement that "The Islamic Jawami' al-Khayr charitable association in the 'Ali Bin-Abi-Talib Center in al-Haram provides its services to the poor, particularly orphans, all over Egypt. The society provides them with clothing, daily meals, and allows them to stay in the center, which is supplied with modern equipment." (page 8) Islamic Insurance Rules Discussed Dr. 'Abd-al-Muttalib 'Abduh, head of the Statistics and Insurance Branch at the al-Azhar University's College of Commerce, was interviewed, discussing shari'ah rules on contemporary insurance systems, including commercial, cooperative, life, and social insurance. He noted that several Islamic conferences on insurance were held and that they all ended with recommendations, but no decisions. Certifying Islamic Interpreters Dr. Sabri 'Abd-al-Ra'uf, professor of jurisprudence at al-Azhar University, was interviewed, explaining the qualifications needed for someone to interpret the teachings of Islam. He pointed out that individual interpretation of Islam by qualified and highly educated people will remain open "as long as there is life to prove to the world that the Islamic shari'ah is suitable for all times and places and is consistent with the time in which we live." Death for Apostates Dictated in Islam Writer Hasan Mahmud Khalil, speaking on the issues of death sentences for apostates (hadd al-riddah) and religious freedom, argued with those who claim that there is nothing called a death sentence on apostates because there is no verse in the Koran that calls for punishing a Muslim apostate on earth and that this contradicts religious freedom. He noted that while it is not mentioned in the Koran, it is mentioned in the Sunnah (prophetic sayings) and the Sunnah, he said, is the second source of legislation and Islam after the Koran. He added that Sunnah contains various religious legal rulings. There was a Sunnah that confirmed what is contained in the Koran and another that explained the Koran. He further explained that "Islam protects rights and freedoms, and the first of these freedoms is the freedom of belief and expression. No one is forced to abandon or change his religion. A person can choose which religion to believe and accept, but if he adopts Islam willingly, he accepts its rules and submits to its obligations. He will be asked about every shortcoming." Khalil also said that "the punishment for apostasy was legalized to safeguard religion, ensure its course, deter those who wish to enter Islam to achieve certain purposes and then return to their infidelity, and purge society of such hypocrites and exploiters of religion." He concluded that apostates are more dangerous to Islam than non-Muslims because they distort religion and deceive many people who are not familiar with Islam." Shaykh 'Abd-al-Rahman Defended Writer Muntasir al-Zayyat argued, in an article entitled "Umar 'Abd-al-Rahman; The Other Side," that Dr. 'Abd-al-Rahman is being held in the United States on political rather than legal grounds. He said that the indictment issued by the federal court in New York in the case of the World Trade Center explosion on 4 September did not include the name of Dr. 'Umar 'Abd-al-Rahman, although much media clamor was raised at the time. This, al-Zayyat said, "opens the way for his possible release soon." Al-Zayyat then recalled that the U.S. Administration several months ago wanted Dr. 'Abd-al-Rahman to leave the country, saying that his entry into the United States was improper. Describing this as "ridiculous" and "surprising," he said that if Shaykh 'Umar's entry visa, which he received in Khartoum, was wrong, then why did no one find fault with his previous 1985 and 1987 entries to the United States? He further argued that the U.S. Administration wanted to get Dr. 'Umar 'Abd-al-Rahman out and could not explicitly express that; therefore, it said that he violated immigration laws and began looking for a country to take him. The problem became more complicated, al-Zayyat said, when the Egyptian Government asked for his extradition and the prime minister of Afghanistan agreed to receive him. This was unacceptable to the U.S. Administration, he said, adding that the day when 'Abd-al-Rahman's lawyer officially requested that the shaykh be allowed to leave for Kabul, he was officially charged to prevent him from traveling there. "Therefore, the problem is not governed by legal considerations, but political. If Dr. 'Abd-al-Rahman was treated according to law, he would always emerge victorious." The writer then tried to shed more light on the "critical and fabricated problem" of Dr. 'Abd-al-Rahman. He said: "The man has always paid for his daring beliefs and views." His freedom has been restricted since the death of former President Jamal 'Abd-al-Nasir, when he called from the pulpit that no prayers should be made for President 'Abd-al-Nasir. Al-Zayyat then reviewed Dr. 'Abd-al-Rahman's struggle for his beliefs in Egypt since that time, noting that he was subjected to ugly" torture during his imprisonment from 1981 to 1984 and was insulted and defamed by "all the media." The writer added that when he left prison, he was strong and continued to adhere to his beliefs and call for the application of the shari'ah. He was threatened by former Interior Ministers Zaki Badr and 'Abd-al-Halim Musa and, as a result, left Egypt and has not since returned. In further defense of Dr. 'Abd-al-Rahman, the writer said: "In the case of Dr. 'Abd-al-Rahman, the law worked in his favor. However, the law now is not respected in Egypt by those who make it. The problem is being tackled on a political basis, and the political situation today is hostile to Shaykh 'Umar and all those who follow in his footsteps." Al-Zayyat continued: "The proceedings for the trial of Dr. 'Umar 'Abd-al-Rahman are being resumed in al-Fayyum at a time when such measures were suspended in New York. It is Dr. 'Umar 'Abd-al- Rahman's fate to pay the price for his adherence to his beliefs and his Islamic call." Islamic "Subversives" Beware Dr. Sa'd al-Hilwani, history lecturer at the al-Azhar University's Arabic language college, warned of attempts by subversive elements to undermine the Muslim religion. He also warned against moral and religious degeneration as a result of immoral literature, referring in this regard to the question submitted by Jalal Gharib, an independent deputy of the People's Assembly, to the minister of culture on the issue. (QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, AFRICA/LEVANT BRANCH AT (7O3) 733-64O8) ENEAG/09 Mar/POLCHF/TOTF/NEASA Division/CL 9/1604Z MAR

In an apparent effort to gain more influence over Polish TV and Radio, President Lech Walesa fired Marek Markiewicz, the chairman of the Polish Radio and TV Council whom he had selected a year ago, after Markiewicz disregarded Walesa's objections to the Council's candidate for exclusive national broadcasting rights. Despite Walesa's repeated assertions that Zygmunt Solorz, an emigre businessman and head of Polsat satellite television network, was not a "suitable" candidate for an exclusive license to broadcast nationally (26 February, Warsaw TV), the Council formalized its agreement with Solorz on 1 March. In stating his objections, Walesa pointed to press reports raising questions about what Rzeczpospolita called a Solorz biography "full of mystery and insinuation" (Rzeczpospolita, 25 February). Apparently referring to reports of Polsat employees' connections with the former communist government, Walesa responded to the Council's 27 January declaration that Polsat won the broadcasting license by accusing the Council of placing private television "into communist hands" (Gazeta Wyborcza, 29-30 January). Gazeta Wyborcza also cited a London Financial Times report asserting that Polsat was heavily backed by British press mogul Rupert Murdoch, contradicting Solorz's claim that his bid was "purely Polish." During a news conference following the signing of Solorz's license, Markiewicz said that his conversation with the president over the license had been "unpleasant" and that Walesa had accused the Council of "accepting a bribe" (PAP, 1 March). Walesa has often expressed his dissatisfaction with Markiewicz and the the Council since the fall of 1993 and may be using the selection of Solorz as an opportunity to create a Council more disposed to accept his advice. Walesa, who has the right by law to appoint three members to the nine-member council, selected Markiewicz, a leading member of the Solidarity trade union, last March when the president was attempting to improve his relations with the trade union (Rzeczpospolita, 10 March 1993). However, as his relations with Solidarity grew increasingly sour (Rzeczpospolita, 28 June 1993) and after the Council had apparently ignored Walesa's advice, Walesa began to criticize Markiewicz and the Council. For example, Walesa objected to Markiewicz's announcement in June that the Council would crack down on private stations that were broadcasting without the Council's authority (PAP, 18 June 1993). He became even more critical of the Council in November, when the Council appointed a former director of Solorz's Polsat to replace Walesa stalwart and current presidential adviser Janusz Zaorski as head of public television. Walesa called the appointment a "major mistake" (Rzeczpospolita, 16 November 1993) and, shortly thereafter, forced the Council out of its office in the Belweder (Rzeczpospolita, 16 December 1993), demanding that the three members whom he had selected resign their posts immediately (PAP, 8 December 1993). As yet, none of the three has complied. (AUTHOR: MIHAILOVICH. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF ANALYST/ELAG (703) 733-6120) ELAG/GILISON/CL 9/1952Z MAR

In an apparent effort to demonstrate that Japan is advancing toward full compliance with GATT rules, Japan's Ministry of International Trade and Industry (MITI) is reportedly moving away from bilateral voluntary export restraints on textiles and toward adoption of more fixed textile import restrictions based on the Multilateral Fiber Agreement. According to the 17 February Nihon Keizai Shimbun, MITI is currently formulating the criteria it plans to use to justify restrictions on future textile imports from China, Pakistan, and Taiwan as early as May 1994. MITI is also reportedly planning for the first time to apply dumping duties consistent with GATT rules to textile products and is, according to the 18 February Mainichi Shimbun, investigating the alleged dumping of Pakistani cotton yarn based on a complaint filed by the Japan Spinners' Association in December 1993. MITI is also reportedly considering whether to move away from voluntary export restraints in other sectors, such as automobiles and forklifts, where Japan has agreed to limit its own exports. According to the 21 January Asahi Shimbun, MITI is officially maintaining that it has not decided whether the current voluntary restraints for car exports to the United States will be renewed. However, it reportedly wants to abolish such restraints, calculating that now, when Japanese car exports to the United States are down, would be a good time to abolish the voluntary export restraints for automobiles. (AUTHOR: INNES. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM, (703) 733-6534.) EAG/BIETZ/CL 9/2118Z MAR

Seeking to project a conciliatory stance on North-South talks, Pyongyang used the 9 March inter-Korean talks to create the image that it is making constructive proposals to pave the way for the exchange of special envoys, a step that is related to the resumption of talks with Washington on the nuclear issue. According to Pyongyang television on 9 March, the North Korean side advanced a new proposal for the envoy exchange that it claimed incorporated South Korean views on the issue. (The proposal, which prescribes the composition of the special envoy's entourage, travel arrangements, and other procedural matters, was characterized by the South Korean chief delegate as "a positive sign," according to Seoul's government-run KBS-1 radio.) Nevertheless, clinging to a position that could enable North Korea to control the pace of progress at the talks, Pyongyang television also depicted the North as still insisting on the four basic demands it previously advanced as conditions for exchanging envoys. In a gesture that could facilitate an eventual compromise on its demands, Pyongyang has slightly tempered its personal attacks on ROK President Kim Yong-sam. A 9 March KCNA report of a Nodong Sinmun commentary criticizing Kim's recent remarks on North-South relations referred to him as a "traitor" only once, while using more neutral terms such as "South Korean rulers" and the "Kim Yong-sam group" to refer to the ROK government. Both sides are set to meet again on 12 March. (AUTHOR: YIM. QUESTIONS/COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM, (703) 733-6534.) EAG/BIETZ JEG 10/0005Z MAR

Table of Contents JAPAN: Auto Industry - FEATURE: Auto Industry Firms Receiving Employment Subsidies Economic Trends - FEATURE: Keidanren Role Likely To Change Under New Chairman; FEATURE: Welfare Payment Increases Will Offset Tax Cuts for Households; FEATURE: Economic Organizations Critical of MITI 'Interference' Environmental Issues - Thirty Small Industrial Waste Companies Form Cooperative Financial Issues - Nippon Credit Bank Expanding, Introducing U.S. Techniques; Banks Considering Establishment of Offices in Hanoi; Former MOF Officials May Become Next BOJ Governor, Stock Exchange Head; MOF To Require Disclosure of 'Off-Balance Sheet' Transactions Foreign Trade and Investment - CHINA -- Japanese Firms Forming Broad Range of Joint-Venture Companies PHILIPPINES -- Shipping Firm Establishes Subsidiary in Manila THAILAND -- Canon To Expand Office Automation Equipment Production UNITED STATES -- Kobe Steel, TI To Market Cladding Material in Japan; Sumitomo Metal To Extend Technical Cooperation to Steel Rod Firm VIETNAM -- Japanese Firm To Assist Marine Products Processing Company Machine Tools/Robotics - MT Sales Fell 25 Percent in 1993, December Sales Dropped 16 Percent Semiconductors/Computers/Electronics - NEC Wins Supercomputer Order From Private University; Seiko Epson To Build IC Design-In Center in China Telecommunications/Satellites - NEC, Mitsui To Build Ground Station For Sri Lanka Telecom; NHK Will Lease Circuit on Panamsat Satellite; Tokyo Experimental CATV Project To Be Operational by 1996; Matsushita Electric Industrial Co., EO Revamp Production Agreement CHINA: Domestic Developments - Shanghai Enterprise Ownership Composition Changes Through Reform; Textile Shortages, Price Increases Forecast in 1994; Bank of China To Introduce Computerized Service Network; Shenzhen Calls Halt to Listing of New 'A' Share Issues; Shandong Remains Country's Leading Gold Producer; Xiamen To Invest in Transport Facilities; Jialing To List Subsidiaries in Hong Kong Foreign Trade and Investment - Fujian Sets Up Intellectual Property Rights Court; Shanghai Exports Exceed Target in 1993; Guangzhou To Set Up Individual Foreign Exchange Markets; Foreign Investment Estimated at $30 Billion for 1993; Guangdong Foreign- Funded Enterprises Expand Export Share; Beijing Views Use of Foreign Loans, Donations; Hebei Use of 1993 Foreign Loans; Airbus Signs Spare Parts Production Deal; Aerospace Industry Corporation Seeks International Cooperation; Stanley Ho Threatens To Halt Mainland Investments; China Overseas To Invest in Guangdong Power Plant; Hong Kong Firm Holds Two Thirds Shares of Guangdong Power Plant; Xiamen People's Income, Foreign Capital Increase; Zhuhai, Singapore Company Sign Shipyard Construction Pact; Sino-Thai Project To Produce Suzuki Motorbikes in Nanning; Wuhan Iron and Steel Imports Spanish Machinery; Tianjin Establishes Joint-Venture Building Materials Institute Taiwan: Additional Incentives To Promote Southern Policy; Draft Trade Regulations on Hong Kong, Macao; Textile Companies To Invest or Expand in Vietnam; Government To Hold Current Tariffs on Automobiles, Parts for Now; Imposition of Anti-Dumping Tax on Japanese, Korean Polypropylene; MOEA Assesses Impact on Manufacturers of Joining GATT; Statistics on Exports to PRC May Be Underestimated NORTH KOREA: FEATURE: DPRK-Chosen Soren Joint Ventures Face Continuing Problems SOUTH KOREA: FEATURE: Patent Office Looks for Countermeasures to Patent Disputes; FEATURE: ROK Efforts in Obtaining Foreign Commercial Technology Chronicled; FEATURE: Electronics Companies Focusing on Large Screen TV's; Government Committee Devising NAFTA Countermeasures; Study Compares ROK and Japanese Overseas Investment Strategies; KDI Approves of Samsung's Entry Into Auto Production; Samsung Develops One-Chip Integrated Circuit; Hyundai Motors Opens Car Institute; Seoul, Beijing Seeking Industrial Alliance; Companies Withdraw From Indonesia Because of Rising Labor Costs; Plant Exports to China on Increase; Companies To Participate in Telephone Business in Russia; Goldstar Signs Communications Agreement With Romania; China Emerges as Major Export Market for ROK Textiles SOUTHEAST ASIA: INDONESIA - FEATURE: Government Urged To Reduce Cost of Economy; FEATURE: Workers Strike as Government Enforces Minimum Wage Decree; Central Bank Needs $400-Million 'Standby Loan'; Government Discontinues 'Protection' of Steel Industry; P.T. PAL To Shift Production Focus; Increase in French Investments Reported; Agriculture's Contribution to GDP Drops to 19 Percent MALAYSIA: Contract for Asia Pacific Cable Network Signed PHILIPPINES: Proposals for Satellite Project Reported SINGAPORE: 'Largest' Petrochemical Investment Announced THAILAND: Rice Sale to North Korea Reported; Cabinet Approves Soybean Import VIETNAM: FEATURE: Losses in Rice Export Earnings Reported; Government To Approve Foreign Construction of Infrastructure Projects; Government To Develop 'Core' Groups of State Enterprises; Banking Association To Include Domestic, Foreign Banks; Finance Ministry Personnel To Study Japan's Securities Industry; Joint Venture With French, Chinese Firms To Produce Nylon Cords; Jewelry Joint Venture Formed With Japanese Company; Joint Venture With Philippine Firm To Build Commercial Complex; Joint Venture With Singaporean Company To Provide Hotel Services; Joint Venture With Malaysian Firm To Produce Glass Containers; Decrease in Coal Export Noted; Singapore's Liang Court Holdings To Invest in Apartment Complex; Hanoi Launches First Paging Service; Hong Kong Firm To Invest in Da Lat Infrastructure; PetroVietnam To Increase Production; Government To Increase Cement Production; Peanut Exports Put Vietnam Third Among Exporting Countries; First Phase of Hoa Binh Hydroelectric Plant Completed; Rice Joint Venture Accord With Hong Kong Company Signed; Construction of Sulfuric Acid Factory Reported; Vietnam Airlines Leases Two Airbus Jets From Air France (Pacific Rim Economic Review FBPSP 94-05) JAPAN: Auto Industry - FEATURE: Auto Industry Firms Receiving Employment Subsidies -- SUMMARY: Battered by Japan's prolonged economic slump, numerous firms in three auto industry sectors- -finished car makers, auto-body manufacturers, and auto parts makers--are temporarily shutting down operations and initiating "one-time layoffs," according to media reports. An increasing number of large industry firms are joining smaller companies in receiving government "employment adjustment subsidies?? to offset labor costs associated with the layoffs. According to the 6 January NIHON KEIZAI SHIMBUN (NIKKEI), Japan's auto industry is ??reeling?? from the fall in domestic demand for new cars because of the prolonged recession. On 5 January, the Japan Automobile Dealers Association announced that domestic auto sales in 1993 fell for the third straight year to a six-year low. Sales of cars (excluding minicars), trucks, and buses totaled 4,887,179 vehicles, down 8.4 percent from 1992, and the lowest level since 1987. The paper adds that sales have fallen nearly 18 percent from their peak in 1990. Auto exports also have fallen sharply. According to the Japan Automobile Manufacturers Association, in January 1994 auto exports fell by 26.5 percent compared to January 1993 to 390,418 vehicles, the tenth consecutive monthly decline, the 25 February NIKKEI reports. This is the largest drop "since statistics have been collected" and the lowest number of vehicles exported in the month of January since 1979. Further, the monthly value of both auto and auto parts exports fell 12.6 percent to just over $6.5 billion, the fifth consecutive monthly decline, the paper notes. Companies Forced To Initiate Temporary Layoffs - According to the 20 November 1993 ASAHI SHIMBUN, because of the prolonged slump, the auto industry is faced with "excess personnel and production capacity." However, given Japan's lifetime employment system, companies are unable to simply fire workers and are looking for other means to lower labor costs. One means companies have resorted to, according to ASAHI, is "one-time," or temporary layoffs. Under this arrangement, to reduce production without actually firing excess personnel, firms require that designated workers take temporary layoffs, during which plant operations are halted. Firms must pay an "operations shutdown allowance" equal to or more than 60 percent of the employee's average salary, as required by the Labor Standards Law. To help firms in selected industries during recessionary downturns, in 1975 the Japanese Government initiated an "employment adjustment subsidy system" through which the Ministry of Labor (MOL) pays companies a subsidy to offset labor costs "during temporary layoffs, retraining, and employee transfers," ASAHI notes. To receive these subsidies, firms must first be "designated" as being in an industry sector experiencing difficulties by the MOL, after which the firm must specify the conditions of its temporary layoffs and petition the MOL for the subsidies. This designation is effective for 1 year, after which the industry may be redesignated by the MOL for another year. Large Number of Industry Firms Receiving Employment Subsidies - In the auto industry, the auto-body manufacturing sector received MOL certification for employment adjustment subsidies in late January 1993, according to the 6 February 1993 NIKKEI, following an appeal by the Japan Auto-Body Industries Association, which represents 218 firms. The MOL eligibility designation was set to expire on 31 January 1994, but, according to the 15 February 1994 NIKKEI SANGYO SHIMBUN, the MOL "redesignated" the auto-body sector for another year. On 1 May 1993 the finished auto assembly sector and the auto parts manufacturing sector were also added to MOL's list of industries eligible for employment adjustment subsidies, according to the 3 May 1993 NIKKEI WEEKLY. Since the designations were made, the number of companies utilizing one-time layoffs has been increasing, reports the 15 February 1994 NIKKEI SANGYO. According to MOL statistics, the number of finished car makers (including some auto-body assembly firms) who petitioned for labor adjustment subsidies to pay for temporary shutdowns and layoffs mushroomed in late 1993, from five firms in November to 21 in December covering 26,785 employees. As these firms halted production, in a ripple effect, an increasing number of auto-body and auto parts firms have had to initiate work stoppages, NIKKEI SANGYO reports. The number of auto-body firms undertaking work stoppages in November expanded to 12 and then to 20 firms, while the number of targeted personnel increased from 990 to 1,515. Auto Parts Firms Particularly Hard Hit - Auto parts manufacturing firms have been particularly hard hit by the downturn, according to the 27 January NIKKEI SANGYO. The number of parts companies planning work stoppages more than doubled, from 136 firms in October to 280 in November, while the number of employees involved jumped from 30,382 in October to 79,201 in November. Further, according to the 15 February NIKKEI SANGYO, the numbers increased again from November to December, from 280 to 361 firms. NIKi?I SANGY0 adds ? that the finished car and auto parts industries do not expect the number of firms requesting subsidies to fall "any time soon." Press Reports on Companies Initiating Layoffs, Requesting Subsidies - Although a number of small auto industry firms applied for subsides soon after the MOL made its designations, until October 1993 no major company had applied. Subsequently, a number of larger auto-related firms plans to initiate temporary layoffs and apply for employment adjustment subsidies. According to press reports, the following companies have initiated temporary layoffs and have received employment adjustment subsidies: Nissan Motor Co.--According the 26 October MAINICHI SHIMBUN, Nissan announced plans to apply for subsidies after revealing that it would stop production for two days in November on one line at its Tochigi assembly plant, which employs 6,500 people, and institute temporary layoffs on those days to 2,100 production workers. In November, Nissan announced it would expand the scope of temporary layoffs to include "virtually all" domestic production lines. The 18 November MAINICHI SHIMBUN reports that Nissan decided to target nearly 15,000 employees and five plants for two-day shutdowns in December, which would cut production by nearly 4,000 vehicles. In December, Nissan announced it would continue to conduct temporary layoffs and production shutdowns in January and February, according to the 18 December YOMIURI SHIMBUN. In January, Nissan had shutdowns for three days at its Murayama and Yokohama plants, two days at its Tochigi plant, and one day at its Kyushu plant. In February the company planned layoffs for two days at its Tochigi and Kyushu plants and one day at the Murayama plant. According to YOMIURI, the Murayama plant will have been closed six days during four consecutive months of temporary shutdowns. Mazda Motor Corp.--According to the 26 October MAINICHI, Mazda decided to initiate temporary layoffs of two days in November for 25,000 of its nearly 30,000 employees throughout the country. MAINICHI reports that Mazda also applied for employment adjustment subsidies. The 25 December Y0MIURI SHIMBUN reports that Mazda, following its November layoffs, planned to have four days of layoffs in January at its Hofu plant. Mazda, which is heavily dependent on exports, has seen its sales fall for fourteen consecutive months. Nissan Diesel Motor--According to the 23 November 1993 NIKKEI, Nissan Diesel, a heavy-duty truck and bus manufacturer, announced it would initiate two days of temporary layoffs involving nearly 3,700 employees at three different plants. The company also stated it would apply for government employment adjustment subsidies, and also announced it had reached agreement with its labor unions to cut yearend bonuses. Sumitomo Wiring Systems--The 26 January 1994 CHUBU SHIMBUN reports that Sumitomo Wiring Systems, the third largest manufacturer of auto wire harnesses, will initiate one-day shutdowns in February and March, affecting more than 4,700 employees. The firm plans to apply for employment adjustment subsidies from the MOL. The shutdowns will cover all of the company's offices and eight plants in Japan. It has seen orders for wire harnesses, which account for over 90 percent of total sales, plummet nearly 20 percent since 1990. If orders do not recover soon, the firm may extend its planned shutdowns beyond March. Tsuchiya Manufacturing Co.--According to the 24 January 1994 NIKKEI SANGYO, Tsuchiya, an auto parts maker affiliated with Nissan, plans to stop production for two days a month at its main plant in Kawasaki City. During this time, the salary of full-time employees will be covered by employment adjustment subsidies, but the salaries of temporary and part-time employees will be reduced on a prorated basis. The Kawasaki plant, which among other things produces fuel, oil, and air filters, accounts for nearly one-third the firm's total sales. The work stoppages will continue "until demand for auto parts has recovered," according to company officials. Further, the company is considering work stoppages at other plants where productivity is low. Other Suppliers Receiving Subsidies Under Different Designations - Other major suppliers to the auto industry have resorted to temporary layoffs and have accepted employment adjustment subsidies under other industry designations. Two major examples, from the rubber and steel industry, are as follows: Bridgestone Corp.--The 3 December 1993 NIKKEI reports that Bridgestone, the world's second largest tire manufacturer, announced that it would initiate three and four days of temporary layoffs at the end of December at nine of the its ten tire plants in Japan. The firm will also apply for subsidies. Layoffs could cover 9,500 employees, or nearly 60 percent of the firm's total payroll. According to NIKKEI, the tire industry received its MOL designation at the end of November, and "this is the first time temporary layoffs have taken place in the tire industry." Earlier, Bridges tone decreased the number of operating days from seven to five per week, but even this measure failed to compensate for the "severe" drop in demand for tires. Daido Steel Co.--The world's largest maker of specialty steel and a major supplier to the auto industry, particularly to Nissan, Daido announced it would receive subsidies for temporary layoffs of nearly 4,000 personnel at four plants at the end of December and in early January, according to the 11 December 1993 YOMIURI SHIMBUN (Chubu edition). While the firm had undertaken temporary layoffs at its Kawasaki plant, this is its first "large-scale" employment adjustment. Daido's sales have fallen for three consecutive years. Economic Trends - FEATURE: Keidanren Role Likely To Change Under New Chairman -- SUMMARY: On 7 February the Federation of Economic Organizations (Keidanren) selected Shoichiro Toyoda, chairman of Toyota Motor Corp., to succeed Gaishi Hiraiwa as Keidanren chairman, according to press reports. While Toyoda chairs Japan's largest manufacturing firm, some industrial leaders express concern whether he can successfully lead Japanese industry because of his personality and Toyota's unusual corporate culture. The press anticipates that under Toyoda's leadership, Keidanren will become an ordinary economic organization" representing the interests of private business, rather than acting as a coordinator between politicians, bureaucrats, and the business community. On 7 February Keidanren chose Shoichiro Toyoda (68 years old), chairman of Toyota Motor Corp. and a Keidanren vice president, to succeed Gaishi Hiraiwa when he steps down as Keidanren chairman in May, according to the 8 February NIKKEI SANGYO SHIMBUN. (The company name is rendered "Toyota"; the legal family name is "Toyoda.") While industrial leaders generally welcomed Toyoda's selection, they also expressed concern, based on his background as the owner and chairman of Toyota Motor, according to the 8 February MAINICHI SHIMBUN. The 8 February NIKKEI SANGYO quotes an unidentified industrial leader as questioning Toyoda's ability to break free from "Toyota egoism" and lead Japanese industry from a "broader viewpoint." Writing in the 10 February NIKKEI SANGYO, editorial staff writer Atsushi Suemura asks whether the head of Toyota, which is often said to have a "Mikawa (the old name for Aichi Prefecture) Monroe doctrine--we don't interfere with you, so don't you interfere with us"--is qualified to lead the entirety of Japanese industries. The 8 February NIHON KEIZAI SHIMBUN (NIKKEI) reports on the expectations--"which also reflect the concerns "--industrial leaders have concerning Toyoda. Masaru Hayami, chairman of Japan's Association of Corporate Executives (Keizai Doyukai), states that he wants Toyoda to exhibit strong leadership "apart from the interests of the auto industry." Kosaku Inaba, chairman of the Japan Chamber of Commerce and Industry, says that the key lies in "how well Toyoda can balance" the interests of various industries and the interests of consumers and corporate shareholders, not as the manager of Toyota Motor, which has "always defended the interests of Toyota and the auto industry," but as a leader of all industries. Concerning Japan-U.S. trade issues, Yoshinari Yamashiro, chairman of steel firm NKK Corp., notes that Japan-U.S. friction "is the Japan-U.S. automobile problem," according to the 8 February NIKKEI, implying that Toyota Motor should change its corporate philosophy and behavior to ease Japan-U.S. trade friction. The article adds that Toyota Motor "symbolizes" Japan's large trade surplus. Where Will Keidanren Go Under Toyoda's Leadership? - Writing in the 15 January ASAHI, economic reporter Yomei Tsuji speculates that Keidanren may become an "ordinary economic organization" under Toyoda's leadership. Tsuji assumes that Keidanren will abandon its function of channelling corporate political contributions to the political parties. Since Toyota Motor has devoted itself to manufacturing and selling cars from its Aichi Prefecture base and has avoided involvement in politics in Tokyo, Tsuji expects Toyoda to be effective in "changing Keidanren's relationship with politicians." In addition, unlike previous Keidanren chairmen who came from the steel, heavy machinery, or electric power industries, industry sectors which were "sponsored" by the government, Toyoda is a representative of "true" private sector firms in Japan. A change in Keidanren's chairmanship from a leader of state-sponsored industry to a private industry leader, Tsuji maintains, means that Japan's economy has been "taken from the government's hands." He also notes that since Toyoda comes from the auto industry, which must sell to consumers directly, Keidanren under Toyoda is expected to pay more attention to consumer interests, unlike his predecessors, who spoke about "national interests" as leaders of "Japan Inc." Writing in the 8 February NIKKEI, editorial staff writer Kazuo Mori notes that Toyoda's Keidanren will no longer play the role of coordinating interests between industry, the politicians, and bureaucrats. Indeed, now it will be difficult for Keidanren to coordinate interests even within private industry. Mori notes that Toyota is an "owner-managed firm, which tends to compete fiercely and to pursue only its own interests,'' even though it has become a giant." He observes that the Keidanren's selection of Toyoda indicates that "competition based on market principles" will be emphasized by corporations more than ever. Japanese practices that hinder competition, Mori notes, such as implementing policies through discussions among political, bureaucratic, and industrial circles, "will be avoided." Press Urges Toyoda's Keidanren To Promote Deregulation - On 7 and 8 February, NIKKEI, SANKEI SHIMBUN, ASAHI, MAINICHI, and YOMIURI carried editorials on Toyoda's selection. All the editorials urge Keidanren under Toyoda's leadership to promote deregulation. For example, ASAHI points out that Japan's auto industry has grown to the level of the U.S. auto industry because of "self-initiated technical innovations and rationalization efforts," not by support from the government, and urges Toyoda to "boldly promote deregulation." MAINICHI, noting that Toyoda himself was a member of the Hiraiwa Study Group, urges him to take the initiative in pressing the government to implement the Hiraiwa Report and "further promote deregulation." YOMIURI also asks Toyoda to promote deregulation to change Japan's economic structure, under which corporations compete for market share or conduct business in a collusive manner." SANKEI's editorial notes that Keidanren also must change its role of being a coordinator between government and industry to being "a representative of private companies." Through channelling corporate contributions to the Liberal Democratic Party (LDP) the past 40 years, Keidanren has "directly and indirectly influenced government policy formulation," but it now has to "deal directly with government regulators." The editorial urges the Keidanren under Toyoda "not be passive" toward the government concerning regulations and administrative guidance, but rather "assert its opinions and act as the leader of private firms in protecting private sector vitality." Profiles Note Similarities Between Toyoda, Hosokawa - The 17 January CHUNICHI SHIMBUN points out the many similarities between Toyoda and Prime Minister Morihiro Hosokawa, such as being from a well-known family, from a regional city, and "somewhat amateurs in their respective new fields," but also observing that "the era requires such leaders." Toyoda is from a rich family--the eldest grandson of Toyota founder Sakichi Toyoda--and has reached his current position "without any political or financial support from the outside." He is viewed as an honest and sincere person, the paper notes, "but not a tactician or a charismatic leader." Since he has been far removed from Tokyo, Toyoda reputedly has not been involved in politics and "is not close to a political party or politicians." He is also viewed as an "amateur" industrial leader, because he had not been involved in the activities of any economic organization before becoming a Keidanren vice chairman in 1990. Toyoda has a doctorate in mechanical engineering and is an accomplished engineer. According to the 8 February CHUNICHI, Toyoda's stances on various issues are as follows: --Political contributions: Toyoda thinks politicians should receive government support and individual contributions rather than contributions from business. He realizes this will "disconnect" collusion within in the so-called "iron triangle" of politicians, bureaucrats and corporations. --Japan-U.S. trade: Toyoda believes that Japan and the United States should build a trade relationship based on "harmony and competition." He has opposed setting numerical targets for Japan's imports of automobiles and auto parts. --Economic structural reform: He believes that corporations should promote self-help efforts to restructure themselves as their own responsibility, while the government should make the Japanese market more open and fair by deregulation. FEATURE: Welfare Payment Increases Will Offset Tax Cuts for Households -- SUMMARY: Japan's proposed increases in welfare and national annuity premium rates will lessen the stimulative effects of the government's proposed income tax cuts on the consumption of working households, according to press reports. The total increase in premium payments is estimated to be equivalent to one-fourth the total estimated gain in disposable income from the income tax cuts, thus largely offsetting tax cuts for average-income working households. The Ministry of Health and Welfare (MHW) claims, on the other hand, that retirees will receive annuity increases that slightly exceed the total amount of premium increases. The MHW has drafted a bill to reform the welfare annuity program (for private sector wage earners) and the national annuity program (for the self-employed, students, and people without jobs) which includes premium rate increases in FY94, according to the 18 February NIHON KEIZAI SHIMBUN (NIKKEI). The draft bill will be submitted to the Diet in mid-March for deliberation. According to the MHW draft, the welfare annuity premium rate will increase from the current 14.5 percent (split equally between employer and employee) to 16.5 percent of monthly salaries effective in October 1994, increasing to 17.35 percent effective October 1995, and a new payment of 1.0 percent (split between employer and employee) of each bonus payment effective in April 1995. Regarding the national annuity premium, the current premium amount, which is a fixed 10,500 yen ($100), will be raised to 11,100 yen ($106) per month effective April 1994. The 26 February NIKKEI reports that total welfare and national annuity premium payments by working households will increase by 1.4 trillion yen ($13.3 billion) a year, which is nearly equivalent to one-fourth the estimated 5.5 trillion yen ($52.4 billion) in income tax cuts specified in the 8 February economic stimulus package. According to MHW's calculations cited by NIKKEI, the total amount of welfare annuity premiums will increase by approximately 2.6 trillion yen ($24.8 billion) a year, assuming an average worker's monthly salary of 340,000 yen ($3,200) and 33 million wage earners. Of this 2.6 trillion yen ($24.8 billion), 1.3 trillion yen ($12.4 billion) will be paid by wage earners, since employers and employees equally split premium payments. The MHW also anticipates that total national annuity premiums will increase by 100 billion yen ($952 million) a year. Premium Hikes Will Wipe Out Tax Cut Gains for Average-Income Families - According to the 15 February NIKKEI, working households with annual incomes below 6 million yen ($57,000) will realize little benefit from the income tax cuts due to increases in annuity premium payments and other public levies. Moreover, while the income tax cuts are only for FY94, the premium increases "will be permanent." In the case of a household with an annual income of 6 million yen ($57,000) or below, an income tax cut of around 71,400 yen ($680) or less "will be largely offset by the increased welfare annuity premium payments." Although the MHW claims that welfare annuity recipients over 60 years of age will receive 5 percent more in benefits from FY94, and therefore the total household disposable income will increase by 3 trillion yen ($28.6 billion), NIKKEI argues that incomes will increase "at the cost of increased burdens for all working households." More broadly, the NIKKEI article notes that FY94 may be a "losing year" for working class households with children in school, since postal rates have recently increased; a 9-percent increase in national university tuition has been proposed for 1995; and an increase in Tokyo expressway tolls has been proposed. The paper concludes that even when workers want to have a bottle of beer after a hard day's work, a 8.9 yen ($.08) tax increase per bottle will "hurt their thin wallets." FEATURE: Economic Organizations Critical of MITI 'Interference' -- SUMMARY: The Ministry of International Trade and Industry (MITI) reportedly faxed a memorandum to four major private economic organizations summarizing the "important points" of the latest government economic stimulus package as well as "model comments" to be made by the heads of the four organizations before the Hosokawa Cabinet approved the package on 8 February, according to press reports. A NIH0N KEIZAI SHIMBUN article on 15 February reported that the economic organizations were very critical of MITI's "interference" concerning comments by their leaders. An editorial in that newspaper the same day sharply criticizes MITI for "excessive guidance" of the private sector, observing that it is "quite ironic" that under the Hosokawa administration, which advocates deregulation, the bureaucrats' control of the private sector "appears to have been strengthened." Major economic organizations are very critical of MITI's "interference" concerning comments by their leaders on government economic policies, according to the 15 February NIHON KEIZAI SHIMBUN (NIKKEI). MITI reportedly faxed a memorandum summarizing the "important points" of the latest government economic stimulus package and "model comments" to the offices of four leading private sector economic organizations--the Federation of Economic Organizations (Keidanren); the Japanese Association of Corporate Executives (Keizai Doyukai); the Japan Federation of Employers' Association (Nikkeiren); and the Japan Chamber of Commerce and Industry--on the afternoon of 8 February, a few hours before the Hosokawa Cabinet approved the stimulus package. The fax reportedly emphasized the "importance" of "praising measures like the income tax cut" and "supporting the government's policy" of cutting direct taxes and increasing indirect taxes. According to the NIKKEI article, the "model comments" for use by the heads of the four economic organizations included: "We highly praise the courageous decisions of the government and coalition to include an income tax cut in the stimulus package." Although MITI defended its action with the assertion that it never intended to force" the organizations to use MITI's comments, NIKKEI reports that the economic organizations are "annoyed" by the fax, which "sounded like an order" for them to use MITI's comments. The article notes that "this is the first instance" of MITI actually sending a document instructing the economic organizations what to say, although in the past MITI telephoned them to request that they make comments "favorable" to MITI. According to a "source connected with an economic organization" cited by NIKKEI, "bureaucratic interference" concerning comments by leaders of the economic organizations "assumed prominence" in December 1993, when Jiro Saito, Ministry of Finance vice minister, and Hideaki Kumano, MITI vice minister, visited the four organizations to "explain" the government's policy of income tax cuts to be paid for by increases in the consumption tax. Editorial Blasts Fax as Example of MITI's 'Excessive Guidance' - NIKKEI's 15 February editorial, which is headlined "Appalled by MITI's Excessive Guidance," is very critical of MITI, noting that its fax "reminds us of an 'education mama' teaching a two-year-old with simple words." However, it observes, "the postwar period, in which Japanese industries were rebuilt under strong MITI guidance, has already ended." "MITI's excessive guidance," the editorial continues, is an "extreme anachronism." "MITI may think that it can freely control private economic organizations with its guidance, but such presumptuousness is no longer acceptable." The editorial urges MITI to "realize that excessive guidance is now one of the causes hindering the vitality of Japanese industries." The editorial also points out that MITI's fax "may be cited by the U.S. Government" to prove its assertion that "bureaucrats control the Japanese economy." It notes that during the recent Japan-U.S. framework talks, the U.S. Government criticized Japanese bureaucrats for "controlling the Japanese economy and hindering deregulation." The editorial concludes that it is "quite ironic" that under the Hosokawa administration, which advocates deregulation, bureaucrats "are gaining more power" and their control of the private sector "appears to have been strengthened." The editorial demands that MITI "reflect gravely on its conduct." Environmental Issues - Thirty Small Industrial Waste Companies Form Cooperative -- About 30 small-scale manufacturers of industrial waste treatment equipment and industrial waste disposal companies from the Tokyo Metropolitan Area and Nagano, Kanagawa, and Shizuoka Prefectures have joined together to form a cooperative association which will pursue contracts for building final industrial waste disposal facilities and conducting R and D activities. The "Cooperative Association for Promoting Environment-Related Enterprises" will be established with an investment of 10 million yen ($96,000) and will be chaired by Yoshinori Ito, president of Kankyo Seibi Shinko, an environmental equipment firm. The companies decided to form this "unique" cooperative because as independent firms, each has limited financial resources and thus can not qualify for special programs sponsored by public corporations, such as the Japan Environment Corporation, to finance work for improving disposal facilities to conform with stricter environmental regulations. The cooperative plans to expand its membership to about 1,000 companies and establish a network of branch chapters throughout the country. (Tokyo NIKKAN KOGYO SHIMBUN 17 Feb 94 p 12) Financial Issues - Nippon Credit Bank Expanding, Introducing U.S. Techniques -- Nippon Credit Bank (NCB), the newest and smallest of Japan's three long-term credit banks, has established a wholly-owned trust banking subsidiary that will begin operations in April 1994, according to the 1 March NIKKEI KINYU SHIMBUN. It will be the seventh financial institution, after the "big four" securities companies and two banks, to enter the trust banking business through a financial subsidiary. Capitalized at 5 billion yen ($48 million) and with 15 employees, the new subsidiary will begin buying real- estate trusts and bank loans for resale. NCB also established a "financial development division" within its Planning Department in February to engage in real-estate project finance and asset securitization, according to the 18 February NIKKEI KINYU. The new division will offer advice to customers on how to securitize their assets through trust banking or by setting up special-purpose companies, and will introduce the securitized products to its large bank bond purchasing customers. For now the division will focus on assisting in the securitization of a customer's better assets, but in the future it will expand to nonperforming loans, as is done by U.S. investment banks. Establishing the new division is NCB's first step in expanding commission-earning operations that fully exploit the financial engineering techniques used by U.S. investment banks. The new division will work in concert with NCB's new trust bank subsidiary in promoting business. By bringing its customers financial engineering techniques from the United States, "smooth fund-raising will become possible" for real estate financing. In addition, NCB is also building up its system of developing new derivative products, such as options, futures and swaps, by establishing a product-development team, according to the 25 February NIKKEI KINYU. The team's objective is to facilitate product development by addressing the need of institutional investors and average companies to hedge against interest rate and currency risks. The team will be located at NCB's interest-rate swap trading desk, the first time a long-term credit bank has set up a product-development team at a trading desk. Product development and marketing will be streamlined, with a single person in charge of both. This official will concentrate on developing products for the portfolio management of manufacturers, not Just securities and insurance companies. Although many banks separate their dealing sites and development divisions, product development is easier at a trading desk because there dealers can collect the hedging know-how of major commercial and foreign banks. NCB expects to be able to reduce the time it takes to develop a product, such as swap-related products, from design to completion in half the time this took previously. NCB plans to sell these products not only to institutional investors but also to average companies. Banks Considering Establishment of Offices in Hanoi - Several Japanese commercial banks are considering opening offices in Hanoi. The Bank of Tokyo, Sakura Bank, Fuji Bank, Tokai Bank, and Daiwa Bank, which have already opened representative offices in Ho Chi Minh City, have also begun looking into opening offices in Hanoi, Vietnam's financial administration center. These banks are expected to set up operations in Hanoi "in the next two or three years" in response to the growing number of foreign banks opening offices in both cities. Sanwa and Sumitomo banks, which are planning to open representative offices in Ho Chi Minh City in the spring of 1994, are expected to join the others in establishing Hanoi offices in the future. The banks are considering several ways of establishing bases in Hanoi, including establishing representative offices, local offices, or liaison offices of their Ho Chi Minh City representative offices. Of the 30 or more non-Japanese foreign banks that have begun operations in Vietnam, roughly one-third have bases in both cities in the form of a branch offices, representative offices, or local offices. (Tokyo NIKKEI KINYU SHIMBUN 16 Feb 94 p 2) Former MOF Officials May Become Next BOJ Governor, Stock Exchange Head - Mitsuhide Yamaguchi, president of the Export-Import Bank of Japan (Ex-Im Bank), who entered the Ministry of Finance (MOF) in 1951 and rose to become vice minister in 1984, is rumored to be the probable candidate to succeed Bank of Japan (BOJ) Governor Yasushi Mieno in December 1994 when Mieno's term ends. In recent years the BOJ governorship has alternated between former MOF vice ministers and BOJ "careerists." Since Mieno is a BOJ careerist, the next governor is likely to be a former MOF vice minister. Although appointing the BOJ governor is the prerogative of the prime minister, the incumbent MOF vice minister customarily recommends a candidate to the prime minister, who "almost automatically approves." Although Yamaguchi is rumored to be the probable candidate, the MOF, BOJ and banking industry officials "are not completely sure yet." They question whether the Hosokawa administration will last until December, when Mieno steps down, and if Prime Minister Morihiro Hosokawa's "advocacy of reforms" might lead to changes in the selection process. There have been several instances in the past where the personal desires of prime ministers altered the selection process. One example was Prime Minister Masayoshi Ohira's selection of Haruo Maekawa, then vice president of the Ex-Im Bank, over MOF candidate Satoshi Sumita, president of the Ex-Im Bank at that time. As a result, Sumita had to wait for five years before getting his chance. BOJ officials have been resistant to the custom whereby every second BOJ governor is a former MOF vice minister. A senior BOJ official is quoted as saying that the BOJ governor needs to have a "sustainable and medium-term viewpoint" of the economy and be strong enough to implement monetary policies from such a viewpoint, "regardless of what the public at large may say," implying that being a former MOF vice minister in itself is not a sufficient qualification to be BOJ governor. Some banking industry officials are also concerned that former MOF bureaucrats tend to compromise too easily with politicians. They are also concerned that former MOF officials tend to adhere to MOF--not BOJ--"priorities" and subject monetary policy to the MOF's fiscal objectives. Yoshino Rumored To Be Next TSE Board Chairman - Yoshihiko Yoshino, president of the Japan Development Bank, who entered the MOF in 1953 and became vice minister in 1986, most likely will succeed Minoru Nagaoka, chairman of the Tokyo Stock Exchange (TSE) Board of Directors, when Nagaoka steps down in May. The chairmanship has been filled by former MOP vice ministers since 1965, when the TSE invited former MOF vice minister Teiichiro Morinaga to restore financial health to the securities industry following the so-called "securities recession" of the mid-1960's. Since likely candidates from within the securities industry have been tainted by the stock-loss compensation scandals of 1991, it is highly likely that a former MOF vice minister will become the next TSE chairman. Nagaoka has been quoted as saying that since current MOF Vice Minister Jiro Saito "plans and decides personnel moves of all former MOF bureaucrats," Saito will select a candidate from among the available former MOF vice ministers. Then, the candidate will be nominated by the TSE Board of Directors and officially elected by two-thirds of all TSE members. Within the securities industry, however, there is strong resistance to the chairmanship becoming a "reserved seat" for former MOF vice ministers. The president of a major securities house states that "the securities industry is now capable of voluntarily promoting fairness and transparency in the stock market," so that the industry "no longer needs influential MOF retirees." Another reason for the strong resistance is that the securities industry was not happy with Nagaoka, who, in the industry's view, "adopted the MOF's position," rather than representing the securities industry, during the series of securities scandals that began in 1991. This viewpoint was particularly evident concerning the issue of establishing a securities industry watchdog organization. Nagaoka supported the MOF's idea of establishing the Securities Exchange Surveillance Commission within the MOF, instead of an independent organization similar to the U.S. Securities and Exchange Commission, which the industry sought. (Tokyo ASAHI SHIMBUN 17 Feb 94 p 11) MOF To Require Disclosure of 'Off-Balance Sheet' Transactions - The Ministry of Finance (MOF) has decided to require financial institutions to disclose information on the status of their so- called "off-balance sheet" transactions. The MOF has determined that the nontransparency of financial transactions not currently included in a financial institution's balance sheet--so-called "off- balance sheet" transactions," such as unlisted futures, swaps, and options--and the concomitant risk of such transactions can cause enormous instability to the Japanese financial system as a whole. Consequently the MOF will reconvene its special advisory panel in March to study the issue in detail. "Off-balance sheet" transactions use cutting-edge financial engineering techniques to allow financial institutions to hedge against risk. Compared to more traditional financial instruments such as loans, off-balance-sheet transactions are conducive to large-volume trading across national borders and have a destabilizing effect internationally when a contract default occurs. Overseas off-balance-sheet transactions of Japanese financial institutions are said to be ballooning, which is one reason why the Bank for International Settlements (BIS) is calling for their thorough disclosure and methods of managing the concomitant risks. Some of the issues the MOF advisory committee, "The Working Subcommittee on Financial Institution Disclosure," will consider are: whether it can establish a means for market-value assessment of unlisted "off-balance-sheet" financial products; whether risk assessment of all counterparts to off-balance-sheet transactions and comprehensive risk assessment are possible; whether overseas transactions are to be disclosed as well; and whether there is a method to demonstrate risk management methods that financial institutions are already using. (Tokyo NIKKEI KINYU SHIMBUN 24 Feb 94 p 1) Foreign Trade and Investment - CHINA: Japanese Firms Forming Broad Range of Joint-Venture Companies -- Japanese economic newspapers in recent weeks have reported the formation of joint venture (JV) companies and other corporate tie-ups in China that involve a wide range of industrial sectors. Manufacturing Sector - Nippon Alkyl Phenol, a Japan-based JV company organized by Mitsui Petrochemical Industries, the Swiss chemical company Ciba-Geigy, and Musashino-Geigy, will sign an agreement in the near future with Gaoqiao Petrochemical Company, a major Chinese petrochemical manufacturer, establishing a JV company in Shanghai to build a plant to manufacture a resin additive which uses alkyl phenol as a feedstock. The investment ratio in the JV will be Nippon Alkyl Phenol 75 percent and Gaoqiao Petrochemical 25 percent. The new company will invest 10 billion yen ($95.2 million) to build a resin additive plant in South China with an annual capacity of 2,500 tons. The alkyl phenol used in the production of the additive, which is an antioxidant and ultraviolet radiation absorbing agent used in resins such as acrylonitrile butadiene styrene, will be shipped from Nippon Alkyl Phenol's plant located in Mitsui Petrochemical's Chiba plant complex. (Tokyo NIKKAN KOGYO SHIMBUN 7 Feb 94 p 1) Shiko Technical Research--The world's largest manufacturer of cooling fans used in notebook computers, Shiko has begun full-scale operations at two JV plants in China. The factories, located in Shanghai and Wenzhou, Zhejiang Province, were completed in December 1993 and employ about 100 workers each. Shiko projects that sales in FY94 from the two plants will be 1-2 billion yen ($9.5-$19 million), which would about double their FY93 sales of 1.4 billion yen ($13.3 million). The Shanghai plant will produce cooling fans for personal computers and sell them to major electronics manufacturers in Taiwan. Production will be contracted out to the Shanghai Video Recorder Equipment Factory until Shiko officially decides on a partner in May. The Wenzhou JV plant, the "Wenzhou Golden Dragon Shiko Company," will make vibration motors for pagers which will be sold to Motorola and to Casio Computer's plant in Tianjin. The JV partner will be an individual. With the establishment of these foreign production bases, Shiko will implement a policy of "domestic production for domestic sales and foreign production for foreign sales." (Tokyo NIKKAN KOGYO SHIMBUN 16 Feb 94 p 26) Juken Sangyo, a second-tier manufacturer of processed wood products, together with the general trading company Nissho Iwai, will establish a wood products manufacturing and sales JV company in Shanghai in April. The company, Juken Nissho China, will be capitalized at $5 million, with Juken investing 85 percent and Nissho Iwai 15 percent. The JV has obtained a 50-year lease from the Chinese Government on a 5-hectare site in Shanghai's Baoshan District. Total investment, including plant and equipment, will be about $10 million. The JV plant, scheduled to begin operation in February 1995, will use imported wood from Southeast Asian countries such as Myanmar, will cut lumber, and will manufacture plywood for export to Japan and for sale in China. (Tokyo NIKKAN KOGYO SHIMBUN 16 Feb 94 p 19) Engineering Design, Transport, and Printing Services - Mitsubishi Heavy Industries (MHI) and Mitsubishi Corp. will establish a JV company on 1 April with the Baoshan Iron and Steel Co. to carry out the design work for Baoshan's No. 2 rolling mill. The JV company, "Shanghai Bao-Mitsu Metallurgical Facilities Engineering Technology Co. Ltd.," will be capitalized at about 200 million yen ($1.9 million), with the Japanese firms investing 50 percent and Baoshan 50 percent. The rolling mill, scheduled to be completed by 1996, is part of Baoshan's third-phase construction. A consortium of seven Japanese companies, including MHI, Mitsubishi Corp., and Nippon Steel, won the third-phase contract in November 1993. MHI is also establishing a JV company with Sumitomo Metal Industries in Chongqing, Szechuan, to design an electric continuous casting steel mill. (Tokyo NIKKEI SANGYO SHIMBUN 10 Feb 94 p 10) Nippon Konpo Unyu Soko, a Japanese transportation company, together with the China Foreign Transport Nanjing Company, in late February established a JV transport company, Nanjing Nikkon Storage and Transport Co. Ltd. The JV will be will be capitalized at $3 million, with Nippon Konpo investing 51 percent and the Chinese firm 49 percent. The JV agreement will be for 20 years. Nippon Konpo hopes to capitalize on trade between Japan and the developing industrial belt along the Yangzi River. In addition, Nippon Konpo plans to establish a transportation network in China by setting up representative offices in Shanghai, Chongqing, and Guangzhou. (Tokyo NIHON KEIZAI SHIMBUN 14 Feb 94 p 11) Nippo Ltd., an Osaka-based trading company with strong ties to printing companies, will open a wholly owned subsidiary offset printing plant in Beijing. The subsidiary, Beijing Nippo Printing Co. Ltd., will be capitalized at $2.3 million. The plant, which will begin operations in late March, will import all materials from Japan and will print high-quality four-color artwork for Japanese companies operating in China. (Tokyo ASAHI SHIMBUN 22 Feb 94 p 10) Consulting Services - Cosmo Public Relation, a marketing consulting company, has established a JV marketing consulting company, Cosmo China Enterprise Ltd., to provide support to Japanese companies planning to enter the Hong Kong and PRC markets. The JV will be capitalized at HK$200,000 ($26,000). The Chinese partner will be a company owned by Yang Zhenhan, a former high-level Chinese Government official with experience in the machine and auto- manufacturing industries, and Tan Nushi, a former Shanghai official responsible for textiles. The JV firm will use the "personal contacts" and market knowledge of Yang and Tan to provide introductions to government organizations and business partners, and to provide business-site selection and real estate contract mediation services. The JV will have its head office in Hong Kong and a a branch office in Shanghai. (Tokyo NIKKAN KOGYO SHIMBUN 8 Feb 94 p 6) Ikeda Hiroyoshi Accountants, an accounting firm, and Inform, an Osaka-based consulting company specializing in investment in China, together with the Shanghai Yangzi International Economic Cooperation Center, will establish a consulting company in Shanghai to target small Japanese companies that are interested in setting up operations in China. The new company, Shanghai Foreign Business Commercial Research Club, will advise small companies on the legal, accounting, and tax systems in China and sponsor regular seminars on business and personnel management, taxes, and legal issues in China. The club will not be based on capital investment but will "operate cooperatively," supported entirely by membership fees of 50,000 yen ($476) and monthly dues of 20,000 yen ($190). The club hopes to recruit 50 companies. (Tokyo NIHON KEIZAI SHIMBUN 21 Feb 94 p 15) PHILIPPINES: Shipping Firm Establishes Subsidiary in Manila -- Keihin Co., a medium-sized warehousing and transport firm, has established a Philippine subsidiary, Keihin Everett Forwarding Co., headquartered in Manila. As Japanese companies have expanded operations in the Philippines, the need for shipping services has grown. Although Keihin has been handling product distribution and delivery services for Japanese companies there, establishing a subsidiary will allow it to initiate full-scale shipping services in the Philippines and expand its international transportation network. Initial annual sales for the subsidiary are expected to be 112 million yen ($1.06 million). Keihin already has subsidiaries in the United States, Singapore, Europe, and Hong Kong and resident offices in Taiwan and Australia. (Tokyo NIKKEI RYUTSU SHIMBUN 24 Feb 94 p 17) THAILAND: Canon To Expand Office Automation Equipment Production -- Canon Hi-Tech (Thailand) Ltd., a Canon subsidiary that produces office automation equipment such as copiers for the Japanese, European, and U.S. markets, will expand operations this year and increase production capacity by 30 percent. In the past, when a new Canon product was manufactured in Thailand, the product was made entirely from parts imported from Japan. As production increased, the local parts content gradually increased as well. In the future, however, Canon Hi-Tech's planned expansion will permit the shift of parts production. Thus, Canon Hi-Tech will be able to develop and produce new products from scratch, with the majority of parts manufactured in Thailand. To ensure the continued high-quality of parts used in its products, in 1994 Canon Hi-Tech will bring in a technology team from Japan to handle product development. Canon Hi-Tech was established in 1990 in Bangkok to help Canon offset the effects of yen appreciation. In 1993 the company shipped 260,000 copiers and 430,000 printers, with sales totaling 20 billion yen ($190.5 million). The expansion work will begin in March and should be completed by October 1994. (Tokyo NIKKEI SANGYO SHIMBUN 15 Feb 94 p 13) UNITED STATES: Kobe Steel, TI To Market Cladding Material in Japan -- Kobe Steel and Texas Instruments (TI) have agreed to jointly market cold-rolled cladding material in Japan manufactured in the United States by TI. This will be the first introduction of cold-rolled cladding material on the Japanese market. TI, which developed its own technology to produce cold-rolled cladding material that is two to three times stronger than existing materials, decided to link up with Kobe Steel in entering the Japan market because Kobe has the aluminum and steel resources and also has "deep connections" with its consumers. The companies have already decided on one use of the cladding material--to make the stainless aluminum composite used in the canisters of induction- heating (IH) thermoses and in the pots for IH rice cookers. Kobe Steel and TI have set a FY94 sales target of 300 tons of cladding material and a turnover of 500 million yen ($4.8 million). Matsushita Electric Industrial Co. also unofficially plans to use this cladding material in its new IH thermos. (Tokyo NIKKEI SANGYO SHIMBUN 16 Feb 94 p 17) Sumitomo Metal To Extend Technical Cooperation to Steel Rod Firm - Sumitomo Metal Industries will cooperate technically with American Steel and Wire (AS and W), a steel rod manufacturer based in Ohio. Sumitomo Metal will provide software-related support to AS and W in equipping its new high-grade steel bar mill, will help conduct various technical inspections, and also will provide operational support when the mill opens. U.S. steelmakers are considering whether to file dumping charges against Japanese firms as a measure to shut out imports of high-grade steel. AS and W decided to seek technical support from Sumitomo Metal, with which it has previous business ties in purchasing steel rods. Sumitomo Metal, on the other hand, is seeking to establish a foothold in the U.S. market. The new AS and W mill, which will cost an estimated $70 million and will have a production capacity of 550,000 tons annually, will produce high-grade steel bars 30-40 millimeters in size mainly for use in automobiles. Plant construction is scheduled to begin this summer, with completion targeted for December 1995. Sumitomo Metal's two-year cooperation agreement, which began in February 1994, includes a financial commitment of- 100 million yen ($962,000). Sumitomo Metal may consider expanding its cooperation with AS and W to include technical support for remodeling AS and W's existing wire rod mill and building facilities to manufacture billets. It will then follow up with consultations with AS and W on producing high-grade auto parts. (Tokyo NIKKEI SANGYO SHIMBUN 22 Feb 94 p 15) VIETNAM: Japanese Firm To Assist Marine Products Processing Company -- Shinto Bussan, the importing subsidiary of Toyo Suisan, a major Japanese food products company, will expand the technical guidance it provides to the Vietnamese company that processes the marine products Shin to Bussan imports into Japan. By raising the processing level of products like shrimp and squid, Shinto Bussan can sell them directly to Japanese sushi and specialty restaurants and other retailers and make far higher profits. In this way, Shin to Bussan hopes to increase sales of products imported from Vietnam to 1.5 billion yen ($14.3 million) annually from the current 1 billion yen ($9.5 million) level. Shinto Bussan will expand the technical guidance it provides to its production consignee, SeaProdex, a Vietnamese state-operated enterprise that processes more than 30 marine products for Shin to Bussan at eight processing plants. Shinto Bussan's imports from Vietnam constitute 20 percent of the company's total sales. (Tokyo NIKKEI SANGYO SHIMBUN 24 Feb 94 p 17) Machine Tools/Robotics - MT Sales Fell 25 Percent in 1993, December Sales Dropped 16 Percent -- According to statistics compiled by the Japan Machine Tool Builders' Association, machine tool (MT) sales for 1993 totaled 531.783 billion yen ($5.06 billion), down 25.1 percent compared to 1992. Sales of lathes and machining centers dropped by 45 percent. Total domestic sales for the year came to 322.57 billion yen ($3.07 billion), down 32.0 percent, while exports totaled 209.213 billion yen ($1.99 billion), down 11.2 percent. The large decline in domestic sales raised the ratio of exports to total sales to 39.3 percent, topping the previous high of 36 percent recorded in 1986. Outstanding orders fell to 267 billion yen ($2.54 billion) at the end of 1993 compared to 354.9 billion yen ($3.38 billion) in 1992. For December, MT sales totaled 40.054 billion yen ($381.467 million), down 16.7 percent compared to December 1992. However, this is the first time in three months that monthly sales have risen above the 40 billion yen ($381 million) level. December domestic sales came to 23.068 billion yen ($220 million), down 24.0 percent year-on-year but up 10.3 percent from November. December exports were 16.986 billion yen ($161.8 million), down 4.3 percent from December 1992. However, exports to the United States increased. (Tokyo NIHON KEIZAI SHIMBUN 10 Feb 94 p 11) Semiconductors/Computers/Electronics - NEC Wins Supercomputer Order From Private University -- NEC Corp. has won an contract from Fukuoka University, a private institution in Fukuoka City, to build a research and education system" that includes a supercomputer at a total cost of just over 1 billion yen ($9.3 million). The company will provide its "SX-3/IIR" vector supercomputer. Further, NEC will construct a local-area network (LAN) that will combine image processing workstations, education-use personal computers, and a library information system. One "special feature" of the system is that the supercomputer and workstations will use UNIX operating software. The system will be delivered in August and is expected to be in operation by October. This is NEC's first supercomputer order in the Kyushu region. Also, NEC's supercomputer will replace a Fujitsu-made "VP2100/10" the university has been using. NEC has not won any of the bids for ten of the eleven supercomputers funded under the the government's first FY93 supplemental budget, while Fujitsu has won four. In several of the bids, including those sponsored by the Communications Research Laboratory and Tsukuba University, the two firms competed head on, but Fujitsu won out over NEC and the other bidders with lower prices and higher technical evaluations "beyond the scope of expectations." With the Fukuoka University contract, however, NEC "has had its revenge." (Tokyo NIHON KEIZAI SHIMBUN 4 Feb 94 p 7) Seiko Epson To Build IC Design-In Center in China - Seiko Epson Corp. will establish an integrated circuit (IC) design-in center in Shenzhen, China in the spring of 1995. The center's goal will be to strengthen local customer support for Seiko Epson's IC design-in operations in China, which were developed through Hong Kong. Currently most of Seiko Epson's design-in customers are in Japan, but the company has decided "it is essential to increase foreign sales." Therefore it is expanding directly into China, where the company anticipates a huge demand in the future for design-in ICs. Seiko Epson first will focus on developing a market in southern China for semiconductors designed for use in light industry, such as electronic notebooks and game machines. Seiko Epson derives about 50 percent of its sales from customized and semi-customized ICs. In this field the ability to develop products which are specialized to a user's needs is the deciding factor in a company's success. For this reason, after starting its semiconductor operations in 1980, Seiko Epson moved to aggressively strengthen its design-in system. Domestically, Seiko Epson has semiconductor design-in centers in Tokyo, Osaka, Nagoya, Fujimi, and Sapporo. The Shenzhen center will be Seiko Epson's fourth overseas design-in center; the other three are in Canada, California, and Taiwan. (Tokyo NIKKAN KOGYO SHIMBUN 10 Feb 94 p 7) Telecommunications/Satellites - NEC, Mitsui To Build Ground Station For Sri Lanka Telecom -- NEC and Mitsui and Co. have won a contract worth 1.5 billion yen ($14.4 million) from Sri Lanka Telecom, the country's state-run telecommunications enterprise, to build an INTELSAT (International Telecommunication Satellite Organization) Standard-A ground station and supply NEAX61 switching equipment. The ground station, the second in Sri Lanka, will be built in the eastern outskirts of Colombo, Sri Lanka's capital, by early 1995. It will increase the country's international communications capacity from the existing 500 lines to 2,500. Sri Lanka Telecom will set up support facilities in the Padukka region, east of Bombay, India, and plans to begin operations at the ground station in early 1995. All financing for the project will be handled through the Asia Development Bank. AT and T and Sweden's Ericsson also bid for the project, but Sri Lanka Telecom selected NEC and Mitsui based on its "high appraisal" of the first ground station the two companies built in 1975. Demand for international communications in Sri Lanka is growing not only because the country is a popular tourist spot, but more importantly because several Asian countries, especially South Korea, have begun textile production operations there. NEC is seeking to sell its equipment for both international and domestic communications in conjunction with Sri Lanka's active program to upgrade its communications infrastructure. (Tokyo NIKKEI SANGYO SHIMBUN 22 Feb 94 p 7) NHK Will Lease Circuit on Panamsat Satellite - The Japan Broadcasting Corp. (NHK) has confirmed that it will lease a circuit on the Panamsat (Pan American) satellite, scheduled to be placed in orbit this May, for video transmission of its newscasts between Japan and the United States. NHK, which currently leases two circuits from INTELSAT (International Telecommunications Satellite Organization), reached its decision after "a comprehensive review of factors." Reportedly the deciding factor was Panamsat's low costs, although NHK has not made a "definite statement" regarding this matter. NKH and Panamsat are currently working out final details of the contract through Kokusai Denshin Denwa (KDD), which is acting as the negotiating agent between the two firms because Panamsat does not have an office in Japan--a requirement for foreign enterprises seeking satellite communications business activities with Japan, as stipulated in the Japanese Government's deregulation measures for this sector of the communications industry. NHK's decision to contract with Panamsat will likely encourage other Japanese customers to follow. This trend will affect INTELSAT, which currently dominates the Japan-U.S. video transmission market, but will also affect Japanese companies like Japan Satellite Systems, which is seeking to establish a presence in the international satellite communications market. (Tokyo NIKKEI SANGYO SHIMBUN 18 Feb 94 p 6) Tokyo Experimental CATV Project To Be Operational by 1996 - The Tokyo Metropolitan Government soon will begin planning for a large experimental digital-based cable television (CATV) project in the new city center currently under development in the Tokyo Bay area. The CATV project is slated to be operational in 1996. This May the metropolitan government will call on representatives from the public and private sector, including the Ministry of Posts and Telecommunications, the Japan Broadcasting Corp. (NHK), Nippon Telegraph and Telephone (NTT), NEC, Hitachi, Matsushita Electric Industrial Co., and communications software companies to form a committee and define a project plan. The government estimates it will cost about 3 billion yen ($28.8 million) to build the CATV project center and to develop the necessary software. Once the committee defines an overall plan, the metropolitan government will proceed with building the project center and establishing a 100-channel CATV network for offices and residences in the city center area that also will provide services such as video-on-demand, home television shopping, interactive health and medical consulting, and business communications services. The metropolitan government plans to officially inaugurate the CATV project in March 1996 during the "Tokyo Frontier" world trade fair. (Tokyo NIHON KEIZAI SHIMBUN 26 Feb 94 p 1) Matsushita Electric Industrial Co., EO Revamp Production Agreement - Matsushita Electric Industrial Co. has concluded an OEM (original equipment manufacturer) agreement with EO, a California- based company which develops portable communications terminal units. The move follows a request by EO to discontinue its existing consignment production relationship with Matsushita because the number of units currently produced is considerably lower than originally forecast due to a decline in demand in the U.S. market. America Matsushita Computer, based in Illinois, has been producing EO terminal units on consignment since 1992, when EO was established with investment from Matsushita Electric Industrial, AT and T, and Olivetti. Initially, the two companies set production targets of 5,000 units per month, but because of the decline in U.S. market demand, they realized only half the target figure. Matsushita states "it is not thinking about reexamining the other aspects of its EO relationship, such as withdrawing its investment from the company." (Tokyo NIHON KEIZAI SHIMBUN 15 Feb 94 p 12) CHINA: Domestic Developments - Shanghai Enterprise Ownership Composition Changes Through Reform -- Economic reform has had a tremendous impact on enterprise ownership composition in Shanghai, with the number of joint ventures, private enterprises, and other types of ownerships growing yearly. According to the latest statistics, from 1980 to early 1993, state-owned enterprises declined from 85.9 percent to 62.2 percent of Shanghai's gross domestic product while collectives, private, and joint venture enterprises grew from 12.4 percent, 0.3 percent, and 1.7 percent to 19.2 percent, 2 percent, and 18.2 percent of the gross domestic product respectively. Shanghai has vigorously encouraged the development of collective enterprises in townships since 1985. The ensuing policy of opening up has also helped to attract a lot of foreign investment. With the liberalization of enterprise ownership, Shanghai's private enterprises have grown to over 5,000 at present. After the socialist market economy was instituted in 1992, the shareholding system proliferated. There are now over 90 Shanghai enterprises selling shares to the public, with capital exceeding 23 billion yuan. The growing economic prosperity during the past 15 years proves that ownership reform is suited to China's general economic development. This reform is not only beneficial to raising people's living standard, increasing state revenue, and maintaining social stability, it is also beneficial to establishing a socialist market economy. (Shanghai WEN HUI BAO 8 Jan 94 p 1) Textile Shortages, Price Increases Forecast in 1994 - According to estimates of the State Administration of Commodity Prices, this year textile supplies will not meet demand and prices will rise. Based on an annual output of 1,150,000 tons of cotton yarn, the textile industry needs 3.5 million tons of cotton, but cotton shortages will reach 1 million tons. Because cotton prices have increased, the price of cotton yarn has also increased. In December, 21-count yarn was 14,000 yuan per ton, and 32-count yarn was 15,000 yuan per ton, increases of 28 percent and 17 percent respectively over the first quarter of 1993. This year the price of cotton yarn will continue to rise. China produces about 2 million tons of chemical fiber annually, and imports 650,000 tons. In 1994, the price of chemical fiber will increase. Annual domestic output of polyester is 1.1 million tons while the processing industry needs 1.3 million tons. Annual imports are 200,000 tons. In December, the price was 10,3000 yuan per ton and in 1994 the price will remain at the current level. Annual output of dacron is 700,000 tons, and the processing industry needs 800,000 tons. Annual imports are 150,000 tons. However, in 1993 the international market price increased and imports decreased. In December, the price was 12,5000 yuan per ton. Production enterprises that use this material changed or stopped production. In 1994 dacron prices will rise. Meanwhile, annual domestic output of acrylic fibers is 150,000 to 200,000 tons and the processing industry needs 400,000 tons. Thus, imports supply over SO percent. In 1994 the price will follow the international market. (Shanghai SHANGHAI JINGJI BAO 28 Jan 94 p 3) Bank of China To Introduce Computerized Service Network - By January this year, renminbi deposits in the Bank of China had increased by almost 4 billion yuan over the end of last year, to stand at 112 billion yuan. By the end of last year, foreign currency deposits in the bank amounted to $9.19 billion, an increase of more than 50 percent over the end of the previous year. In this year's work, the bank will focus on improving efficiency, providing better service, increasing flexibility, strengthening the formation of the deposit network, perfecting the disposition of the network, improving the service functions of big cities' deposit networks, and expediting the automation of deposit service, the aim being to "invigorate itself by means of science and technology." This year it has planned to equip a large number of service networks in all branches with computers. It will try to greatly increase the popularity and use rate of its computerized network in the shortest possible time. It will actively and appropriately introduce a single-person receipt and payment operational method to its deposit service. This method will be introduced by trial throughout the country and popularized in coastal areas. (Beijing ZHONGGUO XINWEN SHE 1318 GMT 16 Feb 94) Hong Kong Bureau Shenzhen Calls Halt to Listing of New 'A' Share Issues - The Shenzhen stock exchange has imposed a complete halt on new listings of "A" shares, issued to locals, in an apparent attempt to ease strains put on the system by the rush of companies coming to the market. Although the 22 February official statement said the ban applied to all issues, it is unlikely that "B" shares, which are traded by foreign investors, will be affected. Saying that investors were unhappy with the flood of new shares being listed, the exchange indicated that listings would resume depending on market conditions. Analysts said the problem lay with the government's overly ambitious plan to enlarge stock markets, while ignoring the markets' capacity to absorb new shares. Of the 5 billion shares approved for listing in 1993, only about 2.6 billion had been listed by the end of the year, leaving 2.4 billion to be listed in 1994, thereby straining the listing schedule. (Hong Kong SOUTH CHINA MOENING POST (BUSINESS POST) 23 Feb 94 p 1) Hong Kong Bureau Shandong Remains Country's Leading Gold Producer - Shandong Province overfulfilled its annual gold production target last year, thereby retaining its 18-year lock on the position of China's leading gold producer. Shandong's gold reserves amount to half the PRC's total, with annual production accounting for one-third of national output. With the deepening of reform and the strengthening of administration over the industry, as well as enterprises' implementation of 14 self-decision-making powers, 1993 profits in the industry rose by 30 percent over the previous year. Since last year, the gold industry has adjusted its development strategy by investing in other industries. By the end of 1993, RMB2OO million had been invested in such industries as construction materials, electronics, and metallurgy, with profits tax earned in these industries alone amounting to 40 million yuan. (Beijing ZHONGGUO XINWEN SHE 1356 GMT 16 Feb 94) Hong Kong Bureau Xiamen To Invest in Transport Facilities - Pan Shijian, general manager of the Xiamen Municipal Roads and Bridges Construction Investment Corporation, said that 1994 would see the largest amount of investment and the greatest number of projects to construct transport facilities in the special economic zone. Pan said Xiamen would adopt various measures to raise capital by guaranteeing the commencement of all key items. Construction began last year on the Shigushan overpass, at a total cost of 90 million yuan. The project is scheduled for completion by September 1994. Work has begun on reconstruction of the Jimei-Guankou road, also slated for completion by September, while the 19-km Jimei-Tongan road will be upgraded at a total cost of 400 million yuan. The work will be completed in 1995. In March, construction will begin on the Xiaoyingling section of the Fuzhou-Xiamen expressway. It should be completed within four years. Construction of the Haicang bridge will start by the end of 1994, with planned investment of RMB2 billion, to be raised in several ways, including government allocation and the issue of stocks both at home and abroad. (Beijing ZHONGGUO XINWEN SHE 0815 GMT 25 Feb 94) Hong Kong Bureau) Jialing To List Subsidiaries in Hong Kong - Jialing, a Hong Kong- based company controlled by Sichuan Province, is restructuring its subsidiaries in an effort to list them on the Hong Kong Stock Exchange. Recently, Jialing has operated as a holding company and has filed an application with the mainland authorities to gain commensurate status there. Jialing's businesses cover import- export, equity investments in industrial and commercial enterprises, real estate investments, information services, securities, transportation, hotels, and the importation of capital and technology. Last year, 70 percent of its income came from real estate investments, mostly in Hong Kong. According to Jialing's chairman, Liu Guangbing, the company will increase investment in the mainland this year. (Hong Kong WEN WEI PO 23 Feb 94 p C3) Hong Kong Bureau Foreign Trade and Investment - Fujian Sets Up Intellectual Property Rights Court -- Fujian provincial's procuratorial court has set up an intellectual property rights (IPR) judicial court recently and the City of Xiamen's Intermediate People's Court has also officially set up an IPR protection court. The move is to demonstrate that the province will fully exercise its judicial authority in IPR cases and is determined to punish the infringement and violation of IPR. According to an estimate, the various levels of the people's court in Fujian has in recent years handled 47 cases and tried 35 involving IPR. These cases include disputes about authorship (copyright) rights, patent rights, and trademark rights. Some cases involve foreign enterprise contract disputes. For example, one such case was between a certain company in Hong Kong and a certain unit in Fujian in dispute involving non-patent technology transfer and in patent application permits. The cases being tried in the provincial procuratorial court cover seven categories of disputes: patent disputes; trademark disputes; copyright disputes; disputes involving invention infringement, exclusive rights to technology and other scientific and technological achievements; technology contractual disputes; disputes involving illegal competition; and any other disputes belonging to the scope of intellectual property protection rights. All categories apply to sino-foreign, Hong Kong, Macao, and Taiwan cases. (Beijing GUOJI SHANGBAO 2 Feb 94 p 1) Shanghai Exports Exceed Target in 1993 - Shanghai's exports exceeded $7.38 billion in 1993 and the export growth rate was higher than the national average. In early 1993, the Shanghai municipal government set its export target at $7.34 billion, but by mid-year only 45 percent of the target had been fulfilled. In June, a municipal economic and trade conference was held to further reform and to create an environment more compatible with a socialist market economy. After administrative protection and preferential policies were abolished, foreign trade enterprises were forced into market competition. Last year, foreign trade privileges were also granted to an additional 4,000 or so industrial units, research institutes, enterprises, and joint venture firms, bringing Shanghai's trading entities to approximately 7,000. Meanwhile, all relevant government work units were instructed to support exports and to launch coordinated measures. After concerted efforts, exports began to increase and eventually exceeded the 1993 target. Future export growth is targeted at 15.4 percent annually. Since the state abandoned the mandatory export plan and foreign exchange submitting quota, relevant export promoting measures, including transforming the operational mechanism of trade offices, providing incentives, and adjusting industrial production, should be instituted as soon as possible. (Shanghai WEN HUI BAO 6 Jan 94 p 1) Guangzhou To Set Up Individual Foreign Exchange Markets - Plans are in the making for Guangdong's capital city to set up individual swap centers to handle foreign exchange transactions. These individual centers will then link up with the nationally established foreign exchange centers. Presently, Guangzhou's foreign exchange regulating markets have two kinds of operations. One involves a specified volume and the other a spot exchange. Having planned to expedite a nationwide foreign exchange market network, the Bank of China and the State Administration of Exchange Control are setting up the corresponding financial organs at the provincial and city levels. Under the plan, the Guangzhou area is the first to form public swap centers, then set up a province wide network, and lastly, to link up with the national foreign exchange market network. Additionally, Guangzhou will set up the Guangzhou financial center and a city shareholding cooperative bank to handle the Renminbi operations involving promissary notes and financial capital. (Beijing ZHONGHUA DISAN CHANYE BAO 6 Jan 94 p 3) Foreign Investment Estimated at $30 Billion for 1993 - China became the world's biggest foreign investment recipient country in 1993. Actual foreign investment introduced for the whole year exceeded $30 billion, of which Guangdong Province accounted for one- quarter, ranking first among China's provinces and municipalities. According to statistics, foreign businessmen invested in nearly 100,000 projects in mainland China in 1993. Agreements signed involved $110 billion, of which direct investment exceeded $20 billion. Guangdong Province attracted more foreign investment than any other province. Last year, $8.5 billion was actually received, accounting for one-quarter of total foreign investment in the mainland. Shanghai ranked second in 1993 with $7.016 billion. Beijing ranked third, attracting $6.28 billion. These were followed by Shenzhen, which attracted more than $5 billion; Fujian, $2.8 billion; Jiangsu, $2.1 billion; Shandong, $1.6 billion; Guangxi, $1.06 billion, and Hainan, $730 million. The overall amount of foreign investment in China increased by a wide margin over the previous year. Hong Kong businessmen ranked first in investing on the mainland last year, with investments exceeding about $13 billion. Taiwan businessmen ranked second, with investments amounting to more than $6 billion, exceeding the total of many previous years. U.S., Japanese, and German businessmen also made enormous amounts of investment in the mainland last year. (Hong Kong ZHONGGUO TONGXUN SHE 0928 GMT 18 Feb 94) Hong Kong Bureau Guangdong Foreign-Funded Enterprises Expand Export Share - According to an office of the Guangdong Provincial Government, by late 1993, foreign-funded enterprises in Guangdong and local state- owned foreign trade, industrial, and commercial enterprises had almost equal shares of the export business for the first time. Guangdong's 1993 export volume hit $26.33 billion, of which $10 billion was contributed by foreign-funded enterprises. In 1993, the average export growth rate throughout the province was 8.6 percent, while the corresponding growth rate of foreign-funded enterprises was as high as 23.2 percent. (Hong Kong ZHONGGUO TONGXUN SHE 0947 GMT 17 Feb 94) Hong Kong Bureau Beijing Views Use of Foreign Loans, Donations - Since 1979, Beijing has applied multilateral aid totaling $29.903 million from the UN Planning Program for carrying out 33 projects; and aid totalling $86.63 million yuan from Japan, Australia, Canada, Germany, and other countries for carrying out 15 projects. Nineteen aid projects, involving $62 million, were being carried out in 1993. As of the end of 1993, Beijing had used government loans and donations from 14 countries for carrying out 85 projects, involving $820 million. With these loans, Beijing has completed 54 projects involving $137.52 million and carried out 19 projects involving $611.38 million. Agreements were also reached on the use of loans for building six projects, involving $28.72 million. Beijing has also used foreign donations to complete four projects, involving $11.75 million. These foreign loans and donations were mainly used for building infrastructure and industries related to the people's lives in the capital, covering industry, agriculture, foodstuffs, aquaculture, environmental protection, education, scientific research, fire prevention, and communications management. For example, Japan has provided 2.7 billion yen of free aid for building the China meat products research center to take charge of Beijing's meat quality inspection, and the Japanese Government has provided aid of 3 billion yen for China to build Beijing Television Station and granted 19.2 billion yen in loans to help Beijing build a subway. (Beijing BEIJING RIBAO 13 Feb 94 p 1) Hong Kong Bureau Hebei Use of 1993 Foreign Loans - Hebei Province has achieved a breakthrough in the use of foreign loans. As of the end of 1993, the Hebei Province had carried out 161 projects with foreign loans, involving foreign capital of $670 million, and with $580 million of funds actually utilized. These loans were mainly used for improving saline-alkaline farmlands, developing farming on Huang-Huai-Hai Plain, and building fast-growing forestry; improving teaching conditions, training teachers and developing adult education; preventing and curing tuberculosis; building the Hebei section of Beijing-Tianjin-Tanggu expressway, the No.7 and No.8 berths of Tangshan Port, Shijiazhuang-Tangshan microwave telecommunications line, and 240,000 program-controlled telephone lines in seven central cities and 22 counties and cities; carrying out polluted water disposal and gas supply projects in Handan, Shijiazhuang, and Baoding cities; and building a cement kiln with a daily production capacity of 2,000 tons at the Tangshan Qixin Cement Plant. (Shijiazhuang HEBEI RIBAO 8 Feb 94 p 1) Hong Kong Bureau Airbus Signs Spare Parts Production Deal - On 1 March, Airbus Industrie announced that it had signed a major cooperation agreement in Beijing last month with the China Aviation Supplies Corporation which will allow Chinese manufacturers to become further involved in the production of the company's spare parts. The deal is valued in the hundreds of millions of dollars. Airbus will deliver nine aircraft to Chinese companies this year and has announced plans to set up a training center and a service support center in Beijing. About 40 percent of pilots and other workers who receive training at the Airbus headquarters in France are expected to come from China. Airbus also has set up Airbus Industrie China, which handles commercial, industrial, and product support activity in the PRC. (Beijing CHINA DAILY 2 Mar 94 p 2) Hong Kong Bureau Aerospace Industry Corporation Seeks International Cooperation - An official from the China Aerospace Industry Corporation has said that the corporation seeks more extensive international cooperation in the areas of satellite information systems, mobile communication devices, global television relay systems, and satellite data communication VSAT stations. He also said that the corporation plans to expand the scale of cooperation in other areas, such as the manufacture of communications, resource-survey, meteorological, and navigational satellites, as well as various kinds of satellites for scientific experiments, and that satellite launching services also will be provided. At a news conference last June, the corporation announced 93 cooperation projects involving $1.28 billion. A majority of the state laboratories and applied technology research centers under the corporation have been opened up to the outside world. (Hong Kong CHING CHI TAO PAO, No 8, 28 Feb 94) Hong Kong Bureau Stanley Ho Threatens To Halt Mainland Investments - Property developer and Macao casino operator Stanley Ho has threatened to stop investing in the Chinese real estate market if the capital gains tax on property is implemented. Ho issued the warning at a foundation-laying ceremony in Shanghai on 26 February for his Shanghai Plaza development, an office, residential, and hotel complex. Shun Tak Holdings, which is controlled by Ho, has a 15- percent stake, and one of his private companies has 20 percent of the 8-billion-yuan project. "If the tax is implemented, I will not be interested in further investment," Ho said, referring to Beijing's new value-added land tax, but he added that his existing projects on the mainland would proceed as scheduled. (Hong Kong EASTERN EXPRESS 28 Feb 94 p 31) Hong Kong Bureau China Overseas To Invest in Guangdong Power Plant - The Hong Kong-listed China Overseas Development Company Limited, a wholly owned subsidiary of China State Construction Engineering Corporation, is planning to invest $117 million in a thermal power plant project in Shaoguan City, Guangdong Province. The plant, Shaoguan City Pingshi Power Plant (B Factory), is a joint venture with the Shaoguan City government and the Shui Heng Development Company Limited, who hold 25 percent and 22.5 percent respectively. The joint venture has a 20-year operating franchise for the plant. (Hong Kong HSIN PAO 1 Mar 94 p 5) Hong Kong Bureau Hong Kong Firm Holds Two Thirds Shares of Guangdong Power Plant - Hong Kong-based Chia Ho Ltd. has invested in a power plant in Guangdong under Maoming City's Electric Development Corporation and now holds two thirds of the shares at a cost of HK$23 million. The term of the partnership is 35 years. This four-year-old power plant has eight generating units imported from Germany, with an installed capacity of over 50,000 kw. (Hong Kong TA KUNG PAO 24 Feb 94 p 5) Hong Kong Bureau Xiamen People's Income, Foreign Capital Increase - Last year, Xiamen's per-capita gross domestic product amounted to 9,288 yuan, about 10 times the amount before the establishment of the Xiamen special economic zone. Citizens' per-capita annual income was 2,034 yuan, an increase of 24.8 percent over the previous year, while peasants' per-capita annual net income was 1,690 yuan, an increase of 20.2 percent over the previous year. Meanwhile, Xiamen has improved its approval procedures and management in introducing foreign capital. The city approved 655 foreign-invested projects last year. Contracted foreign capital was $2.404 billion, while foreign capital that actually arrived in Xiamen amounted to $1.034 billion, an increase of 84.8 percent over the previous year. There were 391 newly started foreign-invested enterprises last year, an increase of 167.81 percent over the previous year. (Fuzhou Fujian People's Radio Network 2300 GMT 16, 17 Feb 94) Hong Kong Bureau) Zhuhai, Singapore Company Sign Shipyard Construction Pact - Zhuhai Port Investment, a subsidiary of the Port Authority of Zhuhai, signed a joint-venture contract on 1 March with Singapore's Marinteknik company to build a 5-hectare shipyard for the production and maintenance of catamarans and monohull ferries, China's first such shipyard. Marinteknik's investment will amount to $12 million. The two partners have a long history of cooperation, having linked up in 1982 to provide the first passenger ferry service between Hong Kong and Zhuhai. Phase one of the shipyard will be completed in mid-1995, enabling the yard to produce 12-16 high-speed ferries per year, which will generate revenues of some $50 million. In addition, the yard will provide ferry maintenance services, which initially should earn around $5 million. Phase two is slated for completion in early 1997. Marinteknik will hold a 60-percent stake in the 50-year joint venture, which initially will be aimed at the export market, though the longer-term outlook envisions selling up to 50 percent of output in China. (Hong Kong EASTERN EXPRESS 2 Mar 94 p 23) Hong Kong Bureau Sino-Thai Project To Produce Suzuki Motorbikes in Nanning - The Nanning machinery factory and the Thailand S.P. International Company have pooled funds to establish the Nanning Yibin Motorcycle Company Limited, which will produce "Suzuki King" motorcycles in Nanning. The new company has an investment of $29.55 million, of which the Chinese side contributed 40 percent. A contract has been signed with Japan's Suzuki Company to import advanced technology, facilities, and management methods to produce Suzuki GS125ESK motorcycles and other new models. By 1996, the company will have an annual output of 400,000 motorcycles. (Beijing ZHONGGUO XINWEN SHE 26 Feb 94) Hong Kong Bureau Wuhan Iron and Steel Imports Spanish Machinery - On 1 March, China's fourth largest steel producer, the Wuhan Iron and Steel Corporation (WISC), signed a contract with two Spanish companies- -Tecnicas Reunidas Internacional SA and Eurocontrol SA--to import an $82.1 million continuous casting machine intended for the second stage of WISC's No. 3 steel smelting plant. The two Spanish companies earlier had supplied equipment worth $320 million for the plant's first stage. WISC used both Spanish Government and commercial loans to seal the deals. The No. 3 plant, with an annual steel production capacity of 2.5 million tons, will go into operation in 26 months, laying the foundation for WISC to increase its annual steel output to 10 million tons by the end of the century. In 1993, WISC produced 5.06 million tons of steel and 5.44 million tons of iron, increases of 6.12 and 6.69 percent, respectively, over the previous year. Sales revenues for 1993 amounted to 11.37 billion yuan ($1.3 billion), up 26 percent; taxes and profits hit 3.1 billion yuan ($356 million), up 38 percent; while exports hit $110 million, up 25 percent. (Beijing CHINA DAILY 2 Mar 94 p 2) Hong Kong Bureau Tianjin Establishes Joint-Venture Building Materials Institute - The Tianjin building materials supply general company and the Australian CSR company will jointly build a precast concrete project, and the Tianjin Municipal Building Materials Research Institute will cooperate with the Housing Construction Research Center of an Australian university to establish the Tianjin- Australian building materials research institute--the first of its kind in China. The agreement signing ceremony was held at the conference room of the Tianjin Municipal government on 19 February. The investment of the concrete company totals $30 million and the designed annual production capacity is 1 million cubic meters of concrete. Four production lines and 90 sets of concrete equipment will be set up in Dongli, Nankai, Hexi, and Hongqiao building materials supply companies under the Tianjin building materials supply general company. This project is expected to be completed within this year. Based on the agreement, the Tianjin Commission of Science and Technology will cooperate with a university in Australia in research, exchange of scholars, training of personnel, and exchange of academic data, and the Tianjin-Australia building research institute will serve as their cooperation demonstration unit in research regarding new building materials, quality control, and construction cost. (Tianjin TIANJIN RIBAO 19 Feb 94 p 1) Hong Kong Bureau Taiwan: Additional Incentives To Promote Southern Policy -- On 14 February Minister of Economic Affairs Chiang Ping-kun said the ministry will offer additional incentives for Taiwanese businessmen to invest in Southeast Asia. Chiang Ping-kun said such incentives would include extending workers' training period, urging banks to increase loans for companies which invest in Southeast Asia, and signing agreements with Southeast Asian countries to avoid double- taxation. The ministry will also help secure loans to businessmen who are interested in establishing industrial development zones in the region. (Taipei CHING-CHI JIH-PAO 16 Feb 94 p 2) Okinawa Bureau Draft Trade Regulations on Hong Kong, Macao - The Executive Yuan's Mainland Affairs Council has drafted regulations concerning Taiwan-Hong Kong-Macao relations in investment, technological cooperation, shipping, finance, and insurance after Hong Kong and Macao are returned to the Chinese Communists in 1997 and 1999 respectively. The first internal examination of the 54-article draft regulations will be held on 24 February. Parts of the draft regulations that concern the economy and trade include: Taiwanese businessmen must report their investment or technological cooperation in Hong Kong and Macao to the ministry; financial and insurance institutions must obtain prior approval before establishing branches in Hong Kong and Macao; the Ministry of Economic Affairs shall draw up procedures to regulate Hong Kong and Macao investments in Taiwan; and the Ministry of Transportation and Communications shall draw up procedures governing air and shipping services with Hong Kong and Macao. (Taipei CHING-CHI JIH-PAO 16 Feb 94 p 3) Okinawa Bureau Textile Companies To Invest or Expand in Vietnam - After the United States lifted its trade embargo against Vietnam, several Taiwanese textile companies decided to invest or expand their investments in Vietnam. The Far East Textile Company plans to establish garment and dyeing mills in Vietnam soon. At the end of 1993, the Hualon Group applied to the Vietnamese Government to establish a comprehensive textile mill involving investment funds of $240 million. The Huang Ti Lung Textile Company has decided to invest more than $20 million to establish knitting and spinning mills in Vietnam. The Chung Hsing Textile Company, which has long been established in Vietnam, decided to invest another $50 million to expand its knitting and spinning production facilities in Vietnam. (Taipei CHING-CHI JIH-PAO 17 Feb 94 p 10) Okinawa Bureau Government To Hold Current Tariffs on Automobiles, Parts for Now - In view of the fact that automobiles and the relevant industries account for 8.5 percent of Taiwan's total industrial output value, Vice Economic Minister Yang Shih-chien said on 17 February: "The government will take this into account, and at this moment will not consider lowering tariffs on imported automobiles and parts and accessories before the issues of Taiwanese restrictions on car- exporting regions and of local car-parts content rates are settled during negotiations for GATT membership." Although the United States calls for Taiwan to lower its auto tariff from 30 percent to 15 percent, the government will still uphold the principle of lowering it slightly, with 25 percent as the bottom line. (Taipei CHING-CHI JIH-PAO 18 Feb 94 p 2) Okinawa Bureau Imposition of Anti-Dumping Tax on Japanese, Korean Polypropylene - The Ministry of Finance has ruled that Japan and South Korea are dumping polypropylene (PP) in Taiwan, and decided to impose a 6.57- 110.68 percent temporary anti-dumping tax on 18 South Korean and Japanese petroleum-chemical factories. According to customs statistics, Taiwan imported 178,000 tonnes of PP in the first 11 months of 1993, and nearly 60 percent of that was exported by Japan and South Korea. (Taipei CHING-CHI JIH-PAO 19 Feb 94 p 13) Okinawa Bureau MOEA Assesses Impact on Manufacturers of Joining GATT - According to an assessment by the Ministry of Economic Affairs, after Taiwan joins GATT and lowers tariffs, the automobile and motorcycle, textile, and machine tool industries will experience the greatest impact. It is estimated that the output value of the auto industry will drop by 60 percent, auto and motorcycle parts by 50 percent, and machine tools by 12.4 percent. However, Taiwan's net exports and imports of manufactured goods may increase by $1.8 billion and $546 million respectively. The net output value of the manufacturing industry is likely to increase by $1.3 billion. In addition to a decline in the output values of the aforementioned industries, thousands of workers in the auto and machinery industries may also lose their jobs after Taiwan joins GATT. (Taipei CHING-CHI JIH-PAO 21 Feb 94 p 2) Okinawa Bureau Statistics on Exports to PRC May Be Underestimated - According to an official of the Board of Foreign Trade, Taiwan's real export value to the PRC is about 10-20 percent higher than statistics indicate. The cause of this discrepancy is because Hong Kong did not add the price of PRC-bound transshipped or transit goods into their statistics. It is also because some goods were not exported to the PRC via Hong Kong; therefore Hong Kong's statistics cannot represent Taiwan's total exports to the PRC. According to PRC customs, Taiwan exported $12.9 billion of goods to the PRC and imported $1.4 billion of goods from the PRC in 1993. PRC statistics on Taiwanese exports should be more reliable because they were based on certificates of origin. (Taipei CHING-CHI JIH-PAO 21 Feb 94 p 9) Okinawa Bureau NORTH KOREA: FEATURE: DPRK-Chosen Soren Joint Ventures Face Continuing Problems -- SUMMARY: According to South Korean press reports, since 1990, most of the DPRK's joint venture companies with Chosen Soren (the General Association of Korean Residents in Japan) have failed because of contract violations, "excessive" government control, a shortage of electricity, and difficulties in obtaining technology from Japan. The surviving companies are at "high risk" of closing down as well, if current conditions prevail, the reports say. Since 1984, when joint venture laws were enacted in North Korea, Chosen Soren and the DPRK have established about 120 joint-venture companies which account for over 60 percent of the total number of DPRK joint ventures, according to the 13 January Seoul NAEWOE TONGSIN. The 25 January Seoul HANGYORE SINMUN, citing the ROK National Unification Board's recent report to the National Assembly, states that since 1990, most of the North Korean joint ventures with Chosen Soren have closed down and only 20 some companies--out of more than 120--are currently in business. Moreover, if the DPRK maintains its "excessive regulations" and "closed-door policy," the remaining joint ventures run the risk of going bankrupt as well, the paper asserts. NAEWOE notes that, according to Chon Chin-sik, president of Moranbong Joint Venture Co. (one of the major DPRK-Chosen Soren joint-venture companies), as relations between Japan and the DPRK improved following former Deputy Prime Minister Shin Kanemaru's visit to Pyongyang in September 1990, North Korea moved from mainly dealing with Chosen Soren to attempting to "recruit" Japanese companies for joint venture projects. Chon said that during this period, North Korea "ignored" Chosen Soren joint-venture companies. Moreover, after the DPRK announced its withdrawal from the Nuclear Non-Proliferation Treaty in March 1993, it put "tight" restrictions on foreign visitors, including Koreans associated with Chosen Soren, and Japanese experts who were to advise the joint- venture factories on technical matters, NAEWOE reports. In addition, the energy shortage in North Korea has had an impact on Chosen Soren joint ventures as well. HANGYORE points out that North Korea has been giving preferential treatment to domestic companies which received their supply of electricity before Chosen Soren joint-venture companies. Furthermore, North Korea has often exported substandard goods, causing a loss of credibility for the joint ventures and eliciting claims against them, according to HANGYORE. For example, a large quantity of poorly made suits manufactured by Moranbong Joint Venture Co. was found at customs clearance in Japan last October, NAEWOE says. NAEWOE cites additional reasons behind the difficulties experienced by the joint-venture companies, such as North Korea's violations of contract provisions, excessive regulations," multiple inspections, and bribery. North Korea has reportedly marketed goods in places that were not stipulated under existing agreements, such as Macao and Hong Kong, in order to obtain a better profit margin. NAEWOE reports that Chosen Soren "strongly protested" against such conduct in 1989 at the 4th annual meeting of Korea International Joint Venture Union Co.'s board of directors, which is responsible for coordinating and giving guidance to DPEK-Chosen Soren joint- venture projects. The board's yearly meeting, whose purpose is to set guidelines for upcoming joint-venture activities, has not been held since November 1992, NAEWOE notes. SOUTH KOREA: FEATURE: Patent Office Looks for Countermeasures to Patent Disputes -- SUMMARY: According to recent Seoul press reports, the number of ROK patent applications is growing, as is the number of patent disputes that ROK firms face. Yet most firms pay scant attention to issues of patents and technology protection. Recently, the Office of Patent Administration has started setting up patent technology councils to foster cooperation among ROK firms and help counterbalance patent disputes. In addition, it has held an open forum to discuss reforming the patent judgment system. According to an article in the 9 February CHUGAN MAEGYONG, there are four ways to protect ideas using the ROK legal system: by registering patents, utility models, designs, or trademarks. It takes an average of 32 to 34 months to screen a patent or utility model application. While South Korea ranks sixth in the world in the number of applications filed for patents or utility models, it lacks the systematic backing to help commercialize these ideas, according to CHUGAN. While there are funds available to help cover production costs for commercializing new ideas, they only amount to about 200 million won ($250,000) annually. The 24 January HANGUK KYONGJE SINMUN (HKS) publishes data from the Office of Patent Administration showing that South Koreans applied for 21,459 patents in 1993, an increase of 34.5 percent over 1992. At the same time patent applications by foreigners dropped 0.6 percent. ROK citizens' applications for low-tech utility models totaled 31,505, a l2.8-percent increase over 1992, while foreign applications fell 3.9 percent. Design and trademark applications by Koreans rose by 20.4 percent and 40.4 percent, respectively. Industrial property rights applications rose 22 percent, to 155,870, with corporations accounting for 57.9 percent of the total. According to HKS, these increases are not caused by an increased awareness of the concept of technology as property, but rather they are spurred by the growing number of industrial property disputes between both domestic and foreign firms. The 29 January HANGUK KYONGJE SINMUN notes that intellectual property rights (IPR) disputes are growing in number, and that ROK firms do not have sufficient ability to respond to the problem. The Hanbit IPR Center recently surveyed member firms about this issue. Of the 153 firms responding, 69.2 percent had been involved in such disputes. For electronics firms, the percentage was even higher- -81.3 percent. Disputes between ROK firms accounted for 50.5 percent of the cases, while disputes with foreign firms accounted for 13.1 percent. HKS adds that 35.4 percent of the firms had had disputes with both domestic and foreign firms. With regard to dispute resolution, HKS reports that 31.3 percent of disputes were resolved in court, with the judge finding for one side or the other, while 30.3 percent were resolved through compromise. According to HKS, when a dispute involved a foreign firm, ROK firms faced such difficulties as a lack of data or technical information (22 percent), insufficient knowledge of foreign laws (14 percent), and high costs (12 percent). Most firms have paid little attention to the issue of patents or technology protection, reports the 15 January HANGUK KYONGJE SINMUN. According to statistics from the Office of Patent Administration, 749 manufacturers, or slightly more than 1 percent of all manufacturing firms, have set up offices to deal with patent issues. Of these, more than 96 percent employ fewer than five workers in their patent office. However, some of the larger firms are devoting resources to this area, HKS notes. Samsung Electronics has a 130- member IPR team, Goldstar has a 43-member intellectual property management office, and Daewoo Electronics, Goldstar Electron, and Hyundai Electronics are all expanding their patent-related offices. HKS comments that the most "anxious" organizations within electronics firms are those responsible for industrial property rights. Firms must control their technology through patents, the paper suggests, and patent experts, who are scarce, should be quickly trained. HKS also notes by cooperating on technology development, firms might reduce the burden of industrial property rights disputes. There are already moves towards cooperation on a larger scale. According to the 4 February MAEIL KYONGJE SINMUN (MKS), "patent technology councils" are becoming active in high-tech areas. These councils enable firms to share reciprocal licenses or patent rights. MKS reports that the Office of Patent Administration is considering cooperative "countermeasures" to international patent disputes and the rise in foreign countries "patent aggression," and this year will set up three new patent technology councils--for computers, electric ranges, and construction. At the end of 1993 it set up nine councils, covering washing machines, electronic circuits, antibiotics, synthetic textiles, PVC processing technologies, organic and inorganic chemistry, waste disposal technology for steel producers, and CFC substitutes. The patent administration believes that these councils could indirectly aid firms in technology development by supplying information on leading edge technologies. MKS predicts that as these councils become more active, cross- licensing agreements will flourish. Another measure which would promote technological cooperation--a proposal to grant tax benefits to firms that have concluded cross-licensing agreements--is under consideration, according to MKS. On the legal front, there are voices calling for establishing a "patent court," reports the 25 January HANGUK KYONGJE SINMUN. On 24 January, the Korea Chamber of Commerce and Industry held a public forum on the issue of revising the patent judgment system. At the meeting, representatives from business and technology circles demanded the establishment of a patent court that includes judges who are technical experts. (According to the 25 January MAEIL KYONGJE SINMUN, currently the Office of Patent Administration handles an initial patent dispute trial and the first appeal, if any. If those involved in the case still disagree with the ruling, they may appeal to the Supreme Court for a third trial.) Industrial circles question the cost, timeliness, and courts' ability to make technical judgments under the current system; they recommend setting up a patent court. One industry representative emphasized that in patent judgments a factual trial is more important than a legal analysis. HKS reports that patent attorneys oppose letting the patent office handle the first and second trials, and suggest establishing a patent court composed of both technical and legal judges. Legal circles also oppose the patent office's role, maintaining that it is unconstitutional. According to HKS, this group would like to see a patent department set up in the Seoul High Court, with the existing court handling matters and bringing in technical aides and advisory groups. Finally, the Office of Patent Administration asserts that the current system is legal. It does, however, recognize a drop in the quality of judges. It recommends setting up a patent judgment court within the current framework, and raising the number of technical judges to improve the quality of judgments. FEATURE: ROK Efforts in Obtaining Foreign Commercial Technology Chronicled -- SUMMARY: South Korea is using a variety of methods to acquire advanced foreign commercial technology, according to ROK press reports. Recognizing a "gap" between the level of technology employed by foreign competitors and what is available domestically to ROK manufacturers, industry and government are jointly engaged in efforts to compensate by appropriating foreign know-how as the basis for the country's commercial S and T programs. Seoul business newspapers recently published several articles describing efforts by the ROK Government and commercial firms to promote economic competitiveness through the use of foreign technology. These methods reportedly include using public funds to indigenize foreign high-tech, hiring foreigners with technical expertise, collecting technical intelligence through overseas ROK subsidiaries, identifying and recruiting expatriate scientists, technical "cooperation" with foreign companies, and exploiting cash- strapped Russian firms for patented technology (see related article in PACIFIC RIM ECONOMIC REVIEW Vol 2 No 20, 6 Oct 93 pp 24-26). The number of cases listed would increase significantly if reports of technical agreements, licensed production of foreign products, buyouts of foreign firms, "indigenized" products, new overseas "research" facilities, and other types of scientific "exchanges" (where the transfer or appropriation of foreign technology is implied) were also included. The picture that emerges through ROK press reporting in recent months on South Korea's intensified quest for technology is that of a country striving to close the "gap" with "advanced countries" more through imitation than innovation. This is reflected in the ROK press' habitual use of verbs such as "acquire," "accumulate," and "indigenize," while the term "develop" is usually restricted to broad technologies with little specific content or to ROK efforts to reinvent existing products, and the word "create" simply does not appear. South Korea To 'Develop' Laser Disk Drive - The ROK Government and domestic computer manufacturers will jointly develop a laser disk drive for use with peripheral equipment in next-generation computers. Work began in December 1993 with a 370-million won ($462,500) grant from the Ministry of Trade, Industry and Energy (MOTIE) to the Korea Computer Research Association, which is managing the project with Goldstar's and Hyundai Electronics' participation. The drive will be ready for domestic use and export by 1997. Goldstar has on hand laser disk drive technology which it imported from Japan in 1990. Hyundai, for its part, obtained "world standard" technology from its buyout of the U.S. electronics firm Maxter, and claims we won't have much trouble developing it." The project is also expected to give a big boost to domestic manufacturers of recording equipment that uses laser disk technology, and could lead to "indigenizing" all parts connected with computer memory devices. (Seoul MAEIL KYONGJE SINMUN 20 Jan 94 p 15) ROK Companies Hiring More Foreigners - The number of ROK firms that hire foreign specialists "to overcome the technological gap with competitors in advanced countries" is rising. Even mid-size firms are discovering they can defeat "barricades to technology" erected by another country by hiring that country's nationals, directly or through overseas subsidiaries. The latter are sent to South Korea periodically "to solve problems that occur on production lines and for technical consultations." The strategy of hiring foreigners with technical skills to improve the competitiveness of ROK products is likened to "using barbarians to control barbarians." (Seoul MAEIL KYONGJE SINMUN 8 Feb 94 p 14) U.S.-Based Subsidiaries Collecting Technical Information - ROK factory automation (FA) companies are busily setting up subsidiaries abroad to open up new markets for their products, and to "beef up their collection of technical information." Poscon's new subsidiary in Delaware, Poscon International Corporation (PIC), will attempt to market its own FA products in the United States while it "engages in technical information collection activities." Samsung Aerospace will form two "teams" this year for FA equipment exports and control equipment exports, while stepping up activities at its U.S. subsidiary Samsung Optical America (SOA). (Seoul MAEIL KYONGJE SINMUN 7 Feb 94 p 18) 'Brain Pool' To Identify, Recruit Expatriate Scientists - The Ministry of Science and Technology (MOST) will begin operating a "brain pool" this year aimed at inducing high-level scientists abroad to come to South Korea and help the country "acquire at an early date the newest science, technology, and know-how in the R and D stages in advanced countries, and breathe life into the domestic R and D scene." The ministry will recruit 100 "overseas Korean" and other foreign scientists in 1994, and if the program is effective expand its scope in subsequent years. Recruits will be leading scientists and technicians with more than five years postdoctoral experience in their countries of residence. Exceptions will be made for personnel with world class achievements who lack these credentials. South Korea will pay round-trip transportation, all moving expenses, and a salary higher than that currently received. A review will be made every six months of each individual's performance as a basis for deciding whether to continue the contract. The system will allow MOST "to make systematic use of more than 40,000 expatriate Korean scientific personnel, including the 14,000- plus members of the Association of Overseas Korean Scientific and Technical Personnel" and "top notch" Western and former-Soviet scientists. MOST is instituting the system "to deal effectively with the increasing reluctance of advanced countries lately to transfer core technology" and to help "overcome South Korea's inferior domestic research and educational environments." (Seoul MAEIL KYONGJE SINMUN 25 Jan 94 p 13) MOTIE Subsidizes Technical 'Cooperation' With Japan - MOTIE will spend 100 billion won ($125 million) between now and 1997 to support companies specializing in Japanese exports. The ministry will also solicit greater "technical cooperation" with Japan through the "ROK- Japan Technical Cooperation Foundation." Firms which shipped $1 million in goods to Japan, and more than 50 percent of their total exports, will have up to two-thirds of their R and D costs subsidized from a "Basic Industrial Technology Development Fund." In addition, some 20 billion won ($25 million dollars) of the $125 million export subsidy fund will be used to help ROK companies market their products in Japan. Technical cooperation with Japan will be facilitated by 3.26 billion won ($4.075 million) spent on personnel exchanges, 600 million won ($750,000) to support joint research, 160 million won ($200,000) on "structural activities for basic industrial technological cooperation," and other related subsidies totaling 4.4 billion won ($5.5 million). MOTIE will increase the number of technicians it sends to Japan for training from 197 in 1993 to more than 300. Another 30 retired Japanese technicians will be invited to South Korea to provide "technical guidance" to ROK small and medium businesses (SMB's). (Seoul MAEIL KYONGJE SINMUN 31 Jan 94 p 4) ROK Firms Importing Patented Russian Technologies - According to the ROK Patents Administration, 41 South Korean companies have applied to transfer 365 different patented Russian technologies since October 1993. The ROK firms include 22 conglomerates, 14 SMB's, and five research institutes, including the Korea Atomic Energy Research Institute (KAERI). Applications by field number 157 in electricity and electronics, 143 in chemistry, 31 in machinery and metals, and 34 others. (Seoul HANGUK KYONGJE SINMUN 31 Jan 94 p 15) FEATURE: Electronics Companies Focusing on Large Screen TV's - SUMMARY: South Korean electronics firms are marketing a variety of large screen color televisions, including conventional designs with screens up to 46 inches, and newer "widescreen" models which make use of redesigned picture tubes for a flatter chassis, according to Seoul press reports. At least one ROK firm is seeking to apply plasma display technology to "multivision" TV's with screens more than eight feet wide. The industry regards these products as "transitional" steps on the way to high-definition equipment now being developed. South Korean electronics manufacturers are turning their attention to large screen color televisions in response to increasing demand for upscale commercial appliances both domestically and abroad. According to the 9-16 February CHUGAN MAEGYONG, large color TV's held 5 percent of the ROK market in 1990, 11 percent in 1991, 21 percent in 1992, and 27 percent last year (35 percent by value). At present, the most popular models are 25-inch sets which have 70 percent of the large screen market, 29-inch with 25 percent of the market, and 33-inch with 4 percent. A small number of homes have 42-inch and 46-inch projection TV's, the magazine reports. These units, whose verticle-to-horizontal dimensions have a fixed ratio of 3:4, differ from the widescreen color TV's just now being marketed which are proportionately wider and based on different technology. According to the 9 January MAEIL KYONGJE SINMUN (MKS), South Korea's first domestic widescreen television--a 36-inch model- -was introduced in February 1993 by Goldstar. A follow-up model with a 32-inch screen that can project as many as four pictures on the same screen (picture-in-picture or PIP) came out at the end of last year. Goldstar expects 1994 sales of the two models to reach 2,000 and 6,000 sets, respectively. Samsung Electronics recently introduced its own 32-inch widescreen model with PIP and stereophonic sound, and is bringing out a 28-inch model later in 1994. Total sales are expected to pass 10,000. Daewoo and Anam reportedly will market competitive products shortly. Meanwhile, the 11 January MKS reports that Samsung Electron Devices has made South Korea the "second country after Japan" to develop a flat cathode ray tube for widescreen TV. The company spent one year and 5 billion won ($6.25 million) "indigenizing" the part which will be used in 32-inch screens. The tube reportedly is "twice as flat" as existing models. It uses a 32.5 mm electron gun (down from 37.5 mm) and Samsung's "double dynamic focus" system to produce clear pictures. The newspaper reports the tube will be used in widescreen televisions just now being produced in South Korea, and in the high-definition television (HDTV) sets of the future. The 9 January MKS states that the ROK electronics industry views widescreen TV as a "transitional by-product" of HDTV, which is expected to "dominate" the market by the year 2000. In a related development, the 10 February Tokyo NIKKEI SANGYO reports that Orion Electronics, a subsidiary of the Daewoo Group, has established a joint venture with Russia's Gas Discharge Equipment Research Lab (under the jurisdiction of Russia's Munitions Industrial Committee) to produce plasma display panels (PDP's). The equipment, originally produced for Russia's aerospace program, reportedly is being designed for use with extra large ("multivision") televisions with 100-inch plus displays. According to the newspaper, PDP's are much narrower than conventional cathode ray tubes, and offer a brighter screen than liquid crystal displays (LCD's). The new company, Orion Plasma Research and Production, will be located southeast of Moscow. Each partner will supply half of the $4-million capital. Government Committee Devising NAFTA Countermeasures - On 24 January, the ROK Government's "NAFTA Countermeasures Committee" consisting of 17 members from trade-related agencies and industry met to discuss a "new strategy" that entails increasing local investment, moving "full-scale" into the U.S. distribution market, relying on trade diplomacy, and strengthening industrial technological "cooperation." The committee agreed that plans to secure a share of the North American market will be frustrated unless accompanied by direct local investment. In those sectors where South Korean exports lose their competitiveness to Mexican goods which enter the United States duty free, South Korea will react by reducing distribution expenses through more aggressive export marketing. A fact-finding team will be sent to the United States in the first half of 1994 to survey the distribution market, while ROK companies are encouraged to participate in U.S. trade exhibitions and make other efforts to find local vendors. Competitiveness of South Korean products will also be enhanced by strengthening technological "cooperation" through the ROK-U.S. Industrial Cooperation Foundation. In terms of diplomacy, South Korea will use the Uruguay Round and bilateral trade negotiating forums to check NAFTA's "excessive discrimination" against non- member countries as evidenced, for example, in its stringent country-of-origin criteria. The committee plans to have a "full- blown NAFTA strategy" ready by March this year. (Seoul MAEIL KYONGJE SINMUN 25 Jan 94 p 6) Study Compares ROK and Japanese Overseas Investment Strategies - The Korea Chamber of Commerce and Industry has published a "Comparative Study of Direct Overseas Investment Strategies by South Korean and Japanese Companies." The study points out that Japan follows a two-part strategy of manufacturing high value-added, high- tech products at home while farming out medium and low value-added work to overseas production sites. Also, Japan continuously shifts its overseas sites depending on the manufacturing cost and the "technological level of the product targeted for investment" so that no country obtains more technology than what it already has. Conversely, the study notes that ROK firms appreciate less the need to keep technology out of other countries' hands, and are concerned only with raising productivity at the overseas site. It adds that South Korean companies take high risks, by Japanese standards, in moving production to countries such as China, Vietnam, and Burma without making a full analysis of the situation and with no means to deal with unfavorable changes that may develop. Japan's ability to keep high technology at home and diversify its overseas labor sites effectively "squeezes" ROK firms which are adept at doing neither. (Seoul MAEIL KYONGJE SINMUN 26 Jan 94 p 12) KDI Approves of Samsung's Entry Into Auto Production - The Korea Development Institute (KDI), a national policy group with close ties to the ROK Government, recently reported it "agrees in principle" with Samsung's bid to enter the passenger car market. KDI acknowledged that "overlapping investment" would be inefficient in terms of the domestic market, but that exports could expand with the enhanced competitiveness that Samsung's entry would help bring about. KDI observed that instead of putting "unreasonable restrictions" on the auto industry, government should support it by investing in related R and D and training of personnel. KDI's approval follows a similar recommendation made last November at a seminar of international experts. The findings are expected to have a major impact on the Korea Institute for Industrial Economics and Trade's recommendation to the Ministry of Trade, Industry, and Energy this April. (Seoul MAEIL KYONGJE SINMUN 17 Jan 94 p 3) Samsung Develops One-Chip Integrated Circuit - Samsung Electronics Co. has developed a high-fidelity one-chip integrated circuit (IC) for wireless phones, that combines the functions of four standard IC's. Using the circuit could reduce the number of IC's used in wireless phones from 12-13 to two or three, and reduce the phone's components by 25-30 percent. This could pave the way for miniaturization of wireless phones. (Seoul YONHAP 0133 GMT 17 Feb 94) Seoul Bureau Hyundai Motors Opens Car Institute - Hyundai Motors recently opened a research institute at the Korea Advanced Institute of Science and Technology (KAIST) to develop high-tech auto technologies and groom skilled workers. The institute, named "Smarveh" (Smart Vehicle Laboratory), is manned by five KAIST professors specializing in machinery and 15 KAIST researchers. The institute will concentrate on developing cleaner-running, quieter, and safer cars. It will also focus on producing more than 1O auto experts with masters-degree level diplomas each year. Hyundai supplied research equipment worth 200 million won ($250,000) and 300 million won ($375,000) in cash to the institute. (Seoul THE KOREA TIMES 20 Feb 94 p 8) Seoul Bureau Seoul, Beijing Seeking Industrial Alliance - The ROK Government will seek an industrial cooperation agreement with China. For South Korea, the main areas of cooperation would include aircraft, automobiles, digital telephone exchanges, and nuclear power plants, while China is interested in high-definition television (HDTV), facsimile, and large-screen televisions. South Korea has already announced an aircraft development plan, and China is expected to be invited to participate in it. In the automotive sector, South Korea has asked China to allow ROK car imports, and will encourage ROK parts producers to invest in China. The ROK Government is also eager to become involved in the modernization of China's telephone networks. Nuclear power is another promising area of cooperation as China constructs new nuclear power plants. The Korea Electric Power Corporation (KEPCO) has signed an agreement to provide operational and management services to a nuclear power plant in Guangdong Province. (Seoul TONGA ILBO 18 Feb 94 p 11) Seoul Bureau Companies Withdraw From Indonesia Because of Rising Labor Costs - ROK companies are closing their plants in Indonesia due to wage hikes. The average daily wage in Indonesia increased from $1.05- $1.33 last year to $1.67 recently, an increase of 25 to 60 percent. ROK companies plan to move their plants to Vietnam or China, where labor costs are lower. Samsung closed its sewing plant in west Jakarta at the end of last year and is moving to close five other plants. Sokwang closed one of two plants in Indonesia, and Lucky- Goldstar International is considering selling its plant. (Seoul HANGUK ILBO 21 Feb 94 p 5) Seoul Bureau Plant Exports to China on Increase - ROK companies are increasing plant exports to China as economic cooperation between the two countries is expected to "improve drastically" following President Kim Yong-sam's visit to China. According to the Korea Export and Import Bank, major ROK companies are expanding from small-volume trade to large-scale plant projects in China. The bank has received applications for deferred payment for nine projects with a total value of $167 million. Plant exports range from port facilities to telecommunications cable equipment and railroads. (Seoul MAEIL KYONGJE SINMUN 21 Feb 94 p 4) Seoul Bureau Companies To Participate in Telephone Business in Russia - Dacom and Goldstar Data Communications will sign a contract with Russia on 25 February to establish a joint communication corporation that will provide local phone service to Russia's Maritime Province. Dacom will invest 1,440 million won ($1.8 million) in the project and hold a 45-percent share in the venture, while Goldstar Data Communications will hold 5 percent and six Russian companies will have a 50-percent share. (Seoul MAEIL KYONGJE SINNUN 25 Feb p 11) Seoul Bureau Goldstar Signs Communications Agreement With Romania - Goldstar Information and Communications has signed a turnkey agreement to supply $50 million worth of telecommunications equipment to Rom Telecom of Romania. The equipment will be used to modernize the telephone network in Prahova Province, a project that will cost $75 million. The ROK's Economic Development and Cooperation Fund (EDCF) will provide $50 million in loans to help the Romanian Government purchase the equipment. Goldstar will supply two types of digital telephone exchanges (TDX), STAREX-TD1 for small cities and STAREX- IMS for rural villages. The firm will also provide optical transmission equipment, microwave equipment, and cables. Goldstar's $50-million contract is the largest TDX contract ever for a ROK firm. (Seoul THE KOREA HERALD 24 Feb 94 p 8) Seoul Bureau China Emerges as Major Export Market for ROK Textiles - China has emerged as a major textile market for ROK companies. According to the Korea Federation of Textile Industries, textile exports to China between January and November 1993 totaled $756 million, a 71.4- percent increase compared to the same period in 1992. This makes China the fifth largest export market for ROK textiles, or the second largest if exports through Hong Kong are included. (Seoul MAEIL KYONGJE SINMUN 23 Feb 94 p 11) Seoul Bureau SOUTHEAST ASIA: INDONESIA - FEATURE: Government Urged To Reduce Cost of Economy -- SUMMARY: Jakarta press sources recently reported the views of several economists on Indonesia's "high cost economy." These economists stress the need to stimulate overall economic activity, reduce production costs, and attain better productivity and efficiency, so that Indonesia can achieve economic growth as well as become more competitive in overseas markets. Sumitro Djojohadikusumo, President Suharto's senior economic advisor, recently expressed his concern over Indonesia's high cost economy and his remarks were cited in several major Jakarta dailies on 22 January. Sumitro's analysis of the economic situation, as reported in BISNIS INDONESIA, KOMPAS, SUARA PEMBARUAN, and MERDEKA, is based on a "capital-output ratio," using quantitative and empirical data, as well as statistical figures from the Central Bureau of Statistics. Sumitro's conclusion is that Indonesia's economic development has been "less efficient and less effective" compared with other ASEAN countries whose economies are "structurally similar." The papers also note that Sumitro attributes this "undesirable situation" to the "large amounts of waste and losses," caused by mismanagement; investments in infrastructure that have slow or little yield; "incompetence" in planning, operating, and maintaining investment projects; and "irregularities" such as graft. BISNIS INDONESIA reports that during Indonesia's fifth Five-Year Development Plan (1989-1994), public and private investments amounted to 33.4 percent of the national income, with annual economic growth at 6.8 percent. Based on these figures, the incremental capital-output ratio (ICOR) is 33.4 : 6.8 = 4.9 or 5. This ICOR, Sumitro points out, is "somewhat high" compared to the ratios for other ASEAN countries, which generally range from 3 to 3.5. Sumitro suggests that a reduction in the cost of the economy will ultimately result in Indonesia's becoming more competitive abroad and in a higher economic growth for the country; he adds that if the ICOR during the second stage of Indonesia's long-term development cycle could be reduced to 3.5, and if investments remain at 33.4 percent of national income, Indonesia could achieve an annual growth of 9.5 percent (33.4 : 3.5). Sumitro's assessment of the country's economic situation coincides with that of Rizal Ramly, executive director of the economic, industrial, and trade consulting firm Ekonit. According to a 23 January KOMPAS editorial, Rizal believes that new measures to directly address Indonesia's high cost economy should be worked out and implemented in order to improve the country's competitiveness in overseas markets. Economists Priasmoro Prawiroardjo and Hadi Soesastro of the Center for Strategic and International Studies share Rizal's view that a new set of deregulation policies is deeded. According to the 22 January KOMPAS, Hadi believes that improving the business climate would play an important role in stimulating overall economic activity and in improving efficiency in the industrial sector, while Priasmoro views production efficiency as the key problem that Indonesian exporters must overcome to penetrate the world market. Priasmoro stresses that cutting back on production cost alone will not be enough and that improved macroeconomic conditions are also necessary. Moreover, he asserts that implementation of the agreements reached at the Uruguay Round will pose more challenges than opportunities to the Indonesian industrial sector. He also points out that Indonesia's electronic industrialists are already concerned about the competition that will come from AFTA (Asean Free Trade Area). They fear that under the Common Effective Preferential Tariff (CEPT) plan of AFTA, the market will be saturated with electronic products from Singapore, Malaysia, and Thailand. And because of the time-consuming procedures and "unpredictable costs" associated with investing in Indonesia (such as "illegal levies" that have to be paid to obtain business licenses), these industrialists predict that other Indonesian products have little chance of getting a share of the international market, KOMPAS reports. FEATURE: Workers Strike as Government Enforces Minimum Wage Decree -- SUMMARY: Several Jakarta newspapers report that thousands of employees went on strike recently to demand better treatment by their employers and an increase to the $2 daily minimum wage recently set by the government for Jakarta and its surrounding areas. The 4 February ANGKATAN BERSENJATA and SUARA PEMBARUAN report that thousands of employees of several companies in the Tangerang area went on strike three weeks after a ministerial decree on an increase in daily minimum wage went into effect on 1 January. The strikes occurred after employers turned down the employees' demand for a 26-percent increase in the daily minimum wage--which is approximately $2--set by the government. In Bekasi, 30 km east of Jakarta, 1,200 workers from five companies went on strike early last week, according to the 7 February ANGKATAN BERSENJATA. In addition to a salary increase, workers demanded that companies grant them better benefits and special allowances. The paper also states that reports from Bandung indicate that hundreds of employees went on strike for the same reasons as their counterparts in Bekasi, while hundreds of workers from Bogor demonstrated in front of the Ministry of Manpower. The demonstration prompted a government investigation into allegations that employers are violating the minimum wage regulations, ANGKATAN BERSENJATA says. SUARA PEMBARUAN notes that most employers have proposed that the decree enforcement be postponed until April, citing the need for more time to adjust their payrolls, not only in connection with the wage hike but also for the annual "Lebaran" (festivities at the end of the fasting month) bonus in March. The paper also quotes Tangerang Regent Saifullah Abdulrahman who said that out of 870 companies in the region, at least 80 small and medium firms cannot afford to pay their workers a daily minimum wage of $2. Saifullah stated that some of the firms have even filed a protest to the Ministry of Manpower and have enclosed their financial statements. However, the paper continues, Manpower Minister Abdul Latief has stated that based on the outcome of a recent survey on cost structure, companies are in fact capable of and should be paying their workers more. Latief said that labor cost averages only 9.8 percent of total production cost, which is "too small." He also asserted that, according to the All-Indonesia Labor Union (SPSI), some companies in the shoe industry have spent only 2 percent of their total operational budget on labor. SPSI General Secretary Bomer Pasaribu attributes this "deplorable situation" to the fact that employers have always regarded wages as part of production cost, subject to reduction, and hence wages have always been suppressed. Minister Latief warns businesses that more strikes will occur prior to Lebaran, unless employers become more responsive to workers' demand for better pay and better benefits, ANGKATAN BERSENJATA reports. The paper also quotes Aburizal Bakrie, chairman of the Indonesian Chamber of Commerce and Industry, who called on all employers to willingly comply with the minimum wage regulation. Bakrie said that "workers are assets, not production tools," and that the minimum wage is set at "a low level so companies won't be burdened." According to the 8 February KOMPAS, the government is determined to make companies comply with the minimum wage regulation. The paper says that President Suharto has ordered his cabinet ministers to make a list of the companies that violate the regulation and/or operate without a labor union, and to take the necessary steps against them. The president has stated that employers should not be concerned with profits only, but that they must also pay attention to the rights and welfare of workers, the paper reports. Central Bank Needs $400-Million 'Standby Loan' - The Bank of Indonesia (Central Bank) recently announced that Indonesia has tasked six international banks to come up with a $400-million "standby loan." The six banks include Banque Nationale de Paris, Bank of Tokyo in Hong Kong, Chase Manhattan Asia, Dresdner, Industrial Bank of Japan, and Long Term Credit Bank, Asia. The seven-year loan will be signed in March, with a utility period of five years after the loan is signed. It will be repaid in five installments every six months, starting at the end of the first five years. The interest for the first two years is set at 0.75 percent above LIBOR (London Interbank Offered Rate), and in the third year, the interest will increase to 0.875 percent above LIBOR. Former Finance Minister Frans Seda said the loan will only be used in the event the government is unable to pay for non-oil/gas imports, or as a safeguard for the balance of payments. (Jakarta KOMPAS 28 Jan 94 pp 1, 5) Government Discontinues 'Protection' of Steel Industry - Minister of Industry Tunky Ariwibowo recently announced that the government will no longer "protect" the national steel industry, even in the event of declining world steel prices. Ariwibowo said the decision is meant to force the national company P.T. Krakatau Steel to become more efficient and more competitive. This decision is also necessary to counteract a claim by the United States that Indonesia is dumping its steel in the international market, the minister said. (Jakarta KOMPAS 28 Jan 94 p 3) P.T. PAL To Shift Production Focus - A recent report issued by P.T. PAL, a state-owned shipyard in Surabaya, states that within two years, the company intends to stop producing small ships in the 900- 4,200 dead weight ton (dwt) range, and will start building war ships and larger ships up to 40,000 dwt. The report does not specify what type of war ships P.T. PAL expects to produce, but the larger ships will include coal carriers, passenger ships, container carriers up to 2,700 twenty feet equivalent unit (teu), and oil tankers up to 30,000 dwt. (Jakarta KOMPAS 4 Feb 94 p 7) Increase in French Investments Reported - The Capital Investment Board recently reported that French investments in Indonesia in 1993 registered a total of $431 million, a 68.3-percent increase over the previous year. Most of the investments were in the chemical, electronic, and gas industries, and in the hotel, banking, and financial sectors. (Jakarta ANGKATAN BERSENJATA 21 Jan 94 p 3) Agriculture's Contribution to GDP Drops to 19 Percent - Agriculture Minister Syarifudin Baharsyah recently said that the agriculture sector's contribution to GDP has dropped to 19 percent, causing a loss of jobs in the sector and particularly in farming. Syarifudin expects the figure to continue to drop, down to as low as 15 percent eventually. (Jakarta ANTARA 1032 GMT 28 Feb 94) Bangkok Bureau MALAYSIA: Contract for Asia Pacific Cable Network Signed - Nine Asian telecommunication companies have recently signed a $7.16- million contract with Fugro Survey Private Ltd. to study the region's optic fiber submarine cable system for the Asia Pacific Cable Network (APCN). The nine companies include Singapore Telecom, Telekom Malaysia Berhad, Communications Authority of Thailand, Hong Kong Telecom International Ltd., Indonesia's Indosat, Taiwan's International Telecommunication Development Corp., Japan's Kokusai Denshin Denwa Company Ltd., the Philippines' Long Distance Telephone Company, and Korea Telecom. The study is designed to find a safe and economically viable route for the APCN. Expected to be put into service in 1996, the APCN will comprise two submarine cable systems: the first system will connect Japan, Korea, Taiwan, Hong Kong, the Philippines, Malaysia, and Singapore, and the second will link Thailand, Malaysia, Singapore, and Indonesia. (Kuala Lumpur BERNAMA 0437 GMT 24 Feb 94) Bangkok Bureau PHILIPPINES: Proposals for Satellite Project Reported - Transportation and Communication Undersecretary Josefina Lichauco recently stated that the Philippines has begun to receive proposals from various private consortiums for a project to launch its own satellite or to lease a satellite from another country. Lichauco stressed that the government will facilitate the project which will be under a government build-operate-transfer arrangement, with the consortiums financing and overseeing construction of the entire project. The consortiums will then be given the right to operate the project for a specified period in order to recoup their investments. The prospective satellite firm will be a 60-percent Filipino-owned public utility and the rest of the equity will be open to foreign partners. To date, Manila has received proposals from Russia-based Global Information Systems, Malaysia's Measat, Thailand's Shinawatra group, and U.S.-based Rimsat. Other companies that have expressed an interest include Europe's Arianespace and Matra Marconi, Hong Kong's Asiasat, and U.S. companies such as Hughes Space and Communications, Martin Marietta, and Panamsat. (Manila BALITA 10 Feb 94 p 2, 11 Feb 94 p 3) SINGAPORE: 'Largest' Petrochemical Investment Announced - A partnership of leading chemical firms from Europe, Japan, and the United States will invest over $1.875 billion in the second petrochemical complex on Ayer Merbau and Seraya islands. It will be the single largest foreign investment in Singapore. The project is expected to be completed in the second quarter of 1997 and will include Singapore companies such as the Petrochemical Corporation of Singapore, the Polyolefin Company, Denka Singapore, and Seraya Chemicals Singapore. (Singapore Singapore Broadcasting Corporation 1100 GMT 1 Mar 94) Bangkok Bureau THAILAND: Rice Sale to North Korea Reported - Deputy Prime Minister Amnuai Wirawan said recently that Thailand will sell North Korea 50,000 tons of rice under a two-year credit plan. Thailand had previously agreed to sell 200,000 tons of rice, but North Korea has delayed issuing a letter of credit. To maintain the relationship, Thailand has decided to proceed with a lesser sale at this time. (Bangkok BANGKOK POST 23 Feb 94 p 20) Bangkok Bureau Cabinet Approves Soybean Import - The cabinet has approved the import of 98,000 tons of soybean, following the recommendation of the Soybean and Other Oil Crops Policy Committee. Some 5,000 tons will be imported from Laos and 10,000 tons from Cambodia. The imports must be completed by July and no imports are allowed during March or April. Current annual domestic demand for soybean is 1.2 million tons, while production is only about 400,000 tons. Thailand spends about $160 million annually on soybean imports. (Bangkok Radio Thailand Network 0000 GMT 2 Mar 94) Bangkok Bureau VIETNAM: FEATURE: Losses in Rice Export Earnings Reported -- SUMMARY: A Hanoi press report notes that Vietnamese rice dealers suffered losses of about $2 million in rice export earnings in October 1993, mainly because of a shortage of funds and stiff competition among the dealers. The same report shows that Vietnam currently ranks third among world rice exporters and points out the need for changes in the State's management of rice export. According to a 22 August 1993 Hanoi VNA report, between 1989 and 1992, Vietnam exported 5.76 million metric tons of rice worth over $1 billion. The 5 January THOI BAO KINH TE VIET NAM notes that in the last three years, the country has exported a yearly average of about 1.7 million metric tons of rice, which brought in revenues that are second only to earnings from crude oil export. The 6-12 January TUAN BAO QUOC TE points out that although Vietnam currently ranks third among world rice exporters, rice dealers have registered losses of about $2 million in October 1993, in exporting more than 100,000 metric tons of rice. TUAN BAO QUOC TE (TBQT) suggests that one of the main reasons for the losses in rice export earnings is the stiff competition between rice dealers, resulting in rising domestic purchase prices and falling export prices. Another reason cited by the newspaper is poor management" by the State. Despite a government directive to reduce the number of principal rice exporters to 17, there were still over 40 exporters in November 1993, since any firm with a contract listing prices commensurate with government prices could obtain an export permit, including those who did not have storage space or processing mills. TBQT also cites the shortage of funds used to buy rice as a problem. Some $200 million were actually required to purchase rice in the Mekong River delta, but the largest amount received was only $740,000 and the smallest $45,000, while small enterprises received only 10 percent of the funds needed. According to TBQT, few firms want to sign big contracts and take out loans to buy rice for export ahead of time, but they will rush out to make rice purchases only when customers offer letters of credit and ships start to come in. TBQT reports that Vietnamese rice export increased from 1.42 million metric tons in 1989 to 1.95 million metric tons in 1992, and totaled 1.7 million metric tons in 1993. The number of countries who have signed purchase contracts with Vietnam has also increased from 24 in 1992 to 50 in 1993. The quality of the exported rice is reportedly improving each year, with an increasingly smaller percentage of broken rice. Currently, prices for Vietnamese rice are $50-$60 less per metric ton than Thai rice of the same quality. TBQT concludes that to achieve success in rice export, the State needs to improve its management system, strengthen the Union of Grain Exporters, and give rice exporters regular guidance on domestic and international trade regulations in order to avoid the kind of losses experienced in the last quarter of 1993. Government To Approve Foreign Construction of Infrastructure Projects - The Vietnamese Government will reportedly prepare legislation to implement a system whereby foreign companies will undertake the construction of infrastructural projects on a turnkey, or "build, operate, and transfer" (BOT) basis. This "BOT-style" system involves entrusting all matters concerning infrastructural projects to foreign companies, from financing to construction and actual operation. The government has "great expectations" for this system, since it will not have to provide financing and because foreign firms will contribute management and other knowhow to Vietnam. China and Southeast Asian countries have successfully used the BOT system to build power-generating facilities and highways. In the first half of March, the Vietnam State Committee for Cooperation and Investment (SCCI) plans to hold a "forum on BOT- style investment" in Hanoi for foreign financial organs and development companies. At that time the SCCI will announce regulations concerning BOT bidding and contracting. However, there have been "many problems" with the BOT system involving contracts let by government agencies and the companies signing them, as exemplified by the recent withdrawal of Japanese companies from an expressway construction project in Thailand. In Vietnam's case, there probably will be difficulties over the long term in collecting fees from completed generating plants, highways, and bridges. And even if some financing consortiums are formed, they will adopt a "cautious stance" regarding involvement in Vietnam. It appears that initially, banks controlled by overseas Chinese and French banks will be the main participants in financing consortiums. (Tokyo NIKKEI KINYU SHIMBUN 24 Feb 94 p 2) Government To Develop 'Core' Groups of State Enterprises - According to an article in the 19 February NIHON KEIZAI SHIMBUN by Makoto Suzuki, the paper's Hanoi correspondent, the Vietnamese Government has decided to make the development of "core enterprise groups" from among major state enterprises a "pillar" of its economic restructuring program. Although the government has been making efforts to nurture private companies as part of its economic reform measures, private companies still remain "weak." Thus, the government's plan is to use selected "core" state enterprises as "locomotives" of economic growth. As soon as possible, a list of candidate firms from among enterprises currently under the control of government agencies will be presented to Prime Minister Vo Van Khiet. Then a "limited number" of core groups will be established--more will be designated later--and they will be removed from the control of ministries and agencies, "placed directly under the government," run "experimentally," and gradually will be expanded. Suzuki writes that as explained by Le Xuan Trinh, minister and director of the Government Office, these core enterprises will be developed into "powerful" groups with capital levels of "several trillion" dong (several hundred million dollars). Also, each group will have "several dozen umbrella companies" under it. According to Trinh, companies under the Energy Ministry and the postal and communications authorities "will be the first" to be transferred. Reorganizing state enterprises is one of the government's basic policy goals, Suzuki notes, along with privatization and reorganizing loss-making enterprises. In this process, developing core enterprise groups appears to be a "precise" policy of selectively developing "superior" state enterprises. Banking Association To Include Domestic, Foreign Banks - Vietnam will establish a Banking Association by mid-1994 that is expected to bring together various domestic financial institutions as well as foreign banks operating in Vietnam. The government intends to use their views in modernizing Vietnam's financial system. There are four types of financial institutions in Vietnam, in addition to Vietnam's State Bank--state-owned commercial banks, private joint-venture banks, credit cooperatives, and finance companies (nonbanks). There are "more than 20 large and medium-size" state-owned commercial banks and private joint-venture banks. About 40 domestic financial organizations intend to join the association. As for foreign banks, there are more than 30 operating in Vietnam through branches, joint ventures, or resident offices. Among Japanese banks, Tokyo and Sakura Banks, which already have resident offices in Ho Chi Minh City, are expected to join the new association. Also, it is anticipated that American banks will quickly enter Vietnam now that the economic embargo has been lifted. However, since foreign banks are "uneasy" about doing business in Vietnam because of the country's undeveloped financial markets, Japanese and other foreign banks hope to use the Banking Association to propose ways the Vietnamese Government might regulate the industry. (Tokyo NIKKEI KINYU SHIMBUN 22 Feb 94 p 2) Finance Ministry Personnel To Study Japan's Securities Industry - In June, Nikko Securities, one of Japan's "big four" securities companies, will invite 15 employees of Vietnam's Finance Ministry to study Japan's stock exchange regulatory system. Ten members of the group will be regular ministry employees and five are students that will be joining the ministry. During their month-long stay, the group will visit the Tokyo Stock Exchange, the Ministry of Finance, securities firms, and listed companies to study market regulations, regulation of securities sales, and market settlement issues. Vietnam is planning to establish a stock exchange in Ho Chi Minh City, but whether the exchange will actually be opened this year, given delays in preparing its regulatory systems and slowness in issuing stock of government-owned companies, has become a "delicate" issue. Anticipating that American investment banks will begin operations in Vietnam with the lifting of economic sanctions, Japanese securities firms and banks "are quickly establishing close personal ties (jimmyaku) with the Vietnamese Government so as not to lag behind." (Tokyo NIHON KEIZAI SHIMBUN 21 Feb 94 p 8) Joint Venture With French, Chinese Firms To Produce Nylon Cords - The Hanoi Industrial Textile Factory, France's Rhone-Poulenc Chimie, and China's Heavenly Horse Tire Fabric Company have formed the Thang Long Nylon Company, a 20-year joint venture in Hanoi to manufacture nylon cords for bicycle and motor vehicle tires. The new venture was licensed in mid-December 1993, with an investment capital of $4.76 million. Prescribed capital is $3.33 million, of which the Vietnamese company is contributing 34 percent while the other two partners are contributing 33 percent each. (Hanoi NHAN DAN 1 Jan 94 p 6) Jewelry Joint Venture Formed With Japanese Company - The Vietnamese Gemstone Company (Vinagemco) and Japan's Kotobuki Holdings Company Ltd. have formed Vijagem, a 30-year joint venture in Hanoi to process gems tones and to make and sell jewelry. The new venture was licensed in October 1993 and is capitalized at $2 million. Prescribed capital is also $2 million, of which the Japanese company is contributing 70 percent. (Hanoi QUAN DOI NHAN DAN 3 Jan 94 p 4) Joint Venture With Philippine Firm To Build Commercial Complex - The Merchant Marine Center (under the Vietnam Maritime Department) and the Philippines' Imex Pan-Pacific have formed the Hanoi Marine Commercial Center, a 30-year joint venture in Hanoi to build a commercial complex--containing a hotel and offices--and to provide merchant marine services. The new venture was licensed in late October 1993, with an investment capital of $12 million. Prescribed capital is $6.02 million, of which the Philippine company is contributing 51 percent. (Hanoi NHAN DAN 4 Jan 94 p 4) Joint Venture With Singaporean Company To Provide Hotel Services - The Vietnam Tourism Company in Ho Chi Minh City and Singapore's Koh Brothers Building and Civil Engineering Contractor Pte., Ltd. have formed Vina Viet-Sinh Ltd., a 15-year joint venture in Ho Chi Minh City to provide hotel services. The new venture was licensed in October 1993, with a listed investment capital of $3.2 million. Prescribed capital is $2.4 million, of which the Singaporean firm is contributing 70 percent. (Hanoi NHAN DAN 3 Jan 94 p 2) Joint Venture With Malaysian Firm To Produce Glass Containers - The Khanh Hoi Glass Factory in Ho Chi Minh City and Malaysia's Malaya Glass Berhad have formed Malaya-Vietnam Glass Ltd., a 30-year joint venture in Ho Chi Minh City to produce glass containers for domestic consumption and export. The new venture was licensed in late October 1993, with an investment capital of $22 million. Prescribed capital is $15.47 million, of which the Malaysian firm is contributing 70 percent. (Hanoi NHAN DAN 8 Jan 94 p 6) Decrease in Coal Export Noted - Coal export in 1993 totaled nearly 1.25 million metric tons, about 350,000 metric tons less than in 1992. Competition among various units brought down prices by 5 to 7 percent compared with 1992. Coal's export value has also decreased by nearly $20 million. (Hanoi THOI BAO KINH TE VIETNAM 23-29 Dec 93 p 5) Singapore's Liang Court Holdings To Invest in Apartment Complex - Peregrine Capital Vietnam Ltd. and Singapore's Liang Court Holdings plan to build a $30-million, 150-unit apartment complex in Ho Chi Minh City. Liang Court owns 60 percent of the project and the Vietnamese firm the remainder. (Singapore BUSINESS TIMES 21 Feb 94 p 18) Bangkok Bureau Hanoi Launches First Paging Service - Hanoi Post and Telecommunications recently launched its first paging service, with technical assistance from Hong Kong's ABC Communication (Holding) Ltd. The service has numeric or alpha-numeric pagers capable of storing up to 98 messages and 280 characters and receiving messages in Chinese characters as well as in the Roman alphabet. The Hanoi paging center has 170 subscribers and charges a monthly fee of $8. The subscription fee for Ho Chi Minh City is $10 a month. (Hanoi VNA 0555 GMT 19 Feb 94) Bangkok Bureau Hong Kong Firm To Invest in Da Lat Infrastructure - Hong Kong's Strategic Development International Corporation will invest in a $150-million project to improve Da Lat's infrastructure, including roads and power and water supplies. (Hanoi VNA 0648 GMT 21 Feb 94) Bangkok Bureau PetroVietnam To Increase Production - The Vietnam Oil and Gas Corporation, PetroVietnam, expects to produce 7.1 million tons of crude oil this year, up by 300,000 tons from the previous year. The increase is attributed to an estimated 6.7 million-ton yield from the Bach Ho oil field and a 0.3 million-ton output from the Rong and Dai Hung fields. (Hanoi Voice of Vietnam 1000 GMT 22 Feb 94) Bangkok Bureau Government To Increase Cement Production - Six ministries and 21 provinces are committed to increase cement production using vertical furnaces. Nearly 35 feasibility studies to upgrade or build new furnaces at a total investment of $670,000 have been done. Experts estimate that these vertical furnaces will produce 650,000 tons of cement this year and 2.5 million tons in 1996. (Hanoi VNA 1444 GMT 19 Feb 94) Bangkok Bureau Peanut Exports Put Vietnam Third Among Exporting Countries - Vietnam exported about 150,000 tons of peanuts last year, ranking third among peanut exporting countries. This year Vietnam expects to produce 275,000 tons of peanuts, including 200,000 tons for export. (Hanoi VNA 0611 GMT 1 Mar 94) Bangkok Bureau First Phase of Hoa Binh Hydroelectric Plant Completed - A 670-ton rotor was recently installed at the Hoa Binh Hydroelectric Power Plant, marking the end of the first phase of the plant's construction, which has taken over 10 years. The rotor will increase the plant's output to 1,920 mw, as planned. (Hanoi Voice of Vietnam Network 1100 GMT 25 Feb 94) Bangkok Bureau Rice Joint Venture Accord With Hong Kong Company Signed - Long An, Tien Giang, Dong Thap, and An Giang Provinces have recently signed a 50-year joint-venture agreement with a Hong Kong company to produce and process rice. The $10-million project includes the planting of special rice varieties on 30,000 hectares in southern Vietnam, and the construction of a processing mill with an annual capacity of 90,000 tons. (Hanoi Voice of Vietnam 1000 GMT 2 Mar 94) Bangkok Bureau Construction of Sulfuric Acid Factory Reported - Construction of a sulfuric acid factory--a joint venture between Indonesia's Unggul Indah Corporation (UIC) and Vietnam Company Ltd.--in Dong Nai Province has begun. The $7.5-million, UIC-funded factory will have an annual capacity to produce 30,000 tons of dodecyl benzene sulfuric acid, the primary ingredient in soap powders and laundry detergents. The factory will begin operating in September and will provide jobs for 100 workers. (Hanoi VNA 1404 GMT 26 Feb 94) Bangkok Bureau Vietnam Airlines Leases Two Airbus Jets From Air France - Vietnam Airlines will lease two Airbus A320 passenger jets from Air France to meet an expected 40-percent rise in passengers over the next few years. The two jets will bring the total of Airbus and Boeing aircraft leased by the airline to seven. Vietnam Airlines has been replacing its aging fleet of 20 Soviet-built planes with more modern jets. (Hanoi Voice of Vietnam 1000 GMT 26 Feb 94) Bangkok Bureau EAG/9MAR94/ECONF/TECHTF/EAST ASIA GROUP JEG 10/0134Z MAR

SUMMARY Russian President Boris Yeltsin reacted angrily to former U.S. President Richard Nixon's meetings in Moscow with opposition leaders, including former Vice President Aleksandr Rutskoy, who had only recently been released from prison. Despite his harsh reaction, he appeared to attempt to minimize the damage to U.S.- Russian relations. Nevertheless, his reaction and the initial treatment of the incident by the Russian media suggest that Moscow is concerned that the United States may be reevaluating its policy toward his administration. END SUMMARY Yeltsin angrily announced cancellation of his meeting with the former U.S. President on 9 March. He told reporters that it was "impossible" for him to meet Richard Nixon after the latter's 8 March meetings with Rutskoy, recently released from jail under an amnesty approved by the Russian legislature over Yeltsin's opposition, and Communist party leader Gennadiy Zyuganov. Yeltsin stressed that neither he, the government, nor his chief of staff--all scheduled to meet with former President Nixon- -would now receive him. Further highlighting his displeasure, Yeltsin stressed that "Russia is a great country" and "simply cannot be trifled with" (Interfax, ITAR-TASS, (9 March). Yeltsin appeared concerned to limit the damage to relations with the United States while at the same time giving an implicit warning that bilateral relations could be harmed by such incidents. He noted that he was "impressed" with the position taken by U.S. President Bill Clinton who he said had phoned him and "distanced himself from [former President] Nixon's trip," and stressed that the "U.S.-Russian partnership must be preserved and developed" as a "great achievement" that "we worked very hard for and we must not lose" (ITAR-TASS, 9 March). Similarly, the Russian Foreign Ministry appeared to distance itself and the U.S. government from the former president's visit. According to Interfax, the ministry said that it "has nothing to do with [former President] Nixon's visit" and the news agency quoted a "high-ranking" Russian diplomat as saying that the ministry "would have monitored" the visit "had the American embassy been in charge of it" (9 March). In contrast, Zyuganov and the Russian Communist Party's press service portrayed the meeting with former President Nixon as a deliberate effort by the U.S. government to broaden its contacts within Russia. Claiming that the ex-president's meeting with Zyuganov will give U.S. officials a more realistic picture of what is happening in Russia, the press service announced that the meeting "proves" that such a "better understanding" is what the U.S. leadership wants. Zyuganov himself claimed that the Communists and "all Russian patriotic movements" were "concerned over the inflexible U.S. approach to Russian political forces" and "believed that the growth in anti-American sentiment in Russia" was connected with "U.S. unconditional support for the present unpopular executive power" (Interfax, 9 March). Media Coverage Russian media coverage of the visit, as presented on 9 March, after his meeting with Rutskoy, was negative. ITAR-TASS, citing "competent sources" on the reasons behind the cancellation of the government meetings, said that the former president's initiatives had been seen "as a sign of disrespect for the political will of the Russian leadership." One Russian television commentary (see box)--describing Rutskoy as a "recent Lefortovo [prison] inmate"- -linked former President Nixon's meetings with what it claimed was recent U.S. "maneuvering" on foreign policy toward Russia and wondered "what's going on in American foreign policy," and if there was a "change of politicial direction" in Washington (Russian TV, 9 March). Implications Yeltsin's angry response to what he portrayed as a personal and political insult suggests a concern that the United States is reevaluating its relationship with Russia and with him personally. Yeltsin's sharp reaction and the media coverage of the incident so far is consistent with previous Russian reaction to what are seen as the U.S. administration's efforts to review its policy toward Russia. BOX State-run Russian Television's coverage of former U.S. President Richard Nixon's visit to Moscow included what appears to be a deliberate attempt to raise questions about U.S. policy toward Russia and dramatize the Yeltsin administration's decision to cancel meetings with him. The coverage of the visit on the 1100 GMT newscast on 9 March began with a commentary on relations between Russia and the United States which claimed that recent visits to the U.S. by Ukrainian President Leonid Kravchuk and Georgian President Eduard Shevardnadze had led to agreements with the U.S. that were "revisions" of agreements previously reached "with Russian participation." The commentator, G. Shakhov then turned to the "private" visit by former President Nixon, noting that the latter "considered it necessary" to meet the previous day with former Vice-president Aleksandr Rutskoy and Russian Communist Party leader Gennadiy Zyuganov but "only today" intended to meet with leading officials such as Prime Minister Viktor Chernomyrdin and Administration Leader Sergey Filatov. Shakov also noted the former President's intention to meet with Liberal Democratic Party leader Vladimir Zhirinovskiy and concluded his commentary by asking rhetorically whether "all this" is a foreign policy "maneuver" by the U.S. or a "change in political orientation." The news anchor then reported that Richard Nixon was 'expected" to meet with Chernomyrdin and Filatov and hoped to meet with Russian President Boris Yeltsin. The report was followed by another commentary, seemingly designed to embarrass both former President Nixon and U.S. President Bill Clinton and to suggest that former President Nixon would be reporting to President Clinton on his Russian visit. The commentor noted that when he returned to the United States, the former president would be able to share not only his impressions from Moscow but also his "rich experience" in political scandals, asserting that President Clinton had already "suffered through" some "unpleasant moments" due to the "Whitewater scandal." The news anchor concluded the program's coverage of the visit with an announcement that he had "just received" a report from ITAR-TASS that the "planned" meetings with Chernomyrdin and Filatov would not take place. ITAR-TASS was first observed to have run this report at 0745 GMT, more than three hours prior to the beginning of the news broadcast. END BOX (AUTHOR: BELLINGER, CRIMMINS. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, RUSSIA ANALYSIS BRANCH, (703) 733-6070). ENEAG/BLOUGH JEG 10/0412Z MAR

In the wake of the Hebron massacre, both Prime Minister Yitzhaq Rabin and Foreign Minister Shim'on Peres have hinted that the Israeli Government is laying the groundwork for dismantling a few controversial Jewish settlements. Both leaders appear concerned to present any such action as a unilateral Israeli decision to head off criticism that they are bowing to Palestinian demands on the settlements, an issue which was to have been deferred to final status negotiations under the Israel-PLO Declaration of Principles (DOP). Rabin seemed deliberately vague in a recent interview when asked if he favored moving settlers from the town of Hebron, where several small settler enclaves have become a focus of attention following the massacre. He first said "I will not answer" the question, then went on to point out that the DOP did not call for moving settlements during the current phase of negotiations. Therefore, he continued, there is no requirement to move any settlers "on the basis of the negotiations with the PLO" and the matter is "currently not on the agenda" of the negotiations, a position that seemed to leave open the possibility of action taken outside the framework of Israel- Palestinian talks. Rabin also hinted that he is willing to negotiate with Yasir 'Arafat over the PLO leader's demand for an armed international observer force in the occupied territories, twice telling his interviewer "I do not conduct negotiations with ['Arafat] through you" when pressed on the matter (IDF radio, 8 March). Peres, who prior to the massacre had openly questioned the justification for preserving a small settlement in the Gaza Strip, (Qol Yisra'el radio, 12 February) reportedly echoed Rabin's remarks on settlements in speaking with journalists on 8 March. As reported by The Jerusalem Post the next day, he said that "public opinion must be prepared for the possible dismantling of some settlements," but that the question of settlements "is an internal Israeli affair" and "completely divorced from the current negotiations with the PLO." He explained that the Israeli Government had insisted on deferring the settlement issue to final status negotiations while negotiating the DOP in order to minimize public opposition to the DOP. The government, he said, would "seek to convince the public" that evacuating some settlements "needs to be done," but "it cannot come as a result of PLO demands." (AUTHOR: MORTON. OUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, NEAR EAST ANALYSIS BRANCH (703) 733-6094). ENEAG/BLOUGH/JF 10/1914Z MAR

Europe Economic Review: WESTERN EUROPE Vol. III, No. 10, 10 March 1994 Notice To Readers: FOREIGN MEDIA SURVEY is a series published by FBIS Europe/Latin America Group featuring brief summaries of foreign media reports on topical issues, compiled from the most recent sources available to FBIS. Europe Economic Review (EER) is a subseries of FOREIGN MEDIA SURVEY published by the West and East European Divisions of Europe/Latin America Group with contributions from FBIS overseas bureaus. The EER is intended to supplement coverage of European economic issues by the FBIS Daily Report for West and East Europe, and other FBIS publications. Foreign news, feature, and editorial reports selected for summary in this publication normally do not appear in other FBIS publications. The EER is published in two editions, one for Western Europe (also including media coverage of Canada and Turkey), and the other for Eastern Europe. Drawing primarily from domestic media sources of these countries but also using other foreign media where appropriate, the EER focuses on national and regional economic issues, such as economic competitiveness, regional economic integration, economic reforms and other changes in economic policies, and foreign trade and investment. FOREIGN MEDIA SURVEY is a U.S. Government publication. Its contents in no way represent the policies, views, or attitudes of the U.S. Government. All comment or analysis contained herein is attributable to the cited media source, unless otherwise indicated. TABLE OF CONTENTS FEATURES: France--Reaction to 'Super 301,' Fish Import Controversy FINLAND Study Finds Job Training Succeeding FRANCE Balladur Moderates CIP Provisions; Employers Stay Out of CIP Debate; INSEE Backs Off Employment Study Conclusions; Banks Use Frozen Iraqi Funds To Pay Creditors; Aerospatiale Wants EU Aid To Fight U.S. Competition; EIB To Loan France More Than Fr15 Million; Longuet Discusses Textile Aid; Winners of Balladur Economics Listed; Conze Concentrates Weapons Production in Cher; GERMANY Germans Outpace Japanese in Productivity; French-German Refinery Deal in Trouble; Hermes Insurance for Russian Railcar Sales; Economist Says Germany Missed Long-Term Growth Cycle; Jobless Rate, Policies Compared to Weimar Republic; Part-Time Employment Attracting Attention; Rexrodt Sees Mexico as 'Bridgehead' to Americas ITALY PDS Presents Economic Program PORTUGAL Telecommunications Merger Approved SPAIN Controversy Surrounds Government Pensions; Labor Reform Includes Review of Disability Benefits; BBV President on Possible Banesto Takeover; Congress Designates Special Committee for Banesto SWEDEN Study Sees Job Growth Confined to Industrial Sector; Volvo Seen Seeking Project-by-Project Partnerships ECONOMIC BRIEFS France FEATURE France: Reaction to 'Super 301,' Fish Import Controversy Super 301 Trade Legislation Recent French commentary and reporting on the decision by President Bill Clinton to revive "Super 301" trade retaliation legislation to pressure Japan into opening its markets to U.S. goods has been mostly critical of the U.S. decision and has expressed fear over its effect on the completion of the final version of the GATT Uruguay Round agreement in Marrakesh on 12-15 April. An article in the 7 March LA TRIBUNE DESFOSSES stated that the revival of Super 301 "can only add to the difficulties faced by the (EU) Twelve in speaking with one voice in Marrakesh..." However, the 7 March LA TRIBUNE DESFOSSES article pointed out that "in Brussels, as in other capitals, everyone is convinced that (President) Clinton's decision is targeted to intimidate only Japan," not the EU. French press reporting also contained the following official statements, most of which were also critical of the United States. For example: * GATT Director Peter Sutherland: Sutherland was quoted as saying the U.S. action is "a new effort in bilateral trade, which is about to test the results obtained in the Uruguay Round before they are even implemented." (LIBERATION 4 Mar 94) "The concept of managed trade constitutes a dangerous and unfortunate notion. When bureaucrats interfere (in trade), the potential of risks increases." (LE FIGARO 4 Mar 94) * Prime Minister Edouard Balladur: "Happy to get rid of the label of bad boy of world trade," Balladur stated that the Super 301 decision "completely validates the French position that one cannot have a system of free trade where each country creates its own justice." (LIBERATION 5, 6 Mar 94) "It is the negation of an international free trade system, which is what we have always said it was." (LE FIGARO 5, 6 Mar 94) Balladur, criticizing U.S. "threats" against France as a "breach of the rules of the game," declared, "It is proof that we are right to ask for the suppression of Super 301. If we do not, the Uruguay Round agreement will only be hot air." (LES ECHOS 7 Mar 94) Despite the negative comments by these officials, the press did report a more positive assessment: * EU Officials: An article in LIBERATION claims that while officials in the EU are declaring that they are hostile to the U.S. unilateral approach on trade with Japan, in private "some officials" understand U.S. "aggravation," acknowledging that the United States "had first tried everything, all in vain." The article cites one of these unnamed official sources as saying, "This (Super 301) affair may threaten to deteriorate the climate of trust a bit more, especially in financial markets. But, if it ends in the Japanese making a gesture, in them launching a real budgetary effort to stimulate domestic demand, then Europe will profit from it." (LIBERATION 4 March 94) U.S.-France Fish Dispute The press also noted coUents on the U.S.-France dispute over U.S. fish imports to France, on which France had imposed strict inspection regulations, prompting the United States to propose retaliation against French cheese. An editorial in the 7 March LA TRIBUNE DESFOSSES stated that the United States "threatened" retaliation because "the Clinton administration has acted under pressure from the National Fisheries Institute and the shipowners' lobby, arguing that Massachusetts fishermen were losing $200,000 a week because of the restrictions on Fish imports imposed by France." The press also reported the following official comments: * Prime Minister Edouard Balladur's Staff: Viewing the retaliation threat as an indication of a tougher U.S. trade policy, Balladur's staff contended, "If the United States is stepping up the pressure on international trade, it is to cast doubt on the Uruguay Round's main achievement, which their Senate refuses to consider: the institutionalization of a World Trade Organization." (LA TRIBUNE DESFOSSES 7 Mar 94) Foreign Minister Alain Juppe: "Our decision (regarding fish imports) conformed perfectly with the applicable Community regulations. If the United States engages in retaliatory measures against France, they will be responsible for an escalation (of trade tensions) just when we are preparing for the Marrakesh conference.... One should ask if this would be a good signal." (LE FIGARO 5, 6 Mar 94) (DiI) FINLAND STUDY FINDS JOB TRAINING SUCCEEDING--According to a recent study, the national adult vocational training program has been enjoying some success in the greater Helsinki region. The study, conducted in Uusimaa Province Labor District, which includes the densely populated Helsinki region, found that one of every three district trainees finds a job within two months of leaving the program. Kari Kiuru, writing in the 25 February HELSINGIN SANOMAT, claims much of the program's success is due to its flexibility in responding to job market changes. Officials constantly monitor these changes and solicit suggestions from industry on, for example, training programs which could fit the needs of laid-off workers. New or expanded courses, however, cannot always keep up with rapid changes in student demands. The boom in the export sector, for example, has led to a recent surge of applications for relevant training: 200 people applied for just 20 available spaces this year. In 1994, Uusimaa District will receive 163 million markkas, which will allow it to accept 12,000 students, or about one-tenth of the the area's unemployed. The district will offer a wide variety of training opportunities, covering about 100 job fields and divided into some 800 separate courses. Training lasts anywhere from one month to as much as an entire year. (RB) (In the hard copy version of West Europe Economic Review, there is a graph depicting the "Participation Distribution of Vocational Training in Uusimaa.") FRANCE BALLADUR MODERATES CIP PROVISIONS--Faced with mounting criticism from labor unions and student demonstrations, Prime Minister Edouard Balladur has made "important" concessions to change the new Professional Insertion Contract (CIP), a measure which has been denounced by labor, student, and opposition forces as a discriminatory "Youth Minimum Wage." According to Delphine Girard writing in the 4 March LA TRIBUNE DESFOSSES, Balladur made these concessions to calm the "social tempest" he created in approving a law to implement the CIP, which originally would have allowed employers to hire those under 26 years of age--even those with a junior college degree--for 80 percent of France's guaranteed minimum wage (SMIC) and would have required that the company provide a mentor "to help the new employee to begin his career." Balladur has agreed to "redefine" the CIP, stating that mentors must provide real training within the company." He has also replaced the provision allowing junior college hirees to be paid at 80 percent of the SMIG with the stipulation they must be paid instead at 80 percent of the "conventional minimum wage" of the industry, which cannot be below the regular SMIC. Those with no degree, however, may still be hired at the below-minimum-wage rate. Balladur's concessions were made not only under pressure from labor, students, and opposition groups but also from members of his own governing coalition. An article in the 3 March LA TRIBUNE DESFOSSES reported that former Prime Minister Jacques Chirac entered the debate, having declared "a Youth Minimum Wage is an ill-adapted way to solve unemployment," bringing with it "important inconveniences." An article in the 4, 5 March LES ECHOS noted that Chirac had added, "If we allow companies to hire young people with a salary less than the SMIC, the difference must be counterbalanced by real training in the company..." The UDF Youth Movement also made public its objection to Balladur's choice of fighting youth unemployment, asking him to "review his options." The president of the finance committee of the National Assembly, Jacques Barrot, contended that "the text of the implementation law on CIP is not satisfactory," and that the tutorial obligations of companies using the CIP must be better defined. He also said that "more detailed coordination on the strategies taken toward junior college graduates is needed." Despite Balladur relenting to these pressures and subsequently redefining the CIP provisions, the labor unions are not convinced he has gone far enough, Girard continues in the 4 March LA TRIBUNE DESFOSSES. The unions still refuse to support what they insist on calling the "Youth Minimum Wage" for those with no college education, to which Balladur responded, "Better this than nothing at all." Workers Force (FO) head Marc Blondel declared, "Tensions will continue. We still disagree with the prime minister's proposals." French Democratic Confederation of Labor (CFDT) secretary general, Nicole Notat, claims the government is trying to appear to relent on the issue "without relenting." (DiI) (Paris LA TRIBUNE DESFOSSES in French 4 Mar 94 p 2; 3 Mar 94 p 4; Paris LES ECHOS in French 4, 5 Mar 94 p 2) EMPLOYERS STAY OUT OF CIP DEBATE--The controversy that has embroiled the government and the labor unions over the CIP is not regarded as such by employers, according to an article in LA TRIBUNE DESFOSSES. Employers state that "there either are jobs or there are no jobs." Employing more workers depends above all on business activity and that "this type of measure (the CIP) can only serve to plug holes where personnel are needed for six or eight months," or until the economy picks up. However, the article claims employers view the CIP as "rather positive," noting that apprenticeship contracts have worked well and that the idea of lowering the wage cost is nothing new. The danger, according to employers, is that the CIP is becoming too politicized and is too associated with a Youth Minimum Wage. As for the fears that the young will take jobs away from the more experienced, the article cites statements from staff members at the Vallourec company as saying, "It is a false problem since a company is always tempted to do just that. The CIP would change nothing." Other employers pointed out that they prefer a more long-term hiring policy and that in any case, companies are looking for workers with at least a junior college education rather than those with no advanced education. (DiI) (Paris LA TRIBUNE DESFOSSES in French 7 Mar 94 p 6) INSEE BACKS OFF EMPLOYMENT STUDY CONCLUSIONS--The National Institute for Statistics and Economic Studies (INSEE) has modified the conclusions of a study it conducted with the Bureau of Information and Economic Forecasting (BIPE) on the impact on employment of either a reduction in employer's social welfare costs or a reduction in youth wages. The study, ordered by the Senate when the five-year law on employment was being considered, reported (see West Europe Economic Survey Special Report, Vol III, No 7, 24 Feb 94) to have established a much sharper macroeconomic effect on employment when employer social charges were reduced (almost 300,000 supplemental jobs in the medium term) than would establishing a "Youth Minimum Wage" (almost 150,000 more jobs). In a communique released on 2 March, INSEE changed its conclusion, explaining that it is not possible to determine a precise distinction between the effects of lowering employer costs versus lowering youth wages. (DiI) (Paris LA TRIBUNE DESFOSSES in French 4 Mar 94 p 3) BANKS USE FROZEN IRAQI FUNDS TO PAY CREDITORS--Three large French banks--Societe Generale, National Bank of Paris (BNP), and the Union of French and Arab Banks (UBAF) have used frozen Iraqi assets to compensate the accounts of Iraqi clients without French Treasury approval, according to an article in LE NOUVEL ECONOMISTE. After months of investigation, the Finance Ministry has concluded that these banks have completed financial operations of several hundreds of millions of francs, despite the freeze on Iraqi assets in France instituted in August 1990 following the Gulf War. Economy Minister Edmond Alphandery must now set the amount of the fines, which can be up to three times the sums in question. The banks, having debited and credited accounts of Iraqi clients, reduced their financial exposure on Iraq. In so doing, they have "designated themselves privileged creditors," the article notes. Between December 1992 and April 1993, for example, nearly 60 million francs (Fr) disappeared from Iraqi accounts at UBAF. The banks argue that the transactions were made in "good faith and in a formal manner." The article points out that some Iraqi creditors were not so lucky. The CED-Viandes and Dumez companies, for example, have been trying for two years to recoup money from Iraq and have, without success, been trying to serve the banks with seizure notices on the Iraqi assets. (DiI) (Paris LE NOUVEL ECONOMISTE in French 21 Feb 94 p 38) AEROSPATIALE WANTS EU AID TO FIGHT U.S. COMPETITION--French Aircraft and Space Industries Group (GIFAS) President Serge Dassault would like the EU to promote--"as (President) Bill Clinton does (for U.S. aircraft companies)"--Europe's aircraft industry, according to an article in LES ECHOS. The article claims that the thinking of EU officials, meeting currently in Brussels to adopt a couon position on the next GATT aircraft industry negotiations, has been "marked" by the "intervention" of President Clinton to win the Saudi Airlines contract for Boeing and McDonnell Douglas at the expense of the Airbus consortium. The article claims this augurs poorly for aircraft industry subsidy negotiations with the United States which, according to Dassault "is trying to enclose Europeans in rigid regulations to which the United States itself does not conform." Aerospatiale President Louis Gallois adds: "We do not have to go along with the U.S. game of managing the negotiations. But, we must defend our system of reimbursable advances, which is a good system based on the idea of risk sharing. At the same time, we must also prepare to progressively adopt indirect aid, as it is given in the United States, in order to have two irons in the fire and to achieve a balance between the two systems." (DiI) (Paris LES ECHOS in French 2 Mar 94 p 10) EIB TO LOAN FRANCE MORE THAN FR15 MILLION--According to an article in LES ECHOS, the European Investment Bank (EIB) is ready to increase its lending if the EU White Paper plan to increase growth and employment in Europe requires it. The bank loaned nearly Fr130 billion to its target countries in 1993--funds which were raised without difficulty on the international markets--and the bank has the means to sharply increase its lending, according to bank president, Sir Brian Unwin. "With a financing capacity of 144 billion ECU's and a total loan portfolio of 98 billion ECU's, the bank can do more for Europe's economy," Unwin said. In France, the EIB intends to increase its loans for public works, environmental protection, and automobile industry projects. Last year the country, which is the fourth largest beneficiary of EIB loans after Italy, Spain, and Britain, received Fr14.6 billion from the bank, a figure more than 13 percent higher than 1992 and which represents 12.4 percent of total 1993 EIB lending. This amount was largely devoted to regional development to reinforce economic and social cohesion in Europe, lending which adheres to EIB statutory goals. More than 50 percent of the loans were accorded to local projects in "industrial decline" zones or "delayed development" areas. EIB lending for industrial priorities is also in line with general EU goals: transportation will receive Fr6.6 billion for the super fast train, TGV Nord, and the Channel tunnel, while the aircraft industry is slated for Fr1.4 billion. The environment will also garner increased support as will the automobile industry. According to unnamed directors of the bank, EIB has "a very specific project currently under study which would involve French auto makers Peugeot and Renault." (DiI) (Paris LES ECHOS in French 28 Feb 94 p 8) LONGUET DISCUSSES TEXTILE AID--Industry Minister Gerard Longuet, speaking at a late February roundtable discussion with textile manufacturers, stated that if they had ideas for investment projects for their industry they should submit them to the government because, "If there are projects, there will be money." He also noted that the government could allocate Fr160 million to textile- clothing investments without any requirements linked to employment. Such allocations would come from new regional funding approved to aid small to medium-sized industries, which in 1994 will amount to Fr80O million for various programs. Additionally, the textile- clothing industry will be able to obtain EU funds targeted for training, of which France's share is Fr700 million and which is to be split among the automobile, electronic, and textile industries. These funds, however, are for training in the broader sense, such as that for trade certification and data processing technicians and not for training related to specific projects. Longuet repeated that while these training funds can generally help textile companies, specific "projects are still needed" to generate additional help. (DiI) (Paris LES ECH0S in French l Mar 94 p 8) WINNERS OF BALLADUR ECONOMICS LISTED--Gerard Desportes and Nathaniel Herzberg writing in the Paris daily LIBERATION have reviewed the results of 10 months of Prime Minister Edouard Balladur's administration and has noted that except for the education field where Balladur's attempt to help finance private schools failed, many groups gained as a result of his economic policies. They are: Small Investors -- Privatizations gave small investors opportunities to buy shares of such companies as Rhone-Poulenc, Elf- Aquitaine, and National Bank of Paris at a discount price. According to the authors, such a discount on these shares amounted to a "gift" of Fr5 billion to investors. Farmers -- The authors claim Balladur was "extremely firm" in his support for farmers during the GATT negotiations, despite the risk of international crisis. Last May, Balladur granted farmers Fr1.9 billion to "sweeten" the oil seeds agreement and Fr1.5 billion in November to facilitate the passage of the modified Blair House agricultural agreement. Small Business -- Balladur temporarily banned the opening of large retail stores, a subject of controversy among small business owners who face stiff competition from such large stores. Big Business -- To foster employment, Balladur has lowered the cost of labor and money, instituted more flexibility in the labor code, granted assistance to foundering sectors of the economy, and transferred part of the social costs paid by companies to the state budget. Doctors -- Private physicians, a group traditionally favorable to the Right, have benefited from Balladur's economic policy, which raised taxpayers health insurance contributions and lowered the number of hospital beds. Civil Servants -- These employees have maintained their retirement benefits and purchasing power, unlike the rest of the population, which has not only been affected by two "highly unpopular" austerity measures to reduce them but have also experienced lower private sector salaries. The Press -- Showing "great understanding" for the difficulties affecting the press, the Balladur government has repeatedly supported modernization in this sector and granted "exceptional" assistance, which will total Fr721 million over several years, to publications foundering because of the loss of advertising funds. Retirees -- The authors contend that this group has benefited from Balladur's "greatest coup," which will modify the entire retirement system. This change will be implemented by stages and be completed by the year 2003 and temporarily settles the problem of the retirement system's deficit. (RM) (Paris LIBERATION in French 15 Feb 94 pp 4-5) CONZE CONCENTRATES WEAPONS PRODUCTION IN CHER--Convinced of the need to "gather forces," Henri Conze, director general of the General Armaments Delegation (DGA), signed an agreement with Aerospatiale, Matra Defense, Thomson and Giat-Industrie to create a number of jobs in the Cher department, where the weapons industry holds 20 percent of all industrial jobs. Aerospatiale will create over 60 jobs before the end of 1995 and 40 more in 1996 in its three regional factories: one of which produces spare parts for aircraft, the second of which is dedicated to "small missiles," and the third of which manufactures ballistic missiles. Matra Defense will create 35 new jobs in its local plants, where the air-to-air Mica missiles are manufactured. Some 200 jobs will be created by Thomson and 15 by Giat-Industrie in the manufacture of various types of munitions. The DGA itself will transfer to the Cher department some of its lIe- de-France "missions," including the production of powders and explosives. In addition, a weapons specialist will advise the region's prefect and a trade mission will promote the region's special defense products such as the Eryx missile. The reinforcement of weapons manufacturing in the Cher region should ease this industry's budgetary problems and help it save an estimated 230,000 jobs. (RM) (Paris LE QUOTIDIEN DE PARIS in French 14 Feb 94 p 11) GERMANY GERMANS OUTPACE JAPANESE IN PRODUCTIVITY--In 1993, Germany outstripped Japan in industrial productivity for the first time, according to a study by Bernd Hof of the Institute of the German Economy in Cologne. According to Hof, Japanese labor productivity, measured in terms of real GDP per worker, declined by 1.2 percent in 1993, compared with only a 0.1 percent drop for Germany. In fact, Hof found that the productivity gap between Japanese and German industry continues to widen. While the recession-related decline in production has caused the profits of Japanese companies to "tumble," German firms appear to be recovering and making progress, at least in cutting costs. By reducing workforces and increasing productivity, the Germans have been able to achieve lower unit wage costs and higher profits. This development also has its darker side, however, as evidenced by current unemployment figures and fears that, when the next economic upturn comes, the skilled workers currently unemployed either will no longer be available or will be employable only at "disproportionately" high costs. The Japanese share these fears and are therefore hesitant to lay off permanent staff. Hof, arguing that the "real" reason for the decline in Japanese productivity is its traditional reluctance to lay off workers, sees a "remarkable parallel" in the German automobile industry, with one "essential" difference as exemplified by Volkswagen. Although Volkswagen has reduced working hours for its employees by 20 percent rather than lay them off, it has benefitted from workers giving up 12 to 13 percent of their wages. Consequently, Volkswagen is in a better wage-cost position than a Japanese company where workers are working fewer hours but drawing full salary. (JS) (Berlin DIE WELT in German 15 Feb 94 p 12) FRENCH-GERMAN REFINERY DEAL IN TROUBLE--Elf Aquitaine, two-thirds owner of the privatized Leuna refinery in the Halle-Bitterfeld region, is attempting to renegotiate the agreement under which it purchased the plant from the Trust Agency. The agreement calls for Elf and its German co-owner, Thyssen Handelsunion (THU) to build a new 4.5 billion German marks (DM) refinery with a 10-million- ton/year capacity; the Trust Agency is pressing Elf to start construction or risk a DM1.5 billion contract penalty and cancellation of the sale of the profitable Minol gas station network which made the agreement attractive to the French in the first place. Elf is reportedly looking for new investors so that it can become a minority shareholder but THU is not interested in increasing its share. Since the original agreement, oil market trends have dictated that refinery output be reduced, rather than increased, and Elf has begun to privatize some of its own operations. Because Elf's new management is selling stock on the market, it wants to avoid risky projects and is citing increased competition, declining demand, and flat economic growth in eastern Germany as grounds for revising its investment policy. Guenter Rexrodt, German minister of economics, has insisted that Elf begin with the agreed upon construction and maintains that Elf cannot reduce its holdings by returning shares to the Trust Agency pending resale. Rexrodt has allowed, however that renegotiation of later stages of the agreement may be possible, and notes that contacts are continuing with other firms, including British Petroleum, which showed interest in Leuna during 1992 negotiations. (CW) (Frankfurt/Main FRANKFURTER ALLGEMEINE in German 2 Mar 94 p 20) HERMES INSURANCE FOR RUSSIAN RAILCAR SALES--Economics Minister Guenter Rexrodt has advised the Berlin railcar firm, Deutsche Waggonbau (DWA), that he expects DM555 million in Hermes export credit guarantees to be available to support the company's 1994 sales to Russia. At the same time, however, the ministry has expressed reservations about Russia's ability to meet international business standards, which normally dictate making a 15-percent down payment on contracts. The recently privatized DWA had requested DM765 million in guarantees for the current year but the German Government has cut 1994 credit guarantees to CIS countries from DM4 billion to DM3.5 billion, thus limiting guarantees for individual export contracts. Consequently, DWA envisions needing more insurance guarantees in 1995 and 1996. The 1994 limits, however, do not affect pending applications for DM111 million in credit insurance on an existing Russian contract and for DM110 million on an order from Kazakhstan. (CW) (Duesseldorf HANDELSBLATT in German 28 Feb 94 p 15) ECONOMIST SAYS GERMANY MISSED LONG-TERM GROWTH CYCLE--According to one economist, Germany's failure to abandon outmoded industries in favor of the growth sectors of the information age has caused it to miss a long-term economic growth cycle and condemned it to a lengthy struggle with recession and high unemployment. Leo Nefiodow of the Institute for Mathematics and Data Processing in Sankt Augustin contends that Germany has failed to recognize information technology as the driving force of the latest in a series of 50-year growth cycles. Instead of encouraging the development of growth industries in the information field, Nef iodow argues, Germany has continued to subsidize the dying industries of the previous cycle, which was characterized by energy-intensive industries like automobiles and petrochemicals. Consequently, those who believe renewed German prosperity will come with the next economic upturn "will have to wait a long time." In fact, no upturn will come unless the country's economic structure adapts to these underlying shifts in the world economy. In Nefiodow's view, other countries--notably Japan--have done a better job of riding the latest economic wave. He notes that only one German firm--Siemens-Nixdorf--plays a significant role in the information field, while Japan is represented by over 20 companies. Nef iodow ascribes Germany's failure to capitalize on the current cycle primarily to social and cultural factors. Germany's emphasis on individualism and hierarchical forms of organization, he maintains, makes it less able to respond to the demands of the information age than Japan, with its stress on group well-being and teamwork. While Nefiodow believes it is too late for Germany to catch up, he contends the country may be well positioned to anticipate the next one, which he thinks could be driven by the information, environmental, and health industries, since Germany has high-quality measurement and process control and software and systems technologies and a top-flight chemical industry. Above all, however, he emphasizes Germany's high degree of public awareness of environmental, health, and information issues. (RoH) (Munich SUEDDEUTSCHE ZEITUNG in German 21 Feb 94 p 20) JOBLESS RATE, POLICIES COMPARED TO WEIMAR REPUBLIC--According to commentator Wolfram Engels, the unemployment rate in Germany is almost as high today as during the Weimar Republic but the German Government, unlike the Weimar Republic, has failed to alleviate the situation by reducing the cost of labor. Engels notes that the unemployment rate in February 1932 stood at 19.2 percent and that the current rate--counting those in various publicly funded work programs and other "hidden" forms of unemployment--has reached 18.2 percent. "However," he writes, "that's where the similarity ends." Weimar's Chancellor of the Reich Heinrich Bruening, Engels points out, reduced the cost of labor from 5.57 million unemployed from 5.57 million to 4.1 million by August 1933. A reduction in the cost of labor, Engels maintains, would prove similarly effective today, with an 8-percent cut in real wages sufficient to produce full unemployment. According to Engels, however, the German Government is moving in exactly the opposite direction. Its new nursing care insurance program, he maintains, will "ignite a rocket" of labor cost increases. Engels suggests that the program could increase the cost of labor by 6 percent or more within a few years, inevitably leading to a further loss of jobs. (RoH) (Duesseldorf WIRTSCHAFTSWOCHE in German 11 Feb 94 p 150) PART-TIME EMPLOYMENT ATTRACTING ATTENTION--With the number of unemployed in Germany at 4 million persons, the idea of expanding the part-time work force to alleviate the situation is attracting increasing attention. Cologne's Institute for the German Economy (IW) reports that 2.66 million more Germans could be employed if the percentage of part-time workers in the labor force were raised from the current 15.5 to the 34.3 percent found in the Netherlands. Experts note, however, that the service sector would have to be significantly expanded and the proportion of working women slightly reduced if this adjustment were to succeed. Calculations show that reducing the 22 million-person full-time labor force in Germany by 2.53 million would add 5.19 million new part-time jobs to the existing 4 million. Various surveys indicate that between 10 and 17 percent of full-time workers would be willing to accept part-time employment, while somewhat lower percentages of unemployed persons would be agreeable to part-time work. As of December, 281,000 jobless were willing to work part-time but only 32,000 part-time jobs were reported available. (CW) (Frankfurt/Main FRANKFURTER ALLGEMEINE in German 28 Feb 94 p 15) REXRODT SEES MEXICO AS 'BRIDGEHEAD' TO AMERICAS--Speaking at the late February trade fair in Mexico City, Economics Minister Guenther Rexrodt described Mexico as a potential "bridgehead" for German exports to North and South America. Rexrodt noted that German industry had overlooked the Mexican market during the boom years of the 1980's, but had rediscovered its potential since the creation of the North Atlantic Free Trade Agreement (NAFTA). German companies now hoped, through Mexico, to gain duty-free access to the U.S. market. Rexrodt also pointed out that increasing trade with Germany offered an opportunity for Mexico to lessen its dependence on the United States, which currently accounts for 70 percent of all Mexican foreign trade. German trade with Mexico, which amounts to about DM5 billion, has "still not realized its full potential," according to an article in the SUEDDEUTSCHE ZEITUNG. By contrast, some progress has been made in the field of capital investments. In 1993 alone, Germans invested DM20 billion in Mexico, 10 times more than in 1992. Experts expect a similarly high level of investment in 1994. According to the article, Mexico's recent trend toward economic privatization, coupled with its balanced budget deficit and its relatively low 8-percent inflation rate, have created favorable conditions for German investors. In addition, the two countries have concluded an agreement to prevent double taxation, although they have yet to sign an investment protection pact. (RoH) (Munich SUEDDEUTSCHE ZEITUNG in German 23 Feb 94 p 30) ITALY PDS PRESENTS ECONOMIC PROGRAM--The Democratic Party of the Left (PDS) presented its election platform on 15 February. The platform contains a large section on economic reforms and programs which advocate the following: * Taxes --Divide revenues equally between the central and local governments. --Extend the tax base, reduce individual tax rates. --Remove taxes from Treasury bills since it "serves no purpose" and the same result is currently being achieved by lower interest rates. --Reduce red tape and accounting procedures. --Abolish local income taxes, health taxes, health benefit contributions, and regional double taxation. Allow individual regional and local taxes. --Combine the payment of personal income tax (IRPEF), VAT, social security tax, and disability taxes for small companies and have them submitted under a single tax return. --Modernize the way tax evasion is fought by accurately determining income and expenses. * Employment --Introduce shorter work hours which will increase competitiveness on foreign markets. --Support the EU's "Delors plan" for employment but it and the quality of life a priority by complementing the plan with "social and economic reorganization," including flexibility, part-time employment, and paid time off. * Privatizations --Continue Prime Minister Carlo Azeglio Ciampi's privatization program, which among other things will bring order to the banking system--including savings banks--and ensure change in bank leadership. * Finance and Markets --Open markets, which are restricted and dominated by a few producers, to institutional investors. --Provide tax incentives for pension, closed-investment, and real estate funds. Pay for profits and transfer payments from these funds with shares of stock. Establish local stock markets and guarantee voting rights to small and institutional stockholders. * Southern Policy --Discontinue supporting a "decaying social structure" in southern Italy. Include the south in general national policies. Encourage the creation of a network of viable small and medium-sized companies in that region. (AB) (Milan IL SOLE-24 ORE in Italian 16 Feb 94 p 2) PORTUGAL TELECOMMUNICATIONS MERGER APPROVED--To create a more internationally competitive telecommunications group, the council of ministers approved the April merger of the Telecom Portugal, Lisbon and Porto Telephones (TLP), and Teledifusora of Portugal (TDP) companies, which will form a single company under the name of Portugal Telecom. Moreover, the government will soon hold negotiations with the Marconi company to discuss its anticipated merger into the new "giant" corporation. Portugal Telecom will be ready for the privatization of about 30 percent of its capital by the end of the year. The government estimates that it will earn 120 million contos from the privatization process. (RM) (Lisbon DIARIO DE NOTICIAS NEG0CIOS in Portuguese 18 Feb 94 p 2) SPAIN CONTROVERSY SURROUNDS GOVERNMENT PENSIONS--Concerned about skyrocketing pension costs, Finance Minister Pedro Solbes warned Spanish workers "in their forties" that they may not receive their pensions if the current system is maintained, according to an article in the Madrid daily EL PAlS on 22 February. In so doing, he elicited strong political reactions from his own party, the Spanish Socialist Workers Party (PSOE) and opposition groups. The article noted that the Spanish pension system, which is administered and funded by the government, increased spending 73.5 percent during 1989-93 and that forecasts indicate a 20 percent increase by 1997. However, Solbes publicly reassured workers that the system could still pay benefits but not over the long term. He attributed this problem to an aging population, longer life expectancy, fewer contributors, and more annuitants. Solbes suggested substituting the current payment system for one which more closely resembles a defined contribution plan rather than the current defined benefit plan, which guarantees pension benefits regardless of the amount contributed. Currently, contributions are mandatory for 15 years. An article in the 23 February EL PAlS claims that Solbes's remarks created a sharp reaction from factions within the PSOE. Although Socialist Prime Minister Felipe Gonzalez defended Solbes by stating that he had acted in a manner which "brings him credit," he added that government pensions do not represent "a problem for today or tomorrow." Gonzalez reassured current pensioners that they were well protected" and that there would always be decent government retirement benefits for all citizens. He also said that "problems would not surface until the years 2020 or 2025" but governments needed to prepare in advance for changes in Spanish demographics. Socialist senator Juan Barranco stated, "this type of declaration unfortunately makes the PSOE lose votes and creates uncertainty among the citizenry." This same article states that reaction from opposition groups was "far more belligerent" than that from the PSOE. People's Party (PP) spokesman Rodrigo Rato demanded that Solbes appear before the parliament to explain the government's position on social security issues. Rato characterized the finance minister's remarks as "irresponsible" and criticized him for "scaring people." According to United Left (IU) Coordinator General Julio Anguita: "Solbes is only stating the obvious. There is not going to be enough growth in employment to generate the necessary resources to be able to pay out retirement pensions." Additionally, Fernando Gimeno, coordinator of the joint committee for the Office of the Controller of the Currency, reproached Solbes by stating that "such declarations only create uncertainty among people from lower income brackets who don't have the money to contribute to pension plans." Gimeno added that the government was now working on reforming the taxation system for government pensions and he thought it "unfortunate" that people were trying to come up with scenarios for 15 years hence. Responding to the criticisms, Solbes remarked that the government would continue to guarantee pensions but reaffirmed that "it will be necessary to review them" given the change in Spanish demographics. Deputy Prime Minister Narcis Serra agreed, stating that in the future the state system would guarantee a "decent pension." (CH) (Madrid EL PAlS in Spanish 22 Feb p 45; 23 Feb 94 p 39) LABOR REFORM INCLUDES REVIEW OF DISABILITY BENEFITS--An article in EL PAlS notes that the Labor Ministry is working on reforms encompassing disability, unemployment, and health issues in the work place, which would complete the labor market legislation being considered in parliament. The Labor Ministry plans to blur two distinct categories which define workers as either "temporarily incapacitated" or "temporarily disabled." These definitions would be combined into a single "temporary" category, paying benefits for less than the current six years. By reducing the time that someone would spend on "temporary disability" before going on to be declared "permanently disabled," the Labor Ministry hopes to return workers to their jobs once they have overcome health problems so they do not remain on disability for six years. Funds would then be directed exclusively to those who really need them. The Labor Ministry also plans to establish teams, which would be administered by doctors working for the Social Security system, to evaluate disabled workers (EVI). According to the article, the doctors will introduce more rigorous standards for the evaluation process to return employees more quickly to the work place. These doctors would also review pensions which are in force to determine the status of disability benefits in the event that the worker should recover. (CH) (Madrid EL PAlS in Spanish 22 Feb 1994 p 45) BBV PRESIDENT ON POSSIBLE BANESTO TAKEOVER--An article in the Madrid daily El PAlS by correspondents M.A. Noceda and J. Rivera, reports that BBV President Emilio Ybarra announced during a shareholders meeting that the bank was seriously considering the purchase of a "significant" amount of shares of Banesto, Spain's third largest bank and the subject of a Bank of Spain mandated reorganization. Ybarra did not specify if BBV would be the only buyer or if other financial institutions would be involved but he added that everything would depend on "the conditions of the sale." He stated, "we are not going to be blinded by the zeal to be number one nor will we close the doors to other competitors." Ybarra noted that it would be "interesting" to buy Banesto because such a move would reinforce BBV's position of leadership. He cautioned, however, that BBV would not consider growth "at any cost." He stressed that BBV would only contemplate the purchase of shares if it were deemed in the best interest of all shareholders. Reportedly, shareholders were divided on the proposed takeover. Ybarra also underscored that Banesto "would be worth zero were it not for the support of all of the banks," adding that Banesto's losses in 1993 will reach "over 50 billion pesetas." He confirmed that Alfredo Saenz, who was formerly vice chairman at BBV, would continue as Banesto's chairman if the takeover occurs. The article reported that the Bank of Santander is BBV's "principal rival" in the upcoming takeover bid for Banesto. Because of their size these two banks would make it difficult for smaller institutions to bid on shares. (CH) (Madrid EL PAlS in Spanish 27 Feb 94 p 43) CONGRESS DESIGNATES SPECIAL COMMITTEE FOR BANESTO--According to an article in EL PAlS by correspondent Jorge Rivera, the executive board for the Congress of Deputies reached an agreement on 24 February to create a special committee to oversee the Banesto reorganization. Jose Bevia, a Socialist and first vice president of the Congress, stated that the committee was to be created with a "basic agreement between Socialists and PP members." Bevia was pleased that a committee had been decided on because it ensures public, open sessions, which the press will be able to attend. The special committee will be coordinated by three members from the PSOE and PP respectively. IU and Catalan Convergence and Union (CiU) will each have two representatives. Canary Islands Coalition (CC) and the Mixed Group (Valencian Union) will each have one representative. (CH) (Madrid EL PAlS in Spanish 25 Feb 94 p 47) SWEDEN STUDY SEES JOB GROWTH CONFINED TO INDUSTRIAL SECTOR--According to a study carried out by the Labor Market Board (AMS), the only sector of the Swedish economy expected to show an increase in employment in 1994 is the industrial sector. AMS divides the labor market into four sectors: industry, construction, private services, and public services. The private services sector, which is the largest, includes most service industry workers, such as bank and insurance company employees and journalists. The number of jobs in this sector has fallen by 7-percent in the last three years and is expected to continuing falling. Unemployment is also expected to increase in the construction sector, where 29 percent of the jobs have been lost. The public sector, which includes teachers and health and child care providers, has seen a 7 percent drop in the number of jobs. This decrease is now expected to level off. Only in the industrial sector, made up mostly of blue-collar workers, is an increase forecast. The sector has, however, already lost 24 percent of its jobs, and AMS fears these jobs are now gone for good. (WS) (Stockholm DAGENS NYHETER in Swedish 26 Feb 94 p 14) VOLVO SEEN SEEKING PROJECT-BY-PROJECT PARTNERSHIPS--After its rejection of a merger with Renault, Volvo must catch up internationally and will probably seek partners on a project-by- project basis. This is the conclusion of an assessment published in the business weekly VECKANS AFFARER. According to the assessment, Volvo has "lost" the last four years, which its competitors have used to conclude international partnerships. Its credibility damaged, Volvo is hardly in a position to seek new long-term partners immediately. Therefore, the most viable alternative is to establish a series of limited partnerships for specific projects. This strategy would reduce costs while retaining the company's independence and reputation. The assessment cites Volvo's agreement with Mitsubishi to develop a new midsize car as a model for future cooperation. Under the agreement, Volvo will develop a successor to its 400 model at greatly reduced cost while gaining access to Japanese technology. The Swedish firm also recently concluded an agreement with Chrysler to build jeeps in Thailand. (WS) (Stockholm VECKANS AFFARER in Swedish 21 Feb 94 p 19) ECONOMIC BRIEF France --Government to subsidize part of price increase in French pharmaceuticals for African franc zone (CFA) countries where devaluation occurred. subsidies to last three months for 20 products, will entail 50 percent of gross price increase. . .goal to guarantee medical supplies there. (LE FIGARO Le Fig-Eco supplement 2 Mar 94 p I) Anilla B. (703-733-6283), Roger B. (703-733-6508), Robert H. (703-733-6504), Carolina H. (703-733-6388), Dian I. (703-733-6286), Rosa M. (703-733-6287), Joel S. (703-733-6503), Wendy S. (703-733- 6506), and Charles W. (703-733-6473) contributed to this Foreign Media Survey. ELAG/10 MAR/ECONF/WED/SM 11/0258Z MAR

nationalists in July 1991 to promote creation of an independent Ukrainian Armed Forces, initially achieved substantial influence within the nascent Ukrainian defense establishment, particularly in personnel and related matters. Since mid-1992, however, the UOU has increasingly come into conflict with the military establishment and has lost much of its influence inside the Defense Ministry, a trend that has greatly accelerated since Vitaliy Radetskyy replaced Konstyantyn Morozov as defense minister. The union has reacted belligerently to the loss of its insider status, returning to its roots as a military-oriented ally of the moderately nationalist Ukrainian People's Movement (Rukh) and seeking to influence the military from the outside through the political process. It is running candidates for parliament and is likely to remain a significant political force if it and its nationalist allies do well in the 27 March 1994 parliamentary election. END SUMMARY The Union of Officers of Ukraine: From Establishment Insiders to Nationalist Opposition The UOU'S Foundation by Ukrainian Nationalists Rukh was evidently the moving force in the UOU's creation. At least since the fall of 1990, Rukh's leaders had been calling for the creation of a separate Ukrainian army, saying this was an essential element in the drive for Ukrainian independence from the Soviet Union (Kultura i Zhyttya, 28 October 1990; Kiev radio, 19, 22 February 1991). When the First UOU Congress met in July 1991, press reports said that Rukh had organized it specifically to pursue this goal (TASS, 29 July 1991; Kiev radio, 27 July 1991; Krasnaya Zvezda, 5 November 1991). Several Rukh leaders played key roles at the congress. Rukh Deputy Chairman Volodymyr Mulyava chaired the congress's organizing committee; Rukh Military Collegium Chairman Lt. Col. Vitaliy Chechylo was a deputy chairman of the organizing committee; and the congress elected Rukh Political Council member Col. Vilen Martirosyan as the UOU's first chairman (TASS, 29 July 1991; Komsomolskaya Pravda, 18 September 1991; Narodnaya Armiya, 29 June 1992). With a large majority of its members ethnic Ukrainians and retired or reserve rather than active-duty officers, the UOU has always been more a Ukrainian nationalist organization than a military one. Eighty-five percent of its members are ethnic Ukrainians, a proportion far higher than that in the armed forces overall (Vechirniy Kyyiv, 6 January 1994). (See Note 1) Only half of the delegates to the First UOU Congress were on active duty (Interfax, 29 July 1991). At its most recent congress it was reported that twice as many members were retired as were on active duty, and that many UOU officers, including oblast organization chairmen, are either in the reserves or retired from the service (Vechirniy Kyyiv, 6 January 1994). Many of the union's organizers were not military men. For instance, Mulyava and Oleksandr Yemets (See Note 2) were civilians. Other key leaders, such as former UOU chairmen Hryhoriy Omelchenko and Oleksandr Skypalskyy, were career police officers (See Appendix C: Biographical Information). (Note 1) In 1992, according to then-military personnel chief Oleksandr Ihnatenko, eighty-five percent of servicemen in Ukraine were ethnic Russians (Narodnaya Armiya, 5 May 1992). (Note 2) Yemets, leader of the Party of Democratic Revival of Ukraine, was a deputy chairman of the First UOU Congress organizing committee (Kiev radio, 27 July 1991). The rapid disintegration of the USSR led the UOU to shift its attention from its original goal of creating a Ukrainian national army to influencing the nascent army's development. As the Soviet state rapidly withered awaY in the wake of the August 1991 coup attempt, Ukraine enacted a package of laws in October 1991 to create its own armed forces by placing Soviet forces stationed in Ukraine under Ukrainian government control. Ukraine also appointed its own defense minister, Konstyantyn Morozov. The UOU then set itself the task of shaping the armed forces--especially the officer corps--in what it considered a patriotic mold. In practice, this meant striving to influence decisions on appointments, promotions, and dismissals, as well as seeking a leading role in military indoctrination activities. In November 1991, the Second UOU Congress demanded that all appointments, "from battalion commander on up," be "coordinated with" the UOU (Krasnaya Zvezda, 5 November 1991). (See Note 3) The congress also passed several resolutions calling for an acceleration of the creation of a Ukrainian army and for measures to assure that the army be manned by soldiers whose first loyalty was to Ukraine. In March 1992, then-First Deputy Chairman Vitaliy Chechylo said that the UOU should "take a most active part" in military personnel matters (Narodnaya Armiya, 28 March 1992). (Note 3) The Soviet Defense Ministry was not reported to respond directly to these demands, but a few days after the congress Defense Minister Yevgeniy Shaposhnikov decried "centrifugal tendencies" in military affairs (Krasnaya Zvezda, 7 November 1991). The nascent Ukrainian Defense Ministry was also apparently silent; the newly-appointed minister, Morozov, addressed the congress but was not reported to discuss a role for the UOU in military personnel matters (Moscow Russian TV, 2 November 1991). Subsequently, however, Morozov strongly backed UOU aspirations in this area (See below, page ). From the beginning, many officers stationed in Ukraine- -particularly among the ethnic Russian majority of the officer corps--were hostile to the UOU, evidently fearing that its influence in personnel decisions boded ill for them personally. As early as the end of 1991, an assembly of air defense officers accused the union of seeking to arrogate to itself the powers of newly minted commissars" and to revive "democratic centralism" (Narodnaya Armiya, 14 December 1991). Rival servicemen's groups sprang up, often with the apparent purpose of opposing the UOU. According to reports in the Moscow press, groups such as the Independent Officers Association (based in Vinnytsya, headquarters of the predominantly Russian 43rd Missile Army) and the Kiev Constructive Union sought to protect their members and the armed forces overall from what they charged were UOU "witch hunts" for supporters of the 1991 coup attempt. The UOU actively, but unsuccessfully, opposed these groups' creation (Rossiyskaya Gazeta, 2 November 1991; Krasnaya Zvezda, 26 November 1991). Defense Minister Morozov Encourages the UOU Despite the hostility of many officers, the UOU at first flourished, helped by the friendly attitude of nationalist-minded Defense Minister Morozov. Morozov signalled early on that his thinking on military matters paralleled that of Rukh and the UOU. He told a Moscow News interviewer that Ukraine needed its own armed forces as soon as possible to guarantee its independence, echoing earlier statements by Rukh leaders (See above, page ). In the same interview, he said that he shared the concerns expressed at the Second UOU Congress over the loyalties of the officers then stationed on Ukrainian territory (3-10 November 1991). A UOU Executive Committee session was held on Ukrainian Defense Ministry premises in January 1992, the members congratulating themselves on their new-found establishment insider status (Narodnaya Armiya, 1 February 1992). Several UOU leaders were appointed to important Defense Ministry and Security Service posts where they were well-placed to pursue the UOU's agenda in personnel and related matters. In December 1991, UOU Chairman Martirosyan was appointed chairman of the government's new Committee for Social Protection of Servicemen (CSPS), with First Deputy Chairman Chechylo as one of his top aides (Narodnaya Armiya, 29 January, 11 March 1992). A UOU Executive Committee member, Oleksandr Skypalskyy, headed the Security Service's Military Counterintelligence Directorate (Molod Ukrayiny, 17 October 1991). UOU Deputy Chairman Hryhoriy Omelchenko was especially well placed to weed out supposedly undesirable officers, heading the organized crime unit in Skypalskyy's directorate as well as sitting on the Defense Ministry Higher Certification Committee, which vets senior appointments (Narodnaya Armiya, 30 January 1993; Nezavisimost, 9 April 1993). "Ukrainianizing" the Armed Forces The UOU scored one of its greatest successes with the appointment of Volodymyr Mulyava, deputy chairman of both the UOU and Rukh, as chief of the Ukrainian Defense Ministry's new Socio- Psychological Service. This service was organized on the basis of ideas developed by Mulyava in his capacity as a Rukh deputy chairman to inculcate Ukrainian patriotism and national identity among the troops (See Appendix C: Biographical Information). To this end, Mulyava launched a highly controversial program requiring servicemen to learn the Ukrainian language, history, and traditions (Syn Otechestva No. 7, February 1992; Narodna Armiya, 29 July 1992). President Leonid Kravchuk endorsed the program--at least in principle--at a Ukrainian Security Council meeting in late 1992 (Narodna Armiya, 9 December 1992). However, Mulyava's critics--both in Ukraine and in Russia--charged that he actually sought to purge ethnic Russians from the officer corps (Narodnaya Armiya, 1 April 1992; Narodna Armiya, 3 December 1992; Interfax, 6 January 1993; Pravda, 13 May 1993), a claim which he and other UOU and Defense Ministry officials heatedly and repeatedly denied (Kiev radio, 6 February 1992; Narodna Armiya, 5 May 1992, 3 December 1992, 17 April 1993; Vechirniy Kyyiv, 22 November 1992). The UOU's influence in the Ukrainian government and armed forces reached a peak in the spring and summer of 1992. Senior military and political figures addressed its Third Congress, which met in April 1992 and attracted 918 delegates, the largest number ever (Ukrinform, 6 April 1992). Congress speakers congratulated the union on the large role it was now playing in military affairs (Golos Ukrainy, 7 April 1993; Narodnaya Armiya, 8 April 1992). UOU leaders had expansive ideas about the organization's present and future role in military affairs. For instance, a "Draft UOU Program," signed by several top union leaders and published in the Defense Ministry newspaper Narodnaya Armiya on 4 June 1992, mapped out ambitious goals for direct UOU involvement in drafting military legislation, personnel decisions, training, indoctrination, and social welfare of servicemen. On 24 June 1992, Morozov ordered that the UOU should be involved in identifying and removing corrupt officers (Molod Ukrayiny, 23 July 1992). The UOU Under Attack, Fights Back Even as its influence peaked in the middle of 1992, the UOU was apparently encountering growing resistance from the defense establishment--despite Morozov's friendly attitude--as well as from politicians outside the military. The critics said that its influence within the military establishment was excessive and decried the ends for which that influence was being used. For instance, in an interview published on the eve of the Third UOU Congress, Yevhen Hryniv, a moderate Rukh member of parliament, complained that the UOU had fixated on the "nationality question" and said its decisions should be taken by the armed forces only as recommendations (Narodnaya Armiya, 1 April 1992). Several months later, a favorable article on Mulyava's activities claimed that the Defense Ministry newspaper Narodna Armiya was developing a disloyal attitude" toward him (Vechirniy Kyyiv, 22 November 1992). At the end of 1992, 155 members of parliament called for Morozov's dismissal, on the grounds that he had supposedly allowed the UOU--in particular Mulyava--to "control" military personnel policy and to impose its "nationalist ideology" on the troops (Interfax, 6 January 1993). (See Note 4) (Note 4) Press reports have not been observed to describe the political leanings of the 155 deputies, although Morozov's supporters consistently described them as communists. Among the organizers of the call for Morozov's dismissal were Col. Valeriy Izmalkov, a deputy from Zaporizhzhya in the mainly Russian eastern Ukraine and an inveterate foe of the UOU; Oleksiy Prychkin, also from Zaporizhzhya and a former high communist party official; Maj. Gen. F. Kiparis; MVD Lt. Gen. O. Badurka; and Viktor Slyusarenko (Holos Ukrayiny, 6 January 1993; Nezavisimost, 13 October 1993). Belligerent Response to Criticism In response, UOU leaders rose to Morozov's defense, while they accused their critics in the military and parliament of being corrupt, unpatriotic, and pro-communist. Hryhoriy Omelchenko, elected UOU chairman at its Third Congress, repeatedly complained that a "nomenklatura mafia" in the government, parliament, and armed forces was blocking his efforts to prosecute officers whom he accused of corruption, communist sympathies and subservience to Russia. Omelchenko also claimed that criticism of Morozov was motivated precisely by Morozov's support for the UOU's anti- corruption efforts (Nezavisimost, 18 July 1992; Molod Ukrayiny, 23 July 1992; Kiev TV, 13 January 1993; Uryadovyy Kuryer, 3O January 1993; Nezavisimost, 9 April 1993; Molod Ukrayiny, 15 July 1993; Khreshchatyk, 8 October 1993). Mulyava dismissed the accusations in parliament against himself and Morozov as comical," describing Morozov's critics as "conservative generals" and "pro-imperialist and pro-communist forces" seeking to protect "corruption and abuses in the armed forces" (Kiev radio, 6 February 1993). Morozov in turn defended Mulyava against charges of discrimination against ethnic Russians (Narodna Armiya, 17 April 1993). The UOU issued a combative statement, published in Narodna Armiya on 4 February 1993, decrying "political provocations by pro-communist, chauvinist [pro-Russian] forces," which it said could lead to civil war and the loss of Ukrainian independence. Furthermore, after the Third UOU Congress in April 1992, pressure from opponents began to unravel the web of personal links that the UOU had so successfully created between itself and the defense establishment, a process abetted by the endemic factional and personal rivalries within the UOU itself. Martirosyan and Chechylo, the UOU's two most prominent figures in the area of servicemen's social welfare, broke with the union after the Third Congress (Narodna Armiya, 13 May 1993). In March 1993, Morozov dismissed Deputy Minister for Personnel Oleksandr Ihnatenko, a key UOU ally, for allegedly tolerating corruption (Narodna Armiya, 26 March, 17 April 1993). Meanwhile, there was infighting within the leadership of the UOU. Martirosyan was forced out from the UOU chairmanship at the Third Congress under heavy pressure (Narodnaya Armiya, 8 April 1992) and after his deputy, Chechylo, had publicly criticized him for being reluctant to step down (Narodnaya Armiya, 28 March 1992). Volodymyr Pylypchuk, a UOU deputy chairman as well as deputy chief of the Defense Ministry Military Education Directorate, attacked the UOU leadership--at that point chaired by Omelchenko- -for "authoritarian methods," incompetence and poor organization (Narodnaya Armiya, 19 June 1992). In December 1992, Chechylo, at that point no longer a UOU official but still identifying himself as a UOU member, accused Omelchenko of tolerating and even encouraging corruption within the UOU leadership (Pravda Ukrainy, 21 December 1992). The following year, Oleksandr Skypalskyy, who had just been elected UOU chairman at the Fourth Congress in April 1993, told an interviewer that Omelchenko, his predecessor as chairman and his subordinate in the Security Service, had used his UOU position to advance his own career (Narodna Armiya, 13 May 1993). The Fourth UOU Congress Despite clear signs that its opponents' attacks were taking a toll on the union, the UOU made it clear at its Fourth Congress in April 1993 that it was not backing down on its ambitions to play a leading role in military policy. Attendance, as compared with the Third Congress a year earlier, was down sharply, from 918 delegates to about 6OO. Outgoing Chairman Omelchenko said Ukraine was facing "difficult times" in the economy, which he blamed on the "nomenklatura" parliament. Other speakers criticized parliament for failing either to enact a military doctrine or to cut back the size of the armed forces, accusing it of protecting servicemen whom the UOU thought should be dismissed for corruption or disloyalty. The congress also expressed considerable dissatisfaction" with the activities of the government's Committee for the Social Protection of Servicemen (CSPS) and called--unsuccessfully--for the dismissal of CSPS Chairman Martirosyan, a former UOU chairman who was by that point estranged from the union (Ukrinform, 6 April 1992; Narodna Armiya, 13 April 1993). Addressing the congress, Morozov praised the UOU's activities and said that it "should not be a bystander" in personnel and indoctrination matters (Narodna Armiya, 13 April 1993; Za Vilnu Ukrayinu, 27 April 1993), advice the UOU seemed inclined to take to heart. Its new chairman, Oleksandr Skypalskyy, asserted shortly afterwards that the Fourth Congress had been held "exclusively to affirm the readiness and aspiration of the UOU to take an active part in the building of the Ukrainian army" (Narodna Armiya, 13 May 1993). New Defense Minister Cracks Down on the UOU The UOU's position within the military establishment suffered an especially serious decline after Vitaliy Radetskyy's appointment in October 1993 as defense minister, replacing Morozov. Radetskyy brought with him a reputation as a foe of the UOU (Narodna Armiya, 17 September 1992), a reputation he did nothing to dispel. Asked in parliament about his attitude toward the UOU, he was implicitly hostile, saying that the question of dissolving the union needed to be "studied attentively." He was noncommittal when asked his evaluation of Socio-Psychological Service Chief Volodymyr Mulyava's activities, though he did tell an interviewer later that he would slow down--but not eliminate- -Mulyava's controversial program to promote use of the Ukrainian language in the armed forces (Kiev radio, 8 October 1993; Moloda Halychyna, 14 October 1993). Meanwhile, the parliament sought to curtail the UOU's role, enacting a new Military Doctrine which banned political activity by servicemen (Golos Ukrainy, 29 October 1993). Omelchenko--clearly seeing the ban as a serious threat--called it a "gross violation of human rights" (UNIAN, 3 November 1993). (See Note 5) (Note 5) Ironically, only four months earlier, the Fourth UOU Congress had criticized the parliament's delay in enacting a military doctrine (Narodna Armiya, 13 April 1993). Once in office, Radetskyy took several steps to curtail the UOU's influence. He shifted Mulyava to a new position as deputy defense minister for ties with the public, parties, and movements, a shift seen as a blow to Mulyava and the UOU, since it removed him from involvement in personnel-related matters. Radetskyy also removed Mulyava from the Higher Certification Commission, along with two UOU allies, former Defense Ministry personnel chief Oleksandr Ihnatenko and Yuriy Prokofyev, chief of the Defense Ministry Military Education Directorate (UNIAN, 2 December 1993). These actions led commentators to claim that the ministry was conducting a "purge" of UOU activists (Narodna Hazeta No. 44, November 1993; Valentyn Labunskyy in Holos Ukrayiny, 12, 17 November 1993). One commentary in a nationalist Lviv newspaper even claimed that Radetskyy was serving Russia's interests by making these changes (Andriy Starostin in Post- Postup, 2 December 1993). Radetskyy reportedly forbade officers to write for publication--supposedly in response to a critical article by Air Force Major General Oleksandr Rol, (See Note 6) a UOU member who was subsequently elected the union's chairman (UNIAN, 3 November 1993). Radetskyy also revoked Morozov's 1992 order giving the UOU a role in personnel matters (Kievskiye Vedomosti, 27 November 1993). (Note 6) Rol's article, published only a few days after Radetskyy's appointment, excoriated the Defense Ministry leadership for incompetence and corruption and asserted that the military was incapable of reforming itself without the involvement of outsiders (Vechirniy Kyyiv, 13 October 1993). Radetskyy's apparent hostility toward the UOU communicated itself down the chain of command. Some unit commanders reportedly tried to suppress UOU activities (Samostiyna Ukrayina, 22 November 1993). In December, the UOU's Kiev organization appealed to Radetskyy to put a stop to what it called "arbitrariness" and "pressure" against UOU activists by commanders (Molod Ukrayiny, 17 December 1993). UOU officials also claimed that the Defense Ministry had attempted to prevent officers on active duty from attending the UOU's Fifth Congress, granting permission only at the last moment (Halychyna, 4 January 1994). At the congress, two delegates claimed that the military command was trying to "ban" UOU representatives from certification commissions at all levels, which vet appointments (Vechirniy Kyyiv, 6 January 1994). UOU Remains Defiant, Steps Up Political Activity The Fifth UOU Congress When the Fifth UOU Congress met in December 1993, the organization's estrangement from the defense establishment was near-total. Attendance was down again, to a mere 225 delegates, less than a quarter of the attendance at the Third Congress a year and a half earlier. Outgoing Chairman Oleksandr Skypalskyy and other participants attributed the decline to "persecution" of UOU members by commanders (Vechirniy Kyyiv, 21 December 1993; Halychyna, 4 January 1994). No top Defense Ministry officials attended (Vechirniy Kyyiv, 6 January 1994); by contrast, Morozov and other senior figures had addressed the Second, Third and Fourth Congresses (Moscow Russian TV, 2 November 1991; Narodnaya Armiya, 8 April 1992; Narodna Armiya, 13 April 1993). In contrast to its extensive favorable coverage of earlier UOU congresses, the Defense Ministry newspaper Narodna Armiya published only a short Ukrinform report on the Fifth Congress (22 December 1993). The congress's mood was defiant. It elected a new chairman, Rol, who was already in disfavor with the Defense Ministry and who was rumored to be on the verge of dismissal from the armed forces in retaliation for the critical article he had published in October (Vechirniy Kyyiv, 21 December 1993, 6 January 1994). Speakers attacked the government for not spending enough on defense and failing to promote arms exports (Kiev TV, 18 December 1993; Halychyna, 4 January 1994). Delegates gave a standing ovation to a fiery speech threatening to revive the 1940's anti-Soviet Ukrainian Insurrection Army if "anybody" prevented the UOU from playing what it considered its proper role (Vechirniy Kyyiv, 21 December 1993). Mulyava called on the UOU, despite the "new conditions," to expand its influence "in all spheres of army life" (Vechirniy Kyyiv, 6 January 1994). Another UOU official, Bohdan Vivchar, assailed the UOU's parliamentary critics as "national chauvinist [pro-Russian] forces" who sought to "prevent the consolidation of an independent Ukrainian state through the building of strong armed forces" (Halychyna, 4 January 1994). Delegates also pointed to recent opinion polls showing high popular support for the officer corps, evidently seeing this as proof that the UOU was in a stronger political position than its critics (Vechirniy Kyyiv, 21 December 1993, 6 January 1994). Parliamentary Election Campaign Activity Faced with official hostility and with its influence within the establishment on the decline, the UOU is re-emphasizing its long- standing links with Rukh and other nationalist groups in preparation for the March 1994 parliamentary election. In December 1993, UOU Deputy Chairman Omelchenko appealed for all "democratic" groups to unite during the election campaign and to run a single "democratic" candidate in each parliamentary district (Interfax, 17 December 1993). Addressing the Fifth UOU Congress, Rukh leader Vyacheslav Chornovil likewise appealed for unity of all "democratic and patriotic forces" in the election campaign and urged the union to "engage in political activity more daringly" (Molod Ukrayiny, 24 December 1993). While the UOU is clearly taking an active role in the campaign, these appeals for unity are meeting with mixed success. The Fifth Congress decided to run UOU candidates in all regions of the country (Halychyna, 4 January 1994)--a goal the union is unlikely to achieve--while at the same time UOU is participating in the All- Ukrainian Electoral Committee of the Democratic Bloc with Rukh and several other nationalist groups to try to unite behind common candidates (Interfax, 17 December 1993; UNIAR, 4 January 1994). At least six UOU leaders are candidates for parliament: Rol; Omelchenko; Skypalskyy; Mulyava; Guards Lieutenant Colonel Oleksandr Lobashchuk, a member of the UOU's Executive Committee and deputy chairman of its Lviv Oblast organization; and Vasyl Krychun, a local government official and deputy chairman of the Ivano-Frankivsk Oblast UOU organization. All but Krychun are apparently defying the Military Doctrine ban on political activity, since they remain on active duty. Five of the six are running in nationalist western Ukraine, the UOU's main power base. Rol is running in Lviv Oblast on the ticket of the Congress of Ukrainian Nationalists, Lobashchuk also in Lviv Oblast as an independent supported by the UOU, Skypalskyy in Volyn Oblast, and Mulyava and Krychun in Ivano-Frankivsk Oblast (Za Vilnu Ukrayinu, 4, 14 January, 24 February 1994; Vechirniy Kyyiv, 21 December 1993; Holos Ukrayiny, 12 January 1994; Halychyna, 27 January, 12 February 1994). Omelchenko is running in Kiev as a candidate of the Party for Democratic Revival of Ukraine (UNIAR, 29 December 1993; Vechirniy Kyyiv, 4 January 1994). Prospects Despite the reverses it has suffered since mid-1992, the UOU is clearly determined to remain a force in Ukrainian military policy. Recent statements by the UOU's leaders show that it has not abandoned its central ambition of playing a leading role in shaping the armed forces and acting as the guardian of their loyalty and honesty. Its vigorous activity in the parliamentary election campaign shows its determination to seek alternate means to exert influence on the military even in the face of the Defense Ministry's hostility. Its strong and long-standing links with Rukh and other important political groups will probably be helpful to it in this endeavor. Appendix A: The UOU'S Agenda UOU spokesmen have said that the union's goal is to ensure that all members of Ukraine's officer corps will be honest, competent, and loyal to Ukraine (See for example the UOU Draft Program in Narodnaya Armiya, 4 June 1992; as well as interviews by then-UOU First Deputy Chairman Vitaliy Chechylo in Narodnaya Armiya, 28 March 1992; then-UOU Chairman Oleksandr Skypalskyy and Kiev local organization Chairman Volodymyr Saladyak in Narodna Armiya, 13 May 1993; and current UOU Chairman Oleksandr Rol in Samostiyna Ukrayina, 5 February 1994). Stated in such general terms, these goals are hardly controversial and in fact have been endorsed even by the UOU's opponents, including Radetskyy (see his articles in Armiya Ukrayiny, 26 January 1994, and in Ukrayinska Hazeta, 2 February 1994). Controversy has centered instead on the UOU's aspiration to play a direct and leading role in personnel decisions, down to the level of influencing individual appointments and dismissals, as well as on its criteria- -particularly ethnicity--for ensuring loyalty to Ukraine. Beyond its primary interest in influencing personnel and indoctrination, the UOU has also pledged to work for better living conditions for servicemen and to prevent the misappropriation of military property, either by corrupt individuals or by Russia. Its focus on Ukrainian nationalism is displayed in its strenuous opposition to Crimean separatism. It has also lobbied against ceding control of the former Soviet Black Sea Fleet to Russia and against the presence of any foreign troops in Ukraine (Khreshchatyk, 3 March 1994). Military Personnel, Indoctrination and Loyalty Issues The UOU's attempts to shape Ukraine's officer corps has been its main raison d'etre almost from the beginning. Two key UOU leaders, Hryhoriy Omelchenko and Volodymyr Mulyava (See Appendix C: Biographical Information) have played the most prominent roles in this area. Omelchenko has sought to use his positions in the Security Service and on the Defense Ministry Higher Certification Commission to weed out unsuitable officers--though he claims to have been thwarted in these efforts by entrenched conservatives in government (See above, page ). Mulyava, meanwhile, took the lead in attempting to mold servicemen into what he and the UOU considered Ukrainian patriots. It remains unclear to what extent this meant--as critics charged--favoring ethnic Ukrainians over ethnic Russians (See above, page ). However, UOU leaders frequently warned union audiences against the danger of ethnic discrimination, suggesting that at least some UOU supporters, despite denials, may have in fact pursued discrimination against Russians. For instance, UOU Deputy Chairman Andriy Haysynskyy told an interviewer in 1991 that "in my opinion" ethnicity should have no significance, implying that others did not share that view (Za Vilnu Ukrayinu, 2O September 1991). At the Third UOU Congress, Deputy Chairman V. Lazorkin said the union should "help" military personnel authorities "make correct appointments to key posts," which should be filled only by "true patriots." While Lazorkin's statement was not unambiguously a call for ethnic discrimination, it may have been understood as such. Omelchenko, who was elected UOU chairman the next day, responded to Lazorkin by warning against seeking "enemies" on the basis of their ethnicity (Narodnaya Armiya, 8 April 1992). The concern with ethnicity seems to be lingering, however, even among the UOU's friends; an interviewer for the nationalist newspaper Za Vilnu Ukrayinu praised newly-elected UOU Chairman Oleksandr Rol's "good idiomatic Ukrainian" as evidence of his "healthy family roots" (14 January 1994). Whatever its views on ethnicity, the UOU clearly will not willingly give up its claim to a role in shaping Ukraine's officer corps. In a recent interview, newly-elected Chairman Oleksandr Rol, while making conciliatory statements about the new Defense Ministry leadership, asserted that "We [the UOU] consider it our duty to indoctrinate army personnel in the spirit of Ukrainian patriotism and glorious traditions of the Ukrainian Army" (Samostiyna Ukrayina, 5 February 1994). The UOU has also pushed insistently to require all officers to swear allegiance to the Ukrainian state. Characteristically, the union presented itself as the guarantor that this goal would be achieved. It early on created a data bank to identify officers who had or had not taken the oath (Moscow Ostankino TV, 29 January 1992). Then-UOU Chairman Vilen Martirosyan said he would use this data to lobby for the dismissal of all commanders who refused the oath (Moscow radio, 18 March 1992). The Defense Ministry has endorsed this goal, but not a UOU role in enforcing it. In mid-1992, then-military personnel chief Oleksandr Ihnatenko, a UOU ally, said that all officers who refused the oath would be transferred to service in Russia or other former Soviet republics (Krasnaya Zvezda, 9 June 1992). One officer, Major Grigoriy Nesmyanovich, claimed that this in practice meant denying salaries and other benefits to officers who refused the oath as a way of pressuring them to leave Ukraine voluntarily (Rossiyskaya Gazeta, 15 July 1992). Defense Minister Vitaliy Radetskyy, a UOU opponent, recently ordered that any remaining officers who had not taken the oath be removed from active service (UNIAN, 1 February 1994). Yet another aspect of UOU involvement in military personnel matters has been its campaign to bring Ukrainian servicemen, stationed in other parts of the former Soviet Union or in Eastern Europe, "home" to Ukraine. Shortly after the dissolution of the Soviet Union, the UOU Executive Committee called for an interstate agreement to send all former Soviet servicemen to their "native" republics (Narodnaya Armiya, 29 January 1992). Then-Defense Minister Konstyantyn Morozov told the Third UOU Congress that the "return" of these servicemen would help to "Ukrainianize" the army (Golos Ukrainy, 7 April 1992). Protection of Military Property The UOU has cast itself as the protector of military property from both theft and attempts by Russian authorities to appropriate equipment claimed by Ukraine. The subject was raised at the Second UOU Congress (Literaturna Ukrayina, 7 November 1991) and at a January 1992 UOU Executive Committee session (Narodnaya Armiya, 1 February 1992). At its Third Congress, the UOU took credit for protecting military property against misappropriation (Narodnaya Armiya, 8 April 1992). The Third Congress highlighted its concern with the corruption issue by electing Security Service Col. Hryhoriy Omelchenko as UOU chairman. Although Omelchenko has complained that he has been prevented by conservative politicians from carrying out this mandate (See above, page ), the UOU nonetheless remains determined to attempt to police the military. The head of the UOU Lviv Oblast organization, Mykola Vasylkevych, recently asserted that "the UOU will take a most active part" in inventorying and protecting military property, "from ships under construction to the last cartridge" (Shlyakh Peremohy, 15 January 1994). "Social Protection" of Servicemen The problem of the shortage of housing and other amenities for military officers evidently presented a dilemma for the UOU. While any organization aspiring to influence among servicemen in the former Soviet Union must address this issue, Ukraine's near- catastrophic economic situation makes it difficult for any group to deliver on its promises. Although the union characteristically at first presented itself as the guarantor that living standards would improve, it eventually backed off its earlier aspirations and promises. It may be a testament to the intractability of the problem that the UOU officials most identified with the social welfare issue, founding Chairman Vilen Martirosyan and former First Deputy Chairman Vitaliy Chechylo, have both fallen out with the organization (See Appendix C: Biographical Information). The UOU urged, and took credit for, the creation in late 1991 of a Committee for Social Protection of Servicemen (CSPS) attached to the Ukrainian Council of Ministers (Narodnaya Armiya, 29 January 1992). Martirosyan was appointed chairman of the new committee (Narodnaya Armiya, 29 January 1992), and Chechylo chief of its General Department (Narodnaya Armiya, 11 March 1992). Martirosyan told the UOU Executive Committee in January 1992 that military housing and other "social protection" issues were a "main task" and "top priority" for the UOU and that his dual role created "new opportunities" to solve the problem (Narodnaya Armiya, 1 February 1992). The "social protection" issue was a major topic of discussion at the Third UOU Congress, and Martirosyan told the congress that the union was establishing a fund to finance housing construction (Moscow radio, 4 April 1992; Narodnaya Armiya, 8 April 1992). In June, the UOU Draft Program repeated that promise (Narodnaya Armiya, 4 June 1992). However, the Third Congress reportedly believed that Martirosyan could not adequately lead both the UOU and the CSPS. Both he and Chechylo stepped down from their UOU posts, Martirosyan reportedly under heavy pressure (Narodnaya Armiya, 8 April 1992). By 1993, the UOU was backing off from its earlier plans to play an active role in providing for servicemen's welfare. In April, the Fourth Congress assailed Martirosyan's stewardship of the CSPS, calling for his dismissal but rejecting a call for the abolition of the CSPS (Interfax, 12 April 1993; Narodna Armiya, 13 April 1993). In May, then-UOU Chairman Skypalskyy said that, earlier promises notwithstanding, the union could not help finance housing construction, and would merely offer "moral support" to officers in need of housing (Narodna Armiya, 13 May 1993). In contrast to the Third and Fourth Congresses, the Fifth UOU Congress in December 1993 was not reported to have discussed "social protection" at all. Crimea In keeping with its Ukrainian nationalist roots, the UOU opposes any change in Crimea's status (Narodnaya Armiya, 9 June 1992). The union and its Crimea regional organization assailed the Russian parliament's July 1993 resolution claiming Crimea as Russian territory (ITAR-TASS, 1O July 1993; Holos Ukrayiny, 28 July 1993). In September, the union declared that no bilateral issues could be solved until Russia "surrendered its territorial claims" (Kiev radio, 2 September 1993). In December, a Crimean Ukrainian Civil Congress was created, headed by Lieutenant Colonel Serhiy Lytvyn, chairman of the UOU Crimea regional organization, to lobby for "preserving Ukraine's territorial integrity." The congress opposed the very holding of a Crimean presidential election (Kiev radio, 2 December 1993; Moscow Radio, 4 December 1993; Holos Ukrayiny, 7 December 1993). Box Allegations of UOU Links to Radical Nationalist Groups Although there have been claims that the UOU is linked to, and is even giving active support to, underground armed nationalist organizations such as Ukrainian Self-Defense (UNSO) (Moscow News, 14-21 June 1992; Pravda, 13 May 1993; Valeriy Izmalkov in Kievskiye Vedomosti, 27 November 1993), Ukrainian news media have not been observed to report hard evidence of such ties. It should also be noted that these allegations emanate mostly from Russian sources or from Ukrainian critics of the UOU. Former UOU Chairman Oleksandr Skypalskyy has denied these claims; although he said that the members of UNSO and similar groups were "patriots," he also said "I do not share their methods" (Literaturna Ukrayina, 23 September 1993). UNSO leader Dmitriy Korchinskiy recently told a Moscow News interviewer that UNSO has the support of "officers' circles," but he did not mention the UOU or any other organization by name (18-24 February 1994). End Box Appendix B: Evolution of UOU Policy on Nuclear Weapons The UOU has moved gradually from a position of supporting the country's denuclearization to one of seeking to retain a strategic nuclear arsenal for some time to come. The First UOU Congress called for a nuclear-free Ukraine (TASS, 29 July 1991). The UOU's first chairman, Vilen Martirosyan, subsequently said that plans for separate Ukrainian armed forces did not include any ''strategic'' component, which he said should remain under central" control (Kuranty, 29 August 1991). The Second UOU Congress in November 1991 supported this position (Literaturna Ukrayina, 7 November 1991). However, the Third UOU Congress hailed a statement by Vasyl Durdynets, deputy chairman of the Ukrainian parliament, that any "strategic" forces on Ukrainian soil should be subordinated to the Ukrainian Defense Ministry (Moscow Radio, 4 April 1992). The Fourth UOU Congress called for keeping nuclear weapons in Ukraine (Interfax, 12 April 1992). At the Fifth UOU Congress, outgoing Chairman Oleksandr Skypalskyy spoke in support of the Ukrainian parliament's heavily- conditioned ratification in November 1993 of the START I Treaty and the Lisbon Protocol (Kiev TV, 18 December 1993). His successor, Oleksandr Rol, recently told an interviewer that he believed that Ukraine would need a nuclear deterrent for as long as Russia possesses nuclear weapons--a position which he has made part of his parliamentary election campaign platform. Rol also said that, in his capacity as UOU chairman, he would "investigate" the fact that the officers of the Vinnytsya-based 43d Missile Army had not sworn allegiance to Ukraine (Za Vilnu Ukrayinu, 14 January 1994; Shlyakh Peremohy, 29 January 1994). The UOU has issued a statement opposing Ukraine's "unilateral nuclear disarmament" (Khreshchatyk, 3 March 1994), and the union's local organization in Kiev has called for a nationwide referendum on the subject (Khreshchatyk, 5 March 1994). Appendix C: Biographical Information The following biographical entries are intended to illustrate the UOU's connections with Rukh and other nationalist organizations, as well as with the Defense Ministry and other government institutions. Russian spellings, where they differ from Ukrainian, are given in parentheses. Chechylo (Chechilo), Vitaliy, Lt. Col. He was chairman of Rukh's Military Collegium; he then served as deputy chairman of the organizing committee for the First UOU Congress, where he was elected UOU first deputy chairman (Komsomolskaya Pravda, 18 September 1991). He is chief of the General Department of the Committee for Social Protection of Servicemen attached to the Ukrainian Council of Ministers (Narodnaya Armiya, 11 March 1992). He stepped down from his UOU post at the Third Congress (Narodnaya Armiya, 28 March 1992). He has since been feuding with the union's leadership, accusing it of corruption (Pravda, Ukrayiny, 21 December 1992). Former UOU Chairman Oleksandr Skypalskyy called his criticisms "ignoble and ungentlemanly," claiming that he had not been expelled only because the union had no expulsion procedure (Narodna Armiya, 13 May 1993). Haysynskyy (Gaysinskiy), Andriy, Lt. A UOU deputy chairman (Za Vilnu Ukrayinu, 2O September 1991), he served on the commission to organize the Defense Ministry Socio-Psychological Service (Narodnaya Armiya, 29 July 1992). Kostyuk, Roman, Col., reserves. He was chairman of the UOU Kiev organization in 1992 (Narodnaya Armiya, 1 February 1992) and then UOU first deputy chairman (Narodna Hazeta No. 44, November 1993). He helped draft the 1991 legislation setting up the Ukrainian Armed Forces (Narodnaya Armiya, 8 April 1992). He was one of the signers, along with Rukh's Vyacheslav Chornovil, of a Proclamation of the Standing Council of Democratic Parties and Movements of Ukraine, calling for unity in the March 1994 parliamentary election campaign (Khreshchatyk, 11 December 1993). Krychun, Vasyl. A former member of the Soviet Air Defense Forces, he is now a member of both the oblast and city soviets, as well as head of the city communal property fund, in Ivano- Frankivsk. A member of Rukh since 1989, he is also deputy chairman of the UOU Ivano-Frankivsk Oblast organization and a candidate in the March 1994 election for parliament (Halychyna, 12 February 1994). Kubakh, M.F., Lt. Col., reserves. A deputy UOU chairman for economic affairs and a member of the Kharkiv Oblast Soviet military commission, he was one of the authors of the UOU Draft Program (Narodnaya Armiya, 4 June 1992). Lazorkin, V, Col., member of the Lviv Oblast Soviet (Narodnaya Armiya, 22 January 1992). He served as UOU deputy chairman (Narodnaya Armiya, 8 April 1992) and chairman of the UOU Coordinating Council (Narodnaya Armiya, 8 July 1992). He helped draft the 1991 legislation setting up Ukrainian Armed Forces (Narodnaya Armiya, 8 April 1992) and was one of the authors of the UOU Draft Program (Narodnaya Armiya, 4 June 1992). Lytvyn (Litvin), Serhiy, Lt. Col., retired. Chairman of the UOU Crimean regional organization and chairman of the Ukrainian Studies Department at the Symferopil Higher Building School, he was elected chairman of the new Crimean Ukrainian Civil Congress in December 1993, at which time he retired from active military duty (Holos Ukrayiny, 7 December 1993). Martirosyan, Vilen, Maj. Gen. A member of Rukh's Political Council, he was elected the UOU's first chairman at its First Congress in July 1991 (TASS, 29 July 1991). He served as chairman until the Third Congress in April 1992, when he stepped down under pressure (Narodnaya Armiya, 8 April 1992), and subsequently left the UOU altogether (Narodna Armiya, 13 May 1993). He recently authored a scathing attack on the UOU, claiming that under Volodymyr Mulyava's leadership it had instigated an "open purge" of the officer corps in favor of then- Defense Minister Konstyantyn Morozov's supporters, which according to Martirosyan has resulted in a wholesale exodus of highly skilled servicemen, both officers and enlisted men (Kievskiye Vedomosti, 5 February 1994). He has been chairman of the Committee for Social Protection of Servicemen, attached to the Ukrainian Council of Ministers, since its creation in December 1991 (Narodnaya Armiya, 29 January 1992; Kievskiye Vedomosti, 5 February 1994). He is an ethnic Armenian (Narodnaya Armiya, 4 April 1992). Mulyava, Volodymyr. Mulyava's only military rank prior to January 1992 was sergeant in the reserves (Moskovskiye Novosti, 10 November 1992). He developed his ideas for a military Socio- Psychological Service to inculcate Ukrainian patriotism among servicemen as early as 1986, and was active in Rukh's 1990 and 1991 preparations to organize the UOU (Narodnaya Armiya, 29 July 1992). A deputy chairman of Rukh's governing board, he chaired the organizing committee for the First UOU Congress and was elected UOU deputy chairman (Kiev radio, 27 July 1991; Rabochaya Tribuna, 2 August 1991). In September 1991, he submitted a report on behalf of Rukh to Ukraine's new defense minister, Konstyantyn Morozov, proposing to create a Socio-Psychological Service. Morozov gave Mulyava the rank of colonel and appointed him to head a commission to organize the new service (Narodnaya Armiya, 29 July 1992). In February 1992, Mulyava was appointed head of the service (Syn Otechestva No. 7, February 1992). He also sat on the Defense Ministry Higher Certification Commission. At the end of 1992, he was promoted to major general (Narodnaya Armiya, 3 December 1992). In late 1993, Mulyava was removed from the Socio-Psychological Service and appointed deputy minister for ties with the public, parties, and movements, a shift which was seen as weakening his and the UOU's influence since his new position gave him no role in personnel or indoctrination (Holos Ukrayiny, 12, 17 November 1993). He was also removed from the Higher Certification Commission (UNIAR, 2 December 1993). Mulyava has served as Rukh spokesman on economic policy (Narodna Hazeta, No. 1, January 1992) and on Ukrainian Orthodox Church affairs (Nezavisimaya Gazeta, 4 June 1992) and is the hetman of the Ukrainian Cossacks (Rossiyskaya Gazeta, 4 March 1993; Kiev radio, 18 August 1993). He is a candidate in the March 1994 election for parliament (Halychyna, 27 January 1994). Omelchenko, Hryhoriy. Formerly a career MVD officer (Narodna Armiya, 13 May 1993), Omelchenko is now a colonel in the Ukrainian Security Service, where he heads the organized crime unit of the Military Counterintelligence Directorate (Nezavisimost, 9 April 1993). He is also a member of the Defense Ministry Higher Certification Commission (Narodnaya Armiya, 30 January 1993). Omelchenko was a deputy chairman of the UOU until its Third Congress in April 1992, when he was elected chairman (Narodna Armiya, 8 April 1992). He served as chairman until the Fourth Congress a year later, when he was again elected deputy chairman (Kiev radio, 15 September 1993); he was re-elected to that post at the Fifth Congress (Molod Ukrayiny, 24 December 1993). He is a candidate for parliament on the ticket of the Democratic Revival of Ukraine Party (UNIAR, 29 December 1993). Pylypchuk (Pilipchuk), Volodymyr, Colonel. He helped draft 1991 legislation setting up Ukrainian Armed Forces (Narodnaya Armiya, 8 April 1992). A deputy chief of the Defense Ministry Military Education Directorate, he headed a Ministry commission to take control of Crimean naval academies from Black Sea Fleet Command (Narodna Armiya, 3 September 1992). He was one of the authors of the UOU Draft Program (Narodnaya Armiya, 4 June 1992) and a UOU executive committee member (Narodnaya Armiya, 29 January 1992) and deputy chairman (Narodnaya Armiya, 19 June 1992). Prokofyev, Yuriy, Maj. Gen. Chief of the Defense Ministry Military Education Directorate (Golos Ukrainy, 15 January 1993). Though not reported to be a UOU member, he co-authored, with UOU deputy chairmen Volodymyr Mulyava and Hryhoriy Omelchenko, an article accusing Lieutenant General Boris Sharykov, then military adviser to President Kravchuk, of corruption, pro-communist and pro-Russian sympathies, and disloyalty to Ukraine (Narodnaya Armiya, 3 June 1992). He was removed from the Defense Ministry Higher Certification Commission by Defense Minister Vitaliy Radetskyy (UNIAN, 2 December 1993). Rol (Ryl), Oleksandr, Maj. Gen. Once a senior Soviet Air Force officer, Rol is now chief of the Operational Administration Staff of the Ukrainian Air Force (Samostiyna Ukrayina, 5 February 1994). He has persistently criticized the leadership of the Ukrainian Defense Ministry for inefficiency and corruption and has called for a robust Ukrainian military, including offensive as well as defensive capabilities (Za Vilnu Ukrayinu, 17 March 1992; Ukrinform, 3 March 1993; Vechirniy Kyyiv, 13 October 1993; Za Vilnu Ukrayinu, 8 February 1994). He recently endorsed Ukrainian retention of nuclear weapons (Za Vilnu Ukrayinu, 14 January 1994). Rol was elected UOU chairman at the Fifth Congress (Vechirniy Kyyiv, 21 December 1993) and is a candidate in the March 1994 election for parliament (Za Vilnu Ukrayinu, 14 January 1994). Skypalskyy (Skipalskiy), Oleksandr, Maj. Gen. A career KGB officer, Skypalskyy headed the Ukrainian Security Service's Military Counterintelligence Directorate (Molod Ukrayiny, 17 October 1991) until he transferred to the Defense Ministry in 1993 to head its new Strategic Military Intelligence Directorate (Narodna Armiya, 13 May 1993; Vechirniy Kyyiv, 23 July 1993). A member of the UOU Executive Committee until April 1993, he was elected UOU chairman at the Fourth Congress (Narodna Armiya, 13 April 1993). He stepped down at the Fifth Congress in December 1993 to run for parliament (Vechirniy Kyyiv, 21 December 1993). With Oleksandr Yemets, leader of the Party of Democratic Revival of Ukraine, he was one of the founders of the Democratic Center electoral bloc for the March 1994 election (Kievskiye Vedomosti, 12 January 1994). Saladyak (Solodyak), Volodymyr, Col., retired. A deputy UOU chairman and head of the UOU Kiev city organization, he was one of the authors of the UOU Draft Program (Narodnaya Armiya, 4 June 1992, 13 May 1993). He also drafted the UOU's plan for bringing ethnic Ukrainian servicemen stationed outside the Ukraine back to Ukraine (Narodnaya Armiya, 17 March 1992). Yemets, Oleksandr. Leader of the Party of Democratic Revival of Ukraine (Interfax, 14 December 1993) and minister for nationalities and migration (Holos Ukrayiny, 28 April 1993), Yemets is also a longtime ally of the UOU. He served as deputy chairman of the organizing committee for the First UOU Congress (Kiev radio, 27 July 1991). The Second UOU Congress called unsuccessfully for his appointment as head of the Ukrainian Security Service (Krasnaya Zvezda, 5 November 1991). With former UOU Chairman Oleksandr Skypalskyy, he was one of the founders of the Democratic Center electoral bloc for the March 1994 parliamentary election (Kievskiye Vedomosti, 12 January 1994). Another former UOU chairman, Hryhoriy Omelchenko, is running for parliament as a candidate of Yemets's party (UNIAR, 29 December 1993). (AUTHOR: O'LEARY. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, MILITARY/INTERNATIONAL AFFAIRS BRANCH, CIS DIVISION, (703) 733- 6375.) ENEAG/BLOUGH/CB 11/1604z Mar

SUMMARY Apparently seeing little merit in a policy of open confrontation with the Chinese over human rights issues and at the same time eager to secure a share of China's burgeoning market, Germany and France have avoided all but the most muted public criticism of China's human rights record while steadily expanding diplomatic and trade contacts. German and French media, while supportive of improved relations with China, have expressed doubts about the wisdom of sof t-pedaling the human rights issue and yielding to China's demand to stop selling arms to Taiwan. END SUMMARY In marked contrast to recent U.S. policy, both Germany and France have chosen a low-key approach to the issue of Chinese human rights violations, arguing that it is more effective to promote democratic development through strengthened economic relations than through public admonitions. Germany's efforts, including lifting sanctions against China and yielding to China's insistence that it not sell submarines to Taiwan, culminated in Chancellor Helmut Kohl's trip to China in November 1993 and the signing of several large contracts. Similarly, following months of diplomatic efforts to repair a rift in relations triggered by France's sale of Mirage airplanes to Taiwan in November 1992, France and China "normalized" relations on 12 January. In return for two key French concessions--recognition of the PRC Government as the "sole legal government of China" and Taiwan as an "integral part of Chinese territory" and agreement "not to authorize" any French enterprises to sell arms to Taiwan--China agreed to welcome participation by French firms in China "on an equal footing," according to a joint communique (Xinhua, 12 January). Germany's "Quiet Diplomacy" German leaders have repeatedly defended the government's policy of not pressuring the Chinese publicly on human rights and instead promoting change through economic relations and "behind- the-scenes" efforts. Both Kohl and Foreign Minister Klaus Kinkel have stressed that Germany's approach on Chinese human rights is to use quiet diplomacy and to promote progress on human rights and democracy in China through trade and economic reform: --Even after the recent roundup of Chinese dissidents, the German reaction was limited to an expression of "concern" over the arrests, and a caution issued by a foreign ministry spokesman that the arrests could "clearly disturb" German-Chinese relations. Indicating that even in this case the usual German nonpublic diplomacy was being followed, the spokesman said Berlin had "approached" Beijing on this matter the previous week (DPA, 8 March). --Explaining Germany's approach to the human rights issue, Kinkel told German ambassadors to Asia on 26 January that "wagging an admonishing finger" at the Chinese would not be productive, because Europeans cannot "impose" their cultural principles on the Asian countries. "Dignity," so important in Asia, he said, had to be respected. He argued that instead of public confrontation, it would be more effective to be "secretly active" to help in concrete cases of human rights violations (Frankfurter Rundschau, 27 January). Apparently with the United States in mind, Kinkel contrasted Germany's approach to those who "bang their fists on the table," and declared that the West "cannot enforce everything" with pressure on the leadership (Das Parlament, 24-31 December 1993). --During his trip to China, Kohl defended his approach on human rights, saying that he had had an "intensive talk on human rights" with China's leaders but that it was "not a subject" for public discussion (N-TV, 19 November 1993). "History has shown," he argued in another interview, that "freedom leads to more freedom" and that free economic development "has an impact on human rights and the freedom of the citizens" (ARD, 19 November 1993). German Press Questions Policy Until the arrest of Chinese dissidents in early March, media reaction had been largely supportive of the Government's trade initiatives in China and its low-key approach to the human rights issue. The Munich daily Sueddeutsche Zeitung even said in a 25 January commentary that Kohl and Kinkel's efforts on human rights could "serve as a model" for dealing with China, because they demonstrated that "value-oriented" foreign policy does "not have to be an exercise in finger-pointing." Since the largescale arrests, however, the press has questioned this policy, criticizing both Germany and the United States for acceding to China's demands and suggesting that the West's approach is giving Beijing every reason to believe that the West will do nothing to jeopardize trade relations: --Following the arrest of prominent Chinese dissidents in early March, the influential daily Frankfurter Allgemeine on 5 March said the Chinese Government had shown what it thought of Western criticism: namely, "nothing." "For the sake of economic interests" the West will continue to turn a "blind eye" to the political suppression in China and even more so in Tibet, because the Chinese market is "too enticing." Europe's argument that the "closer the economic ties," the greater the chances for "political loosening up," has proved "illusionary." --On 17 February, Frankfurter Allgemeine chastized the German Government for the "shameful" way in which the city of Frankfurt had officially "invited and then uninvited" the Tibetan Dalai Lama to a celebration of Frankfurt's 1,200th anniversary, calling the move an "unnecessary kowtow" and an "undignified retreat" in the face of China's unreasonable demands. --The left-of-center Frankfurter Rundschau of 5 March said that "just as during Kohl's trip" to China, Beijing seems to have come to the conclusion that "all western admonitions" on human rights are meant "halfheartedly." France Pleased In announcing renewed relations with China, Foreign Minister Alain Juppe avoided any mention of human rights issues, while saying that the "political weight of China and its economic power" justified France's decision to "resume the ties of trust." He expressed hope that this could be brought about through an "intense political dialogue with Beijing" and "strengthening of economic relations" (France-Inter Radio, 12 January). Although they avoided pressing the Chinese on the issue, French leaders apparently did mention human rights in subsequent meetings with Chinese Foreign Minister Qian Qichen. Following a meeting with Qian in Paris on 22 January, Juppe spoke of a "new departure" in relations with China, saying that he had addressed the issue of human rights with Qian and that "a lot must still be done" by China in that area (AFP, 22 January). France's special envoy to China Alain Peyrefitte addressed the issue "with great subtlety" according to Le Figaro of 31 January, when he said at dinner with Qian in China that France, while it was unwilling to "impinge on a sovereign state's internal affairs," could "not be insensitive to matters relating to the respect of individual and group freedoms." Skeptical French Press The French press has criticized the government's failure to press the human rights issue, and has largely been skeptical of prospects for significantly improved trade relations. Several commentaries attacked the government for yielding to China's demands on Taiwan and expressed pique at what they viewed as China's favoritism toward the United States, which they saw as having maintained relations with Taiwan without incurring Chinese retribution. --The influential daily Le Monde was particularly skeptical. An editorial on 14 January expressed doubt about the terms of the joint communique, saying that the Chinese have shown "how little regard" they attach to their promises of trade advantages. As for human rights, it charged, Beijing is "convinced that 'hypocritical' Western concerns for human rights" will eventually be superseded by greed. On 25 January, Le Monde wrote sardonically that normalization of relations with China indeed represented a "new departure," since "commercial interests" had now "displaced the memory of the Tiananmen massacre," which the French government at the time had denounced with a determination "unmatched throughout the world." --A commentary published in Liberation of 16 February charged the French Government with "obsequiousness" and "grovelling" toward Beijing in pledging not to sell weapons to Taiwan. China's rulers "do not respect the rules" accepted by the international community with regard to human rights, weapons sales, or external trade, the commentary said, noting that the United States remained the "only country that still dares to say no to China" (Liberation, 16 February). (AUTHOR: SHAVER. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF ANALYST, ELAG, (703) 733-6120.) ELAG/GILISON cka 12/0031z mar

Foreign Economic Review: EASTERN EUROPE Vol. III, No. 09, 09 March 1994 Notice To Readers: FOREIGN MEDIA SURVEY is a subtitled series published by FBIS Europe/Latin America Group. The Survey series features brief summaries of foreign media reports on topical issues compiled from the most recent sources available to FBIS. Any and all comment or analysis contained herein is attributable to the cited media source. Europe Economic Review is a subseries of FOREIGN MEDIA SURVEY published by the East and West Europe Divisions of Europe/Latin America Group with contributions from FBIS overseas bureaus. Europe Economic Review is intended to supplement coverage of European economic issues by the FBIS Daily Reports for West and East Europe and other FBIS publications. Foreign news, feature, and editorial reports selected for summary in this publication normally do not appear as full-text translations in other FBIS publications. The contents of Europe Economic Review consist of abstracts of foreign media coverage of European economic developments under two main geographic headings: -- Western Europe: Drawing on West European, Canadian, and Turkish media, this section reports on national and regional economic issues, focusing on economic competitiveness, key industries, regional economic integration, internal economic policies and performance, and foreign trade and investment. -- Eastern Europe: Citing East European and, where appropriate, other foreign media sources, this section highlights East European efforts to rebuild national economies and achieve integration into the European Community and the global economy, focusing on policy debates and practical action geared toward the implementation of internal economic reforms and industrial restructuring and on developments in foreign trade, cooperation, and investment from national and regional perspectives. Under these two main headings, summaries of foreign media reports on all categories of economic issues generally are grouped under subheadings by subject, country, or region. FOREIGN MEDIA SURVEY is a U.S. Government publication. Its contents in no way represent the policies, views, or attitudes of the U.S. Government. ALBANIA NEW TELEPHONE EXCHANGE IN LAC: A new telephone exchange with 5OO numbers was inaugurated in Lac on 1 February. This new exchange tripled the capacity of the existing one. Future plans for 1994 anticipate over 1,000 telephone numbers to be added to the existing ones in town. The inauguration of this exchange was made possible due to cooperation with the Norwegian Telecom. (Tirana ATA in English 1115 GMT 3 Feb 94 AU) BUSINESSMEN'S CONFEDERATION: A group of representatives from the existing businessmen associations held a meeting on 3 February to create the Confederation of Albanian Businessmen. This association will be independent from the state, political parties, and religious communities. Its program requires that the confederation appears in the country's economic and social life as an organization that will represent and support the interests of industrialists, constructors, merchants, traders and all businessmen who will be organized in their federations. It will contribute to strengthen the democratic state and democracy in general as a worthy partner in the state- trade-union-employer triangle. This confederation will be an active organization to protect the financial position of the Albanian businessmen in face of foreign capital competition. The confederation will have relations with its analogous organizations abroad. (Tirana ATA in English 1138 GMT 4 Feb 94; au0502183794 AU) TRANSPORTATION MINISTER'S TALKS WITH GERMAN COUNTERPART: Transportation Minister Fatos Bitincka paid a one-day visit to Bonn at the invitation of his German counterpart, Wissmann. During the talks, both sides agreed in principle to sign an agreement on roads, goods, and passengers and another one on maritime as soon as possible. Wissmann said that Germany will continue to contribute to the development of Albanian infrastructure by granting its support through international organizations. Bitincka also met with Schmidtbauer, minister at the cabinet of Chancellor Kohl. They focused on developments in Albania and the situation in the region. Schmidtbauer assured Bitincka of a continuous support by the German Government in bilateral and multilateral aspects and presented some concrete possibilities of short-term, mid-term, and long-term cooperation. Bitincka and his delegation also held a working meeting in German Ministry of Foreign Economic Cooperation. (Tirana ATA in English 1108 GMT 5 Feb 94 AU) EUROPEAN UNION ENVOY OUTLINES 1994 ASSISTANCE PLAN: Elio Germano, EU Commission ambassador in Tirana, said today in a press conference that the European Union will continue to support the economic reform in Albania during 1994. The 75 million ECU assistance, i.e. 10 million ECU more than in 1993, will be used in three directions: 35 million ECU for salaries, 20 millions for PHARE program, and 20 millions in the context of a regional program. In conformity with an agreement signed in principle by the Albanian Government, the regional program will be applied to agriculture, medicine and education fields as well as to develop the private sector and infrastructure. The European Union, which started to operate in Albania in 1991, has so far assisted with 326 millions ECU ($38O millions). The EU assistance has been used for the development of different sectors and for the growth of food products. The assistance includes special programs for Albania, such as the Tempus Program, humanitarian aid given by governmental and non-governmental organizations, as well as concrete contributions by Italy, Greece and Germany. (Tirana ATA in English 0910 GMT 9 Feb 94 AU) ITALY, EU TO FINANCE ENVIRONMENTAL PROJECT IN SHKODER: A joint Italian-Albanian environmental protection project based in Shkoder began operation in December 1993. The goal of the project is to protect the environment of the city, famous for its cultural and historical interest and its excellent museum. The project will also have an educational component. The "Lvia Project" has employed 690 people so far engaged in the reforestation of the hills round the city, the improvement of roads, restoration of the Rozafa Castle, including work on hospitals, schools, libraries, and the city's museum. Gjon Markagjoni, Caritas director for northern Albania, said that "this is a good beginning," adding that in the future, the project will also cover the communes of Lac and Vau i Dejes. The additional activity will increase the number of workers by several hundreds. The Italian Government has allocated 3 billion liras to this joint venture. This sum will finance the "Lvia Project" only for several months. However, Markagjoni confirms that the European Union will contribute to the project in the near future. The EU financing will permit the employment of additional workers and expand project activities. Another Caritas representative said that future plans on the project will also cover agriculture, particularly vineyards. (Tirana ATA in English 1126 GMT 27 Jan 94 AU) ASSEMBLY ADOPTS AGREEMENTS WITH POLAND, SLOVENIA: At its morning session, the People's Assembly approved a bill on the ratification of the agreement over taxes on incomes and capital between the Republics of Albania and Poland and a draft agreement on the mutual protection, promotion, and stimulation of investments between the Republics of Albania and Slovenia. (Tirana ATA in English 1113 GMT 27 Jan 94 AU) PUBLIC TRANSPORTATION FARES TO RISE: Feim Godo, chief of the Road Transport Department at the Ministry of Transports and Communications, pointed out in an interview with Albanian Television on 27 January that the fuel price rise will also bring about an increase in public transportation fares. Concerning the price of public urban, interurban, and railway transportation tickets, the ministry has specified a possible increase in tariffs, viewing the fuel price rise and the recent wage increase as a possible rise in inflation. The Transports Ministry has envisaged a 40-percent increase in public transportation fares. Godo states that the price of monthly public transportation cards will also be increased. The ticket for an urban bus service will be five leks instead of three, thus denoting a 40-percent increase. While the price of a monthly card will be 24-30 percent higher. The train ticket fares will be about 30-40 percent lower than the price offered by private buses or cars. Consequently, the state will cover losses in public urban and railway transportation to the amount of 350 million leks per year. (Tirana ATA in English 1113 GMT 28 Jan 94 AU) DISTRIBUTION OF 2,000 CHINESE MINITRACTORS: The Ministry of Agriculture and Food reports that on 24 January, 2,000 Chinese mini tractors, which reached Durres port on 15-17 January, were distributed to 11 private service centers in various districts of the country. Ismail Bega, agricultural mechanisms director, stated that the mini tractors were sold to private farmers, mainly in northern areas, through four-year loans granted by the Agrarian Trade Bank at a 5-percent annual interest rate. The Albanian Government bought these mini tractors in China at the cost of $4.4 million to encourage local agricultural production. Despite the poverty prevailing in the Albanian countryside, peasants bought the mini tractors in a short period of time, thus showing that the Albanian agricultural market badly needs agricultural facilities. Land privatization, which was 92 percent completed by the end of 1993, brought about the use of that part of the land that for various reasons remained untilled during the last two years. A total of 9,000 agricultural appliances are presently functioning in the Albanian agriculture that counts 400,000 peasant families, each possessing a little more than one hectare of land. Thanks to loans granted by the Albanian State Bank and various banks, and through private traders as well, during the last two years some 1,600 tractors and 2,250 minitractors and cultivators have been brought to Albania from Germany, Italy, Britain, Greece, and other countries. (Tirana ATA in English 1125 GMT 29 Jan 94 AU) SAUDI FIRM TO INVEST $100 MILLION: RILINDJA DEMOKRATIKE reports today that the Saudi Arabian Holding Company will make an investment of $100 million in the fields of industry and agriculture in Albania. (Tirana ATA in English 1306 GMT 29 Jan 94 AU) CONSTRUCTION OF TIRANA-DURRES HIGHWAY TO BEGIN: The Ministry of Transport has signed a contract for the construction of the first 5 km of the Tirana-Durres highway. The whole project is financed by the Albanian state. The Albanian-Italian Euroteorema Joint Venture was announced winner of the tender. The construction is expected to start in 45 days and be completed in a year or so. The ministry sources confirm that this will open the way to other Albanian and foreign firms' making investments in the further construction of this highway. Work to construct the first 5 km will start from Tirana. The ministry has drafted other programs covering the restructuring of approximately 80 km of roads throughout the country. Fatos Pojani, director of the Roads Department at the ministry, states that the World Bank has accorded a favorable loan to help in the construction of roads. (Tirana ATA in English 1107 GMT 30 Feb 94 AU) TIRANA MUNICIPALITY AID TO FAMILIES: During the second half of 1993, the economic and social assistance sector in the Tirana municipality provided monthly economic assistance to 10,103 families, to the sum of 126 million leks. Economic aid for one family member has been given to 1,479 families, for two family members to 1,216 families, three members to 1,879 families, four members to 2,086 families and so on. As for 1994, the necessary documentation is already compiled to grant economic assistance to this category of the population. (Tirana ATA in English 1302 GMT 30 Jan 94 AU) TRAINING FOR BERAT UNEMPLOYED: The Office of Social Assistance and Former Political Persecutees in Berat is arranging the training of unemployed people in order to employ them in the private sector. This will also contribute to the consolidation of the small business sector. Tapir Numani, head of this office, said that 25 persons are being qualified at a private firm specializing in the production of bread and biscuits. Every worker will receive 5,100 leks for three months with the condition that the firm's owner will employ 70 percent of the workers trained there. The same practice will also be followed in a construction firm. At present, some 16,200 persons are receiving social assistance in Berat. This figure has increased because the Textile Mill products are not being sold, so many textile workers have become jobless and are receiving assistance. (Tirana ATA in English 1123 GMT 31 Jan 94 AU) STATE EMPLOYEES TO GET 'SIGNIFICANT' WAGE INCREASE: Starting with 1 February, employees of budgetary institutions will have a salary increase of 33 percent. Based on the decision by the Ministry of Labor and Emigration, a higher rise in wages is anticipated for senior state officials and institutions, including deputies. This is the second year that the budgetary employees have received a significant salary rise. The 1993 minimal wages, including the auxiliary sectors of state administration, will have a l00-percent increase, thus a monthly salary of 2,400 leks. However, the minimum wage will be 1O times lower than the highest wage in the budgetary sector. Both the rise and differentiation in salaries is made considering qualifications and positions in organizing and managing all state structures. The decision on the salary rise came immediately after the Albanian Parliament approved the decision on taxes on personal incomes. This decision does not cover monthly payments up to 4,000 leks and pensions. (Tirana ATA in English 1108 GMT 1 Feb 94 AU) RESTITUTION PROBLEMS IN FIER: The Commission for Restitution and Compensation of Properties in Fier have made only 60 decisions concerning houses, shops, and sites. So far, the commission has received 220 requests for the restitution and compensation of properties. Commission Chairman Shemedin Buci said that "we are facing many difficulties, although instructions have been very clear. In some cases, two or three persons have claimed the same site. That is why we have been cooperating with the district court." Main reasons for the slowness in this process were the conflicts between the Town Planning Department and former owners who insist on taking the site pertaining to them, despite the town regulatory plan. Another reason was also the uncontrolled sale of the buildings without first notifying their former owners. (Tirana ATA in English 1127 GMT 1 Feb 94 AU) PRIVATE FARMERS ASSOCIATIONS: By the end of December 1993, the number of private farmers associations reached 90. They are concentrated in central Albania in the region of Elbasan, where there are 21 of them, and in Lushnje, where 10 associations are now operating. Their number is limited in the north of the country, which is a mountainous area with limited land and populated by people with a strong feeling for land ownership. The area that a farmers association covers is approximately 750 hectares. The establishment of these associations has enabled the farmers to buy agricultural facilities and fertilizers and employ their family members in them. A great number of families have now become members of these associations. The Farmers Association of Kercukaj in Kavaje, central Albania, has 300 families as members, whereas the Farmers Association in Lac has 246 member-families. Stock-breeders, too, have set up their own associations. The largest of such associations is in Seman, in the Fier region, with about 700 head of livestock. A great number of the farmers who possess greenhouses in Rrashbull and Kruje, central Albania, have joined the stock-breeders associations. (Tirana ATA in English 1112 GMT 2 Feb 94 AU) SAUDI ARABIA, EUROPEAN UNION GRANT FOOD, MEDICAL AID: The World Islamic Bank and the World Islamic Aid Organization of Saudi Arabia have recently donated humanitarian aid to Albania. The Unite ship arrived in Durres port, containing 8OO tons of flour, 400 tons of rice, and 100 tons of sugar. Abdulla Elgami, director of this organization, said that this aid and the next shipments are being donated to poor Albanian families. The "Medecins Sans Frontieres" Organization has started work distributing medical aid and facilities to the Albanian hospitals. The distribution will continue for two months and will help improve conditions for vaccines and solve the problem of vaccination in general. The project will then continue with the distribution of medical equipment to outpatient clinics and medical centers all over Albania. This aid is funded by the European Union and amounts to approximately 5 million ECU. (Tirana ATA in English 1128 GMT 2 Feb 94 AU) HUMANITARIAN, TRADE ACTIVITY OF IRANIAN GROUP: The Iranian private association, Alba-Iran, began its humanitarian and trade activity in Albania two years ago. Its activity is concentrated in three main directions, health service, agriculture, and industry. The company has made some investments so far. Mr. Abbas Khonsari, head of the association, stated that they have brought to Albania 25 tractors, three harvesters, and different spare parts at reasonable prices. The foundation representatives in Albania expects another shipment with humanitarian aid to arrive soon. (Tirana ATA in English 1109 GMT 2 Feb 94 AU) ISRAELI FIRM READY TO BEGIN BUILDING APARTMENTS: "We are the first Israeli firm to invest in Albania," Oren Yona, vice president of YY International Investments Limited, said at a news conference organized in one of the halls of the Dajti Hotel in Tirana. "Our first step was an agreement we signed with the Albanian Government and which is a proof of its readiness to cooperate. We are on the verge of signing a contract for the construction of 1,600-2,000 flats. If work goes well, then the number of flats will increase to 6,000-7,000," Yona said. Responding to questions by reporters present in the conference, Yona said that his firm is ready to start work as soon as the contract is signed. He also expressed his conviction that, with the present situation in Albania, which is changing everyday in favor of foreign investors, his work in Albania will go well. (Tirana ATA in English 0912 GMT 21 Jan 94 AU) MAT RIVER BRIDGE: The bridge over the Mat River, which links Klos with remote areas of Mat district, was inaugurated on 18 January. It was a great investment of 9.5 million leks, which was accomplished in a relatively short period of time by a private construction firm. Funds for the construction of this bridge have been allocated twice since 1963, but the bridge has not built before because there were only two construction enterprises in Albania that were specialized in such projects. Recently, several construction enterprises in Mat competed for the bridge project. (Tirana ATA in English 1311 GMT 21 Jan 94 AU) BREAKS FOR FOREIGN INVESTORS: Finance Minister Piro Dishnica confirms that foreign investments are significant for Albania's economic recovery. Thus, foreign companies with a $50 million initial capital, opposed to some $100 million written in the contract, have launched their activity in Albania. Other companies with a total of $70 million investment will launch their activity under contracts. Foreign investors in Albania are free to transfer their profits. All investors in the production sector are exempt from taxes for a four-year period. The length of term may be prolonged for those companies that invest in the sector of tourism and continue to invest in production sectors. Foreign investors are exempt from customs duty for the goods used in the process of creating investments. (Tirana ATA in English 1104 GMT 23 Jan 94 AU) IMF FUNDING FOR IRRIGATION SYSTEM REPAIR: The Department of Agriculture and Food in Kavaje District reports that, after a study of the lowland area, Kavaje is one of the seven districts in which a pilot plan will be applied to repair irrigation and drainage systems. Investment for the plan will come from the IMF. Only 15 out of 26 pumping stations in the Kavaje District functioned during 1993. The Peqin-Kavaje drainage system was also improved and is able to function after serious damage suffered during the transition period. The 25 water reservoirs have also been repaired and are now functioning at full capacity. (Tirana ATA in English 1113 GMT 24 Jan 94 AU) ISLAMIC GROUP AIDS SHKODER ORPHANAGE: The Relief Benevolent Islamic Society has invested about $60,000 to reconstruct Shkoder Orphanage. The restoration started in February 1993 and will be completed in March 1994. The investments of this society comprise also the salaries of the orphanage staff, food and clothes for the children in the orphanage, as well as monthly pensions, i.e. $20 for about 2,000 orphan children. (Tirana ATA in English 1116 GMT 24 Jan 94 AU) CABINET ACTS ON TAX LAW, FOREIGN AGREEMENTS, PROPERTY: On 24 January, the Council of Ministers discussed and adopted the Law on Notaries presented by the Justice Ministry. The law sanctions the content and aim of notarial activity. The Council of Ministers also approved the Law on Taxation Over Property in the Republic of Albania. The above-mentioned law aims at increasing the fiscal contribution by the population presently living in the countryside. Compiled in complete accordance with the Law on Land, this law will help balance the contributions of urban and rural populations. The cabinet also approved in principle the Law on the Agreement Between the Russian Federation and the Republic of Albania on Judicial Aid and Relations on Civil, Family, and Penal Cases. It also approved the Law on the Ratification of the Agreement Between the Republic of Albania and the Republic of Tunisia for the Encouragement and Defense of Investments. The meeting also discussed the draft decision on the criteria of assessing state property that will be privatized or given to joint ventures and the rent for state objects given to third parties for usage. This draft was approved in principle. Besides problems of valuation in the conditions of promoting privatization due to the privatization of small units, small and medium enterprises, the decision also solves the problems of the final liquidation of their activity and especially their obligations. (Tirana ATA in English 0912 GMT 25 Jan 94 AU) IOCU MEMBERSHIP FOR CONSUMER ASSOCIATION: On 23 December 1993, the Albanian Consumer Association was accepted as a correspondent member of the International Organization of the Consumers' Union (IOCU), which has its headquarters in London. This independent association was formed on 1 September 1991 and is the first organization of Albanian consumers recognized by international organizations. Its main objective is to defend the interests of Albanian consumers. (Tirana ATA in English 1135 GMT 25 Jan 94 AU) LABOR MINISTRY, GREEK OAED 1994 COOPERATION PROGRAM: The Albanian Ministry of Labor and Social Assistance and the Greek Unemployment Office (OAED) recently agreed on a joint cooperation program for 1994. The medium-term program will include the exchange of specialists between the OAED and the Albanian Ministry of Labor and Social Assistance, a short training course by OAED for 6O Albanian youngsters at Greek professional schools, and the provision of new and reconditioned equipment for the professional education system in Albania. The program will be implemented in the context of the PHARE Program of the European Union and will be signed by the Albanian Government during 1994. Based on the needs in Albania, the PHARE Program will provide technical assistance in the organization, employment, professional training, and establishment of the necessary structures for the functioning of the programs. In February, the two sides will sign a detailed financial agreement in Athens. Some parts of 1994 activities will be financed by a European Union program. (Tirana ATA in English 1124 GMT 25 Jan 94 AU) FOREIGN INVESTMENT IN ELBASAN DISTRICT: Some 20 foreign companies, 18 of which are joint ventures with the state and two are private firms, are investing in Elbasan District. A total of $7.5 million have so far been invested in a variety of enterprises, and an additional $7 million will be invested during the first half of this year. Twelve investments cover productive enterprises. (Tirana ATA in English 13O1 GMT 26 Jan 94 AU) EUROPEAN UNION HUMANITARIAN AID: A statement by the European Union (EU) Commission, a mission of which will visit Tirana confirms that the EU has granted an additional 1O million ECU to Albania as humanitarian aid. Of that sum, 6.3 million ECU will be used to repair the country's eight-year schools according a plan provided by the Albanian Government. The pupils of these schools are from six to 15 years of age. One million ECU will be used to construct the houses of former political prisoners and provide them with social assistance. The EU has financed a 2 million ECU program for building lOO flats for former political prisoners in Tirana. The present grant will finance the construction of another 60 flats and additional social assistance. In accordance with the request of the Albanian Government, the EU will grant 1.2 million ECU to finance a part of the principal repairs (walls, windows, shelters) of all the Albanian prisons and to equip them. A pilot program for seven prisons selected by the Albanian Government will finance organized activities for the prisoners. A sum of 1.5 million ECU is going to be used for small projects titled "Close to Albanian Citizens." There are funds to be used by Albanian or foreign non-governmental organizations for such small projects. The EU has already financed 24 projects of that kind, such as supplying medicines and clothes, reconstructing a center for Albanian handicapped children, and furnishing farmers with seeds and chemical products. The EU has given a larger fund for such projects this time because they have previously been successful in Albania. A EU Commission mission from Brussels will come to Albania in order to define the execution of these projects. (Tirana ATA in English 1316 GMT 26 Jan 94 AU) TRANSPORTION AGREEMENT WITH DENMARK: An agreement on the international transport of passengers and commodities was signed between the Kingdom of Denmark and the Republic of Albania in Copenhagen on January 25. The agreement was signed by the Albanian minister of transport and communication, Mr. Fatos Bitincka, and the omnipotent of the Danish Government and state secretary for transport, Mr. Ole Zaki. (Tirana ATA in English 1323 GMT 26 Jan 94 AU) BULGARIA COMMISSION REVIEWS RECONSTRUCTION, DEVELOPMENT FUND: On 2 February the Parliamentary Economic Commission opened discussions on a report on the state and 1993 performance of the State Reconstruction and Development Fund. The fund was set up in 1991 to consolidate funds extended to this country by international financial institutions and other persons and allocate them in the form of loans for the purposes of structural adjustment of Bulgaria's economy or for servicing Bulgaria's foreign debt. The funds are kept in accounts at the central bank but there are nine commercial banks servicing them. According to the figures submitted to the commission, the fund's proceeds slightly exceed 19 billion leva and the available funds amount to some 1O billion leva. (Sofia BTA in English 1545 GMT 2 Feb 94 AU) FIRST PRIVATE BANK EXPECTS PROFIT FOR 1993: In contrast to most of the Bulgarian commercial banks, the First Private Bank ended 1993 with a profit, the bank's executive director Emiliyan Dimitrov informed the PARI daily. The final figures are not yet known, but Dimitrov expected a net profit of about lOO million leva, most of which will be retained to build up the bank's reserves as required by law. Dimitrov said that about 1O million leva would be distributed as dividends to shareholders. Dimitrov attributed the lower profits in 1993 to the accumulation of bad debts, which increased from 9 percent in 1992 to 12-13 percent in 1993. However, he considered this percentage normal for the conditions prevailing in Bulgaria. One of the nonperforming loans is that made to the failed Yambol Bank. However, Dimitrov said that the Bulgarian National Bank is likely to reach agreement soon with the committee of creditor banks. (Sofia PARI in Bulgarian 2 Feb 94 p 4 AU) RAYON PLANT ENGAGED IN WASTE REDUCTION PROJECT: A project for the reduction of industrial waste, developed at the World Center for Environmental Protection in New York, will be implemented in the Sviloza Rayon Plant in Svishtov, northern Bulgaria, the director of the regional inspectorate of environmental protection, Kostadin Gugov, told the local BTA correspondent. The plant will save between U.S. $25,000 and 50,000 as a result of the project, which is expected to be completed this year. It is part of a long-term program for pollutants reduction along the Yantra river financed by the U.S. International Development Agency. (Sofia BTA in English 2319 GMT 3 Feb 94 AU) JOINT INVESTMENT BANK PLANNED WITH RUSSIA: Ten Bulgarian banks are going to set up a joint venture investment bank with Russian partners, TRUD reported on April, citing Bulgarian bankers. Touristsportbank, the Slavyani Bank, the Bulgarian Post Bank and the Capitalbank have submitted their documents for the registration of the new partnership. They expect to receive a banking license in three months. Several large Russian banks, power engineering companies, and insurers will be partners in the bank. (Sofia BTA in English 1212 GMT 4 Jan 94 AU) FIRM'S STOCK TO TRADE ON NASDAQ: For several days now the U.S. Stock Exchange National Association of Securities Dealers Automated Quotation System (NASDAQ) has been offering shares of Lifechoice International Inc., the joint-stock company said. Its officials say this is the first of the moves aimed at taking the shareholders on the U.S. stock market which will bring about a higher liquidity of investments. Two months ago Lifechoice Int. launched an advertisement offensive in the press. In terms of profitability, with its predicted dividends the company is way ahead of any other proposals for investment. The setting up of the company with Canadian holding last June raised a stir. It was said to be the first Bulgarian company to enter the international markets both with its output and with its shares. Lifechoice Int. attracted attention following reports on the development of Factor-R, a new medicine for immuno-prophylaxis against HIV. For the time being, most experts decline to comment either on the projected dividends or on the effectiveness of the widely advertised medicine. Some would even say all this fuss was nothing but a publicity stunt related to the sign-in that has been launched to increase the company's capital to 100 million leva. (Sofia BTA in English 1541 GMT 4 Jan 94 AU) FIRM TO BUILD TOWN IN RUSSIA: In the face of strong international competition, the Silistra branch of the Bulgarian Construction Trust has won a contract to build a modern town for 60,000 inhabitants in the vicinity of Rostov on Don, in Russia. Construction work has already started. The work is being financed by Germany, and the housing is intended to accommodate the families of former Soviet troops returning from the former GDR. The work includes constructing 500 apartment blocks, a school, two kindergartens, and a medical clinic, together with all the necessary services and infrastructure. An advance group of workers has already completed a temporary settlement and services for the main contingent of construction workers. Excavation work is now underway. It is expected that 4,000-5,000 Bulgarian workers will be employed at the site during the summer months. (Sofia Khorizont Radio Network in Bulgarian 0900 GMT 5 Feb 94 AU) FOREIGN EXCHANGE RESERVES FALL: Referring to information released by the Bulgarian National Bank, STANDART NEWS reported on 5 February that at the end of January the central bank's foreign exchange reserves were valued at U.S.$664.44 million. During January the bank's dollar reserves fell by about 36 million, as a result of debt service payments to the IMF and the European Union, the paper reported. (Sofia BTA in English 1911 GMT 5 Feb 94 AU) BUSINESS MEETING WITH RUSSIAN COMPANIES: The first Bulgarian- Russian meeting in Veliko Turnovo, central Bulgaria, ended with an exhibition sale. The meeting, initiated by the local Chamber of Commerce and Industry, was attended by officials of 16 Russian companies and industrial associations operating in the food processing industry, electronics, power engineering, mechanical engineering, timbering and the cellulose and paper industry. (Sofia BTA in English 1644 GMT 6 Feb 94 AU) NEW TRUCK SUCCESSFULLY TESTED: The automotive plant in Veliki Preslav, northeastern Bulgaria, has successfully completed the testing of the latest Bulgarian truck Preslav-206 The first 20 trucks have been assembled and will soon be put on the market. The truck's 90 HP turbo-engine has improved technical and performance characteristics. The next model, the Preslav-206K, which is designed to service small municipal economies, is being tested at the moment. Other types of trucks are being also developed and will be available in the market soon. (Sofia BTA in English 1644 GMT 6 Feb 94 AU) LOVECH FIRM TO ASSEMBLE U.S. BUSES: The Balkan Mechanical Engineering Company in Lovech, northern Bulgaria, which until recently has assembled the Russian Moskvich car, is planning to change over to assembling American buses. The company is expected to assemble 120 buses this year and intends to increase its annual production to 340 buses. The deal was concluded on a production sharing basis, in partnership with the automotive plant in Gotha, Germany, and the project is financed by a German privatization agency and a Swiss stockholding company. (Sofia BTA in English 1644 GMT 6 Feb 94 AU) PRIVATE VRATSA COMPANY MAKING TELEVISION SETS: The Videomax Private TV Company in Vratsa, northwestern Bulgaria, began manufacturing three models of Philips TV sets this year. Philips provided the technological concept and the basic components. The new TV sets have 37, 51, and SO cm flat rectangular screens, 90 channels, cable television tuners, teletext decoders for the Roman and Cyrillic alphabets, and remote controls. This year the company plans to start producing new Daewoo TV sets. According to Videomax President Kiril Modrev, most of the company's production is exported to Russia. (Sofia BTA in English 1644 GMT 6 Feb 94 AU) ELECTRICAL FIRM DIVERSIFIES PRODUCTION: The Ekita Private Company in Petrich, southwestern Bulgaria, has a small plant making electric motor commutators. Three years ago it began manufacturing electronic clocks. Now it makes about 40 types of starters for U.S. and European-made cars, using electrical equipment produced by Bosch, Chrysler, Delco, Lada, and Mitsubishi. According to Ekita President Kiril Georgiev, the plant uses highly efficient U.S. technologies and exporting its products to Europe, the United States, and Canada. The annual production capacity of the Petrich- based company is about two million units pieces (as received) of various sizes. (Sofia BTA in English 1644 GMT 6 Feb 94 AU) MARC RICH WINS STATE TENDER FOR POWER STATION COAL: On 8 February the daily KONTINENT led with an article saying that Marc Rich of Switzerland has won the tender for the delivery of 120,000 tons of coal from South Africa. Five Western and several Bulgarian companies took part in the tender competition. It is still unclear why the National Electricity Company accepted this particular offer and rejected all the rest, KONTINENT noted, adding that Marc Rich is the main supplier of crude oil to the largest refinery in Bulgaria, Nef tokhim-Burgas. The paper voiced doubts that the Swiss company's offer really was the best one. The SDS daily DEMOKRATSIYA also questions the advantages of the Marc Rich offer. (Sofia BTA in English 1155 GMT 8 Feb 94 AU) SOFIA-BASED BANKS PAY LESS PROFITS TAX FOR 1993: The profits taxes paid by Sofia-based banks for 1993 total 742 million leva, 24 CHASA reported on 8 February, referring to data released by the Sofia tax administration. This amount represents only 14 percent of the budget projection of 4,760 million leva and 17 percent of the profits tax collected in 1992, the paper notes. The reported reason is the low profits that the banks posted in 1993. (Sofia BTA in English 1259 GMT 8 Feb 94 AU) AGENCY CHIEF DENIES BEST COMPANIES ALREADY PRIVATIZED: In an interview published in the latest issue of the CASH weekly, Khristo Pamukchiev, chairman of the Supervisory Board of the Privatization Agency, said that "nothing has been sold in Bulgaria yet to justify the claim that 'the tidbits' have already been eaten." "The Bulgarian enterprises are in such a grave state that we cannot expect large financial proceeds. That is why in the next few years we will pursue a policy of encouraging national investors. The Privatization Agency intends to set into operation several additional techniques and levers such as leasing, management contracts with purchase and sale clauses, and the setting up of restorable privatization funds from which people will draw money at favorable terms and will gradually repay it from their profit," Pamukchiev says. (Sofia BTA in English 1143 GMT 9 Feb 94 AU) RECONSTRUCTION, DEVELOPMENT FUND HAS 9.9 BILLION LEVA: STANDART NEWS reported on 9 February that the state Reconstruction and Development Fund has 9.9 billion leva available for investment. According to a report on the state of the fund, last year it granted credits totalling some 2.8 billion leva. The National Electricity Company received 728 million leva and the Sofia Municipality was granted a 15O million leva loan for the construction of the new metro system, which it has already paid back. Balkancar got 300 million leva to finance exports to Poland and Glavbolgarstroy was granted DM40 million for bank guarantees in connection with construction projects in Russia, at 10 percent interest and to be repaid by the end of the year. The comparatively long list of enterprises and organizations financed by the fund does not include a single private company, STANDART NEWS observes. (Sofia BTA in English 1143 GMT 9 Feb 94 AU) DANUBE RIVER PORT IDLE: Never in its 155-year-long history has the Danube river port of Lom faced such a crisis. The quays are empty, and the 600 employees, who are completely idle, fear heavy layoffs. According to port manager Kuzman Khristov, the management has no other choice, because the port lost almost 5 million leva last year. All attempts to conclude new goods handling contracts have failed. Even longstanding business partners like Ukraine, which delivers power station coal and metals for the Kremikovtsi Plant, have failed to sign any new contracts. (Sofia DEMOKRATSIYA in Bulgarian 22 Jan 94 p 5 AU) PRIVATE BUSINESS LEADER MOLLOV INTERVIEWED: In an exclusive BTA interview, Valentin Mollov, president of the Confederation of Industrialists (G-13, an organization of big private business), denies that G-13 has political ambitions. The group is in favor of the majority electoral system for the next parliamentary elections. Mollov believes that, given Bulgaria's fledgling market relations and democratic practices, it is dangerous to have lobbies in the political circles formed by private firms or groups. The G-13 leader sees no worthy politicians among Bulgaria's present statesmen who might lead the country forward. G-13 is waiting for government clearance on investment in various projects: a free transport corridor to the Aegean, construction of a port at Alexandropolis and of tunnel beneath Mount Shipka in the Balkan range, and a proposal to take over an unused military material base, guaranteeing its exploitation. G-13 has no formal contacts with G-21, the Association of Bulgarian State Industries. Mollov thinks the association is faced with serious problems regarding bad bank receivables and their huge debts to the state. (Sofia BTA in English 13O9 GMT 26 Jan 94 AU) FRENCH PLAN FOR FERROUS METALLURGY RESTRUCTURING CRITICIZED: Bulgarian experts have serious objections to the project to restructure the nation's ferrous metallurgy sector assigned to French consultants Sof fres Conseil under the PHARE (Economic Reconstruction Aid for Poland and Hungary) Program, DUMA reports on 27 January. On January 12 corporate managers in the sector said that the French firm had failed to move an alternative development program for the sector's major four companies, the report says, and they also pointed to other inadequacies. Most experts of the Ministry of Industry and the Institute of Metallurgy believe that the project's impact will be adverse, the daily adds. (Sofia BTA in English 1230 GMT 27 Jan 94 AU) PRIVATE PRODUCTION INCREASES IN 1993: The TRUD daily reported on 27 January that there was a further expansion of private initiative in all sectors of material production in 1993. Output totalled nearly 44 billion leva (more than U.S.$1 billion, with trade accounting for 44 percent, construction -- 22 percent, industry -- 21 percent, and transport -- 7 percent. Production rose 22 percent from a year earlier (at 1992 prices), with industry and trade growing even more, the paper reported. However, only in trade is the share of the private sector larger than that of the state-run enterprises and the cooperatives. Private firms accounted for 57 percent of retail sales in 1993, up from 46 percent a year earlier. (Sofia BTA in English 123O GMT 27 Jan 94 AU) PARLIAMENT APPROVES NEW EXCISE DUTIES: At its session on 27 January, the National Assembly took the second reading of the Excise Act and approved the excise duty tariff. Under the new tariff, cars with less than 1,800 cubic centimeters (cc) cylinder displacement carry no excise duty; cars from 1,8OO to 2500 cc displacement will carry a duty of 10 percent and cars above 2,500 cc 40 percent. The duty on lead-free gasoline with an octane rating below 93 is 60 percent; lead-free gasolines above 93 octane will carry a l00- percent duty. Ordinary leaded gasoline of grades A-93 and below will attract a duty of 70 percent, while gasoline above this octane number will carry a duty of 110 percent. Diesel fuel carries a duty of 30 percent. Erotic and pornographic products will carry an excise duty of 70 percent; perfumes will carry a duty of 40 percent; and articles made of precious metals, including jewelry, will carry a duty of 20 percent. Audiovisual equipment carries an excise duty of 10 percent; wine carries a duty of 2 leva per liter; and plum brandy, 30 stotinki per alcoholic percent. (Sofia Khorizont Radio Network in Bulgarian 1600 GMT 27 Jan 94 AU) TRADE TALKS WITH INDIA: The Bulgarian-Indian Intergovernmental Committee for Economic, Scientific and Technological cooperation will hold its 1Oth session from 1 to 3 February. The committee is co-chaired by Deputy Prime Minister and Minister of Trade Valentin Karabashev for Bulgaria and Minister of Agriculture Balram Jakhar for India. The Indian delegation will include about 10 senior Indian Government officials and a group of Indian businessmen. Representatives of a number of Bulgarian companies will also take part in the session. The sides are expected to sign an agreement on the avoidance of double taxation and map out measures to curb the decline in Bulgarian-Indian trade. As compared with U.S.$90 million in 1985, the volume of trade between Bulgaria and India fell to $9.6 million in 1992. In the first nine months of 1993 it was $13.5 million. Bulgaria's exports to India mainly comprise petroleum products, ferrous and nonferrous metals, industrial goods, chemicals, fertilizers, electrical equipment, pharmaceuticals, and rare metals. Imports from India include cars, knitwear, garments, leather wear, mica, jewelry, pharmaceuticals, and spices. The Indian side wants to invest in Bulgarian industry, a Trade Ministry official said. There is great interest in tractors, bulldozers, hoisting and hauling equipment, lighting fixtures, and seamless pipes. (Sofia BTA in English 1826 GMT 27 Jan 94 AU) INDUSTRIAL MANAGERS POLLED ON INVESTMENT POLICY: According to a survey of corporate finance taken by the National Statistical Institute in late 1993, 78 percent of corporate managers in the nonfarming sector say high interest rates were a serious setback in 1993, while 62 percent point to indebtedness. Only 20 percent of respondents say the loss of markets was a major cause of fiscal instability. According to inconclusive estimates by corporate managers, tangible and nontangible investment in 1993 amounted to some 10,500 million leva, 500 million up from early-year forecasts. Yet investment has been shrinking. Money was spent to maintain old assets and less on new technology. Experts put that down to the fact that capacities were utilized only 57 percent. Some 70 percent of investors think money should be invested in upgrading existing assets. Investment plans for 1994 are within the investment framework set in 1993, the survey shows. The high prices of investment goods are seen as a key reason for constraints on investment in 1994. (Sofia BTA in English 1235 GMT 28 Jan 94 AU) HEINEKEN, ZAGORKA BREWERY FORM JOINT VENTURE: The Dutch Heineken concern and the Zagorka Brewery in Stara Zagora will set up a joint venture. The Dutch side proposes to invest $35 million over a 4- to 5-year period with a view to increase the output up by 50 percent. The products will keep the Zagorka trademark, and 10 percent of the brewery's production capacity will be used for producing Heineken. (Sofia BTA in English 1446 GMT 30 Jan 94 AU) BULGARIAN-FRENCH FIRM TO BUILD MOTELS: The Bulgarian-French joint-stock company Bulphoenix will build motels in this country, Chamber of Tourism Chief Tsvetan Tonchev said. The 1994-95 construction plan includes 12 sites. A French bank will provide a loan of 0.25 million French francs at 6 percent for the construction. The Bulgarian-French company will be registered by March this year. The French side, including Phoenix and another three companies, hold 48 percent of the shares, and the Bulgarian side (Touristsportholding and three other companies) 52 percent. (Sofia BTA in English 1446 GMT 30 Jan 94 AU) FUNDS SOUGHT FOR NEW DISCOUNT BANK: East-West European Holding Group and the Financing House Temex Ltd. are launching a sign-in for raising funds to set up a Bulgarian Discount Bank. The bank will start with 200 million leva authorized capital and will apply to the central bank for a domestic license. Discount and clearing operations and check accounts will be serviced with priority. (Sofia BTA in English 1446 GMT 30 Jan 94 AU) FIRST PRIVATE BANK TO OPEN BRANCH IN GREECE: The First Private Bank has developed a project for opening its first overseas subsidiary in Greece, First Private Bank Executive Director and Deputy Chairman Emiliyan Dimitrov said. So far the bank has opened offices in Izmir, Frankfurt, Vienna, and Moscow. (Sofia BTA in English 1446 GMT 30 Jan 94 AU) PRIVATE FIRM PRODUCES TELEVISION SETS: The market saw the first TV sets of the Bedson trademark. The new product was developed and tested by the private company of the same name in Shumen and specialists of the Dutch firm of Phillips. (Sofia BTA in English 1446 GMT 30 Jan 94 AU) NATIONAL BANK AUCTIONS SECURITIES: The press reports that the Bulgarian National Bank sold securities worth 1.5 billion leva at auction on 31 January. "This is a record, as we auctioned off all securities on offer," Plamen Oresharski, chief of the bank's Treasury and Internal Debt Department, was reported as saying. The proceeds of the sale will go towards financing the budget deficit. The securities sold at an average of 77.82 leva for a par of 100 leva. The 22.18 leva margin gives a redemption yield of 28.5 percent. (Sofia BTA in English 1101 GMT 1 Feb 94 AU) NEW RO-RO FERRY TO NOVOROSSIYSK: At a meeting in Novorossiysk, the chiefs of Burgas and Novorossiysk Ports agreed to open a new ferry service between the two ports. The new service is intended to save Bulgarian trucks from following the long and unsafe route through Romania, Moldova, and Ukraine. The Bulgarian party confirmed its readiness to open the service immediately, all the more that the construction of a Ro-Ro (roll on-roll off) terminal in Burgas is already under way. Under the project it is envisioned to include passenger ships in the service too. The Burgas Port delegation insisted on two vessels a week: one sailing from Varna and the other from Burgas. However, the capacity of Novorossiysk Port allows handling of only one voyage a week, and the parties agreed on this. (Sofia BTA in English 1425 GMT 1 Feb 94 AU) FIGURES ON 1993 PRODUCTION: In the view of the National Statistics Institute (NSI), production enterprises have little opportunity to recover in the present economic situation. According to the NSI, in 1993 over half the industrial sectors were unable to find markets for their products, One enterprise in eight had to shut down its operations during the year, as a result of which the state sector shrank by 1O percent and the private sector by 8 percent. All in all, the volume of production fell by 12 percent compared with 1992. Enterprises in the material production sphere produced goods valued at 357 billion leva during 1993, while retail goods turnover was 118 billion leva, 86 percent of which was in retail trading and the rest in public catering. Compred to 1992, this represents a decline of 3.6 percent 1992. Receipts from the sale of goods and services showed a decrease of 12 percent. The continued decline in activity on the part of state and cooperative enterprises was to some extent compensated for by increased activity in the private sector, whose share of total output rose from 8.6 to 12.3 percent during the year, being valued at 44 billion leva. In 1993 the official inflation figure was 15.6 percent lower than in 1992. Inflation was fueled by the higher prices of energy and postal and telephone services. The cost of services rose by 93.66 percent during the year, and food products increased in price by an average of 40 percent. The NSI estimates that the GDP will decline by 2.5 percent during 1994. (Sofia PARI in Bulgarian 28 Jan 94 p 3 AU) PRELIMINARY 1993 ECONOMIC DATA: According to preliminary data of the National Statistical Institute (NSI), annual inflation in 1993 amounted to 63.9 percent, which falls within projections, according to a 26 January KONTINENT report, quoting the boss of the NSI Economic Statistics Department Milcho Mladenov. Foods rose 60.4 percent, non-foods 55.9 percent, and services 93.7 percent in 1993. Wages rose by an average of 52.3 percent and social security payments by 50 percent. By last October, the jobless totalled 750,000. In 1993 the GDP fell by 9 percent, industry shrank by 8.2 percent, and construction by 22.6 percent. Transport was the only sector to report a rise of 4.5 percent. According to preliminary NSI estimates, the private sector accounted for some 25 percent of the GDP in 1993, up from 15 percent in 1992. (Sofia BTA in English 1209 GMT 26 Jan 94 AU) PRIVATE OIL COMPANIES ATTACK NEFTOKHIM: Following the first meeting yesterday between private and state-owned oil companies, it emerged that private oil importers insist that the state-owned Neftokhim Refinery be transferred to the direct jurisdiction of the government, STANDART NEWS reported on 2 February. The private firms allege that Nef tokhim owes the exchequer billions of leva and that these debts are rescheduled over and over again. At the same time, Nef tokhim keeps exporting petrol and diesel fuel at a loss because it cannot sell it in Bulgaria, states a letter from the private firms Eltex, Europetrol, Petromax, Litex, and Elpida to the president, parliament, and government. According to the private companies, Nef tokhim preferred cargo deliveries from Western partners under the pretext that they were more accurate. This, however, is not fair and harms the interests of the Bulgarian suppliers, the private oil companies' bosses argue. Nef tokhim charged U.S.$18 for processing a ton of crude from Bulgarian companies, but only $9 for crude supplied by Marc Rich. (Sofia BTA in English 1339 GMT 2 Feb 94 AU) CABINET CLOSES KOMI JOINT TIMBER ENTERPRISE: On 10 January the cabinet decided to close down the Bulgarian wood-processing enterprise in the Komi Autonomous Oblast in the Russian Federation. The decision was prompted by Moscow's refusal to amend the agreement on joint wood processing to make it more profitable for Bulgaria. The cabinet ministers insisted on increasing the Bulgarian wood- processing quota from 38 to 42 percent and reducing the tariffs imposed on transporting the wood on Russian territory. A further demand was for permission to export timber directly from Komi to third markets. Khristo Todorov, head of the Forestry Committee, said that at the negotiations in September 1993 an agreement was reached with the Russian experts. However, in November Moscow said that the Bulgarian demands were unjustified. He added that beginning in April the enterprises in Usogorsk and Gorniy Mezen will gradually be shut down. Two other joint Bulgarian-Russian enterprises in Blagoevo and Mezhdurechensk will also shut down in mid-June, as it has become impossible to continue their self-financing and self- maintenance under the current Bulgarian-Russian agreement. The 4,600 people currently employed at the four enterprises will have to seek other jobs as of September 1994. "Before 1991 we used to process 3.6 million cubic meters of timber in Komi. Last year production dropped to 1.2 million cubic meters," Todorov pointed out. He added that the cessation of timber supplies from Komi will not cause a crisis in the Bulgarian timber- processing industry, as domestic timber production will satisfy local needs. However, talks on joint timber production could continue and an agreement could still be reached, he said. Prime Minister Berov has invited Komi's leaders to Sofia for talks. (Sofia 24 CHASA in Bulgarian 11 Jan 94 p 13 AU) CABINET BARS OFFICIALS FROM BOARDS OF STATE COMPANIES: On 13 January the Council of Ministers decided to prohibit National Assembly deputies, ministers, heads of committees, and oblast administrators from serving on the boards of directors and supervisory councils of state companies. The ministers also approved a code of regulations for managing state companies. The ban on serving as directors of state firms extends to mayors of municipalities and their deputies, secretaries of municipalities, senior officials of the Privatization Agency, and relatives of members of the managements of state companies. Until now, the majority of top state officials have derived additional income -- up to one and a half times their regular salaries -- from serving on different boards of state companies. Under the new regulations, executive directors who also serve on the boards of state firms may draw salaries of up to 35O percent of the national average wage. (Sofia 24 CHASA in Bulgarian 14 Jan 93 p 13 AU) PLOVDIV PEOPLE'S BANK REESTABLISHED: A group of 21 heirs of former members of the Plovdiv People's Bank have reestablished the bank, which was founded in 1913 for the purpose of providing credit for the middle class. The bank was closed in 1951 by government decree and its assets transferred to the State Savings Bank. The founders of the restored bank are the sons, daughters, and grandchildren of prominent Plovdiv families. Plamen Dichev, the chief initiator of the move to restore the bank, was chosen as its chairman. (Sofia PARI in Bulgarian 17 Jan 93 p 4 AU) NATIONAL MEETING OF STOCK EXCHANGES: "Bulgaria's stock market is chaotic, but so is the country's economy," the executive director of the Sofia Stock Exchange, Bozhidar Danev, said after the end of the second national meeting of stock exchanges and divisions on January 14 and 15. "The economy is stagnant and the stock markets are also flat. To talk of a stock market in Bulgaria is an overstatement for the time being," Danev said. "Wildcat exchange trade is going on now, but the taming of the economy will lead to a taming of the stock markets as well," he added. According to Danev, capital has been immobilized over the past few years, above all due to the moratorium on transfer of state property. Capital movement is now more restricted than in the first years prior to the passage of the Privatization Act, he added. The participants in the meeting coordinated positions on security trading and adopted mutually acceptable principles and rules. A Standing Coordinating Group was formed to draft uniform codes for stock trading. They also adopted a declaration expressing readiness to provide stock market mechanisms to the state authorities for their fullest possible utilization in the privatization process. The existing bills on securities and stock exchanges were considered. Differences will be thrashed out at a forthcoming roundtable discussion, organized jointly with World Bank resident representative John Wilton and experts of the Frankfurt Stock Exchange and the U.S. Securities and Exchange Commission, Viktor Papazov, executive director of Sofia's First Bulgarian Stock Exchange, said. (Sofia BTA in English 1106 GMT 17 Jan 94 AU) UNEMPLOYMENT RISE SLOWS IN DECEMBER: According to the National Employment Service, the number of registered unemployed rose at a lower rate in December 1993. The total number of jobless rose by 0.24 percent in December, reaching 626,141, or 16.38 percent of the working population. In December 42,017 persons registered for unemployment benefit, 8,666 fewer than in the previous month. During the month 23,824 workers were made redundant in industry and 3,560 employees in the nonproduction sector. Registered job vacancies fell to 6,059, compared to 7,294 in November. (Sofia PARI in Bulgarian 18 Jan 94 p 3 AU) PENSION INCREASE EXPECTED IN MARCH: As of 7 March pensioners are expected to receive a 78-percent increase to compensate for inflation, plus a monthly allowance of 280 leva. Nikolay Nikolov, head of the Pensions Department of the Ministry of Labor and Social Welfare, said on 18 January that this would happen if the new compensation mechanism is approved. According to the new mechanism proposed by the government, pensions will be updated every six months, not every quarter as has been the case so far. The minimum social pension will rise from 450 to 800 leva per month, plus the 280 leva allowance. (Sofia KONTINENT in Bulgarian 19 Jan 94 p 1 AU) BULGARIAN-JAPANESE ECONOMIC COUNCIL MEETS IN TOKYO: The Bulgarian-Japanese Economic Council held its 13th session in Tokyo on 19 January with the participation of representatives of Japanese business circles and a Bulgarian delegation headed by Bulgarian Chamber of Commerce and Industry Chairman Bozhidar Bozhinov. The forum agreed the terms for restarting the credit line for insuring Japanese exports to Bulgaria and for extending a two-tranche loan to stimulate small and medium-sized private enterprises. The hosts expressed their readiness to increase technical assistance to Bulgaria within the International Cooperation Fund. (Sofia BTA in English 1116 GMT 20 Jan 94 AU) WEST EUROPEAN CONSORTIUM TO BUILD MARITSA IZTOK UNITS: A consortium comprising German, French, and British companies is planning to construct a further two generating units at the Maritsa Iztok-1 Thermal Power Plant, 24 CHASA reported on 20 January, citing Power Engineering Committee Chairman Nikita Shervashidze. The construction will cost 2 billion French francs, to be provided by the consortium as a loan. The new units, each of 175 megawatts, will replace older ones and will operate on low-heating-value types of coal. (Sofia BTA in English 1116 GMT 20 Jan 94 AU) GREEK BANK OPENS SOFIA OFFICE: The Greek Macedonia Thrace bank has opened an office in Sofia. It is the first northern Greek lending institution to open offices in this country. The bank will service payments between Bulgaria and Greece and will join in the planned founding of the Orthodox Bank, in which the Moscow Patriarchate will also hold a stake. The Bulgarian National Bank is expected to issue a permit for the opening of an Orthodox Bank subsidiary in Sofia. (Sofia BTA in English 1116 GMT 20 Jan 94 AU) PROBLEMS WITH JOINT VENTURES: Joint ventures attract little investment but create lots of problems, says an article in PARI on 21 January. The daily puts the amount of foreign capital invested in Bulgarian-based joint ventures at $53.1 million. The problems are in-built in the joint ventures' memorandums of association, the article says. According to the author, these memorandums fail to clear up some essential aspects of the companies' operation. Conditions are created for undervaluation of the Bulgarian contribution because the Bulgarian partner contributes its entire share right from the beginning, while the foreign partner contributes its share later and piecemeal, the feature says. One possible way to solve the numerous problems of the joint ventures is to treat their formation as privatization. This approach has been adopted in Hungary, Romania, and other countries, PARI recalls. (Sofia BTA in English 1127 GMT 21 Jan 94 AU) 1993 BUDGET CASH DEFICIT REPORTED: The 1993 cash deficit totals 32.223 billion leva, about 11 percent of Bulgaria's GDP, on which official statistics are not yet available. Only 74.5 percent of taxes have been collected. Financial institutions have paid a mere 14.5 percent of due contributions, the BULGARSKI BIZNES weekly reports. (Sofia BTA in English 1631 GMT 23 Jan 94 AU) BALKAN SMALL, MEDIUM BUSINESS CENTER FORUM: The General Assembly of the Balkan Center for Small and Medium-Sized Enterprises held its first session at the St. Konstantin resort near Varna. It was attended by representatives of government organizations in charge of small and medium-sized businesses from Greece, Turkey, Albania, and Romania. A statute and rules of procedure for the Bucharest-based Secretariat were signed. The Balkan Center was set up in October 1992. Last June it was officially registered in Bucharest. By the end of March, business training centers will be set up in Thessaloniki and Istanbul. The General Assembly will hold its second session in Thessaloniki from March 14 to 20. (Sofia BTA in English 1631 GMT 23 Jan 94 AU) LOANS FOR TOURISM-SECTOR BUSINESSES: The Black Sea Investment Fund, Expressbank, and the Dobrudzha Bank-Dobrich will guarantee loans issued by the Bulgarian-American Fund to private hoteliers and tour operators. Three-year loans of up to $75,000 at 15 percent interest will be available for feasible projects. (Sofia BTA in English 1631 GMT 23 Jan 94 AU) PRIVATE KNITWEAR FACTORY OPENS: The first private knitwear factory in this country set up with foreign capital has opened in Sofia. The owner, Arman Tex of Cyprus, set up in 1993 with its head office in Sofia, has invested 5 million German marks so far. The factory will use raw materials from China and Pakistan and will export its products to the United States and Western Europe. (Sofia BTA in English 1631 GMT 23 Jan 94 AU) ROVER CARS TO BE PRODUCED IN BULGARIA: Philip Burney, Rover Group's director for Bulgaria, confirmed the company's decision to launch production in this country. According to an investment project, several factories in northeastern Bulgaria will be making car parts, while the assembly will be carried out in Varna. A Rover limousine, estate car, and van will be made in Bulgaria. (Sofia BTA in English 1631 GMT 23 Jan 94 AU) BURGAS PORT EXPANSION: The Council of Ministers has considered a new general scheme for reconstructing Burgas Port. Four new terminals will be built that will double the capacity of the harbor. The management gave the go-ahead to start building the important container terminal, which will cost 10 million leva. (Sofia BTA in English 1631 GMT 23 Jan 94 AU) PIZZA HUT IN SOFIA: The Pizza Hut chain will open its first outlet in Sofia this summer. Pizza Hut International, a Pepsico affiliate, and Exel Associates, a Bulgarian investment group, have agreed to open 15 restaurants in Bulgaria. (Sofia BTA in English 1631 GMT 23 Jan 94 AU) EXPERT PREDICTS 45 PERCENT INFLATION: According to a report in DUMA on 25 January, Zakhari Karamfilov, director of the National Statistical Institute, predicts that inflation will be about 45 percent in 1994. Karamfilov expects that macroeconomic performance will be better this year than in 1993. He predicts a zero decline in production this year, against 28 percent in 1992 and 8 percent in 1993. (Sofia BTA in English 1225 GMT 25 Jan 94 AU) BANKERS DEMAND AMENDMENTS TO BAD DEBTS ACT: Bulgarian banks have demanded amendments to the act transforming into public debt the nonperforming loans contracted by state-owned companies prior to December 31, 1990, 24 CHASA reported on 25 January. The bankers say that because of this time limit they will lose billions of leva. Many of the bad debts incurred before the end of 1990 were later transformed into new loans and under the law will not be exchanged for bonds. Banks that have lent funds to trading companies will get least money back. (Sofia BTA in English 1225 GMT 25 Jan 94 AU) LEV RISES ON FOREIGN EXCHANGE MARKET: The Bulgarian lev has been rising on the interbank market, to 36.889-39.960 leva to the dollar on 24 January, up from between 37-39 leva during the previous week. The weakening of the national currency against the dollar last week caused tensions in the domestic foreign exchange market. On 20 January the central lev exchange rate hit a record low of 36.937 leva to the dollar. Meeting on 18 and 20 January, Prime Minister Lyuben Berov, Trade Minister Valentin Karabashev, Finance Minister Stoyan Aleksandrov, and central and large commercial bank leaders agreed to defend the lev. The gentleman's agreement to cut the central rate by 0.20 leva a day succeeded in propping up the national currency, which began recovering on 21 January without much intervention by the Bulgarian National Bank. As an additional measure to influence home market rates, the cabinet amended the exchange regulations on 24 January, obliging state-run companies to trade in foreign currency with commercial banks alone and not finance houses, brokerages, or forex offices. According to a bank expert, the state-run companies reportedly stocked up on dollars to profit from the rising rate. flow through brokerages, he said. The lev rate is expected to keep rising over the next few days, by as much as one lev, according to some traders. Bank dealers said the dollar-buying spree is subsiding, but it is too early to predict a new margin of fluctuation in the short term. If the central bank does not intervene, the rate could shoot up again. (Sofia BTA in English 1853 GMT 25 Jan 94 AU) NEW PRIVATE AIRLINE: The new Air Zori private airline will airlift cargoes and organize business and tourist flights throughout the world. Air Zori has rented three Il-18 planes from Russian and German private companies that will use the airport in Gorna Oryakhovitsa, central Bulgaria. Last week this airport was authorized to handle international cargo and passenger flights by Bulgarian airlines. (Sofia BTA in English 1209 GMT 26 Jan 94 AU) CZECH REPUBLIC PRICES RISE 18.7 PERCENT: On 2 February, Prime Minister Vaclav Klaus officially announced that prices in the fourth quarter of 1993 were 18.7 percent higher compared with the same period in 1992. This indicator is essential for wage regulation calculations. (Prague CTK in English 2 Feb 94 AU) TAIWAN GRANTS MOST FAVORITE NATION STATUS: The Taiwan Government has put the Czech Republic on the list of countries that were granted most favored nation status. This status will help further open the Taiwan market to Czech exporters. Czech exports to this country have tripled over the past three years and reached almost $44 million. (Prague HOSPODARSKE NOVINY in Czech 2 Feb 94 p 1 AU) FOREIGN CURRENCY RESERVES REACH $6.6 BILLION: The development of foreign currency reserves in the banking system shows a tempo similar to that of the most dynamic periods last year. This follows from information provided to HOSPODARSKE NOVINY by Ondrej Kvacek from the Ceska Narodni Banka (Czech National Bank) Press Department. In January, the level of foreign currency reserves in the banking system rose from $6.2 billion to $6.5 billion. The Ceska Narodni Banka foreign currency reserves reached $4.1 billion, compared to $3.8 billion at the end of 1993. In commercial banks, this level has remained at $2.4 billion. (Prague HOSPODARSKE NOVINY in Czech 2 Feb 94 p 2 AU) AVERAGE WAGE RISES 24.5 PERCENT IN 1993: The average wage in industry rose 24.5 percent in 1993. This information was provided by Prime Minister Vaclav Klaus after a government meeting yesterday, 1 February. Foreign trade turnover increased significantly, the prime minister said. Exports (excluding Slovakia) increased 20 percent at current prices. Adjusted for price increases, export growth amounts to 17.6 percent. Imports increased 2.7 percent compared with 1992. (Prague HOSPODARSKE NOVINY in Czech 2 Feb 94 p 2 AU) UNIVERSAL BANK OPENS PRAGUE BRANCH: Universal Banka (Universal Bank), which is based in Usti nad Labem, has opened a branch on Lazarska street in Prague. The total number of branches of this bank rose to five. The banks is oriented toward entrepreneurial activity, but it also provides services to ordinary people. (Prague HOSPODARSKE NOVINY in Czech 2 Feb 94 p 2 AU) WATER PRICES UP IN PRAGUE: As of 1 February, new prices for water apply in Prague. The price has been fixed at 8.40 Czech Korunas (Kc) per cubic meter. (Prague HOSPODARSKE NOVINY in Czech 2 Feb 94 p 2 AU) GERMAN FIRM TO BUILD PLANT IN ZDAR NM) SAZAVOU: The German firm Hetich will build a modern plant for manufacturing furniture and office equipment in Zdar nad Sazavou. The plant will start operating in the second half of 1995 and employ more than 200 people. (Prague HOSPODARSKE NOVINY in Czech 2 Feb 94 p 2 AU) COSMETICS MAKER TO EXPAND PRODUCTION: "By 1996, our present production capacities should increase by almost 80 percent. The existing production capacity is fully utilized, and demand is increasing constantly," Pavel Kubec, executive director of Dermacol Praha says. This company manufactures cosmetics products. Most of the production, about 72 percent, is designated for the domestic market, the rest is exported to Poland, followed by Slovenia, Germany, Russia, and Mongolia. The management expects export volume to increase by 35 to 40 percent within three years. (Prague HOSPODARSKE NOVINY in Czech 2 Feb 94 p 2 AU) MINISTER CONFIDENT BAVARIA WILL ACCEPT PIPELINE GUARANTEE: The Bavarian Land Government has responded favorably to the Czech proposal for a guarantee of the Ingolstadt Oil Pipeline project, Czech Minister of Industry and Trade Vladimir Dlouhy told correspondents today in reference to a telephone conversation he had on 1 February with Bavarian Economics Minister Otto Wiesheu. The Czech proposal constitutes an 80 million German mark (DM) guarantee covering uninsurable and extraordinary damage to the pipeline (as a result of terrorist action, natural catastrophe, or war). The Czech National Property Fund (FNM) would provide the guarantee. The ministers agreed two days ago that experts would continue to discuss the guarantee next week, by then, the Bavarian side is expected to make known its position on the new Czech proposal. The fact that they have already requested the FNM's detailed financial profile is a sign that the Bavarian Government is viewing the proposal favorably, Dlouhy said. If the Bavarian side accepts the latest Czech proposal, the guarantee could be approved by Bavarian Parliament as early as in the spring, which will allow the pipeline construction to commence shortly thereafter. Construction of the pipeline from the Bavarian town of Ingolstadt to Nelahozeves near Kralupy in central Bohemia began in the Czech Republic in September. Construction of the pipeline in Germany was expected to begin this spring. The entire project should be completed in 1995, unless it is rejected by the Bavarian Parliament. (Prague CTK in English 3 Feb 94 AU) BANK FACES BANKRUPTCY PROCEEDINGS: The Kreditni a Prumyslova Banka (Credit and Industrial Bank), based in Prague, will have to file for bankruptcy. The bank was established in April 1992; its founding capital was 550 million Czech crowns (Kc). In the first year of its existence, the bank expanded its loan activities. The bank did not have skillful management, Ceska Narodni Banka Vice Governor Jan Vit said yesterday. Having consulted creditors, Ceska Narodni Banka proposed launching bankruptcy proceedings. (Prague HOSPODARSKE NOVINY in Czech 3 Feb 94 p 2 AU) GERMANY'S SCHOELLER TO ACQUIRE MAJORITY IN STROJPLAST: The German firm Schoeller Plast Holding will acquire 51 percent of Strojplast in Tachov, one of the largest manufacturers of plastics. Schoeller will become the owner of property worth Kc1OO million. Strojplast processes 8,000 tons of plastics and employs 640 people. Last year, the company's turnover was Kc496 million and it made a net profit of Kc28 million. Some 17 percent of the production was sold on Western markets. (Prague HOSPODARSKE NOVINY in Czech 3 Feb 94 p 6 AU) ELITEX TEXTILE MACHINES TO ASIA, SOUTH AMERICA: The state-owned company Elitex has solved the problem that arose after its exports to the Soviet Union were discontinued. The company, which exported some 90 percent of its production to the Soviet Union, began exporting to Southeast Asia and South America. Elitex offers textile machines of the Arachne type, which are in demand in Southeast Asia and South America. Because of the low production costs in the Czech Republic, the textile machines are more competitive on these markets than German, Italian, or Japanese-made machines. (Prague HOSPODARSKE NOVINY in Czech 3 Feb 94 p 6 AU) 900 MHZ-BAND MOBILE TELEPHONE SYSTEM TO BE INTRODUCED: The Czech Republic is to introduce a progressive digital system of mobile telephones operating in the 9OO MHz band. Besides providing additional services, this system is compatible with the systems used in other European countries. People from other countries will be able to use their phones in the Czech Republic. (Prague HOSPODARSKE NOVINY in Czech 3 Feb 94 p 7 AU) SELLIER, BELLOT TO REMAIN IN CZECH HANDS: The two components of the name of the company are the only things foreign about the Sellier and Bellot Company. Jiri Hanak, chairman of the board of directors, stresses that the company does not need foreign capital. "We have received so many orders that our production capacities are not able to cope with them all. We can profit from the situation in which many European ammunition manufacturers are undergoing a crisis," he explains. (Prague MLADA FRONTA DNES in Czech 3 Feb 94 p 10 AU) PALABA SLANY TO REINVEST 1993 PROFITS: The Palaba Slany company, a manufacturer of household batteries, does not anticipate paying out dividends to shareholders from its 1993 profits. Palaba Slany is the legal successor of the Bateria Slany company (the change of name was approved last year). In 1993, the company made a profit of over Kc10 million, but all profits will be reinvested. (Prague MLADA FRONTA DNES 3 Feb 94 p 10 AU) PRECISION ENGINEERING FIRM'S SHARES UNDERVALUED: Zavody Presneho Strojirenstvi (Precision Engineering Plants) stock is undervalued on the Czech market. The company is based in Zlin. This is what CS First Boston says in a report to investors. The report says that Zavody Presneho Strojirenstvi in Zlin offer quality products for a good price on foreign markets. According to the report, the company is not one of the Czech blue chips, but it certainly deserves attention. At the price of Kc1,215 attained on the Prague stock exchange on 27 January, the price-to-earning ratio of this company is 12.7. This makes this stock cheap, since the average price-to- earning ratio on the Czech market is about 20. (Prague MLADA FRONTA DNES 3 Feb 94 p 13 AU) SIEMENS TO BUY MEZ MOHELNICE PLANTS: The German company Siemens is to buy three Moravske Elektotechnicke Zavody (Moravian Electrical Appliances Plants) factories in Mohelnice, Frenstat pod Radhostem, and Drasova. This is what Katerina Petrova, spokeswoman for the Ministry for the Administration of National Property and Privatization said on 2 February. The Ministry has already reached agreement with the German partner on the terms of the sale. (Prague MLADA FRONTA DNES 3 Feb 94 p 13 AU) INDUSTRIAL WAGES RISE 24 PERCENT IN 1993: The average monthly salary in industry was Kc5,992 in 1993, while in December this figure reached Kc6,923, according to data provided by the Czech Statistical Office. The average salary rose by 24 percent. (Prague MLADA FRONTA DNES 3 Feb 94 p 13 AU) NUMBER OF LEGALLY WORKING FOREIGNERS: As of 31 December 1993, there were 28,281 foreigners working legally in the Czech Republic, 48 fewer than on 30 September 1993. (Prague LIDOVE NOVINY 3 Feb 94 p 2 AU) CLOSING CEFTA DECLARATION SIGNED: The signing of a closing declaration of the Central European Free Trade Agreement (CEFTA), which stipulates the efforts and convictions of the participants to ensure liberalization of trade within five years, marked the end of a joint session of delegations from four Central European Countries in Prague today. The economics ministers of the CEFTA countries, Bela Kadar of Hungary, Leslaw Podkanski of Poland, Jan Ducky of Slovakia, and the Czech Republic's Vladimir Dlouhy told journalists they attached great significance to the agreement. They especially stressed the fact that the changeover to liberalizing Central European trade was occurring at a time when important trade agreements worldwide were being concluded, examples including NAFTA and the Uruguay Round of GATT. Liberalization will not apply to certain problem groups, particularly agriculture, they said. It will also proceed more slowly with a number of "sensitive goods," such as automobiles, textile, and metals. (Prague CTK in English 4 Feb 94 AU) SWISS PROGRAMS FOR ENTREPRENEURS: Since 1991, more than 60 small entrepreneurs from the Czech and Slovak Republics have acquired experience in Swiss Government programs organized by the Zurich Chamber of Trade and the Czech and Slovak Association of Entrepreneurs. There are another 40 future entrepreneurs in Switzerland at the moment, and it is expected that by the end of 1995 a further 100 people will take part in the program. The project will continue after 1996, but with certain changes that are currently being discussed. (Prague CTK in English 5 Feb 94 AU) CONSUMER PRICES GREW 18.2 PERCENT IN 1993: Consumer prices grew 18.2 percent in the Czech Republic from December 1992 to December 1993, according to the latest information CTK received on 7 February from the Czech Statistical Office. The 1993 average was 20.8 percent higher than the 1992 average. Taking into account basic groups of goods, the prices for food products rose by 16.6 percent, and prices for non-food consumer goods by 19.4 percent. These two are the most important groups, having the greatest impact on the overall price level. Prices for public catering increased by 27.5 percent and those for services by 28.7 percent. Since the beginning of 1993, the cost of living has increased by 18.2 percent in the households of employees, while in farmers' households it grew by 18 percent, and in those of pensioners 16.4 percent. When comparing the 1993 average with the 1992 average, the cost of living in the households of white-collar workers increased by 20.8 percent, in farmer's households by 20 percent, and in those of pensioners by 19.5 percent. When comparing December with November 1993, the costs of living in the households of white-collar workers and pensioners grew 0.9 percent, while in farmers' households by 0.8 percent. (Prague CTK in English 7 Feb 94 AU) LOW PRODUCTION COSTS MAKE PRODUCTS COMPETITIVE IN WEST: Czech Trade and Industry Minister Vladimir Dlouhy said today that the Czech Republic's low production costs make Czech products competitive on Western markets. Addressing German businessmen and politicians in Sankt Augustin, the seat of the Konrad Adenauer Foundation, Dlouhy said the cheap labor force was one of the major factors positively influencing economic reform in the Czech Republic and the main reason for Czech exports being successful. He dismissed claims by Western firms that the Czechs exported their goods at dumping prices. Dlouhy said he appreciated cooperation with Germany, the Czech Republic's most important trade partner. Germany is the most flexible country in both investing and setting up joint ventures, he said, adding that of the total number of joint ventures in the Czech Republic about 30 percent had been established with German companies. (Prague CTK in English 8 Feb 94 AU) CZECH CURRENCY TRADED ON BLACK MARKET IN SLOVAKIA: A year after the split of Czechoslovakia, the growing demand for Czech currency has turned it into a valued article on the black market, the Czech daily MLADA FRONTA DNES writes on 8 February, describing the situation in the regional town of Cadca. Cadca lies near the Czech border and Ostrava, north Moravia, the center of a mining and industrial region from where many Slovaks commute to work, returning for weekends. Illegal money changers, who buy and sell foreign currency on the street, say that the trade in Czech money brings more profit than trade in dollars or German marks, the paper writes. Czech currency is finding its way into common use, especially in the border regions. Waiters in restaurants accept Czech money from customers but return Slovak change. (Prague CTK in English 8 Feb 94 AU) INVESTMENT FUNDS RUN LARGEST ADVERTISING CAMPAIGN: The advertising campaign launched by investment funds before the second wave of coupon privatization has been the largest advertising campaign ever launched in the Czech Republic. Over half a billion Czech korunas (Kc) ($17.2 million) were spent on advertisements in all branches of the media between October 1993, when the campaign was launched, and the end of the year. Total expenses are likely to be even higher, as the campaign is to run until February. (Prague CTK in English 17 Jan 94 AU) PRIVATIZATION MINISTRY TO EXIST UNTIL 1996: According to ministry of privatization spokesman, the ministry will wind up before parliamentary election in 1996. The usefulness of the ministry has diminished, since 90 percent of the property designated for privatization has been transferred to the National Property Fund. "The ministry is dealing will all the claims linked to the first, as well as the second wave of privatization, which is coming to an end," the spokesman said. By the end of 1993, property worth Kc850 billion had changed hands. The ministry estimates the income from small and large privatization to amount to between Kc52 billion and Kc54 billion. (Bratislava SME in Slovak 18 Jan p 14 AU) GOVERNMENT INJECTS MONEY INTO KONSOLIDACNI BANRA: The Czech Government today approved the allocation of more than Kc15 billion ($5OO million) from the National Property Fund (FNM) to Konsolidacni Banka (Consolidation Bank) in Prague to boost its reserve fund. This is what Prime Minister Vaclav Klaus told reporters. According to Klaus, the first task of Konsolidacni Banka after its founding in the spring of 1991 was to reduce the load on other commercial banks and on firms with outstanding debts. Since then, Konsolidacni Banka has demonstrated its viability and long-term ability to compete and gained a stable position in the republic's banking sector, Klaus said. Konsolidacni Banka is a state financial institution, to which many outstanding debts have been transferred. Because of the non- recoverable nature of these debts, the bank's reserves needed to be increased. (Prague CTK in English 19 Jan 94 AU) CUTBACK IN POTATO CULTIVATION: To combat the potato glut, the Presidium of the Central Union of Potato Growers recommended that potato growers reduce the area planted with potatoes to 90,000 hectares in 1994, compared with almost 105,000 hectares last year. As a result, 40,000 tons of seed potatoes have remained unsold in the Czech Republic. (Bratislava HOSPODARSKE NOVINY in Slovak 20 Jan 94 p 1 AU) ENVIRONMENT MINISTER WORRIED ABOUT RAW MATERIAL EXPORTS: Curbing the alarming increase in the extraction and exports of raw materials is one of the top priority tasks of the Environment Ministry, Minister Frantisek Benda told CTK on 20 January. According to Benda, the ministry will seek ways of stopping the current situation. This situation has arisen due to lax border checks and due to the fact that some raw materials are exported as construction supplies. Benda said that raw materials should not be extracted above certain limits. The extraction should be scaled down to satisfy the most urgent economic needs only. The environment ministry' objective was to reach a compromise during the talks with Vladimir Dlouhy, minister of industry and trade, on reducing export quotas, Benda said. According to the data on foreign trade in raw materials compiled by the Ministry of Industry and Trade and furnished by the Green Party to CTK, only 89,000 tons of limestone were exported in 1989, while the figure rose to 2,362,000 tons in 1992. A similar increase was recorded in stone dust, sand, and lumber, the ministry's report reveals. (Prague CTK in English 20 Jan 94 AU) RESUMPTION OF TALKS WITH AIR FRANCE ON CSA: Negotiations between Czech Transport Minister Jan Strasky and Air France representatives on the possible sale of Air France's shares in the CSA are to take place next week at the latest, Strasky said on 27 January. He added that the sale of the shares would be "neither a sensation nor a tragedy for the Czech side. However, neither would it be a solution to CSA's problems, though the negotiations will be the first step toward reaching an agreement with Air France," he said. In his letter of January 7 to Air France, Strasky proposed that the shares be sold to a Czech entity. The Czech side has proposed that Konsolidacni Banka purchase the shares, but any proposal submitted by the French side will be considered. (Prague CTK 27 in English Jan 94 AU) AIR FRANCE REPRESENTATIVE ON CSA PROBLEMS: The probable sale of the CSA's shares is likely to harm Air France, a representative of the Public Relations Department of the French Airlines said in Paris on 28 January. "If our Czech partners refuse to cooperate, Air France cannot force them to," the representative said in reply to Transportation Minister Jan Strasky's request on 27 January that Air France sell its shares by the end of February. It is CSA, not Air France, that wants to break the 1992 agreement and have the French company sell its 19.1-percent share in the company, the representative emphasized. He added that the final decision must take this fact into account, particularly when the issue of money is addressed. The French company expected both airlines to benefit from cooperation. "The probable divorce of CSA and Air France will certainly not help the French company, which is now experiencing financial difficulties. At the very least, its reputation will be harmed," the Air France representative said. He went on to say that the CSA management was responsible for CSA's problems, and now the Czech side was seeking the culprit elsewhere. He also said that the French had pointed out early on that CSA's main difficulties were the result of bad management and the financially disadvantageous purchase of airplanes before signing the contract with Air France. The representative confirmed that Air France would participate in next week's negotiations. (Prague CTK in English 28 Jan 94 AU) NUMBER OF BUSINESS LICENSES RISES 33 PERCENT IN 1993: The Number of individuals and organizations holding business licenses increased sharply by 33 percent in 1993, compared with 1992, Minister of Economy Karel Dyba announced today. A total of 877,000 companies and private businessmen held at least one business license at the end of 1993, Dyba said. A total of 1.26 million licenses have been registered. Dyba said the increase appeared all over the country, and made a remark saying that the number of business licenses issued in a district was indirectly proportional to that district's unemployment rate. The minister also pointed out that small and medium-size industrial and construction firms were increasingly adding to the country's overall production and employment. (Prague CTK in English 24 Jan 94 AU) KC12 BILLION FOR SMALL, MEDIUM-SIZED BUSINESSES IN 1993: More than Kc12 billion ($400 million) from the state budget was allocated for the support of small and medium-sized businesses in 1993, Minister of Economy Karel Dyba announced on 24 January. The amount is equal to about 1.7 percent of the Czech Republic's 1993 gross domestic product. More than half of the amount, Kc7.5 billion, came in the form of tax breaks granted by the Finance Ministry, Dyba said. The Ministry of Agriculture provided Kc2.8 billion, the Ministry of Economy Kc1.2 billion, and the Ministry of Labor and Social Affairs Kc178 million. The Ministry of Economy's support was granted primarily in the form of government-approved programs through the Ceskomoravska Zarucni a Rozvojova Banka (Czech-Moravian Guarantee and Development Bank) and other financial institutions. Ten programs have been approved for 1994, Dyba said. (Prague CTK in English 24 Jan 94 AU) OIL SUPPLY RESUMPTION HALTS DRAWDOWN OF RESERVES: The resumption of the Russian oil supply to the Chemopetrol refinery in Litvinov, north Bohemia, on 22 January has halted the decline of its very low levels of reserves, the director of Chemopetrol's trade policy, Lubos Kyselo, stated 23 January. He said that in the next few days reserves would begin to be replenished. According to Kyselo, a similar fluctuation in the supply of Russian oil was usual at the beginning of the year. This year's interruption in supply was unusually long, however, and caused production in the Litvinov plant to fall by a third. This did not affect the supply of fuel and heating oil, he said, and Chemopetrol also managed to secure the necessary supplies of products to other enterprises. (Prague CTK in English 24 Jan 94 AU) GASOLINE PRICE CEILING ELIMINATED: The Finance Ministry has decided to abolish the cap on gasoline prices as of 1 February. However, this does not mean a complete liberalization of gas prices. As a matter of fact, prices will still be regulated by the state. Merchants will fix the prices, and the state will only check whether they are economically justified. (Prague LIDOVE NOVINY in Czech 25 Jan p 1 AU) MINISTRY RECONSIDERS, RETAINS GASOLINE PRICE CEILING: After preliminary research, the Finance Ministry abandoned it plan to abolish fixing maximum prices for gasoline. This information was provided by Czech Television on 31 January. The ministry justified this step by saying that "it is necessary to find a proper deadline, so as to avoid a massive increase in gas prices." It is realistic to expect that maximum gas prices will be abolished before the summer season. (Prague HOSPODARSKE NOVINY in Czech 1 Feb 94 AU) FREE TRADE ZONE DISCUSSED WITH ROMANIA: An initial meeting of experts on the planned establishment of a free trade zone between the Czech Republic and Romania took place in Prague on 24 and 25 January, according to Milos Rezek of the Ministry of Trade and Industry. Rezek said that experts from the Czech and Romanian Ministries of Trade discussed political and economic conditions in both countries -- the starting point for negotiating a free trade zone agreement. They also discussed last years' trade results and possible ways of settling the former Czechoslovakia's trade surplus in Russian rubles. In November 1993, it was decided that a free trade zone agreement between the Czech Republic and Romania should be signed by September 30, 1994. Negotiations will continue in February. (Prague CTK in English 25 Jan 94 AU) CONVERSION OF TEMELIN TO GAS-FIRED PLANT UNLIKELY: Turning the Temelin nuclear power plant being constructed in south Bohemia into a natural-gas-fired plant, as suggested by a member of Austria's opposition party, would be costly and difficult, a Czech university professor says. Jiri Fleischhans, deputy director of the Nuclear and Physical Engineering Faculty at the Czech Technical University, said experts have already pondered over the problem. However, 80 percent of the completed structure would have to remain unused. Gas to run the plant would require the entire capacity of a standard pipeline. A strategic decision of whether to rely on one supplier for such a source of power would also have to be taken. Fleischhans said that a large gas-fired plant would likely be more efficient and would thus release about one-third less steam, which is believed to cause global warming. On the other hand, emissions of carbon dioxide would be greater. He noted that cost estimates are not available for a project of this size. Temelin is expected to be put into operation between 1996 and 1997. The Austrian Press Agency (APA) reported that a spokesperson for Austria's opposition Free Party, Peter Rosenstingel, called on the country's president to make it clear to the Czech Republic that it would resort to sanctions if necessary. (Prague CTK in English 25 Jan 94 AU) CZECH INVESTMENTS ABROAD GROWING: Direct Czech investments abroad reached $45.2 million in 1993. This information has been provided by the director of the Ceska Narodni Banka (Czech National Bank) Director Jiri Zimola. According to him, the activity of Czech enterprises has sharply increased compared with previous years. In 1992, $28 million were invested abroad and in 1991 only $3 million. The largest investors were Skoda Mlada Boleslav (Great Britain), Cementarny a Vapenky Prachovice (Netherlands), Invest Plzen (Russia), Strojimport (Austria), CSKD Intrans (Slovakia), Namorni Plavba (Malta), and Prumysl Kamene Brno (Croatia). The largest investments were placed in Malta (28.4 percent), Russia (16.0 percent), Great Britain (10.3 percent), Slovakia (12.7 percent) and other countries (26.5 percent). The absolute majority of investments have been placed in trade and services. (Prague HOSPODARSKE NOVINY in Czech 26 Jan 94 p 1 AU) FRENCH FIRM BUYS 90 PERCENT OF ELEKTROPRISTROJ: French Telemecanique, one of the three important companies of the Groupe Schneider, has bought 90 percent of the Elektropristroj (Electrical Devices) Pisek company for Kc12O million (without land and buildings belonging to the city of Pisek). Telemecanique has become the majority shareholder in Elektropristroj. The company will keep its logo but will add the Groupe Schneider sign to it. (Prague LIDOVE NOVINY, FINANCNI NOVINY SUPPLEMENT, in Czech 26 Jan 94 p 8 AU) KRALOVOPOLSKA BRNO FACES FINANCIAL PROBLEMS: The discontinuation of the construction of the Mochovce nuclear power station has caused problems to one of the largest suppliers of technology -- Kralovopolska Brno. The company has supplied work worth Kc1.2 billion, and there is still work outstanding for Kc1.05 billion. According to the director general of the company, the material supplies to the Mochovce power plant alone represent Kc400 million. Moreover, the company has to put up with the consequences of not having met its obligation toward its own suppliers. For instance, the German partner who was to deliver pumps worth Kc90 million, is claiming penalties amounting to 80,000 German marks per month. (Prague LIDOVE NOVINY, FINANCNI NOVINY SUPPLEMENT, in Czech 26 Jan 94 p 8 AU) ZBROJOVKA VSETIN TO RESUME MACHINE-GUN PRODUCTION: Zbrojovka Vsetin (Vsetin Arms Factory) will produce 250 Type 59 machine guns worth Kc25 million. The decision to restart the production of machine guns, which have not been produced in Vsetin for at least 20 years, was made at the end of 1991, when the factory had to produce a certain number of these guns for our army in a short period of time. After machine-gun production is resumed, the factory will replace the Type 59, which is 35 years old with a new, more modern type. Apart from deliveries to our army, machine guns will also be exported. (Prague HOSPODARSKE NOVINY in Czech 27 Jan 94 p 27 AU) FOREST PROPERTY RESTITUTIONS TO INDIVIDUALS: Approximately 70 percent of the 145,000 applications by individuals for restitution of forest property in the Czech Republic have been settled, though compensation remains a problem, the director of the Lesy forest management enterprise, Jiri Oliva, said at a news conference today. The Czech Republic has 2.6 million hectares of forests, of which 20 percent are to be owned by individuals and less than 20 percent by municipalities. They are entitled to take over 410,000 hectares of forests, though 160,000 hectares have not yet been claimed, Oliva pointed out. Six percent of the forest lands is to go to churches -- something that has not yet been carried out, Oliva said. Around 54 percent of forests are to remain in the hands of the state, he added. (Prague CTK in English 27 Jan 94 AU) ARMS DEALS UP IN 1993: The Ministry of Industry and Trade granted 366 licenses for trade in military equipment and material last year, according to a 28 January statement by Bretislav Gregr, the ministry's senior official. The number consists of 198 licenses granted for import from 19 countries and 258 for exports to 52 countries, involving 23 European states, 12 Asian, 7 African, 5 Central and North American and 5 South American, Gregr announced. In line with legal standards, the ministry removed three licenses already granted and turned down 15 license applications. A total of 35 companies were involved in trade in military equipment, Gregr said. The total value of exports was $167 million, 17 million more than the figure for Czechoslovakia in 1992, Gregr reported. The structure of the exported material has markedly changed: while in 1992 the exports included ground mobile equipment, particularly the T-72 tanks sold to Syria, last year the bulk of the exports was aviation technology, particularly L-59 aircraft along with spare parts exported to Egypt, Gregr announced. In comparison with 1992, the proportion of infantry weapons increased, largely due to the export of the CZ-75 pistols to Turkey. The export of mobile ground equipment (vehicles) was largely made up of supplies of spare parts for the armored equipment sold earlier and partly of the special vehicles on Tatra chassis. (Prague CTK in English 28 Jan 94 AU) KLAUS ON KORUNA CONVERTIBILITY: Full Convertibility for the Czech korunas is not necessary as yet, Czech Prime Minister Vaclav Klaus announced at the World Economic Forum in Davos, Switzerland, on 28 January. He pointed out that the Czech koruna became convertible three years ago for the purposes of foreign trade and the currency has retained a stable exchange rate for 37 months now. "We do not believe that by transferring to full convertibility five years after the velvet revolution (the toppling of the communist regime) we will gain anything particularly positive, Klaus was quoted as saying. The government has rejected a plan proposed by the Czech National Bank whereby the Czech koruna could become fully convertible in January 1995. Instead it favors a gradual liberalization of the currency regime with other countries. (Prague CTK in English 28 Jan 94 AU) CZECH KORUNA TO BE FULLY CONVERTIBLE BY 1997: The Czech koruna will be fully convertible in 1997, at the latest. It will be necessary to take gradual steps toward this goal, Finance Minister Ivan Kocarnik told a rally of the ruling Civic Democratic Party today. He said that the interest rates of the Czech banks would go down fast since this trend has been stimulated by the inflow of foreign investments and the offer of credits by foreign banks. This is a result of the fact that the world has found that the Czech Republic is a consolidated state with a stable economic and political situation, he added. (Prague CTK in English 31 Jan 94 AU) KATERINA MINE IN RADVANICE TO BE CLOSED: The extraction of coal in the Katerina mine in Radvanice in the east Bohemian coal-mining region will be terminated at the end of the first quarter. Ceske Energeticke Zavody has not extended their contract with Vychodoceske Uhelne Doly (East Bohemian Coal Mines) to purchase coal for the power station in Porici u Trutnova. Some 8OO people in the Radvanice mine will be laid off. (Prague LIDOVE NOVINY in Czech p 8 28 Jan 94 AU) EBRD TO BUY ONE-QUARTER OF BARUM-CONTINENTAL: The German partner of the Barum company, Continental, will transfer a part of its stake in Barum-Continental to the European Bank for Reconstruction and Development (EBRD). Peter Zitek, chairman of the Barum-Continental Executive Committee said on 28 January that the bank had promised to supply a loan amounting to 70 million German marks to the company. (Prague MLADA FRONTA DNES in Czech 29 Jan 94 p 6 AU) WASTE-PROCESSING ENTERPRISES FACE BANKRUPTCY: Enterprises processing waste materials are on the brink of bankruptcy following the imposition of radical restrictions on the import of waste materials from abroad. The Ministry of Environment Spokesman, Jiri Hampejz, says that about 10 or 20 enterprises are prepared to launch a lawsuit against the ministry. The ministry believes, however, that about 50 of the companies facing bankruptcy are themselves to blame for the situation since they started processing waste material without having proper technology available for sorting the waste. (Prague MLADA FRONTA DNES in Czech 31 Jan p 2 AU) CITY OF SMRZOVKA ISSUES BONDS: The city of Smrzovka has issued bonds amounting to Kc200 million. The bonds will mature in 2001. They have been issued in the denomination of Kc1O,0OO and will bring in interest of 14.24 percent per annum. The bonds are sold by Ceska Sporitelna (Czech Savings Bank). (Prague MLADA FRONTA DNES in Czech 31 Jan p 3 AU) CABLE TELEVISION FOR PRAGUE, BRNO: The Council for Radio and Television Broadcast has granted a license to Kabel Net Holding for installing MMDS-system cable television in Prague District 4 and Brno. This system allows the signal to be transmitted though the air. (Prague CESKY DENIK in Czech 31 Jan p 2 AU) AUSTRIAN CREDITANSTALT TRADES IN CZECH CALL WARRANTS: Austrian Creditanstalt, the largest bank in Austria, has been successfully trading in call warrants based on a basket of shares of nine Czech companies. There is quite substantial interest in the warrants. The greatest weight in the basket is contributed by Ceske Energeticke Zavody (25 percent), Cokoladovny (15 percent), Komercni Banka (14 percent) and Tabak (13 percent). (Prague HOSPODARSKE NOVINY, BURZOVNI NOVINY SUPPLEMENT, in Czech 31 Jan p 1 AU) FOREIGN TRADE TURNOVER FIGURES GIVEN: The Czech Republic's foreign trade turnover was 10.6 percent higher in 1993 than in 1992, according to the preliminary results of a Czech Statistical Office study. Czech imports increased by 2.7 percent and exports by 20.0 percent last year. The only countries with whom Czech trade decreased were those of the former Soviet Union. Czech Republic exports to and imports from other countries increased. A total of 58.0 percent of Czech trade in 1993 was concluded with countries with advanced economies, while 8.7 percent was exchanged with former members of the Soviet Union, and 6.1 percent with other Eastern European countries undergoing economic transformation. The Czech Republic's trade surplus was Kc5.9 billion ($200 million) last year. The largest surplus was recorded in trade with developing countries (Kc13.6 billion, $453 million), while the surplus with European Union countries was Kc7.5 billion ($250 million). The Czech Republic's largest trade deficit was with countries of the former Soviet Union (Kc19.8 billion, $66O million). Czech trade with Slovakia reached a surplus of Kc9.6 billion (Kc320 million). Prague CTK in English 31 Jan 94 AU) SKODA HAS STOCKPILE OF NEARLY 12,000 CARS: The are some 11,800 Skoda cars in stock in the Czech Republic. This is what Milan Smutny from the Mlada Boleslav Automobile Plant Public Relations Department told a CTK reporter. "This inventory allows us to react promptly to customer demand" he said. The Skoda plant produced some 200,000 cars last year, since demand for Skoda cars rose sharply in 1993. (Prague RUDE PRAVO in Czech 31 Jan 94 AU) SKODA DIESEL PLANT FACES ECONOMIC PROBLEMS: Three years ago, Skoda Diesel, manufacturer of Diesel motors, was one of the enterprises achieving the best economic results. At that time, the plant was delivering diesel locomotive parts to the CIS. Later on, however, payments for deliveries were stopped. Currently, the debt amounts to Kc140 million. Despite the fact that the management took steps to restructure production, the loss in 1993 was about Kc200 million. Since 1989, when the company employed 1,622 people, the number of employees has been gradually reduced to the current 600. Most of the company's output was exported to Peru. (Prague HOSPODARSKE NOVINY in Czech 1 Feb 94 AU) SKODA PLZEN ELECTRIC CAR PROTOTYPE: A prototype of a two- passenger electric vehicle was on display at the Skoda Plzen factory in Ejpovice. The car can travel a distance of 80 kilometers per recharge, which takes 8 hours and uses 8 Czech korunas-worth of electricity. (Prague RUDE PRAVO in Czech 27 Dec 93 p 6 AU) UNRECOVERABLE AGRICULTURE LOANS: Banks have provided loans totaling 24.6 billion Czech korunas (Kc) to Czech agriculture. This sum represents 3.7 percent of all loans by the banks. Of the agriculture loans, Kc11.2 billion are categorized as bad and temporarily unrecoverable. (Prague HOSPODARSKE NOVINY in Czech 27 Dec 93 p 1 AU) NOVEMBER FOREIGN TRADE SURPLUS: According to the Czech Statistical Office's preliminary data, there was a surplus of Kc8.1 billion in the foreign trade balance in November. Exports reached Kc332.6 billion and imports Kc324.5 billion. (Prague HOSPODARSKE NOVINY in Czech 27 Dec 93 p 1 AU) KOLORA SEMILY TEXTILE FIRM SPLIT: On the basis of its privatization plan, the Kolora Semily company has been divided into three parts. Two shareholders' companies, Kolora and Hybler, have been established. Factories belonging to the third group have been returned to their original owners or sold. The production process used in the factories requires close cooperation between Kolora and Hybler. Kolora Semily mainly exports textile products to Scandinavia, Germany, and France. (Prague HOSPODARSKE NOVINY in Czech 28 Dec 93 p 6 AU) FOREIGN INVESTMENT IN EASTERN EUROPE: The influx of foreign capital into Eastern Europe reached $16.6 billion. This information was provided by the Austrian Ministry of Economy in Vienna. Thirty- eight percent of that sum went to Hungary and 15 percent to the former CSFR. In the first half of 1993, $580 million were invested in Hungary and $380 million in the CSFR. Of the latter, $290 million was invested Czech Republic. There were 80,000 companies with foreign participation in the Czech Republic in the first half of 1993. (Prague HOSPODARSKE NOVINY 30 Dec 93 p 1 AU) CONTINUED SUGAR SURPLUS: There is a surplus of 200,000 tons of sugar on the domestic market. This is one of the reasons the domestic sugar market has collapsed, and producers are selling sugar for less than the cost of production. To help the situation, sugar is being exported, mostly to the former Soviet Union. So far, 60,000 tons of sugar have been exported at a price of $310 per ton. It is realistic to expect that the whole of the surplus will be exported. (Prague HOSPODARSKE NOVINY 30 Dec 93 p 1 AU) INDUSTRIAL SECTOR EMPLOYMENT DECLINING: Production in the industrial sector has reached 92.3 percent of the 1992 level. The number of employees declined to 1,416,000, that is, 93.8 percent of the 1992 level. This information was provided by Czech Statistical Office. (Prague HOSPODARSKE NOVINY 30 Dec 93 p 2 AU) KRALUV DVUR CEMENT PLANT TAKEN OVER BY GERMAN PARTNER: The German company Heidelberger Zement AG, has acquired all the shares of the Cement Factory in Kraluv Dvur (KDC). The German partner increased its stake in KDC from the existing 40 percent to 100 percent. Heildelberg Zement produces some 8 million tons of cement a year. (Prague HOSPODARSKE NOVINY 30 Dec 93 p 2 AU) SOUTH BOHEMIAN DAIRY PLANT EXPORTS TO FAR EAST: The South Bohemian Dairy Plant will achieve a turnover of Kc3.8 billion. Of this, Kc1.3 billion represents exports, chiefly to the Far East. The company employs some 2,100 people in six plants and produces over 200 dairy products. (Prague HOSPODARSKE NOVINY 30 Dec 93 p 2 AU) CONSUMER PRICES OUTPACE FACTORY PRICES: Consumer prices have risen more sharply than factory prices, according to the latest statistics of the Czech Statistical Office. While consumer prices rose 17.2 percent compared with December 1992, industrial producers increased their prices by only 11.5 percent. Average wages rose 23 percent in this period, and industrial output declined by 5 to 6 percent. (Prague MLADA FRONTA DNES 30 Dec 93 p 14 AU) INCREASE IN CONSTRUCTION WAGES: In the January to November period, wages in the construction sector reached some Kc6,485, an increase of 29 percent in comprison with the same period last year. The average wage in construction in November was Kc7,478, which is 22 percent more than a year ago. (Prague RUDE PRAVO 30 Dec 93 p 8 AU) CONSOLIDATION BANK TO GET CAPITAL INJECTION: The Konsolidacni Banka (Consolidation Bank) will receive a capital injection of Kc16 billion from the National Property Fund. The fund has acquired this sum from the sale of short-term bonds. This information has been confirmed by National Property Fund Chairman Tomas Jezek. The Konsolidacni Banka will apparently use this sum to increase its capital stock. The director general of the bank declined to provide information on this subject, however. (Prague MLADA FRONTA DNES 31 Dec 93 p 14 AU) PRIVATIZATION FUNDS SHARES TO TRADE ON STOCK EXCHANGE: As of 6 January, it will be possible to buy and sell shares of 20 privatization funds on the Prague Stock Exchange. The total number of traded items will reach 989. (Prague MLADA FRONTA DNES 3 Jan 94 p 14 AU) CEDOK TRAVEL AGENCY INCURS LOSS: The Cedok travel agency incurred a large loss last year, Petr Urban, director of the company, stated yesterday. According to Urban, the Tourinvest and Hotelinvest joint ventures suffered the largest losses. The travel agency itself incurred losses, as well. Urban declined to give precise figures. (Prague MLADA FRONTA DNES 4 Jan 94 p 14 AU) AERO UNDER BANKRUPTCY PROCEEDINGS THREAT: Since the Investicni Banka (Investment Bank) is unable to recover claims amounting to Kc1.7 billion it has against the Aero Holding company, which associates Czech aviation factories, bankruptcy proceedings may be launched against these companies. (Prague DENNI TELEGRAF 4 Jan 94 p 6 AU) AERO HOLDING SELLING COMPONENTS: The sale of the Mesit Uherske Hradiste has eased the situation in the Aero Holding company and its components, Jan Rezek, spokesman of the Investicni a Postovni Banka (Investment and Postal Bank) said yesterday. He added that the sale of the Moravan company in Otrokovice, Let in Kunovice, and Motorlet Prague is also being readied. These steps cannot solve Aero Holding's debt problem, however, the spokesman said. (Prague HOSPODARSKE NOVINY 5 Jan 94 p 2 AU) MEZ POWER PLANTS TO BE SOLD TO SIEMENS: The sale of MEZ's (Moravian Electrical Plants) three plants in Mohelnice, Drasov, and Frenstat for Kc1.3 billion to Siemens will be completed within a few weeks. The Ministry for Administration and Privatization of National Property has already decided the terms of the sale with the German partner. (Prague HOSPODARSKE NOVINY 5 Jan 94 p 1 AU) TESLA HRADEC KRALOVE JOINT VENTURE WITH JAPANESE FIRM: Tesla Hradec Kralove will produce ceramic substrates using the newest technological process -- casting the aluminum oxide material together with the binding agent. The joint venture with the Japanese firm Y.S. Inc. will make this possible. A total of 80 people will be employed on the production line. The company will gain access to all the markets that have been dominated by Y.S. (Prague HOSPODARSKE NOVINY 5 Jan 94 p 2 AU) COKOLADOVNY SHARES TO BE TRADED ON STOCK EXCHANGE: As of today, Cokoladovny (Chocolate factory) Prague will be traded on the Prague Stock Exchange. Cokoladovny Prague is one of the Czech enterprises with the largest foreign participation. The factory was privatized in the first wave of coupon privatization, and some shares were set aside for direct sale to a foreign partner, Cokoladovny Partners, B.V., of Amsterdam. (Prague MLADA FRONTA DNES 6 Jan 94 p 2 AU) U. S. INVESTMENT IN CZECH ECONOMY: According to information provided by the Czech National Bank, direct foreign investment reached approximately Kc13.7 billion in the January to November period. The largest investor in the Czech Republic was the United States, with 54.5 percent of the total. American money was primarily directed toward the food industry and the consumer product industry. (Prague MLADA FRONTA DNES 6 Jan 94 p 14 AU) TRADE WITH COLOMBIA: Trade with Colombia reached approximately $30 million. Columbia exports to the Czech Republic coffee, bananas, and flowers. The Czech Republic exports to Colombia engineering products, transportation equipment, and irrigation equipment. (Prague CESKY DENIK 6 Jan 94 p 5 AU) ASSOCIATION OF INSURANCE COMPANIES ESTABLISHED: According to Jaromir Blazke, spokesman of the Ministry for Economic Competition, the establishment of the Association of Insurance Companies does not constitute a violation of market ethics. The Finance Ministry, a controlling body in this sector, endorses the establishment of this organization. (Prague DENNI TELEGRAF 7 Jan 94 p 6 AU) MINING COMPANY MERGER: A new mining company, Severoceske Doly Chomutov, (North Bohemian Mines Chomutov) was established on 1 January 1994 after two state-owned companies, Doly Nastup Tusimice (Tusimice Mines) and Doly Bilina (Bilina Mines) merged. Vratislav Vajnar, previously director of Doly Nastup Tusimice has been elected the new company's president. (Prague HOSPODARSKE NOVINY 10 Jan 94 p 6 AU) DROP IN SKODA CAR SALES IN UK: The Skoda automobile plant sold 9,153 automobiles in Great Britain last year, about 1,000 cars fewer than in 1992. Skoda cars sell in Great Britain for 5,500 British pounds. According to the number of units sold, Skoda cars are roughly in the same category as the Spanish Seat or Russian Lada. (Prague HOSPODARSKE NOVINY 10 Jan 94 p 1O AU) AGRICULTURE SECTOR SHOWS LOSS: According to Minister of Agriculture Josef Lux, farmers incurred a loss of Kc6 billion to Kc8 billion in 1993. Precise numbers will be available within several months. In view of the fact that the loss was even greater the previous year, Minister Lux does not see the situation as catastrophic, not even if the loss were Kc8 billion. (Prague MLADA FRONTA DNES 10 Jan 94 p 1 AU) CZECHOSLOVAK AIRLINES TO ANNUL AIR FRANCE AGREEMENT: After the Czechoslovak Airlines shareholders' meeting on Thursday, 6 January, and the negotiations with Air France that followed, it has been decided to annul the treaty with the French company, which is one of Czechoslovak Airlines' shareholders. It has not been decided yet who will buy the shares, Transportation Minister Jan Strasky said. (Prague MLADA FRONTA DNES 10 Jan 94 p 14 AU) AIR FRANCE WANTS TO KEEP STAKE IN CZECHOSLOVAK AIRLINES: Air France confirmed yesterday that it wants to keep its stake in Czechoslovak Airlines. (Prague LIDOVE NOVINY 11 Jan 94 p 13 AU) STATE GUARANTEES PAYMENT FOR BOEING PLANES: The state budget is guaranteeing the repayment of $8.5 million for five Boeing airplanes. If problems with Czechoslovak Airlines's ownership are not solved, the state will pay for the Boeings. This information was confirmed by Transportation Minister Jan Strasky. (Prague HOSPODARSKE NOVINY 12 Jan 94 p 2 AU) CZECHOSLOVAK AIRLINES MANAGEMENT CHANGES: Antonin Jakubse, president of Czechoslovak Airlines, announced yesterday that he would make radical changes in Czechoslovak Airlines' management. Four of the six vice-presidents have already been dismissed and new ones appointed. Jakubse also provided information about an agreement with the Konsolidacni Banka (Consolidation Bank) to receive a loan to pay off a lease for Boeing aircraft amounting to $8.5 million. (Prague DENNI TELEGRAF 15 Jan 94 p 1 AU) PLZEN FACTORY TO PRODUCE NEW TRUCK: The state-owned enterprise Stavebni Stroje (Building Machines) Plzen will manufacture a new 3.5-ton vehicle. The Testing Institute in Prague is testing the vehicle at present and is expected to issue manufacturing approval by the end of January. France's Peugeot will deliver diesel motors for these trucks. The company intends to produce 300 trucks this year and 1,000 next year. (Prague MLADA FRONTA DNES 10 Jan 94 p 14 AU) SKODA MLADA BOLESLAV SALES RISE 20 PERCENT: The Skoda automobile plant sold 219,600 cars in the 1993 fiscal year. This information was provided by Detlev Schmidt, chief of the marketing department. Compared to the 1992 results, this is a 20-percent increase. (Prague MLADA FRONTA DNES 10 Jan 94 AU) DECEMBER 1992-DECEMBER 1993 INFLATION 18.2 PERCENT: Consumer prices rose 18.2 percent in the December 1992-December 1993 period. This information was provided by the Czech Statistical Office. (Prague HOSPODARSKE NOVINY 11 Jan 94 p 1 AU) FOREIGN TRADE BANK ACQUIRES 70-PERCENT STAKE IN CEDOK: The Ceskoslovenska Obchodni Banka (Czechoslovak Foreign Trade Bank -- CSOB) has become the owner of 70 percent of the Cedok travel agency. This information was confirmed by Milan Tomanek, press spokesman for the bank. (Prague LIDOVE NOVINY 11 Jan 94 p 13 AU) SWISS FORBO TO BUY INTO PLASTIC MAKER: Forbo International, the leading manufacturer of floor materials in Europe, will become a shareholder in Fatra Napajedla, the largest manufacturer of plastics in the Czech Republic. (Prague HOSPODARSKE NOVINY 12 Jan 94 p 2 AU) EU TO END SUBSIDIZED APPLE SALES: As of 21 January, the European Union (EU) will stop subsidizing deliveries of apples to the Czech Republic. This information was provided by European Union Ambassador to Prague Leopoldo Giuniti after business talks were held in Brussels. By the same date, the Czech Republic will abolish the 15,000-ton quota imposed on the importation of EU-produced apples this year. (Prague HOSPODARSKE NOVINY 13 Jan 94 p 1 AU) LIBRA ELECTRONICS' AGREEMENTS WITH IBM, DIGITAL: The Czech manufacturer of computer equipment, Libra Electronics, has concluded agreements on cooperation with the IBM and Digital companies. GENOM hard disks, keyboards, and monitors manufactured by IBM in Scotland will be added to the computers made at the Libra plant in Ceske Budejovice. According to the agreement with Digital, Libra has become one of that company's three main distributors, and its task is to establish a network of authorized dealers of Digital computers. (Prague HOSPODARSKE NOVINY 14 Jan 94 p 2 AU) GOVERNMENT SUPPORT FOR SMALL, MEDIUM-SIZE BUSINESS: The government approved a draft proposal of a plan to support small and medium-size businesses in 1994. A sum of Kc1.2 billion will be released for this program. According to the program, regions with the highest unemployment will receive the support. (Prague HOSPODARSKE NOVINY 14 Jan 94 p 3 AU) INCREASE IN FOREIGN TRADE TURNOVER: The Czech Republic's foreign trade turnover increased by 16.5 percent (excluding trade with Slovakia) during th first 11 months of 1993, compared with the same period the previous year. Imports rose 15.8 percent and exports 17.3 percent. The trade balance, including trade with Slovakia, ended in a deficit of Kc400 million. (Prague DENNI TELEGRAF 15 Jan 94 p 6 AU) GROWTH IN TOURISM EARNINGS: According to a Czech National Bank estimate, income from tourism amounted to approximately $1.4 billion last year. This is roughly 24 percent more than in 1992. In 1993, 71.2 million foreign visitors arrived in the Czech Republic, approximately 5 percent more than in 1992. (Prague CESKY DENIK 17 Jan 94 p 2 AU) OSTRAVA-KARVINA MINES' ECONOMIC PROBLEMS: The Ostravsko- Karvinske Doly (Ostrava-Karvina Mines) showed a profit of only Kc15 million last year. According to Director General Ivan Dzina, the Ministry of Industry will try to sort out the situation together with the situation the metallurgy industry. Metallurgical plants should be given credit to finance continuous casting plants which could help them pay at least part of their debt to Ostravsko- Karvinske Doly. (Prague RUDE PRAVO 18 Jan 94 p 3 AU) PALIVOVY KOMBINAT PRIVATIZED, NEW COMPANY ESTABLISHED: The largest producer of coal gas, the Palivovy Kombinat (Fuel Combine) in Vresova, has been privatized. With capital of Kc6.6 billion, the National Property Fund has established a new company called Sokolovska Uhelna (Sokolovo Coal Company). The new company will extract coal in the Sokolovo region. (Prague HOSPODARSKE NOVINY 19 Jan 94 p 6 AU) CITY OF PRAGUE TO ISSUE BONDS: The Prague City government intends to issue bonds this year. This information was provided by the Prague mayor at a new conference yesterday. The Standard and Poor's rating for the City of Prague is BBB. The mayor did not provide information on the exact amount of bonds, but he indicated that the minimum would be $150 million. (Prague HOSPODARSKE NOVINY 20 Jan 94 p 1 AU) PEPSI-COLA TO INVEST $85 MILLION IN CZECH REPUBLIC: The Pepsi- Cola international company intends to invest $85 million in the next five years. This is what David Jones, Pepsi-Cola president for Europe, told our paper yesterday. The total investment, including Slovakia, should reach $115 million. (Prague HOSPODARSKE NOVINY 21 Jan 94 p 1 AU) WAGES HIGHEST IN BANKING, FINANCE, INSURANCE: According to the findings of the Czech Statistical Office, the highest average wages during the first three quarters of last year were to be found in the banking, financial, and insurance sectors. The overall average monthly salary was Kc5,771, while in the banking sector the average was Kc15,562, followed by the financial sector with Kc1O,684, and the insurance sector with Kc7,834. (Prague MLADA FRONTA DNES 21 Jan 94 p 14 AU) AUSTRIA WILL NOT INTRODUCE ANTI-DUMPING STEPS: We have managed to do away with the "petty wars" regarding exports of cement, tractors, and agricultural machines from the Czech Republic to Austria. This is what Economy Minister Vladimir Dlouhy said in Vienna yesterday after his meeting with representatives of the Austrian Government. He also said that only the exports of mineral fertilizers remain to be sorted out. In all other cases, the anti- dumping measures planned by the Austrians have been called off. (Prague MLADA FRONTA DNES 21 Jan 94 p 14 AU) NATIONAL PROPERTY FUND MAY PROVIDE LOAN GUARANTEES: The Ministry of Industry and Trade will recommend that guarantees should be provided on loans to north Moravian metallurgical plants for building continuous casting lines. The guarantee should be provided by the National Property Fund to Trinecke Zelezarny (Trinec Ironworks), Vitkovicke Zelezarny (Vitkovice Ironworks) and Nova Hut Ostrava (Ostrava New Metallurgical Plant). (Prague HOSPODARSKE NOVINY 25 Jan 94 p 3 AU) HUNGARY MNB TO REDUCE MANDATORY RESERVE RATE: The Board of the Hungarian National Bank (MNB) decided to decrease the mandatory reserve rate by 1 percent from March 1 and by a further 1 percent from May 1. The mandatory reserve rate has been 14 percent since January 1, 1993. At the same time, the Board has decided to increase interest rates on mandatory reserve deposits on FOREX (foreign exchange) liabilities from 11 percent to 18 percent. The 2 percent interest rate on reserves on forint deposits remains unchanged. Mandatory reserves are to be allocated on all FOREX liabilities except those from the central bank or other domestic banks and not including FOREX deposits placed with the MNB. The board has also decided to cancel securities repo deals for longer than three months and to cancel the two-weekly deals as of February 14. From this date, the MNB will introduce passive repo deals. The MNB estimates that a 1 percent decrease in the mandatory reserve rate will result in 15 billion Hungarian forints (HUF) worth of excess liquidity in the banking system. In order to drain the excess liquidity, the MNB intends to boost passive repo deals. With this in mind, the MNB plans to announce passive repo tenders when the liquidity position of the commercial banks makes it necessary. (Budapest MTI in English 1555 GMT 7 Feb 94 AU) FOREIGNERS CAN PURCHASE STATE BONDS: Foreigners will shortly be able to purchase state bonds with one-year or longer maturity, Hungarian National Bank (MNB) Chairman Peter Akos Bod said. The permit will be extended to state securities with a shorter maturity from next year on. The MNB strives to encourage domestic savings and thereby intends to cover the government's credit needs and to create the ever increasing amounts needed for local industry operations. The Budget Law makes it possible for the Finance Ministry to issue state bonds with longer than one-year maturities to a value of HUF300 billion to cover the planned deficit of HUF329.56 billion (compared to the budget deficit of HUF199.7 billion last year), and to raise the treasury bill stock by HUF29.56 billion to refinance the deficit. Hungary is issuing bonds on the international money market at more or less regular intervals as the so-called risk surcharge on Hungarian bonds has recently declined significantly. When the country reappeared on the international market in 1991, it was ranked in the 300-point category in the European points system, which serves as the basis for the risk surcharge. Today, Hungary has to reckon with a risk surcharge that accords to only 160 to 170 points. The pace of raising further loans depends on direct foreign investments. "If the value of these remains at around $1.5-2 billion, then we shall continue to be forced to raise loans," Bod said. (Budapest MTI in English 1143 GMT 2 Feb 94 AU) BANK, CREDIT CONSOLIDATION PROGRAMS COST OVER HUF300 BILLION: The bank and credit consolidation programs will require a total of HUF3IO billion to HUF320 billion from the state. This includes a total of HUF99 billion for 1992 credit consolidation programs and, in 1993, HUF114 billion for the bank consolidation program and HUF57 billion for debtor consolidation. A capital injection of an estimated HUF20 billion to HUF30 billion is necessary in order for the banks involved in the second phase of the bank consolidation program to achieve a capital adequacy ratio of 4 percent. The government has spent HUF13 billion on the consolidation of the Hungarian Railways (MAV), HUF6 billion on a capital injection for savings cooperatives, HUF4 billion on debt relief for drought- affected companies, and HUF1 billion on the repayment of soil improvement loans to banks. The government's advisor on bank privatization, Credit-Suisse First Boston, is soon to prepare a study on the future structure of the banking system. (Budapest MTI in English 0758 GMT 2 Feb 94 AU) AV RT'S BANK PRIVATIZATION STRATEGY: According to State Property Management Corporation (AV RT) officials, the property policy guidelines regarding the ownership of banks should be drawn up before privatization. These should include the amount of the stake to remain in state ownership, the most favorable ownership structure, and the importance of foreign and small investors. The AV RT has already drawn up a plan for the privatization of large banks under which the privatization of the Hungarian Commercial Bank (MKB) and Budapest Bank has been launched. In accordance with this concept, the first stage is to find professional strategic investors. The second stage is the involvement of owners with long- term interests such as local and foreign insurance companies, pension funds, and investment companies. Finally, the third stage involves the banks' introduction onto the Budapest Stock Exchange (BSE). AV RT's plan sets the stake of strategic investors in the banks at 30 to 50 percent, that of financial investors at 2 to 10 percent, that of employees and management at 5 to 10 percent, and that of small investors at 5 to 20 percent. A 1992 government decree selected the eight banks where the state should retain long-term ownership. Under the decree, the long-term state ownership will remain 50 percent plus one vote at the Hungarian Savings Bank RT (OTP RT) and the Hungarian Investment and Development Bank RT (MBFB RT), 25 percent plus one vote in the Hungarian Credit Bank (MHB), Commercial and Credit Bank (K and H), General Banking and Trust Co. RT (AEB), Budapest Bank (BB), and Hungarian Commercial Bank (MKB), and 20 percent in Postabank. (Budapest MTI in English 0826 GMT 3 Feb 94 AU) MCDONALDS PLANS TO EXPAND: The McDonalds fast-food chain has invested HUF2.5 billion ($25 million) in Hungary over the past five years. Last year its investments here amounted to HUF650 million. McDonalds presently runs 12 restaurants in Hungary. Last year its aggregate turnover came close to HUF2.5 billion, as compared to HUF1.6 billion in the previous year. In 1993, the company increased its prices by 13 percent. This year McDonalds plans to open seven restaurants and increase the turnover of its network by 30 to 40 percent. Despite the growing turnover, the company closed last year with a loss, though its deficit was smaller than a year before. (Budapest MTI in English 1150 GMT 8 Feb 94 AU) MALEV AGREEMENT WITH DELTA ON NEW YORK SERVICE: The Hungarian Airline MALEV and Delta Air Line are to operate MALEV's Boeing 767- 200er aircraft on the Budapest-New York service under a joint flight number. The first flight will be on May 2, 1994. The daily non- stop flights will land at the Delta terminal at New York's JFK Airport. Delta has purchased some Sky Club and economy seats in advance. The new service will eliminate the stopover in Rome. MALEV began flying to New York via Rome last summer, but the service made a loss of $3.5 million in the first seven months of operation. (Budapest MTI in English 2104 GMT 3 Feb 94 ) MINERALIMPEX AGREEMENT WITH GAZPROM: The Hungarian oil and gas trading company Mineralimpex is to import an annual 2.8 billion cubic meters of natural gas from the Russian company Gazprom over the next five years under an agreement signed between the two companies. The contract was based on a former inter-governmental agreement that provides for the gas to be supplied by the Orenburg field from the beginning of this year. In addition, 2 billion cubic meters of natural gas will be imported from the Yamburg field in Russia in repayment of Hungary's investment in the field. An additional 1 billion cubic meters could be imported depending on demand and on further agreements with Gazprom. The Industry and Trade Ministry (IKM) intends to extend the contracts on Yamburg and Orenburg gas that expire in five years. The demand for natural gas is expected to rise by 20-30 percent to 12-13 billion cubic meters by the year 2000, up from 10 billion cubic meters. The building of a transit pipeline through Hungary to Italy is advocated by the IKM. The users of the pipeline could pay the transit fee in gas, for the use of which a new gas-fuelled, combined cycle power station would be built. Gazprom said that it was willing to participate in a consortium established for this purpose. It also intends to become involved in the privatization of Hungary's gas and electricity supply companies. (Budapest MTI in English 1750 GMT 8 feb 94 AU) SUPPLIERS TO GET STAKE IN CENTRUM CHAIN: Strategia KFT, the company formed by the management of Centrum Aruhazak RT, is to transfer 23 percent of its 25 percent stake in the department store chain to a consortium of food and clothing suppliers. Strategia, which was set up by 270 managers, bought its 25 percent stake in Centrum at the same time as the company's 3,500-member ESOP (employees' share ownership program) organization purchased a 26 percent stake from the State Property Agency (AVU). The AVU made a decision on the sale of the 51 percent stake in mid-January, with the contract to be signed in two weeks' time. Strategia KFT included in its bid its intention to transfer the 23 percent to suppliers. Strategia and the ESOP organization will pay for the shares with HUF420 million cash, HUF754 million worth of compensation coupons and an E-loan (as received) to the value of HUF1.374 billion. The E-loan bears interest of 7 percent and has a maturity of 15 years, with a grace period of three years. Centrum Aruhazak has drawn up a three-year strategic plan which requires an additional HUF3.1 billion worth of capital. A Canadian- Hungarian businessman, Andrew Sarlos, has offered to carry out an equity raise of HUF2 billion and the MHB-Daewoo Bank would grant a loan of HUF500 million. The company's bank, the Commercial Bank (OKHB), and the World Bank are prepared to lend the remainder. The Centrum department store chain, which has registered capital of HUF5 billion, consists of 25 department stores and has total assets of HUF9 billion. The company had turnover of HUF16.3 billion last year (HUF15.4 billion in 1992) and achieved a pre-tax profit of HUF300 million (HUF450 million in 1992). Centrum is expected to have total turnover of HUF19.5 billion this year and to achieve a pre-tax profit of HUF450 million. Centrum owed HUF150 million in loans at the end of last year, compared to HUF200 million at the end of 1992. The loans were mostly short-term working capital loans. The company invested HUF260 million in remodelling 12 shops last year and plans to invest HUF180 million in development this year. Centrum has also begun establishing a HUF800 million bar-code stock control system which will transfer data through satellite. (Budapest MTI in English 1733 GMT 8 Feb 94 AU) DEVELOPMENTS IN COMPUTER INDUSTRY: Although Hungary has certain traditions in computer sciences, its computer industry and trade can only look back on a few years' past. The industry is about to face recession, some experts claim. The number of solvent companies is decreasing and Hungarian companies cannot compete with multinational corporations. The estimated number of companies specializing in computers is 300, while the number of Hungarian specialists is presumably several thousand. In the past few years, computers have become widespread and commonly used in Hungary. Computer industry in Hungary began to take shape at the beginning of the l98Os -- a period when computer scientists could start their own enterprises, mainly focusing on software development. Their small firms have been expanding and are the leading companies today (for example Microsystem, Controll, Rolitron), while subsidized research centers have had to close down one after another because their specialists realized they could earn more in business enterprises. In the 1990's, the liberalization of import conditions and the lifted western embargo resulted in a multitude of small firms, most of which became personal computer dealers without any adequate background for service. Many a leading firm found its prices too low to compete with them and went bankrupt. Meanwhile many powerful Western firms appeared in Hungary (IBM, Hewlett-Packard, Epson). Their share of the market has been gradually increasing due to the direct distribution of products and professional service network. At present computer industry and trade in Hungary can be divided into three main areas. There are 2OO to 300 small firms selling cheap, mainly Taiwanese hardware. There are about 10 Hungarian companies mostly involved in such services as building computer networks, maintaining computer service shops, and teaching computer sciences. The third group consists of some multinational firms selling both hardware and software, and also having well-developed service networks. By 1993, hardware development in Hungary almost came to an end. There are only a few experts dealing even with special software development because multinational firms offer almost complete program packages to customers in each professional field. Hungary, following the Western market tendency, has entered a period of recession in computer business, some experts claim. Hewlett-Packard is said to possess one-sixth of the Hungarian computer market and is prepared to face a continuous recession ending only in 1995. Established in Hungary three years ago with 72 employees, Hewlett- Packard made an income of HUF3 billion, or $30 million, in 1993. The European marketing manager of the firms expects a 10 percent fall of income by 1996. The cause of decreasing prices both on the international and Hungarian market is standardization, a phenomenon expected also in software business. The 1993 results, however, for example the 121 percent rise of turnover on the Hungarian market, do not indicate the penetration of world-market recession into Hungary. (Budapest MTI in English 0719 GMT 8 Feb 94 AU) CENTRAL EUROPEAN FREE TRADE AREA: Creating a Central European Free Trade Area (CEFTA) helps the countries concerned catch up with Western Europe because it stimulates their economic growth and transformation into market economies, Minister of International Economic Relations Bela Kadar Said. In Kadar's view, sound economic cooperation is the best tool for stabilizing Central Europe. Owing to the free trade agreement which came into force on March 1 last year, half of trade among the four countries has been liberalized by now. According to Kadar, trade among the countries concerned will be almost entirely liberalized by 1998. (Budapest MTI in English 1954 GMT 3 Feb 94 AU) REAL WAGES DECLINED IN 1993: The per capita gross earnings during the month of December 1993 amounted to HUF37,358, with blue- collar workers earning HUF27,109 and white-collar workers earning HUF6O,399 on average, the latest report of the Central Statistical Office (KSH) says. In 1993, gross earnings grew by 25 percent on average. The increase was 21.1 percent for blue-collar workers and 27.2 percent for white-collar employees. Real earnings dropped by 1.6 percent in 1993. Last year the average gross monthly earnings for employees working in firms with a staff of over 20 amounted to HUF28,243 -- 25.6 percent more than in 1992. The net monthly income of full-time employees was HUF18,901 -- 20.6 percent over the 1992 figure. Major wage increases in December were registered only in the financial and mining sectors. (Miners received their loyalty money that month.) (Budapest MTI in English 1243 GMT 8 Feb 94 AU) UNEMPLOYMENT RISE FIRST IN 11 MONTHS: The number of registered unemployed was 641,000 at the end of January, 9,000 more than a month earlier, the National Labor Center announced. This is the first time the unemployment figure has risen since February last year, when it stood at 705,000. From the start of this year, the calculation of the unemployment rate is based on Central Statistical Office (KSH) estimates of the total working-age population in 1993 and not in 1992. As a result, the unemployment rate is 0.5 percent higher (12.8 percent) in January. The highest rate (21.1 percent) was registered in Borsod-Abauj-Zemplen county, the second highest (20.6 percent) in Szabolcs-Szatmar-Bereg, and the third highest (19.1 percent) in Nograd. The unemployment rate was relatively low (6.3 percent) in Budapest. Using the same basis for calculation as last year, the unemployment rate was 12.3 percent in January. The number of first-time job seekers continued to fall in January. 47,300 people lost their jobs in January and 36,900 people were taken off the list of registered unemployed. 22,800 new jobs were available in January, 40 percent more than in January, and the total number of job vacancies grew by 3,200 to around 51,000. (Budapest MTI in English 1456 GMT 4 Feb 94 ) FOREIGNERS CAN PURCHASE STATE BONDS: Foreigners will shortly be able to purchase state bonds with one-year or longer maturity in Hungary, Hungarian National Bank (MNB) Chairman Peter Akos Bod said. Bod also said the permit will be extended to state securities with shorter maturity from next year on. Bod said the bank strives to encourage domestic savings and thereby intends to cover the government's credit needs and to create the ever increasing amounts needed for local industry operation. The Hungarian budget law makes it possible for the Finance Ministry to issue state bonds with longer than one-year maturities in a value of 300 billion forints to cover the planned deficit of 329.56 billion forints (compared to the budget deficit of 199.7 billion forints last year), and to raise the Treasury Bill Stock by 29.56 billion forints to refinance the deficit. Hungary is issuing bonds on the international money market at more or less regular intervals as the so-called risk surcharge on Hungarian bonds has recently declined significantly. When the country reappeared on the international market in 1991, it was ranked in the 300-point category in the European points system, which serves as the basis for the risk surcharge. Today, Hungary has to reckon with a risk surcharge that accords to only 160 to 170 points, Bod said. He added that the pace of raising further loans depends on direct foreign investments. "If the value of these remains at around $1.5 to 2 billion, then we shall continue to be forced to raise loans," Bod said. (Budapest MTI in English 1143 GMT 2 Feb 94 AU) HALF OF LOSSES IN NATIONAL ECONOMY FROM INDUSTRY: Fifty percent of the losses in the national economy are posted by industrial companies, a recent survey by the Ministry of Industry and Trade shows. Ninety percent of the losses were posted by the manufacturing sector. Half of the industrial-companies which do make profits account for 60 percent of industrial output. They employ less than 50 percent of the industrial workforce. Industrial companies' assets account for more than 50 percent of the economy's total assets, and the sector employs 60 percent of the country's workforce. (Budapest MTI in English 0720 GMT 28 Jan 94 AU) COST OF BANK, CREDIT CONSOLIDATION PROGRAM: The bank and credit consolidation programs will require a total of 310 billion to 320 billion forints from the state. This includes a total of 99 billion forints for 1992 credit consolidation programs and, in 1993, 114 billion forints for the bank consolidation program, and 57 billion forints for debtor consolidation. A capital injection of an estimated 20 billion to 30 billion forints is necessary in order for the banks involved in the second stage of the bank consolidation program to achieve a capital adequacy ratio of 4 percent. The government has spent 13 billion forints on the consolidation of the Hungarian Railways (MAV), 6 billion forints on a capital injection for savings cooperatives, 4 billion forints on debt relief for drought affected companies, and 1 billion forints on the repayment of soil improvement loans to banks. It is seen to be unfortunate that the stakes owned by the state in banks were in the hands of different state institutions. It was time to draw up contracts between the Finance Ministry and the Hungarian State Holding Company (AV RT) on the handling of these stakes. The government's adviser on bank privatization, Credit-Suisse First Boston, was soon to prepare a study on the future structure of Hungary's banking system. (Budapest MTI in English 0758 GMT 2 Feb 94 AU) BAUXITE MINING FIRM'S PROBLEMS: Hungary's sole bauxite mining company, which operates four mines (Bakony Bauxite Mine Kft.) has decided to close down for the last week of January. The company has orders for only 250,000 tons of bauxite in the first three months of this year. The company now employs 1,800, compared with 3,000 in 1988, when it mined 3 million tons of bauxite. Some 1.7 million tons of bauxite was mined in Hungary in 1992, and 550,000 tons of alumina and 27,000 tons of aluminum were produced. Although the same amount of aluminum was produced last year, production of alumina and extraction of bauxite fell 10-15 percent. At present, HUNGALU's three alumina plants (in Ajka, Mosonmagyarovar, and Almasfuzito) are still in operation but it now has only one aluminium smelter (in Inota) following the closure of smelters in Tatabanya and Ajka three years ago. (Budapest MTI in English 0731 GMT 26 Jan 94 AU) U.S. INVESTORS BUY INTO DANUBIUS HOTELS: Three U.S. financial investors have bought into the hotel chain Danubius Hotels Rt. following the largest-ever deal on the Budapest Stock Exchange on 28 January. One of the three is Kingdon Capital Market Corporation based in New york, which manages a $1 billion investment portfolio, another is Indian Harbor Holdings, registered in Connecticut, an asset managing firm with a portfolio worth $100 million, while the third is the Investment and Pension Fund of an undisclosed U.S.- based multinational company. The three together now hold 29.8 percent of Danubius Rt's 8 billion forints registered capital. CA Securities stood on both sides of the 2.38 billion forints deal in Danubius shares on 28 January, as it was commissioned to sell by the State Property Agency (AVU) and Danubius Hotels Rt. while also acting for the three U.S. purchasers. In the 28 January transaction, AVU sold a 26 percent stake in Danubius, while the remaining 3.8 percent stake sold was held by Danubius itself. The AVU still holds a 10 percent stake in Danubius Rt. which will be eventually offered in exchange for compensation coupons. 34.7 percent of Danubius's equity is in the hands of small investors, 10.6 percent is owned by local councils and 7.5 percent by employees. The remaining shareholders include institutional investors, brokerage firms and the vehicle third party liability fund. According to preliminary figures, the hotel company had 1993 gross profits of 882 million forints on net turnover of 5.098 billion forints which included 4.88 billion forints worth of FOREX turnover. (Budapest MTI in English 1818 GMT 31 Jan 94 AU) FAR EASTERN CLUB TO BREAK FROM CHAMBER OF COMMERCE: The Far Eastern Business Club (FEBC) of the Hungarian Chamber of Commerce (HCC) plans to have itself registered as an independent interest organization. Since its foundation in 1982, the FEBC has operated as an associate body of the HCC promoting links between companies. In the future, the club will work independently, in close cooperation with the chamber, with the principal aim of furthering Hungarian ventures' business ties in Hong Kong, Macao, China, South Korea, Taiwan, and Indochina. (Budapest MTI in English 1534 GMT 1 Feb 94 AU) STATE OF INFRASTRUCTURE PROJECTS: Central Statistical Office figures show that infrastructure was a crucial area of the national economy in 1993. Over the first nine months of last year, 90.9 billion forints ($900 million), or 37 percent of the total investment spending, was channelled into transport, storage, post, and telecommunications, as well as electricity, gas, heat, and water supply. The volume of overall investments, in real terms, was the same as in 1992, while that of infrastructure projects increased. The fastest development is in the telephone system. Last year, 1.3 million main stations operated in the country, 4O percent more than in 1989. The over 500,000 applicants waitlisted at the end of 1993 have all been promised a telephone by 1997. To accelerate the process, the government allowed each local municipality, meeting dozens of concession requests, to set up a telephone distribution system. Privatization of the Hungarian Telecommunications Co. last December mobilized foreign capital worth $875 million for the purpose. Over 90 percent of the main stations were connected to the direct distance dialing system, which is planned to be completed nationwide by 1997. (The 1989 ratio was 85.5 percent.) The national road system last year measured 30,800 kilometers. This compared to 30,000 in 1992. Construction of the M1 highway from Gyor in western Hungary to the Austrian border began last year and will be completed in 1995. (It presently covers the 150-km distance between Budapest and Gyor.) The M15, leading to Bratislava and Prague via Mosonmagyarovar, will be opened to traffic in 1997, with the new section of the MO, around the capital, opening this autumn. Beginning this year, the M3 speedway, currently 80 kilometers long, is being built further towards northeastern Hungary, but will not reach the border by the time of the 1996 Budapest World Expo. The large cities of the region -- Debrecen, Miskolc, Nyiregyhaza -- will be linked to it from the National Road Fund. The southern motorway towards Serbia will be completed up to Kecskemet, central Hungary, with two lanes by 1996. The M7 motoway running across Transdanubia by Lake Balaton at a length of 90 kilometers, will be extended in the direction of Croatia and Slovenia. These projects will be carried out on a concession basis. M1 will be built by a French-Austrian-Hungarian consortium in cooperation with the European Bank for Reconstruction and Development (EBRD), and M7 with Italian participation as part of the Trieste-Kiev axis. The European Union also supports development of Hungary's southern and eastern transit routes and the extension of the northern Hungarian section of the Polish-Slovak-Hungarian road system. Six towns will receive bypasses from state and local authority finances. Utilizing the state road fund, 443 towns and villages built 103 kilometers of road and 177 kilometers of cycle track last year. Regional projects are also given foreign assistance. For example, several border posts have been set up with aid from the European Union's PHARE (Economic Reconstruction Aid for Poland and Hungary) scheme. The World Bank and the EBRD have granted 17 billion forints ($170 million) for the reconstruction of tramways and an underground line in Budapest. Both transport and communal infrastructure projects are expected to narrow the gap between regions with varying degrees of development. So far, the various counties have spent state support, granted under a regional development program, on different sectors of their infrastructure: The drinking water supply and roads in Nograd, the telephone network in Borsod, both in northern Hungary, and the gas program in the eastern county of Szabolcs-Szatmar. Public utilities are expanding at an accelerated rate. The length of water mains last year exceeded 55,300 kilometers, of which 4,000 were built over the past four years. At present, 89 percent of towns and villages have conduit water supply, reaching 3.6 million households, or more than four-fifths of the total. Full-scale supply is planned for 1997. Drainage measured 16,300 kilometers in 1993, with 1,900 kilometers built during the last three years. Thus, 17 percent of towns and villages and nearly 38 percent of households -- 1.7 million -- are connected to the drainage system. Of the 600 towns and villages (18 percent) supplied with gas last year, 172 have been connected to the system since 1989. The 30,000-kilometer-long pipe network carries gas to 40 percent of the households, numbering 1.8 million. (Budapest MTI in English 1004 GMT 26 Jan 94 AU) UNEMPLOYMENT DECLINE CONTINUES: Registered unemployment continued to fall last December, the National Labor Center said. With 632,000 jobless listed at the end of December, 3,000 fewer than in the previous month, the unemployment rate went down from 12.2 percent to 12.1 percent. However, a few counties in the north are still facing massive unemployment, including Borsod-Abauj-Zemplen (19.9 percent), Nograd (19.7 percent), and Szabolcs-Szatmar-Bereg (18.7 percent). This compares to 6.3 percent in the capital city of Budapest. (Budapest MTI in English O946 GMT 31 Jan 94 AU) ELEVEN-MONTH INDUSTRIAL OUTPUT UP 4.3 PERCENT: Industrial output was 4.3 percent up in real terms in the first eleven months of 1993 as compared with the same period of the previous year, the latest Central Statistical Office report shows. Overall output in the construction industry in the first nine months was the same as in the comparable period of 1992 but house construction in January- November was 16 percent down on the first eleven months of 1992. Sales of farm produce were down 24 percent in the first 11 months of last year as compared with January-November 1992. Preliminary figures show a grain harvest of 8.4 million tons last year, 13 percent less than in 1992, the sugar beet harvest down 24 percent, and the sunflower seed harvest down 11 percent. Livestock numbers for all kinds of farm animals were lower in September 1993 than a year earlier. Consumer prices rose 22.5 percent in the whole of 1993. Industrial producer prices rose 10.8 percent in the first 11 months and agricultural producer prices rose 25.3 percent in the 12 months up to the end of November. The total personal cash income in the first 11 months was 18 percent higher than in the same period of 1992, which represents a fall of 3 to 4 percent in real terms. The total gross wage income in the first 11 months was 25.5 percent up and the net wage income 20.5 percent up on the corresponding period of the previous year. The workforce of companies with more than 20 employees was on average 9 percent lower in the first 11 months than in January-November 1992. The number of unemployed at the end of December was 632,OOO, 73,OOO fewer than its peak in February 1993. (Budapest MTI in English 1230 GMT 2O Jan 94 AU) AGRICULTURAL CROPS SHRINK IN 1993: Owing to a serious drought hitting agriculture for two years, last year's grain crop was 13 percent down on that of 1992 and 40 percent down on the average of the years 1986-1990, the Central Statistical Office reported. In 1993, grain crops totalled 8.4 million tons, 1.3 million tons less than in 1992 and 5.5 million tons less than the average of 1986- 1990. Cereals yielded 4.4 million tons in 1993, 19 percent less than in 1992, despite the area sown being 7 percent larger. The sown area of wheat grew by 17 percent but the average crop fell by 25 percent per hectare. The sown area of maize shrank by 2 percent compared with 1992 and its yield by 5 percent. Sugar beet grews on an area 9,000 hectares smaller than in 1992, and the crop fell by 18 percent per hectare. Sunflower crops dropped by over 10 percent, potato crops by 22 percent. According to the report, besides drought, the low average of crops was due to a drop in the use of artificial fertilizers. Fertilizers used on one hectare were under 40 kgs, compared to 180-200 kgs in previous years. Also, owing to restructuring and the low level of income, agricultural companies failed to complete part of the work properly. (Budapest MTI in English 0811 GMT 20 Jan 94 AU) MINISTER EXPECTS 'STABILIZATION' IN AGRICULTURE: The year 1994 may be one of stabilization in agriculture, according to Agriculture Minister Janos Szabo. Szabo says, in 1994, the output of agriculture is to increase by 5 to 8 percent, within that, plant cultivation by 14 to 20 percent, while animal husbandry is expected to stagnate. Production of the food processing industry is expected to rise by 3 to 5 percent. The domestic market of agriculture will probably stop shrinking. A boost in demand is expected in external markets as well, which could mean agricultural exports of at least $2-2.2 billion. According to preliminary figures, agricultural exports in 1993 exceeded $2 billion. Compared with a record $2.7 billion in 1992, this is a drop but is still more than the best results in the socialist years. Last year, agricultural exports were down on the previous year by 8 to 9 percent. Szabo denied that there is a disastrous situation in agriculture. Domestic food supply is not in danger, he added, and a price of 100 forints for a kilogram of bread is out of the question. (Budapest MTI in English 1434 GMT 19 Jan 94 AU) CENTRAL BANK CREDIT LINE FOR LONG-TERM EXPORT FINANCING: The Hungarian National Bank (MNB) plans to earmark 10 billion forints -- half of its planned 1994 net loans to the banking system -- for export financing. The MNB will refinance the Hungarian Eximbank, which is currently being established, up to the 10 billion forints limit, so that Eximbank may grant long-term export loans. The MNB will grant the credit to Eximbank in foreign exchange, with the latter to grant foreign exchange loans to exporting companies at conditions which are in line with OECD standards. The details of the loan structure will be prepared soon. The loan is designed to help engineering exports. Hungarian companies have until now suffered from not being able to offer long-term loans to clients because the Hungarian banking system has in general only short-term resources. The document stresses that this solution is only temporary. Eximbank will have to finance itself from the capital market in the long run. The MNB stresses that halting the fall in exports requires well-coordinated government efforts. (Budapest MTI in English 1623 GMT 24 Jan 94 AU) CENTRAL BANK ISSUES 1994 MONETARY POLICY GUIDELINES: The Hungarian National Bank (MNB) published its 1994 monetary policy guidelines focusing on improving the country's external balance and slowing inflation. The main aim is to reverse last year's unfavorable trends in the external balance. This year's current account deficit should stay below $1.5-2 billion. The MNB predicts the,arrival of $1.3-1.5 billion working capital in the country. The guidelines stress that imports must not be allowed to exceed exports consistently or considerably. Exports should increase by a minimum of 7 to 9 percent, while imports may only rise by 0.2 percent. Consumer prices in 1994 may increase at a somewhat slower pace than in 1993. Inflation is expected to be 16 to 22 percent, producer price rises by 11 to 13 percent, and the budget deficit 340 billion forints. Personal savings are likely to rise by 24O billion forints. Budapest MTI in English 0734 GMT 21 Jan 94 AU) PRIVATE SAVINGS UP 212 BILLION FORINTS IN 1993: According to the latest Hungarian National Bank figures, total personal savings increased by 212.1 billion forints in 1993, a smaller increase than in 1992, when private savings grew by 307.8 billion forints. At the same time, private borrowings were up 41.8 billion forints to 294.1 billion forints, compared with an increase of 11.3 billion forints the year before. Personal savings deposited at financial institutions showed a 185.8 billion forint growth last year, compared with a rise of 281.2 billion forints the preceding year. At the end of last year, savings totalled 1395.8 billion forints, of which 1228.7 billion forints were deposited with financial institutions. Savings deposits totalled 704.4 billion forints, of which deposits in foreign exchange were worth 204.4 billion forints, an increase of 51.8 billion forints over 1992. Foreign exchange worth 3.9 billion forints was deposited by private persons at domestic banks in December. The value of securities issued by non- financial institutions, including state securities, held by private individuals totalled 116.1 billion forints on December 31, 1993, 16.6 billion forints up on the year. This included a 8.8 billion forint rise in December. Personal net savings totalled 1101.7 billion forints on December 31, 170.3 billion forints more than a year earlier. (Budapest MTI in English 1431 GMT 19 Jan 94 AU) 1993 PRIVATIZATION REVENUE: The State Property Agency (AVU) had a revenue of 77.9 billion forints from privatization in 1993, 25.5 billion forints, or 32.7 percent, in convertible currency. Total expenditure exceeded revenue in 1993, amounting to 79.1 billion forints, over two-thirds of which were obligations to the national economy. The AVU used 53.56 billion forints for that purpose. A total of 22.2 billion forints was used to pay state debts. The withdrawal of compensation vouchers cost 13.04 billion forints, while a further considerable sum was used to raise the state holding company's registered capital by 6.5 billion forints. The costs of reorganizing and restructuring companies to be privatized amounted to 13.67 billion forints, while costs related to the privatization process itself, for example amounts spent on handling assets, on founding corporations, and on sales, totalled 11.89 billion forints. The largest foreign investors in 1993 continued to be Austria and Germany. Austria is involved in 96 companies, while Germany in 65. The share of foreign capital in privatized property has totalled 176 billion forints over the past three years, a third of which was invested in Hungary by Austria and Germany. (Budapest MTI in English 0732 GMT 20 Jan 94 AU) 20 BILLION FORINTS FOR SMALL INVESTORS PROGRAM: The board of AV Rt. (State Property Management Corporation) has allocated total stakes worth 20 billion forints face value to be offered this year for the Small Investors Share Ownership Program (SISOP). The following stakes have been offered: 3 percent of MVM Inc. worth 7.5 billion forints, 5 percent of MATAV Inc. worth 4.5 billion forints, 5 percent of EGIS Inc. worth 320 million forints, and 2 percent of MOL Inc. worth 2 billion forints. Zsolnai Porcelangyar Inc. (Zsolnai Porcelain Factory Inc.) and Kalocsa Kornyeki Agraripari Inc. (Kalocsa Area Agricultural Inc.) are also in the portfolio with 10-percent stakes. Following the government's reduction of the stake of AV Rt.-owned companies remaining under permanent state ownership at the end of last year, part of the share packets released has been included in the portfolio. As a result, a further 5 percent of MATAV shares, 5 percent of Pick Szeged Inc., 5 percent of Szegedi Paprika Inc., and 10 percent of Richter Gedeon Gyogyszer Inc. (Richter Gedeon Pharmaceutical Inc.) have been added. A 3 billion forints face value share packet was assigned by the State Property Agency (AVU) earlier to be offered this year for small investors within the SISOP. (Budapest MTI in English 1723 GMT 19 Jan 94 AU) TRADE AT BUDAPEST COMMODITY EXCHANGE PICKS UP: In 1989, the Budapest Commodity Exchange (Budapesti Arutozsde, BAT) reopened after a 41-year hiatus. In 1993, trading on the exchange exceeded 13 billion forints ($130 million), two-and-one-half times the amount of the previous year. Grain transactions amounted to a ninth of commodity-exchange turnover last year, while trading on the two- year-old meat division remained sluggish, with a turnover of less than 200 million forints. The newly founded foreign-currency exchange produced a turnover of 1.2 billion forints in its first nine months. Although the first day of trading on the reopened commodity exchange was October 25, 1989, trading began to gather momentum only after price liberalization in 1990. Grain turnover that year reached 600 million forints. Meat was introduced onto the BAT in 1991, but the 3 billion forint turnover that year was almost exclusively in grain. Total trade in 1992 was close to 6 billion forints, with 1.5 million tons of grain changing hands there -- nearly a quarter of Hungary's overall grain trade. 1993 was successful for the BAT in several respects. Although its turnover of 13.1 billion forints ($130 million) lagged far behind that of the Budapest Stock Exchange (Budapesti Ertektozsde, BET), this was still Eastern Europe's highest commodities exchange turnover, matched only by the Prague commodity exchange. The foreign-currency exchange, which opened last March, had a turnover of 1.2 billion forints in 1993. Both this and the BET's currency exchange base their speculative market in U.S. dollars and German marks on the safe background of Hungary's $20 billion export-import traffic -- $3 billion of which is transacted by joint ventures. In mid-October 1993, the Central Accounting House and Assets Store Co. (CAHAS) was founded by the BET and the Hungarian National Bank with equity capital of lOO million forints. It operates as a central clearing house and joint backing to Hungary's commodity and capital markets, conducting deals in futures, options, inter-bank securities, and foreign-currency exchange. The house guarantees that contracts are fulfilled on time, thus diminishing interest risk for domestic investors and exchange-rate risk for foreign investors. To tackle its increasing role, last year the BAT opened a new exchange room and started preparations for a new Central European energy-trade division. Its planned opening in the second half of 1994 was supported by an international conference of the Central European Energy Exchange Foundation, held in Budapest last November. Annual oil trade in Eastern Europe is around 6O million tons, worth $12O billion. Hungary's location at the intersection of two large pipelines makes Budapest a good place to host an exchange for crude oil from various countries, especially considering that the price of oil from the former Soviet Union is not yet quoted on international exchanges. However, Hungary must first adopt an exchange law before setting up the Central European energy exchange. The draft of the law was drawn up in 1992 and will probably go before the new parliament (to be elected this spring) sometime in the third quarter of 1994. (Budapest MTI in English 0905 GMT 19 Jan 94 AU) ESZTERGOM TO BUILD OVER 30,000 SUZUKIS IN 1994: Esztergom's Suzuki plant will turn out 30,000-35,000 cars in 1994, three times the number produced in 1993, the January report of the company says. In 1993, 12,556 Hungarian-made Suzukis, 35O imported Swifts, and 1,766 Marutis were sold in Hungary. The export of over 10,000 cars starts in April through Suzuki's Western European distributors. Currently, 34 Hungarian companies deliver spare parts for the Esztergom factory. The proportion of domestic suppliers is expected to reach 50 percent by late March, which, together with 1O percent European suppliers, will give the 60-percent ratio that exempts Hungarian Suzukis from European Union customs duty. Suzuki officials think there will be a further need for investment supported by the finance and industry ministries. Last year, eight firms supplying Suzuki received financial support or interest preferences worth a total of 200 million forints. This was used to help upgrade production to replace imports from Japan. (Budapest MTI in English 1006 GMT 20 Jan 94 AU) GE INVESTS $30-50 MILLION PER YEAR IN HUNGARY: The U.S. General Electric (GE) company invests $30-50 million a year in its Hungarian projects. According to GE's plans, Hungary will continue to be its European manufacturing center. After lay-offs in the initial period, the company has created 1,500 jobs. Also announced was that Tungsram, an affiliate of General Electric Lighting Europe, is to end 1993 with a profit. (Budapest MTI in English 1522 GMT 25 Jan 94 AU) MALEV TO LEASE BACK BOEING 767'S FOR U.S. FLIGHTS: Hungarian airlines MALEV is expected to deal with a cash crisis by signing a deal with a U.S. airline in the next two weeks to have its two Boeing-767 aircraft jointly operating on the Budapest-New York route this summer. The aircraft were sold to a Cayman Islands firm fully owned by MALEV, which will then lease the aircraft back. Malev bought the two 767's last year and flew them jointly with Italian airline Alitalia on a Budapest-Rome-New York route. (Alitalia has a third of MALEV's shares.) By the end of 1993, the aircraft had caused losses of $2 million. The flights were well booked, but only because of low ticket prices forced on MALEV by strong competition. Revenue also suffered because the aircraft made stops in Rome. MALEV lost 1 billion forints in 1993, with big exchange rate costs on loans coming from devaluations of the Hungarian forint. (Budapest MTI in English 1722 GMT 24 Jan 94 AU) NEW POWER STATION FOR BUDAPEST WORLD EXPO: A new 180-megawatt block is to be completed at the Budapest Power Station of Kelenfold. To be constructed by the joint Hungarian-Italian company Ganz Ansaldo -- from World Bank and European Investment Bank credit -- the new block will not only produce electricity but will heat 50,000 flats with what is called "tired steam." The 260 million forint investment will be completed in the second half of 1995. The new unit will completely meet European noise and pollution standards and is intended to be a reference establishment for the Hungarian electricity industry. The Kelenfold Power Station supplies energy, including distance heating, to one of the country's largest regions, which includes the suburbs of Kelenfold, Gazdagret, and Budapest Castle. Experts believe this new project will promote Hungary's increasing independence in energy supplies. The new power station is expected to play a major part in energy supply for the 1996 World Expo. (Budapest MTI in English 1123 GMT 21 Jan 94 AU) ENERGY USE ROSE IN 1993: The greater use of energy last year was mainly due to more intensive heating in the winter period, the State Authority for Energy Management and Energy Safety reported. Total energy consumption was 1,067 petajoules in 1993, nearly 10 percent up on 1992. The share of domestic production was 48.4 percent, 2.8 percent down on the previous year. Within the total energy consumption, the proportion of coal fell from 18.2 percent in 1992 to 15.9 percent last year. Domestic coal production totalled 14.5 million tons, and imports amounted to 1.17 million tons. Oil production was 1.7 million tons and natural gas production 5 billion cubic meters, 0.25 billion more than in 1992. Including imports of 6 million tons of oil and 5.87 billion cubic meters of gas, hydrocarbons accounted for 67.8 percent of energy use. Electricity consumption rose by 0.5 percent and consumption was close to 35,000 gigawatt-hours, including imports of 2,474 gigawatt-hours, which covered 7.1 percent of consumption, compared with 10 percent in 1992. (Budapest MTI in English 1143 GMT 25 Jan 94 AU) NUMBER OF BUSINESS ORGANIZATIONS INCREASES: The number of business organizations continued to increase last year, with units financed from the central budget being the only exception to the rule. Business organizations without legal personality showed the sharpest increase. According to a recent report of the Central Statistical Office, in late 1993 there were 85,638 business organizations with legal personality, 23.4 percent more than a year before, in the country. Business organizations without legal personality numbered 98,036, 13.6 percent more than in late December. The number of private entrepreneurs increased by 13.6 percent, to 688,843. The structure of business organizations changed to a slight extent: 35 percent of them were specialized in trade, 20 percent in industry, 18 percent in real estate and services, and 10 percent in construction. In the category of private entrepreneurs, 35 percent were artisans, 35 percent traders, and 20 percent intellectuals. (Budapest MTI in English 1300 GMT 25 Jan 94 AU) SEPARATE STATE FUNDS MAY BE MERGED: The Finance Ministry plans to present draft legislation to the government which will merge certain separate state funds and eliminate overlaps between individual funds. As the funds are regulated by law, only Parliament has the authority to change them. Under the law on public finances, as of last year, only separate state funds that have been set up by legislation are eligible for central budget support. Seven funds were established under one law: funds for tourism, trade development, investment promotion, water management, environmental protection, market intervention, and regional development. A further six agricultural funds were set up under one law and other funds are regulated by individual laws. The draft bill proposes that all funds connected with economic development be merged. This would involve the creation of a single fund, managed by the Finance Ministry, to replace the existing separate funds for employment, regional development, investment promotion, trade development, and technical development. I 1993, just over a third of the funds' total income came from central budget support, and this year the proportion will fall to slightly over a sixth, even though the total income of the funds will be 20 billion forints higher this year than last. Other sources of income for the funds this year include 26 billion forints from tax revenue allocated directly to the funds, of which 15 billion forints will go to the Road Fund. The total revenue from contributions from the corporate sector will be 60 billion forints, of which 50 billion forints will come from employers' contributions to the Solidarity Fund. Employees' contributions will generate a further 15 billion forints, and 28 billion forints will come from the income from privatization, of which 13.5 billion forints will go to the Employment Fund. The other resources of the funds are sums carried over from last year, various capital income, and credit. This year the Road Fund plans to take out the largest single amount of credit, almost 20 billion forints. Managers of the separated state funds and the amount of their subsidies: BOT Name of the Fund Manager Budget Total Income Subsidy 1993 1994 1994 Expected Targeted Targeted National Forestry Fund FM --- 200 2,600 Land Protection Fund FM --- --- 440 Fish Farming Fund FM --- --- 88 Animal Breeding Fund FM --- --- 390 Agricultural Development Fund FM --- 2,000 6,000 Tourism Fund IKM 1,500 200 2,000 Trade Development Fund NGKM 2,900 2,020 2,820 Investment Promotion Fund NGKM 700 600 1,003 Water Management Fund KHVM --- --- 4,050 "Catching up With Europe" Higher Education Fund MKM 1,000 1,600 1,850 Professional Training Fund MUM --- --- 2,057 Central Youth Fund MEH 100 36 80 National Cultural Fund MKM --- 133 925 OTKA MEH 2,440 1,920 1,928 Environment Protection Fund KPM --- --- 5,030 Technical Development Fund MEH --- 4,680 5,280 Market Intervention Fund IKM 150 --- 651 Employment Fund MUM 21,500 --- 21,400 Regional Development Fund KTM 31,000 --- 8,400 Solidarity Fund MUM 52,000 16,380 81,600 Rehabilitation Fund NM --- 100 540 Refugee Support Fund BM 4 1,000 900 922 Road Fund KHVM --- 6,100 46,370 Expo Fund VP 13,700 --- 24,300 Orszsgows Jatek Alap PM --- --- 1,002 Small Investor Guarantee Fund Third Party KGA --- --- 11,000 Vehicle and Compensation Fund PM 1,000 1,900 2,669 Wage Guarantee Fund MUM --- 600 1,800 National Sports Fund 0TSH --- --- 400 Total: 76,990 40,369 237,716 eot Abbreviations: FM -- Agricultural Ministry IKM -- Industry and Trade Ministry NGKM -- Ministry of International Economic Relations KHVM -- Ministry of Transportation, Telecommunications, and Water Management MKM -- Ministry of Education MUM -- Ministry of Labor MEH -- Prime Minister's Office KTM -- Ministry of Environment Protection and Regional Development NM -- Welfare Ministry (Budapest MTI in English 1757 GMT 21 Jan 94 AU) POLAND OIL COMPANY TO HIRE NORWEGIAN RIG: The Polish "Petrobaltic" company will rent the "West Beta" oil rig from the Norwegian firm "Smedvig AS," the Norwegian agency NTB announced on 27 January. Under a $6.1 million contract, signed for two years with a possibility of an extension for another two years, "Smedvig AS" will also launch the rig. The Norwegian firm expects that this deal will be followed by more orders for oil equipment. (Warsaw PAP in English 1736 GMT 27 Jan 94 AU) POLSAT RECEIVES LICENSE FOR NATIONWIDE TV CHANNEL: The National Radio and Television Council on 27 January awarded the Polsat TV network a license to broadcast a nationwide television channel. Polsat, the only legal private TV broadcaster in Poland, was the first station to receive a satellite broadcasting license last year. The capital of Polsat amounts to 250 billion zlotys (Z) (about $11.6 million, 97 percent of which is owned by Polish businessman Zygmunt Solorz. Polsat plans two share issues in the future. The first issue is planned to amount to 250 billion zlotys and the second to 500 billion zlotys. After the last issue the share of the company founders is to be limited to 25 per cent. (Warsaw PAP in English 1916 GMT 27 Jan 94 AU) NESTLE DONATES $500,000 TO POZNAN HEALTH SERVICE: The Swiss company Nestle on 27 January transferred $500,000 dollars to the Poznan provincial health service. Nestle bought 47 percent of the shares in the Goplana joint-venture company in Poznan on 6 January. A spokesman for the governor of Poznan province said the money will be spent on opening a thoracic surgery department for children at the provincial lung and tuberculosis clinic. (Warsaw PAP in English 1933 GMT 27 Jan 94 AU) REVENUE HIGHER, SPENDING LOWER IN 1993 BUDGET: State budget revenues in 1993 were Z458.9 trillion (some $21.5 billion) or 5.9 percent higher than forecast in the budget law, while expenditures amounted to Z502.7 trillion, 2.3 percent lower than the planned figure, the Finance Ministry's press office said in a document released on 28 January. The budget deficit was Z43.8 trillion, compared with the planned Z81 trillion figure. According to the Finance Ministry, income was higher due to the better implementation of VAT and excise tax, an effective collection of advance income taxes, as well as higher payments of profits of the National Bank of Poland. Poland's budget expenditures were lower by Z11.8 trillion because subsidies for the social insurance fund and expenditures for foreign debt servicing were cut by Z5.9 and Z4 trillion, respectively. According to the ministry, there were Z4.2 trillion left in the Treasury. (Warsaw PAP in English 1454 GMT 28 Jan 94 AU) 1993 ECONOMIC STATISTICS: According to the Central Statistical Office, the GNP in 1993 increased by 4 percent, industrial and agricultural production went up, unemployment figures did not decrease, and inflation remained high. The purchasing power of the zloty also declined. In 1993 prices went up by 35.3 percent. Such a high inflation rate was caused mainly by increases in the cost of energy, transport, telecommunications, and fuel. Unemployment was still high in 1993, amounting to 15.7 percent in December. There were 2,889,600 unemployed people registered in job centers. The budget deficit was lower than the amount envisaged in the budget law and amounted to Z44 trillion (over $2 billion). Imports exceeded exports by $3.5 billion, which was connected with an increase of imports by 47 percent in comparison with 1992 before the introduction of VAT. At the same time, exports went up by only 24.1 percent. (Warsaw PAP in English 1808 GMT 28 Jan 94 AU) SCANIA BUS, TRUCK PLANT OPENS IN SLUPSK: The Polish-Swedish joint venture which produces Scania trucks and buses has opened a factory in Slupsk. The company was set up in the autumn of 1992 by the Swedish firm "Scania Trucks and Bus" and the Polish state enterprise "Kapena". Since that time the firm has produced 80 trucks of various kinds. The success of the company led to the decision to manufacture buses. These buses will be made with Swedish parts at first, which will gradually be replaced by Polish parts. The first buses will be deployed in the Slupsk transport system. Scania hopes its investment in Slupsk will be a springboard for future investments in East European markets, especially in the republics of the former Soviet Union. (Warsaw PAP in English 2118 GMT 29 Jan 94 AU) PUBLIC DEBT EXPECTED TO GROW IN 1994: The public debt stood at 1,372 trillion zlotys (Z), approximately $64 billion, at the end of last year, Piotr Dziewulski of the Finance Ministry said on 2O January. Of that total, some Z360 trillion represented domestic debts, while the rest was due to foreign creditors. The ministry expects that in 1994 the overall debt will increase to some Z1,7OO trillion zlotys, of which some Z500 trillion will be sums due to internal creditors and some Z1,200 trillion will be in foreign debt. Last year the state budget paid Z48 trillion zlotys of interest on domestic debts and another 12 trillion in interest on foreign debts. This year the expected figures are 82 and 30 trillion respectively. (Warsaw PAP in English 1503 GMT 20 Jan 94 AU) NEW TREASURY BONDS TO BE ISSUED: New kinds of treasury bonds are to be offered to Polish and foreign investors starting in February. The first issues of two- and five-year bonds, carrying fixed interest rates of 18 and 15 percent per annum respectively, will be sold at auctions from 17 February until 19 May 1994. The auctions are open to Polish and foreign natural and legal persons willing to buy not less than Z1O billion (about $450,000) worth of the securities. (Warsaw PAP in English 1509 GMT 20 Jan 94 AU) AGREEMENT ON ECONOMIC COOPERATION WITH ISRAEL: The Central Office of Planning (CUP) and the Israeli Ministry of Economics and Planning signed a joint communique announcing the establishment of closer cooperation in selected areas between the two ministries and cooperation that would create conditions for joint actions of economic units, CUP Chief Miroslaw Pietrewicz told correspondents after a four-day visit to Poland by Israeli Economics and Planning Minister Shimon Shetrit. Shetrit headed a delegation of Israeli businessmen whose task was to find ways of stepping up trade and tourist exchange between the two countries. Shetrit said that "politicians have marked out the roads, but it is businessmen who will drive along them." (Warsaw PAP in English 1519 GMT 20 Jan 94 AU) SWEDISH PETROCHEMICAL CONCERN TO INVEST IN POLAND: The Swedish petrochemical concern OK Petroleum has announced plans to invest some $17 million in Poland. Sven-Erik Zachrisson, managing director of the concern, said that in the first stage of its presence in Poland, OK plans to sell its gasoline which, according to experts, is the cleanest and environmentally friendliest in the world at this moment. The concern also has plans to open its own depots and later on build a network of gasoline stations together with the Norwegian Statoil concern. Zachrisson said the concern has initially earmarked almost $17 million for investments in Poland, not including the costs of the building of gasoline stations. (Warsaw PAP in English 1525 GMT 20 Jan 94 AU) DOUBLE TAXATION AGREEMENT WITH LITHUANIA: Marek Borowski and Eduardas Vilkelis, the finance ministers of Poland and Lithuania, signed an agreement on barring double taxation on 20 January. "This is the third in a series of agreements Poland has signed with the Baltic states. It ends the series and undoubtedly takes us closer to a Polish-Lithuanian treaty. This is a good sign in our neighborly relations," Borowski told correspondents. Stressing the importance of the agreement for the development of bilateral trade relations and the conclusion of the treaty, Vilkelis said the agreement will create favorable conditions and opportunities for political and economic cooperation of the two countries and the growth of their economies. The agreement is also of considerable significance for over small 500 joint venture manufacturing and trading companies that have their operations in Lithuania. Poland and Lithuania signed an agreement on mutual trade and economic cooperation in February 1992 and since then have developed their trade exchange in all branches of the economy, chiefly in the construction materials industry, the food-processing sector, finances, banking, tourism, and health care. Poland's Ministry for Foreign Economic Relations claims that there are possibilities of increasing Polish-Lithuanian trade exchange in such sectors as agriculture, construction, maritime economy, and timber industry. (Warsaw PAP in English 1542 GMT 20 Jan 94 AU) IMPROVEMENT OF GERMAN BORDER CROSSINGS: Poland and Germany have agreed on the need to adjust the pace of the modernization of the existing Polish-German border crossings and build new ones to cope with the constantly growing border traffic. Polish Minister of Transport Boguslaw Liberadzki, returning to Warsaw on 2O January after talks with his German counterpart Mathias Wismann, said they focused on structural and legal reforms in rail transport and on Polish-German border crossings. Liberadzki said that last year saw an "explosion" of Polish-German border traffic. Poland's western border was crossed by some 80 million people in 1993. He said that construction works at the Swinoujscie-Garz crossing and the building of bridges in the border towns of Jedrzychowice and Zgorzelec should end this year. The ministry also plans to modernize border crossings in Swiecko and Podroze and, taking advantage of credits from the World Bank and PHARE (Economic Reconstruction Aid for Poland and Hungary) programme, develop the existing crossings in Kolbaskowo, Olszyna and Gubin, all on Poland's western frontier. Liberadzki said he also discussed with Minister Wismann the possible construction of German-Czech freeway going through the Polish region of Turoszow. Poland is currently studying documents received from the German Ministry of Transport. Liberadzki also announced that the Transport Ministry will examine the proposal by the German air carrier Lufthansa to become a strategic partner of LOT Polish Airlines. (Warsaw PAP in English 1609 GMT 20 Jan 94 AU) ONE-THIRD OF STATE FARMS PRIVATIZED IN 1993: The Agricultural Property Agency of the State Treasury last year managed to sell or lease into private hands almost one-third of land formerly under cultivation by the state farms. Of the 3.3 million hectares formerly managed by these farms, 890,000 hectares were leased and another 58,000 hectares sold to private owners. The agency put to the bloc last year 1.7 million hectares of state farm land, of which nearly 57 percent found customers. The land still remaining to be sold (about 2.1 million hectares) has been under temporary administration by treasury plenipotentiaries. The agency hopes to speed up the process of privatization this year, largely thanks to the new regulations that took effect on 19 January. The amended law on agricultural property of the State Treasury now allows greater flexibility in fixing starting prices at auctions and offers more favorable terms to buyers of land. (Warsaw PAP in English 1728 GMT 20 Jan 94 AU) SURVEY SHOWS RISING PRODUCTION, SLOWER EXPORTS: A poll conducted by the Central Office of Planning (CUP) in 135 enterprises shows that most plants expect the growing production trend to continue but feel export sales will slow down. In a similar poll carried out last November, 35 percent of the polled firms reported growing production. In December, the figure was 31 percent, while the expectations for January stand at 22 percent. In November, 45 percent of the enterprises covered by the poll reported growing export sales. In December, the figure was 40 percent, while expectations for January stand at 20 percent. (Warsaw PAP in English 2016 GMT 20 Jan 94 AU) POLISH, UKRAINIAN AIRLINES TO EXPAND COOPERATION: The deputy ministers of transport from Poland and Ukraine signed an agreement in Warsaw enabling regular air services between Polish and Ukrainian cities. The already existing regular connections between Warsaw, Lvov, and Kiev will be extended to two more cities in each of the countries. This is the first agreement between Poland and independent Ukraine, said Polish Ministry of Transport spokeswoman Marzena Grabiszewska-Gryka. Until now, the services have been based on an agreement with the former Soviet Union. Ukrainian Deputy Minister of Transport Nikolai Marchenko asked the Polish Ministry of Transport for aid in training Ukrainian aviation administration staff. (Warsaw PAP in English 2102 GMT 20 Jan 94 AU) FREEWAY CONSTRUCTION PLANNED: Some 2,500 kilometers of freeway are to be built in Poland, according to Transport Minister Boguslaw Liberadzki said. The Government Economic Committee (KERN) examined a bill on the building of freeways on 21 January. The government plans to build the following freeways: A-1 Gdansk-Cieszyn, A-2 Swiecko-Terespol, A-3 Szczecin-Czechy, and A-4 Wroclaw-Przemysl motorways. The latter s to have a branch from Wroclaw to Lodz. The expressways will be built by investors who will win licenses for this by way of a tender. The land through which the freeways will pass will be purchased. Construction costs will be recouped by means of tolls. The building of one kilometer of expressway costs about $2.5-3 million. (Warsaw PAP in English 1612 GMT 21 Jan 94 AU) NEW BANKNOTES WITH ANTI-COUNTERFEIT FEATURES: New high- denomination banknotes incorporating anti-counterfeit features are to be introduced as of 24 January 24, the National Bank of Poland has announced. The new notes, with face values of Z500,000 zlotys and Z1,000,000 are improved versions of the existing notes. They are printed on better-quality paper, incorporating a new watermark and new security threads, which change color under ultra-violet light. There are also slight color changes, although the basic design is largely unchanged from the existing notes of the same denominations. The changes have been made in response to widespread concern over the increase in circulation of counterfeits of the higher denomination Polish banknotes. However, the existing 500,000 and 1,000,000 zloty notes are to remain in circulation alongside the new ones, and will be replaced only as they become worn out. (Warsaw PAP in English 1730 GMT 22 Jan 94 AU) THIRD ANNIVERSARY OF STOCK EXCHANGE: Wieslaw Rozlucki, president of the Warsaw Stock Exchange, presented Prime Minister Waldemar Pawlak with one share in the Warsaw exchange at the inauguration of the third year of its operations on 24 January. The prime minister gave the president a green clover as a sign of good luck. Under the stock market regulations, one share in the stock exchange makes its holder eligible to apply for direct participation in stock market tradings. The prime minister may thus open its own brokerage house provided that he is granted a license from the Securities Commission. "The stock market is very useful for the budget as a seller of shares in privatized companies. The history of this institution proves that it performs the role of market pricing of enterprises well," Pawlak said. Rozlucki recalled that 1993 was very successful for investors contrary to the previous years when prices of most shares had been noting markdowns. In 1993, prices of securities rose over 10 fold and turnover 40-fold, Rozlucki said. Prizes for the best brokerage houses were awarded during the inaugural ceremony, with the Central Brokerage Office winning as regards turnover and the Wielkopolski Credit Bank winning as regards a rise in the number of customers. (Warsaw PAP in English 1838 GMT 24 Jan 94 AU) STRUDER PROGRAM TO SUPPORT INFRASTRUCTURE PROJECTS: The Struder program of support for regional development, under which some 14 million ECU are to be earmarked for concrete infrastructure projects in Silesia, was unveiled on 25 January in Gliwice, Katowice province, Tuesday to representatives of rural districts of the province. Subsidies for public investments are to be granted to districts on condition that they prepare a project of a venture designed to stimulate economic development, create new jobs and encourage enterprise in the region. The districts are also expected to finance a minimum of 30 percent of the total costs of a venture, Tadeusz Schoepe, director of the Friedrich Ebert Foundation, which organized a seminar on the issue, said. Struder is one of the European Union programs that covers regions especially threatened with unemployment. The Silesian office of the Struder programme has been operating since 1992. (Warsaw PAP in English 1200 GMT 25 Jan 94 AU) SWISS PACKAGING FIRM TO INVEST IN LODZ: "Rig Rentsch," the biggest European producer of paper packaging, has bought the "Polgraf" printers in Lodz and intends to build its own factory on the site. The firm wants to invest $8 million over the space of three years and eventually employ 90 workers. "Rentsch Poland" will produce cardboard packaging for cigarettes, cosmetics, and food products for those Western clients of "Rig Rentsch" who have their factories in Poland. Raw materials will come from Scandinavia, mainly from Finland, although Rentsch does not exclude buying raw materials in Poland. "Rig Rentsch Industrie Holding AG" has 10 factories in 7 West European countries. (Warsaw PAP in English 2137 GMT 25 Jan 94 AU) ROMANIA OLTENITA BUILDING RIVER SHIP FOR SWISS CUSTOMER: The Navol Stock ship-building company of Oltenita has signed a contract on the building of a second passenger river ship, apt to accommodate more than 150 in special comfort conditions, for a partner in Switzerland. George Bozeanu, general manager of the company, says that the first ship being built for the same customer is in an advanced stage of assembly works. (Bucharest ROMPRES in English 0759 GMT 3 Feb 94 AU) PRIVATIZATION PROSPECTS IN 1994: The State Property Fund (FPS) privatized 40 companies in the first month of this year. The total number of enterprises that turned private is currently 293 with a total number of more than 83,000 employees. The State Property Fund's nominal capital is about 61 billion lei and the number of shares sold by it is 9,116,107, with a total value of 82.2 billion lei. The FPS privatization offer through stock sale for 1994 is estimated at 2,368 companies including 1,930 small, 403 medium and 35 big ones. Out of the privatized companies the most numerous are handle building activities (74), home trade (44), services (26) and ready-mades and textile industry (10). The most numerous companies within this year's privatization offer will be farming ones, that is, 1,036. Eligible for privatization are also 280 industrial companies, 215 trade ones, 141 transport companies, 131 food industry companies, 100 building and 27 travel companies. (Bucharest ROMPRES in English 0849 GMT 3 Feb 94 AU) OIL, NATURAL GAS EXTRACTION PROSPECTS: The extractive industry turnover in 1993 was 1.649 billion lei, of which the Romgaz and Petrom companies' contribution to it was 18.3 percent, announced the Ministry of Industries in its news conference on February 3. As many as 6.63 million tons of crude and 20.117 billion cu.m. natural gas were extracted last year and gas imports totalled 4.6 billion cu.m. The major targets of the respective branch for the year are to reach the crude and gas extraction level of 1993, secure financing through European Bank for Reconstruction and Development loans for the project of recovery of the extractive sector and augmentation of underground storage capacities. (Bucharest ROMPRES in English 1024 GMT 4 Feb 94 AU) AGRICULTURE MINISTER REVIEWS 1993 RESULTS: The 1993 agricultural production exceeded the 1992 one with about 3 million tons of grain, 1 million tons of potatoes, 500,000 tons of grapes and 1 million tons of other fruits, said Agriculture Minister loan Oancea. In 1993 milk and eggs production leveled the 1992 production, while meat production fell by about 300 tons. The fall was explained by the agriculture minister through the lack of fodder and funds, especially in the state sector. Food exports mounted in 1993 to over $55 million which means a 15 percent fall compared with 1992. 1993 is the first year when the production decline flattened out for several items such as oil, margarine, vegetables, fruit, beer and wines. (Bucharest ROMPRES in English 1308 GMT 7 Feb 94 AU) AGRICULTURE MINISTER DISCUSSES RESTRUCTURING: A new phase in the restructuring of Romanian agriculture is about to start, which is intended to replace a number of links in the food-processing chain and to do away with monopolies in services for agriculture, Romanian Minister of Agriculture and Food loan Oancea says in an interview. 516 agricultural machines units will be passed into private hands over 1994-1996 and consequently competition is likely to appear. Minister Oancea mentions that last year private owners bought most of the 16,138 tractors on the domestic market. Private farmers own 44,000 of the existing 149,000 tractors. Services for agriculture are expected to turn into an efficient lever for agriculture activities. A number of food-processing companies in which the state holds most of the capital at present are also expected to get privatised until 1996, Oancea said. (Bucharest ROMPRES English 1409 GMT 7 Feb 94 AU) LEGAL FRAMEWORK FOR ISSUANCE OF STATE BONDS: The convention on the issue of sales and redemption of state bonds, concluded between the Ministry of Finance, as issuing party, and the National Bank of Romania, as state's agent, was signed in Bucharest, on January 31. "It is an historic moment", stressed Finance Minister Florin Georgescu, referring to the significance of the convention, that stipulates the issuance by the state of its own bonds to finance the budget deficit and such important actions of large public interest as road and bridge building, environment protection programs, etc. The Finance Ministry and the National Bank, together with the U.S. State Treasury, have established the technical details for a first issue of state bonds, worth lOO billion lei. "After more than 50 years, the legal framework of state bonds issue is established, resuming thus a tradition in Romania", said National Bank Governor Mugur Isarescu. "To begin with we will apply to institutions, insurance companies, the State Property Fund, commercial banks and even commercial companies with very good liquidities", he added. (Bucharest ROMPRES in English 1721 GMT 7 Feb 94 AU) CONSTANTA MARITIME, COMMODITY EXCHANGE: With a capital of 420,000,000 lei and 139 shareholders, the recently established Constanta Maritime and Commodity Exchange, mostly with private capital, plans a specialization in maritime, farming, tourist service and general commodities markets. Placed near the Constanta Port and the Agigea Free Zone, the Constanta Exchange is open to new members and has already established relations with similar institutions in Romania and abroad such as Britain, Italy, the Netherlands, Bulgaria, Germany, Russia. (Bucharest ROMPRES in English 1040 GMT 9 Feb 94 AU) ECONOMIC RELATIONS WITH VIETNAM: Raw material in shortage in the Romanian economy will be brought from Vietnam in 1994, Romanian Commerce Minister Cristian Ionescu told ROMPRES on his coming back from a recent session of a Joint Romanian-Vietnamese Commission. The trade balance has looked even in the recent years as Romania has exported none but imported goods from Vietnam on account of Vietnam's debts to Romania. The Joint Commission has agreed that Vietnam pay out its debt through commodity deliveries worth about seven million rubles yearly. The debt would be further denominated in rubles as a hard currency denomination would have come to be detrimental on Romania's interests, said Minister Ionescu who added that the Joint Commission works had marked the normalization of the economic relations between Romania and Vietnam. In the context, the Romanian commerce minister said the Commission had found out opportunities for Romanian exports to Vietnam such as Dacia cars for the Vietnamese Police and other public authorities, drilling equipment, electric railway engines to replace the older ones imported also from Romania in the 8O's. "These goods will be paid for in hard currency or through goods swaps," said Minister Ionescu. The Romanian cars are going to be paid for in hard currency, the tires would be swapped for Vietnamese natural rubber and the drilling equipment for crude oil. (Bucharest ROMPRES in English 1102 GMT 9 Feb 94 AU) PROJECTS TO IMPROVE TRANSPORTATION NETWORK: Under a $403.4 million project to increase efficiency and adjust the road traffic network in Romania to international standards, the World Bank is to bring financing of $120 million, the EBRD is to contribute $80 million and the European Bank of Investment $80 million, to which $123.4 million are to be added from Romania's Government. The project envisages an improvement of the 1,000 km of national routes, in view of a daily flow between 2,000 and 10,000 vehicles, most of them part of the master routes connecting the West with the East of the continent. Moreover, modernization of border crossing points at Nadlac, Varsad, Borsa, Siret, Albita, and Calafat is also in view to ease international traffic, reads an article in the weekly ECONOMISTUL. Works concerning the safety of routes are to include placement of international road signs and milestones on 5,000 km. (the total length of European routes in Romania), in view of bringing more information and security on road traffic. Investment for railway transport will help purchase of railway network maintenance equipment, spares and an improvement of the data processing system under the program of restructuring of the Romanian railway network and help correlate it to international networks. The article reads that the World Bank has already started to grant assistance for operations related to reform in the transport system also by elaborating studies with international standards as starting point. (Bucharest ROMPRES in English 1243 GMT 9 Feb 94 ) FOREIGN CAPITAL INVESTMENT IN ROMANIA: Germany ranks first among the countries represented in Romania by companies with foreign capital participation, with 3,821 such companies registered over December 1990-December 1993, according to a report issued by the National Trade Register. In point of the amount of subscribed nominal capital, Italy first comes with 58,438.3 million lei, 17.6 percent of it in hard currency. Syria and Turkey are both registered with 2,380 mixed-capital companies each, followed by Jordan (more than 1,500), Hungary and the United States (more than 1,300 each) and Lebanon (more than 1,100 companies). Even though ranking 12th in point of the number of companies with capital investment in Romania, France distinguished itself with a 33,500 million lei subscribed capital (11.3 percent in hard currency), similar to the German capital of some 33,500 million lei with a 10.5 percent share in hard currency. A lower share is held by a total of 127 countries represented in Romania in point of subscribed capital investment, half of them with a foreign capital lower than 10 million lei. (Bucharest ROMPRES in English 0453 GMT 27 Jan 94 AU) PRIVATIZATION PROSPECTS IN INDUSTRY: So far 27 state-owned companies have been turned to the private sector. Some are in the textile industry, others in the wood processing, electrical, electronic, and chemical branches, in oil and gas drilling, machine- building, all cumulating a nominal capital of 1.8 billion lei. The information comes from VOCEA ROMANIEI (Romania's Voice), the government's newspaper, which carries an interview with Industry Minister Dumitru Popescu. A standard methodology was elaborated in June 1993 for the assessment of the companies' degree of profitability and solvency. The selection for privatization is a continuous process that gives Premier Vacaroiu's statement that "1994 will be the year of wide-scale privatization" the chance to make this come true in industry, the minister said. He is also quoted as having said that "industry still furnishes over 45 percent of the gross domestic product, over 50 percent of the national budget, about 90 percent of Romania's exports, and keeps 45 percent of the work force employed. The main assets of the industrial sector are well trained hands, specialists with a solid technical education comparable to Western standards. Most sectors, the minister opined, have the force to survive free market competition provided the necessary technological updating is done at moderate and short-term recoverable costs and that the social protection rules stipulated by the international regulations Romania has adhered to are observed. Romanian industry is also capable, Minister Dumitru Popescu said, to cover its own imports from exports, many Romanian suppliers being well known on the international market for years. (Bucharest ROMPRES in English 0402 GMT 28 Jan 94 AU) 1993 INDUSTRIAL OUTPUT, 1994 PROJECTIONS: The industry of road transportation means ranks first in point of growth in 1993 with 125.7 percent, followed by furniture, 129.7 percent, the industry of communications equipment, radio and television sets, 119.2 percent, the rubber and plastics processing industry, 105.9 percent, rail, sea and air means of transportation, 112.7 percent, the chemical industry and that of synthetic fibers, 103.9 percent. "Energy- greedy" industrial sectors and those based on imports, such as the paper and pulp industry and textiles reported drops in 1993 as against 1992. The production of the units subordinated to the Ministry of Industries will grow by 2-4 percent in 1994, the ministry estimates. Most branches are expected to redress (as received), with important growth in electricity and heating -- 3-5 percent; textiles, leatherware -- 5-7 percent; chemistry and petrochemicals -- 3-4 percent; machine-building -- 4-6 percent; and the wood-processing industry -- 4-5 percent. A 2 percent drop is estimated in crude and natural gases extraction in 1994 against 1993. Estimates for 1994 have taken into account both data from economic units and departments and expected effects due to the improvement of the legislative and institutional framework. (Bucharest ROMPRES in English 0417 GMT 28 Jan 94 AU) JANUARY FOREIGN INVESTMENTS: 620 joint companies with a nominal capital of $14.8 million were registered with the Romanian Agency for Development in January. Compared with the same month of 1993, the number of newly created joint ventures dropped by 147 and the invested capital is $2.6 million less. First in the standings of the foreign investors in January was Britain, with investments of $6.2 million and 16 joint ventures, followed by Italy with $1.4 million and 63 joint ventures, Germany with $1.4 million and 39 joint ventures. The most numerous joint ventures were set up in January by Romanian entrepreneurs in cooperation with partners from Syria (80), Italy (63), China (50), Iran (46), and Iraq (42). The total number of companies with foreign participation is now 29,753 and their total nominal capital is $768.8 million. (Bucharest ROMPRES in English 1000 GMT 2 Feb 94 AU) NEW TIMISOARA-BUCHAREST TELEPHONE LINE: A new telephone line between Timisoara (western Romania) and Bucharest, connecting several other important localities en route, will be finished in 1994. The project, estimated at around $30 million, will be financed by the European Bank for Reconstruction and Development. (Bucharest ROMPRES in English 0902 GMT 20 Jan 94 AU) AIRCRAFT ENGINE PLANT: The "Turbomecanica" plant is the only manufacturer of aircraft jet engines in Romania. The company was set up in 1975 to revive an old tradition in Romanian aircraf t- manufacturing. At present the company manufactures a wide range of items for the aircraft industry, as well as for other industrial fields. The company is entirely state-owned and employs some 2,400 people, many of whom have undergone highly specialized training in Romania and abroad. There are 400 engineers working at "Turbomecanica," which can develop programs for aviation and other related economic fields. The aviation profile (profile 1) consists of four types of engines (military and civilian) and spare parts for helicopters; some of the items are also exported. The licenses for aircraft parts were bought from prestigious firms: Rolls Royce (Britain), Turbomeca and Aerospatiale (France). The second profile of the company involves manufacturing free turbines (for high-power gas pumping stations) as well as other parts derived from aircraft systems. Within the same profile "Turbomecanica" manufactures parts for nuclear and medical equipment (like the "Dermojet," which has been approved by medical authorities), compressors for freezing units, compressed-air turbines, and so forth. In view of the wide range of its products and the delicate fields they belong to, "Turbomecanica" strives to achieve high overall quality, in keeping with all international standards. (Bucharest ROMPRES in English 0804 GMT 21 Jan 94 AU) ISSUANCE OF TREASURY BILLS PLANNED: Treasury bills will be issued again in Romania as of February 1994, after 50 years of interruption -- an act regarded as a first step toward a capital market and the fulfillment of a major task of the agreement concluded last month with the IMF, under which Bucharest is to issue state bonds starting 1994. The terms under which the issuance will be made are to be set by the Ministry of Finance together with the National Bank, with the latter acting as the government's agent in the issuing of state bonds. The Ministry of Finance will study possibilities of issuing treasury bills at market rates, in an attempt to obtain some 20 billion lei and to partly finance the budget deficit. (Bucharest ROMPRES in English 0758 GMT 25 Jan 94 AU) SLOVAKIA SLOVENE BUSES TO BE PRODUCED IN BRATISLAVA: Representatives of the Slovakia BUS shareholding company gave a briefing on a joint Slovak-Slovene project for producing buses. These will be the most up-to-date models, with a long service life, at least 12 years, low maintenance costs, and environmentally friendly MAN engines. It is reckoned that 50 buses will be produced this year; the maximum production capacity is 100 buses. Each bus costs around 5.5 million korunas (Sk). A new assembly building is to be built in Bratislava before the end of 1995. (Bratislava REPUBLIKA in Slovak 28 Jan 94 p 2 AU) STATE OWES PHARMACEUTICAL DISTRIBUTORS SK1.1 BILLION: The Association of Private Distributors of Pharmaceuticals, Medicines, and Health Care Materials and Technology held a meeting in Bratislava on 27 January at which it discussed resolving its outstanding claims for the fourth quarter of 1993, the maximum prices for medicines, privatization, and agreements between pharmacies and regional national insurance companies. Representatives of the Health and Finance Ministries were also present. The state owes the distributors Sk1.1 billion for the fourth quarter of last year, and it is not yet clear when this sum will be paid. (Bratislava REPUBLIKA in Slovak 28 Jan 94 p 3 AU) INSTITUTE FORECASTS GDP DECLINE IN 1994: According to the Slovak Forecasting Institute, the real gross domestic product will decline by between 0.8 percent and 3.3 percent in 1994 compared with 1993. In the opinion of P. Karasz, an expert at the Institute, it would be realistic to reckon with a further decline in households' consumption. "Compared with last year, it is possible to estimate a 0.7 percent to 1.4 percent decline," he said. Despite the envisaged increase of 14 to 17 percent in the population's nominal disposable income, its real value will fluctuate around the level recorded in 1993. An increase between 1.8 percent and 4.6 percent is forecast in the gross generation of fixed capital. (Bratislava NARODNA OBRODA in Slovak 28 Jan 94 p 24 AU) PUBLIC POLLED ON STANDARD OF LIVING: According to a public opinion poll conducted by the Statistical Office, 43 percent of citizens assess their standard of living as more poor than good; 15 percent as poor; 34 percent as more good than poor; and 8 percent as good. Seventy-three percent of citizens over the age of 60 take a negative view of their standard of living while 23 percent have a positive view. Respondents with a university education assess their standard of living more positively than other groups. Some 59 percent of this group assess it positively, while 41 percent assess it negatively. Citizens who support the Movement for a Democratic Slovakia (HZDS) assess it more positively than other groups, 62 percent considering it to be good. Eighty-seven percent of entrepreneurs rate their standard of living positively, compared to 48 percent of blue-collar workers and 51 percent of white-collar workers. Some 43 percent of citizens expect their standard of living to decline this year, 27 percent expect it to remain the same, and 16 percent expect it to improve. (Bratislava SLOVENSKY DENNIK in Slovak 28 Jan 94 p 3 AU) REPUBLIC RECEIVED 110 MILLION ECU FROM EIB IN 1993: Last year, the European Investment Bank released 882 million ECU in credits for the countries of Central and Eastern Europe. The fourth largest sum was released for Slovakia. Of the overall sum of 110 million ECU, 55 million were earmarked for gas extraction in the border region with Austria and the Czech Republic, 45 million for modernizing the telecommunications system, and 10 million for developing the trans- European road network. (Bratislava NARODNA OBRODA in Slovak 29 Jan 94 p 1 AU) EUROPEAN UNION ASKED FOR INCREASE IN EXPORT QUOTAS: Slovakia has asked the European Union to increase its export quotas. According to Finance Minister Julius Toth, this request is in harmony with the agreement reached in the GATT Uruguay Round. Toth held talks in Brussels on 28 January with Henning Christopherson, EU senior commissioner for economic affairs, and was given an assurance that the trade barriers between the European Union and Eastern European countries would be further reduced and that the possibilities for exporting steel, leather products, and clothing to the European Union would be increased. (Bratislava NARODNA OBRODA in Slovak 29 Jan 94 p 4 AU) SCHOOL MEAL SUBSIDIES ABOLISHED ON 1 FEBRUARY: Subsidies for school meals will be abolished as of 1 February. The cost of meals in kindergartens will rise from Sk12 to Sk16 per day, in the lower grades of elementary schools from Sk1O to Sk14, in the higher grades of elementary schools from Sk12 to Sk16, and in secondary schools from Sk13 to Sk19. (Bratislava-SME in Slovak 29 Jan 94 p 2 AU) IMPORTED DRUGS NO LONGER EXEMPT FROM CUSTOMS DUTIES: As of 15 February, pharmaceuticals will no longer be exempt from import duties. As a consequence of devaluation and revaluation, the cost of Czech pharmaceuticals will increase by an average of 8 percent. The cost of other foreign imported pharmaceuticals will increase by an average of 9 percent. (Bratislava SME in Slovak 29 Jan 94 p 2 AU) MOST TOURISTS TO REPUBLIC COME FROM HUNGARY: More than 11.9 million tourists visited Slovakia during the first 11 months of last year. Most of them -- 6.2 million -- came from Hungary. Almost 2.5 million came from Austria, 2.4 million came from Poland, and 750,000 came from Ukraine. During the same period, 7.2 million Slovaks traveled abroad. (Bratislava HOSPODARSKE NOVINY in Slovak 31 Jan 94 p 1 AU) CONSUMER PRICES RISE 0.6 PERCENT IN DECEMBER: According to an analysis conducted by the Statistical Office, consumer prices rose 0.6 percent in December. During 1993, they rose by 16.7 percent compared with December 1992 and by 23.2 percent compared with 1992 as a whole. Inflation also increased in December by 0.6 percent. (Bratislava HOSPODARSKE NOVINY in Slovak 31 Jan 94 p 2 AU) ECONOMIC COUNCIL PROPOSES RAISING REGULATED PRICES: According to the Economic Council, regulated prices account for roughly 5.0 percent of the gross domestic product (GDP) and prices determined by agreement account for 95 percent. This ratio should be maintained in 1994. The Council is considering increasing certain maximum prices due to the reductions in state subsidies and increased costs. It is proposing that the maximum prices of drinking water for households be increased from Sk3.0 per cubic meter to Sk4.0 in the Bratislava region, or up to Sk8.0 per cubic meter in East Slovakia. Waste water prices would increase from Sk0.60 to Sk5.0 per cubic meter. In railroad transportation, as a result of the reduction in non-investment subsidies from Sk2.3 billion to Sk2.06 billion, the Ministry of Transportation is proposing to increase the cost of pre- paid travel passes by 40 percent as of 1 February. The ministry is also proposing to abolish workers' travel passes and replace them with a commercial discount in pre-paid travel passes. In telecommunications, it is proposed that the charges for installing a telephone be increased by around 50 percent, from Sk2,000 to Sk3,000. The increased value-added tax, from 5 to 6 percent, should also be projected in the cost of telecommunications. As far as energy costs are concerned, it is proposed that as of 1 April the cost of natural gas be increased by 25.6 percent and that electricity be increased by 35 percent. Heating costs should rise by 20 percent as of 1 July. (Bratislava SME in Slovak 31 Jan 94 pp 1,2 AU) ENTREPRENEURS GROUP TO PAY NATIONAL INSURANCE LEVY: The Party of Entrepreneurs and Tradesmen (SPZ) has reversed its decision not to pay national insurance levies for its members as of 1 February. (Bratislava SLOVENSKY DENNIK in Slovak 31 Jan 94 p 1 AU) TESLA LIPTOVSKY HRADOK JOINT VENTURE: Representatives from Tesla Liptovsky Hradok and Schrak Telecom AG of Austria signed an agreement in Bratislava on 31 January on founding the STT-Schrak Tesla Telekomunikacie limited company. The basic capital for the joint enterprise, which will be based in Liptovsky Hradok, is Sk1.O million. The Austrian company will own 60 percent of the enterprise and the Slovak side the remainder. The enterprise aims to produce telecommunications equipment, and production should begin at the end of 1994. The investment required for the first stage of production is 15 million Austrian schillings. (Bratislava HOSPODARSKE NOVINY in Slovak 1 Feb 94 p 2 AU) REPUBLIC AGAIN EXCEEDS CLEARING CREDIT MARGIN: At the end of January, the Slovak Republic was in the red by 176 million ECU in the clearing account with the Czech Republic. This means it has exceeded its credit margin by 46 million ECU. The National Bank will repay this amount to the Czech side by 15 February. (Bratislava REPUBLIKA in Slovak 1 Feb 94 p 1 AU) PROPERTY FUND'S STAKE IN ENTERPRISES: The National Property Fund owns an average of 38 percent of the shares in all privatized enterprises. It owns all of the shares in more than 40 enterprises and more than 50 percent of the shares in more than 50 enterprises. (Bratislava NARODNA OBRODA in Slovak 1 Feb 94 p 3 AU) PLANT IN KYSUCE LAYS OFF 491 WORKERS: As of 1 February, 491 workers will be laid off at the roller bearing plant in Kysuce. This means that the number of people employed at the plant will decline to 2,100. (Bratislava SME in Slovak 1 Feb 93 p 3 AU) ORAVA TV PLANT IN JOINT ENTERPRISE WITH TAIWANESE FIRM: Within two months of a joint agreement being signed by the Orava Television Plant (OTF) in Nizna, the Taiwanese company PROSYST Corporation, and the Association of Slovak Industrial Enterprises (ZSPP) in Martin, the production of new products should begin. The agreement was signed on 25 January by Anton Grobarcik of OTF, Rong Chang of PROSYST Corporation, and Jozef Petrik of the ZSPP. It will guarantee the production, export, and marketing of telecommunications and electronic equipment. The new company will be known as PROSYST-OFT-ELEKTRONICS. In 60 days, the company will begin to manufacture fax machines intended for businessmen and households. (Bratislava SME in Slovak 1 Feb 94 p 14 AU) DAILY QUESTIONS OFFICIAL UNEMPLOYMENT STATISTICS: The Bratislava daily PRAVDA recently questioned the accuracy of official unemployment statistics, which reflect the number of job applicants registered with labor offices, and argued that they "distort" the actual rate of unemployment. As Mikulas Sliacky, the author of the article, pointed out, job applicants who do not find a job within six months after their registration with the labor office are automatically deleted from the official statistics of job seekers and are no longer considered unemployed for statistical purposes. He suggested that, by means of this ploy, some 229,400 people who were jobless did not figure in the official unemployment statistics for October 1993. Had these people been included, Sliacky said, October 1993 unemployment rate would have been 22.8 percent, rather than 13.8 percent. (Bratislava PRAVDA in Slovak 8 Jan 94 p 1 AU) ONLY ONE-THIRD OF UNEMPLOYED RECEIVE BENEFITS: A total of 122,853 persons were receiving unemployment benefits at the end of December 1993, which was 33.38 percent of the registered unemployed (368,095). Since the end of November 1993, the number of recipients of unemployment benefits has declined by 1,599. (Bratislava SLOVENSKY DENNIK in Slovak 19 Jan 94 p 2 AU) EAST SLOVAK UNEMPLOYMENT: The number of jobless in eastern Slovakia reached 123,000, or 17.35 percent, at the end of 1993 out of a total of 368,OOO (14.44 percent) in the whole of Slovakia, SLOVENSKY VYCHOD reported on 21 January. The east Slovak daily said that in six local districts the unemployment rate went beyond 20 percent, with the highest rate of 23.3 percent in Spisska Nova Ves, which, after the Rimavska Sobota district, central Slovakia, with 26.41 percent, ranks second on the nationwide scale. The lowest unemployment rate of 10.01 percent was registered in the city of Kosice, and on a nationwide scale it was Bratislava with 4.5 percent. There are some 37,000 eastern Slovaks seeking jobs (123,000 people in the whole republic), with an average 48 jobless per vacancy both in the districts and on the nationwide scale. (Prague CTK in English 21 Jan 94 AU) MARTIN ARMS FACTORY'S DEBT WRITTEN OFF: The government has kept its promise and has written off 615 million korunas (Sk) from the debts of the ZTS (Heavy Engineering Works) Turcianske Strojarne Martin state enterprise. On top of that, on 10 January the company received from the state Sk20 million for development programs. ZTS Martin is owed more than Sk3 billion by its customers; $20 million of the company's claims are "frozen" in Iraq alone. The partial debt write-off and the drawing of new credits will substantially improve the company's situation. (Bratislava NARODNA OBRODA in Slovak 11 Jan 94 p 13 AU) SLOW PROGRESS IN PRIVATIZING HEALTH CARE: The Slovak Ministry of Health has thus far issued 307 permits to operate a private practice, of which 180 were for dentists, 49 for dental technicians, and 78 for other medical professions. Only two of Slovakia's 413 ophthalmologists, for example, operate private practices. Because of a shortage of funds, the National Health Insurance is not concluding any contracts with private physicians, whose services must therefore be paid for in cash. (Bratislava REPUBLIKA in Slovak 15 Jan 94 p 2 AU) 1993 INCOME FROM TOURISM: Slovak National Bank (NBS) data shows that foreign exchange income from tourism reached $3O4.1 million by 30 September 1993. This was $151.1 million more than Slovak citizens spent on trips abroad. The amount of foreign capital invested in tourism (catering and accommodation) facilities reached Sk527.2 million by the same date. This was 5.2 percent of all foreign investment in Slovakia in the first three-quarters of 1993. (Bratislava NARODNA OBRODA in Slovak 17 Jan 94 p 2 AU) STATE OF RAILROAD INFRASTRUCTURE: The Slovak Republic's railroad network consists of 3,662 km of tracks (102 km of which are broad- gauge and 52 km narrow-gauge lines), 2,322 bridges, and 76 tunnels. More than two-thirds of the network are single-track lines. One- third of the network is electrified. Because of neglected investments in maintenance and modernization, the railroads are marked by a high degree of wear and tear and technological backwardness. Experts estimate the "investment deficit of the railroad infrastructure" at Sk20 billion. (Bratislava HOSPODARSKE NOVINY in Slovak 18 Jan 94 p 3 AU) WATCHTOWERS FOR UNPROFOR UNITS: On 17 January Vojensky Opravarensky Podnik (Military Repair Shop) Trencin dispatched the first watchtowers for UNPROFOR peacekeeping units in former Yugoslavia. The company will deliver a total of 125 watchtowers in three different heights to former Yugoslavia. All watchtowers are provided with double-glazed windows, heating, electric installations, signalling devices, and a telephone. (Bratislava REPUBLIKA in Slovak 18 Jan 94 p 2 AU) UNDERVALUATION OF PROPERTY: Following an inquiry, the Slovak Ministry of Justice has withdrawn the property evaluation license of the Interconsult Bratislava company, which used to carry out 80 percent of all expert appraisals for the government. The inquiry revealed, for example, that the value of the Stein brewery in Bratislava was understated by Sk332 million, that is, about 50 percent. (Bratislava REPUBLIKA in Slovak 18 Jan 94 p 2 AU) LIQUIDATION OF 10 STATE FARMS PROPOSED: The Ministry of Agriculture is the sponsor of 301 state farms. An analysis of the economic efficiency of these farms revealed that only 51 of them "have the prospect of further growth." This was announced by Ivan Lachkovic of the ministry's Budget and Economic Policy Department. The analysis also showed that in some state farms it will be necessary to resort to the application of the law on bankruptcy and settlement. The Ministry of Agriculture has therefore proposed that bankruptcy proceedings be initiated in 10 state farms that the analysis showed to be the least efficient. (Bratislava SME in Slovak 18 Jan 94 p 14 AU) MEASURES TO CONTROL SWINE FEVER: The District Anti-Epidemiologic Commission in Prievidza, central Slovakia, adopted special measures against the spread of swine fever on 18 January, after the disease was discovered in the tissue of a boar shot in the area on January 9. District Veterinarian Jaroslav Hatapka told journalists that two protective belts had been set up within a 15-km and 25-km radius from where the disease was found. The regulation orders reducing the number of boars by shooting them, then having every shot animal examined by a vet and samples of its tissue tested. (Prague CTK in English 18 Jan 94) Swine fever has been identified in four Slovak districts to date -- Nove Zamky, where 3,848 infected pigs have been slaughtered, Rimavska Sobota (138 pigs), Lucenec (10 pigs), and Prievidza, where only wild swine have been identified as carriers of the disease thus far. (Bratislava NARODNA OBRODA in Slovak 24 Jan 94 p 9 AU) BALANCE SHEET OF 1993 STOCK EXCHANGE TRADING: A total of 1,383 transactions with 138,251 shares and bonds in an aggregate volume of Sk177.38 million were realized at the Bratislava Securities Exchange (BCPB) between 6 April 1993, when the BCPB went into operation, and the end of the year. The total turnover was thus lower than the turnover on a single day of trading at the Prague stock exchange. A total of 17 different securities (shares in 9 companies, 3 state bonds, 2 bank bonds, 2 participation certificates, and one company bond) were registered on the BCPB's listed market and another 499 securities (shares in 496 companies and 3 investment funds) on the unlisted market at the end of 1993. Turnover in listed securities amounted to Sk1O6.72 million and turnover in unlisted securities to Sk7O.66 million. The most liquid securities were the Vseobecna Uverova Banka bond (turnover of Sk44.748 million), state bond number O4 (Sk38.51 million), Figaro shares (Sk33.6 million), Nafta Gbely shares (Sk24.88 million), and shares of the Slovnaf t refinery (Sk14.22 million). Some 9O percent of the shares registered on the unlisted market were not traded even once in the course of the year. The BCPB had 25 registered members at the end of 1993, 17 of which were institutions based in the Slovak Republic (13 banks and insurance companies, three brokers, and the National Property Fund) and 8 institutions based in the Czech Republic. The Czech institutions do not yet possess a license for trading in securities in Slovakia, however. (Bratislava HOSPODARSKE NOVINY BURZOVE NOVINY in Slovak 13 Jan 94 pp 5, 6; Bratislava SMENA in Slovak 18 Jan 94 p 4 AU) BALANCE SHEET OF 1993 RM-SYSTEM TRADING: Between its inauguration in March 1993 and 16 December 1993, the RM-System Slovakia electronic market in securities organized seven periodic auctions, during which 199,810 shares worth Sk41.786 million changed hands. The number of registered issues increased from 497 in the first periodic auction to 548 in the seventh auction, but actual trading was restricted to a few issues. The three most traded shares were those of VSZ (East Slovak Iron Works) Kosice with a turnover of Sk7.9 million, Slovnaf t (Sk4.05 million), and Vseobecna Uverova Banka (General Credit Bank, VUB) (Sk2.26 million). (Bratislava PRAVDA FINANCNE SPRAVODAJSTVO Supplement 26 Jan 94 pp 1, 5 AU) POPRAD BID FOR 20O2 OLYMPICS: Jan Madar, mayor of Poprad, said after the 18 January meeting of the Slovak Government, which approved Poprad's bid to host the 2002 Winter Olympics, that expenditures on sports facilities would amount to Sk8.5 billion, while overall budgeted costs, including infrastructure improvements and construction, were projected at Sk27 billion. The state budget would participate with about Sk3 billion in the project's financing. Proceeds from television rights, advertising, and ticket sales are estimated at Sk13 billion. (Bratislava SME in Slovak 19 Jan 94 p 2 AU) PEPSI-COLA INVESTMENTS: Representatives of the Pepsi-Cola International company announced in Bratislava on 19 January that the firm intends to invest $30 million in Slovakia over the next five years. The plans include the construction of at least three distribution and sales centers with three warehouses and a car pool of at least 100 vehicles. This should create about 200 new jobs in Slovakia in the next two years. (Bratislava PRAVDA in Slovak 20 Jan 94 p 3 AU) BANK PROJECT CRITICIZED: A commentary in the Bratislava daily PRAVDA voiced serious objections to the National Property Fund's plan, promoted by Prime Minister Meciar, to set up Banka Slovakia in Banska Bystrica and, thereby, to establish Banska Bystrica as Slovakia's "second banking center." Ivan Podstupka, the daily's economic commentator, asked why a second banking center needed to be set up at a time when "the first center, Bratislava, stands on feet of clay." He pointed out that Slovakia's problem did not lie in the small number of banks, but in the shortage of capital, and criticized the further fragmentation of the banks' already scarce resources. Podstupka also questioned the wisdom of "pressuring state-controlled financial institutions to make their deposits with Banka Slovakia where there is not the least guarantee of an efficient use of resources" and compared the entire project with "growing strawberries at Skalnate Pleso," the highest-altitude lake in the High Tatra mountains. Speculating about the motives behind the project, Podstupka suggested that the ruling Movement for a Democratic Slovakia needed "an obedient bank" that would finance privatization and thereby help "lay the foundations for an ownership structure that will survive for at least decades." Given these motives, Podstupka said, "it does not matter in the least that an inorganic and non-market element of the banking system is coming into being, one lacking in professional background and without the least chance of establishing itself abroad." (Bratislava PRAVDA in Slovak 20 Jan 94 p 5 AU) GAS UTILITY CUSTOMERS FAIL TO PAY BILLS: Customers of Slovensky Plynarensky Priemysel (Slovak Gas Industry, SPP) owe the gas distributor Sk1.237 billion. (Bratislava NARODNA OBRODA in Slovakia 21 Jan 94 p 24 AU) ELECTRICITY PRODUCTION, IMPORTS: Slovensky Energeticky Podnik (Slovak Energy Company, SEP) is the largest generator of electricity in Slovakia. In 1993, it generated 24.5 billion kilowatt hours of electricity (84 percent of Slovakia's overall production), about one-half of which was nuclear power. In 1992 Slovakia imported 6 billion kilowatt hours of electricity, 21 percent of total consumption. (Bratislava NARODNA OBRODA in Slovak 24 Jan 94 p 12 AU) ZILINA HYDROELECTRIC PROJECT DELAYED: The construction of a hydroelectric power plant in Zilina has been delayed because the state does not yet own all the land where it will be built, according to Julius Binder, the director of the state water construction enterprise Vodohospodarska Vystavba Bratislava. The power plant is to be built on the Vah river, and its construction demands the relocation of residents in the villages Mojsova Lucka, Mojs, and Hrustina. According to Binder, so far it has not been possible to purchase about one-half of the 700 plots of land included in the future building site. The state is expected to exercise its right of expropriation and pay the current residents for the land. An acceleration of the whole process could allow for the beginning of construction within the first half of the year. The entire project will cost Sk5 billion (some $170 million) invested over three years. International financing is being sought for the project. Once completed, the power plant will provide 170,000 megawatt hours of electricity every year, which will cover the annual consumption of electricity of more than 50,000 households and help save 190,000 tons of coal. (Prague CTK in English 25 Jan 94; Bratislava SMENA in Slovak 25 Jan 94 p 2 AU) TRADE WITH POLAND: Trade turnover between Slovakia and Poland reached Sk6.9 billion in 1993, which made Poland Slovakia's eighth largest trading partner, after the Czech Republic, Germany, Russia, Austria, Hungary, Italy, and Ukraine. The trade balance between the two countries showed a Slovak surplus of Sk1.191 billion. A total of 122 Polish firms with an aggregate capital of SkIS million were registered in Slovakia at the end of September 1993. (Bratislava SLOVENSKY DENNIK in Slovak 25 Jan 94 p 2 AU) SHOE FACTORY TO BE SOLD TO EMPLOYEES: JAS Bardejov, the second largest footwear manufacturer in Slovakia, will be privatized by means of direct sale to a shareholding company established by 4,527 of the company's 4,980 employees. The management will acquire 83.3 percent of the shares, with the rest going to the other employees. The shareholding company proposes a purchase price of Sk510 million, which is slightly above the company's book value of Sk508 million, but it demands that Sk180 million in investments planned by 1996 be subtracted from this amount. The terms of payments will be agreed with the National Property Fund. JAS Bardejov made a profit of almost Sk2O million in 1993. (Bratislava REPUBLIKA in Slovak 26 Jan 94 p 2 AU) GOVERNMENT APPROVES SALE OF BANK SHARES: At its meeting on 25 January the Slovak Government approved the sale of 4,098 shares of the Tatra Banka (Tatra Bank), worth Sk4O.98 million, to the Raiffeisen Zentralbank Oesterreich AG Wien. (Bratislava REPUBLIKA in Slovak 26 Jan 94 p 2 AU) EBRD CREDIT FOR ITALIAN-SLOVAK JOINT VENTURE: The London-based European Bank for Reconstruction and Development (EBRD) approved a credit of more than 15 million German marks for the SLOVECA company, a joint venture formed by ENI, the Italian industrial group, and two Slovak state enterprises, to finance special equipment for the production of cleaning agents. As the EBRD announced, this is the first EBRD credit for the Slovak petrochemical industry. The total cost of the project is 28.1 million German marks. (Bratislava PRAVDA FINANCNE SPRAVODAJSTVO Supplement in Slovak 26 Jan 94 p 1 AU) RECESSION IN CONSTRUCTION INDUSTRY: According to F. Slavik, president of the Association of Slovak Contractors, construction is one of the branches of the Slovak economy hardest hit by recession. The "alarming" situation is demonstrated by a 30-percent drop in the volume of building work and by the loss of another 16,000 jobs in 1993. According to Slavik, 40 building companies have gone bankrupt thus far, 22 of them in 1993. The liquidation of at least another 40 building companies is expected this year. "Liquidation is thus almost becoming the main form of privatization in construction," Slavik said. The branch employs about 105,000 people. (Bratislava NARODNA OBRODA in Slovak 27 Jan 94 p 13; Bratislava SMENA in Slovak 27 Jan 94 p 5 AU) HUNGARY SLOVAKIA' S FOURTH-LARGEST TRADING PARTNER: Hungary is Slovakia's fourth largest trading partner, Hungarian ambassador to Slovakia Jeno Boross said on Slovak Radio. He held a consultative meeting with Slovak Deputy Premier Sergej Kozlik on 31 January, before the meeting of Czech, Slovak, Polish, and Hungarian Economics Ministers in Prague on 3 February. He and Kozlik discussed the possibility of bilateral investments, the foundation of a Hungarian- Slovak bank, the possibility of cooperation after the Adria oil pipeline was opened and the tourist industry. Boross said he believed bilateral relations will not only be tied to Bratislava. Hungary is interested in opening a trading and marketing center in Kosice, east Slovakia. Reacting to Slovak Premier Vladimir Meciar's earlier statement that there is too much Hungarian capital in south Slovakia, Boross said that investments by ethnic Hungarians must have been meant, as investments from the republic of Hungary were slight. (Prague CTK in English 31 Jan 94 AU) HEALTH-CARE SECTOR'S FINANCIAL PROBLEMS: According to Engineer M. Janovicova, director of the Health Insurance Fund Administration, the 15.7 billion Slovak korunas (Sk) which the 1994 state budget approved for the Health Insurance Fund falls "at least Sk7.1 billion" short of the fund's needs. As Janovicova points out, the fund's "demonstrable need" is for Sk28.1 billion, while its "minimum variant of solvency" reckons with Sk22.5 billion. The health sector's current debt is estimated at between Sk3.5 to 6 billion. Hospitals' unpaid bills alone amounted to Sk2.1 billion at the beginning of December. (Bratislava SME in Slovak 3 Jan 94 p 1 AU) NOVEMBER CONSUMER PRICE DATA: Consumer prices increased 1.1 percent in November 1993 compared with October, the Slovak Statistical Office announced. While food prices increased by 0.7 percent, prices of manufactured goods went up 1.3 percent, the cost of restaurant meals increased by 1.6 percent, and the cost of services rose by 0.9 percent. Compared with December 1992, November 1993 consumer prices were 15.9 percent higher. The greatest increase was in the cost of restaurant meals (27 percent). Food prices, on the other hand, went up only by 12.3 percent in the first 11 months of 1993. (Bratislava HOSPODARSKE NOVINY BURZOVE NOVINY in Slovak 3 Jan 94 p 5 AU) BUDGET DEFICIT TO AFFECT CREDIT AVAILABILITY: In an interview for the Slovak News Agency TA SR, Marian Jusko, vice governor of the Slovak National Bank, conceded that "1994 will not be an easy year in terms of the availability of credits." As he observed, "obtaining credit will continue to be rather complicated because a considerable proportion of bank credits will be allocated to cover the state budget deficit." (Bratislava HOSPODARSKE NOVINY in Slovak 4 Jan 94 p 1 AU) PUBLIC, PRIVATE SECTOR CREDIT: The volume of credit in the Slovak economy increased from Sk236.0 billion at the beginning of 1993 to Sk249.93 billion at the end of September 1993. The bulk of it (Sk231.53 billion at the end of the third quarter of 1993) had been extended to the "enterprise sphere." While the volume of credit extended to the "public sector" declined from Sk131.35 billion on 1 January 1993 to Sk127.59 billion on 30 September 1993, the volume of credit extended to the "private sector," which includes cooperatives, increased over the same period from Sk79.31 to Sk99.O3 billion. (Bratislava HOSPODARSKE NOVINY in Slovak 4 Jan 94 p 2 AU) FINANCE MINISTRY'S 1994 PRICE POLICY: The price policy of the Slovak Ministry of Finance in 1994 will follow up the liberalization steps taken in recent years, Eva Bonova, director of the ministry's Price Policy Department, announced. Price regulation will be retained in branches where a competitive environment does not yet exist and in branches with a "natural monopoly," she said, adding that this applies mainly to energy and heat prices, telecommunications and postal rates, fares for passenger traffic, health services, housing rents, water and sewage rates, and the like. (Bratislava SME in Slovak 4 Jan 94 p 2 AU) SHELL BEGINS BUSINESS OPERATIONS: The Shell Slovakia Ltd., a subsidiary of the London-based Shell Overseas Holding Ltd., began to operate in Slovakia on 1 January 1994. The company will be engaged in the procurement, sale, and distribution of petrochemical products and in the construction and operation of gas stations. By the end of 1994 it intends to open the first five to seven gas stations at an "international standard." The company intends to invest $6 to $8 million in Slovakia annually, which is equivalent to 5 percent of all foreign investment in Slovakia in 1993. According to Wilhelm Weiss, general director of Shell Slovakia, the company's aim is to achieve a 10 percent market share in Slovakia. (Bratislava HOSPODARSKE NOVINY in Slovak 4 Jan 94 p 1; Bratislava HOSPODARSKE NOVINY in Slovak 12 Jan 94 p 2 AU) FIRST FRENCH NUCLEAR SPECIALISTS ARRIVE IN MOCHOVCE: The first eight French specialists who will participate in the completion of the Mochovce nuclear power station and their families arrived in Slovakia on 4 January. Their new home will be the "French village EDF" near Tlmace, which was built in only five months. Another 53 French families are expected to arrive in Tlmace by mid-January. The French specialists, whose number will total about 70, will remain in Slovakia for five to six years. (Bratislava REPUBLIKA in Slovak 5 Jan 94 p 2 AU) HARD CURRENCY DEPOSITS: The equivalent of Sk24.312 billion in hard currency was deposited in foreign exchange accounts in Slovakia at the end of August 1993, of which Sk19.432 billion were deposited by individuals. At the beginning of the year, that is, prior to the currency split and the introduction of the Slovak koruna, foreign exchange deposits totalled only Sk14.746 billion. (Bratislava REPUBLIKA in Slovak 5 Jan 94 p 3 AU) FOOD IMPORTS FROM CZECH REPUBLIC: Slovakia recorded an Sk1.014 billion deficit in its trade with the Czech Republic in the first nine months of 1993, mainly as a result of food imports. In the first half of the year, Slovakia imported from the Czech Republic Sk1.205 billion worth of agricultural commodities, while Slovak exports of these commodities to the Czech Republic reached only Sk379 million. The 10 percent devaluation of the Slovak koruna in July helped to reduce the gap between Slovak imports and exports of food in the third quarter of the year. (Bratislava REPUBLIKA in Slovak 5 Jan 94 p 4 AU) CONTRACT FOR NUCLEAR WASTE PROCESSING CENTER: Slovria, the Slovak subsidiary of the Kralovopolska a.s. (Karlovo Pole Engineering Works) in Brno, Moravia, won a tender to supply equipment for the nuclear waste processing center at Jaslovske Bohunice. The contract is worth Sk500 million. (Bratislava HOSPODARSKE NOVINY in Slovak 5 Jan 94 p 1 AU) SLOVAK COMPANY PLACES BONDS ON WESTERN CAPITAL MARKET: For the first time ever, a Slovak company has issued bonds on international capital markets. The issuer is the Calex Zlate Moravce a.s., the only manufacturer of freezers and refrigerators on the territory of the former CSFR. The lead manager of the issue was the London-based Nomura International securities company. The three-year, $21 million "Eurodollar" bond carries an interest rate of 7.875 percent, and the issue price was 99.832 percent. The spread is 3.25 percent above equivalent U.S. Government bonds. The bonds issue is guaranteed by the Slovak Government. The proceeds will be used to finance the completion of a production line for environment-friendly compressors (without CFCs). (Bratislava HOSPODARSKE NOVINY BURZOVE NOVINY in Slovak 5 Jan 94 p 1; Bratislava SMENA in Slovak 25 Jan 94 p 4 AU) GOLD MINING: About 200 kilograms of gold were mined in the area of Hodrus in 1993. German and Canadian firms have shown interest in gold mining and processing in Hodrus and Kremnica, but their participation is conditional on the privatization of the Rudne Bane (Ore Mines) state enterprise, which is now "deadlocked." Geological research has confirmed the presence of gold in ore around Pezinok as well, but available technology and environmental considerations do not permit the start of extraction. (Bratislava REPUBLIKA in Slovak 7 Jan 94 p 1 AU) GABCIKOVO ELECTRICITY OUTPUT: The controversial Gabcikovo hydroelectric power plant on the Danube generated 2 billion kilowatt hours (kWh) of electricity in 1993 and expects to increase its output to 2.5 billion kWh in 1994. The entire project should be completed by the end of 1995 and will require an additional investment of Sk4.5 to Sk5 billion. Proceeds from electricity sales would suffice to finance virtually all the investment required (the current procurement price is Sk1.lO per kWh). (Bratislava HOSPODARSKE NOVINY in Slovak 12 Jan 94 p 2 AU) DUBNICA ARMS FACTORY'S DEBT WRITTEN OFF: The long-awaited process of writing off the debts of the ZTS (Heavy Engineering Works) Dubnica nad Vahom state enterprise has started. Vseobecna Uverova Banka (General Credit Bank) and Konsolidacna Banka (Consolidation Bank) confirmed on 13 January that Sk918 of the company's Sk962 million debt, caused by the conversion of arms production in Slovakia, have been written off. The remaining Sk48 million, which are owed to Investicni Banka (Investment Bank), are expected to be written off "in the next few days." Despite a six- month delay (the government promised to write off ZTS debts in August 1993), P. Konciar, the company's director, "received the news with great gratitude." (Bratislava NARODNA OBRODA in Slovak 14 Jan 94 p 2; Bratislava SME in Slovak 14 Jan 94 p 2 AU) ELAG/09 March/ECONF/East Europe Division cka 12/0446z mar

SUMMARY In a move designed to realize high-level U.S.-DPRK talks, Pyongyang used the 12 March meeting with Seoul to suggest a willingness to withdraw the four demands it had previously insisted Seoul must meet before presidential envoys could be exchanged. In signaling its willingness to move toward holding an inter-Korean summit, the North also claimed that it is the South that has repeatedly rejected North Korean summit offers, including one heretofore unreported. In keeping with its new interest in exchanging envoys, Pyongyang media have so far continued to temper personal attacks on ROK President Kim Yong- sam, a circumspection first noted last week. END SUMMARY Pyongyang media treatment of the 12 March working-level talks suggested that the North is poised to strike a deal with the South on the exchange of special envoys. Pyongyang radio on 12 March depicted the North Korean chief delegate--identified in South Korean media as Pak Yong-su--as noting that of the 28 points raised in connection with procedural matters for the envoy exchange, "all but four points" had been agreed upon "in principle." Furthermore, Pak was cited as making conciliatory gestures for resolving the four North Korean demands: + Pak said that two issues--the "large-scale nuclear war exercises" and the "international cooperation system" (an allusion to threats of UN sanctions)--could be discussed by the envoys. Further defusing these issues, he claimed that the South had announced its decision "not to stage" Team Spirit this year. + On the introduction of the Patriot missile to the South, he seemed to agree with the South's alleged statement that "the situation had changed" because Seoul "had already decided to shelve the plan" to bring in the missiles. + On ROK President Kim's earlier remarks that he "cannot shake hands with a party that possesses nuclear weapons," Pak seemed to suggest that the question is moot, since the "person in the highest authority" in the South subsequently said that the North has no nuclear weapons. Pak noted that although the South's response to the four North Korean demands still falls "short of our expectations," it is proof of Seoul's recognition of the basic "reasonableness" of the demands (Pyongyang radio, 12 March)--a formulation that may allow Pyongyang, having made its points, to yield without losing its "dignity." Summit Talks Signaling a willingness to eventually hold a North-South summit meeting, while at the same time illustrating North Korea's desire to put the South on the defensive, Pak claimed that the South has rejected the North's offers of top- level talks dating back 20 years. In particular, he revealed that in "early April 1992" an unnamed North Korean "special envoy visited Seoul and invited the ROK president to Pyongyang around the time of DPRK President Kim Il-song's 80th birthday. Implying that Pyongyang could use the South's rejection of the summit for propaganda purposes, Pak pointedly noted that up to now the North had "never mentioned" its special envoy's visit to Seoul or his offer. Joint Communique Seeking to foster the impression of progress at the 12 March meeting, the North unsuccessfully proposed a North-South joint communique(SEE NOTE) to "reconfirm" both sides' intention to exchange envoys "at an early date." Pyongyang apparently hoped it could use such a communique to claim to Washington that North Korea has met its prerequisites for reconvening high-level U.S.-North Korea talks. (Although U.S.- DPRK high-level talks tentatively are set to start on 21 March, Washington is reportedly insisting that the special envoys must be exchanged between the North and South before such talks could be held (Yonhap, 12 March).) (NOTE: Precedents for issuing North-South joint communiques in recent years are somewhat mixed. A joint communique was issued at the fourth round of inter-Korean prime ministerial talks (Pyongyang radio, 24 October) in a departure from the practice of the previous three rounds. Communiques were also issued following inter-Korean talks on the nuclear issue in 1992 (Pyongyang radio, 19 February 1992, 14 March 1992). However, in August 1992 the South rejected a North Korean proposal for a joint communique following another meeting on the nuclear issue (Yonhap, 31 August 1992).) Just how eagerly Pyongyang wanted a joint communique was demonstrated in the extraordinarily conciliatory remarks Pak made in pressing for the communique. In accusing the South of delaying the realization of the envoy exchange by "suspecting" Korean motives, Pyongyang radio portrayed Pak as indirectly admitting that the North was also partly to blame for the delay (12 March). The radio cited him as saying that the North on its part had created "four barriers "--a clear reference to the four North Korean demands. In pleading for compromise, Pak also cautioned against the sides playing a zero-sum game, declaring that neither side should "absolutize" its own position. Limiting Rhetoric In line with the image of conciliation the North Korean leadership is trying to project, Pyongyang media have in recent days continued to moderate their personal attacks on ROK President Kim. The KCNA report of an 11 March commentary in the party paper Nodong Sinmun calling for unity of South Korean "patriots" against their government avoided using the South Korean leader's name, referring to the ROK Government only as the "'civilian' fascist forces" (11 March). For the past few months, Pyongyang media have been signaling the North's reluctance to deal with the South Korean government with repeated harsh personal attacks on President Kim. The first sign of moderation on this issue appeared last week. Implications Pyongyang's attempt to project a conciliatory stance toward Seoul suggests that the North may try to work out a substantive accord on the envoy exchange at the next scheduled session on 16 March. Failing that, the North may hope that taking the high road on this issue will strengthen its contention of the South's intransigence and thus enable it to pressure the United States to proceed with bilateral talks. (AUTHOR: YIM. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM, (703) 733-6534.) EAG/BIETZ/DEW 14/1729z MAR

SUMMARY Amid foreign media reports of IAEA inspectors departing North Korea after encountering difficulties, Pyongyang on 15 March used the authoritative vehicle of a Foreign Ministry spokesman's statement to demand that Washington proceed with the 21 March DPRK-U.S. high-level talks in Geneva as scheduled. Reinforcing earlier warnings against the imposition of preconditions for the talks, the spokesman threatened that North Korea would call off the meeting and refuse future nuclear inspections. Pyongyang radio at the same time issued an oblique threat to proceed with a nuclear arms development program. END SUMMARY Seeking to place Washington on the defensive, the Foreign Ministry spokesman's statement, carried by Pyongyang radio on 15 March, declared that North Korea has "completely fulfilled" its obligations under the 25 February DPRK-U.S. agreement and called on the United States to do its part without setting "unreasonable preconditions." Repeating the familiar refrain on the 25 February accord, the spokesman said that the accord set forth "simultaneous" action by both sides, namely 1)"resumption" of inter-Korean contacts for exchanging special envoys and 2)IAEA inspections for ensuring continuity of safeguards on Pyongyang's part, in return for 1)suspension of Team Spirit and 2)resumption of DPRK-U.S. high-level talks in Geneva on 21 March. Now that "several rounds" of inter-Korean talks have been held and IAEA inspections "enough for continuity of safeguards" have been completed, he warned, any U.S. failure to fulfill its obligations will "automatically" render the 25 February accord "invalid." If Washington persists in its "unreasonable" insistence that nuclear inspections must be proven "satisfactory" to the IAEA and that special envoys must be exchanged by the North and the South before Team Spirit can be cancelled or the bilateral talks can take place, the spokesman warned, Pyongyang will consider DPRK- U.S. negotiations to have ended in a "rupture" and will take unspecified "unilateral" and "appropriate" action. Ominous Threat Clearly seeking to add weight to its threats, Pyongyang seems to be preparing a public fallback position in case of failure of its nuclear talks with Washington by hinting at a readiness to proceed with a nuclear weapons program. In the latest variant of this threat, Pyongyang radio on 15 March reiterated North Korea's profession of concern for alleged Japanese plans to develop a nuclear capability. After criticizing Japanese Foreign Minister Hata's alleged statement on "countermeasures" in case of North Korean intransigence on the nuclear issue, the radio declared that Pyongyang "may face a situation of having no choice but to reconsider [its] position regarding the denuclearization of the Korean peninsula." IAEA Inspections The 15 March statement comes amid reporting of the departure of a group of IAEA inspectors from Pyongyang (KCNA, 15 March) and speculation that the IAEA may hold a special Board of Governors meetings to address difficulties encountered by the inspectors (Yonhap, 15 March). Giving credence to foreign media accounts of disputes between Pyongyang and IAEA inspectors, Seoul's KBS-1 radio carried a report of a North Korean Embassy official in Beijing saying that Pyongyang had rejected a request by IAEA inspectors to extract samples from "one facility," regarding it as an "unjust demand" (15 March). The councillor, Choe Han-chun, was depicted as playing down the significance of the dispute, claiming that it was "not a serious problem" and can be resolved through future dialogue between North Korean and the IAEA. Implications Pyongyang is clearly moving to forestall any IAEA move to convene a special meeting of the Board of Governors- -a predecessor to possible referral of the North Korean nuclear issue to the UN Security Council. By assuming a tough position and emphasizing the gravity of the situation, the North Korean leadership seems to hope that Washington will propose a compromise solution. (AUTHOR: YIM. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM (703) 733-6534.) EAG/BIETZ/CL 15/1755Z MAR

S U M M A R Y Although the vote by the State Duma to amnesty prisoners implicated in the August 1991 coup and the October 1993 Supreme Soviet uprising marks the Duma's most confrontational move against President Boris Yeltsin to date, it was passed as part of a compromise package that somewhat mitigated its anti- presidential thrust. Centrists and moderate reformers supported the amnesty after hardliners gave up a legislative commission that was to have investigated last autumn's constitutional crisis and agreed to accept an additional document defining the amnesty as part of a movement toward national reconciliation. The amnesty vote appears to have weakened Yeltsin politically and has deepened the divisions among reformers, further undermining their ability to fight the anti-Yeltsin opposition in the legislature. END SUMMARY Hardliners in the Duma scored a political victory over Yeltsin when, with the help of centrists and moderate reformers, the Duma adopted on 23 February a package of decrees amnestying prisoners charged in the 1991 coup attempt and the 1993 uprising, including Yeltsin's archenemies Ruslan Khasbulatov and Aleksandr Rutskoy. The Duma had debated but failed to approve a political amnesty several times previously, but proponents scored a breakthrough on 22 February when the Duma's Council put together a "large" compromise package that included decrees on a criminal and political amnesty, a memorandum calling for national accord, and a decree that apparently abolishes a Duma commission established on 9 February to investigate the events of 21 September to 4 October (see box 1) (Radio Rossii, 9 February; Segodnya, 23 February). Legislative hardliners had intended to use the commission to attack Yeltsin by publicly questioning the constitutionality of his edict dissolving the Supreme Soviet. During the Council's session, hardliners reportedly agreed to "act as if the vote on setting up the commission never took place," a choice that reportedly caused considerable anguish among more extreme Yeltsin opponents, who did not want to give up the commission (Segodnya, 23 February; Sovetskaya Rossiya, 26 February). How the Factions Voted The compromise amnesty package passed 252 to 67 (with 28 abstentions)--just 29 votes above the required majority--with the bulk of support coming from hard-line deputies. According to an account by a Communist Party (CPRF) deputy published in Sovetskaya Rossiya (26 February), the CPRF, Agrarian Party, Liberal Democratic Party of Russia (LDPR), and the hard-line nationalist "Russian Way" group led by Sergey Baburin provided 147 votes for the compromise amnesty package. Some hardliners, however, including nine CPRF deputies and one each from the Agrarian Party and Russian Way, were so intent on retaining the Duma's investigative commission into the September-October crisis that they voted against the final compromise. After a decree abolishing the investigative commission was added to the "large" package, enough centrists and moderate reformers joined in supporting the amnesty compromise to put it over the top. Apparently at the urging of Party of Russian Unity and Accord (PRES) leader Sergey Shakhray, PRES and the Women of Russia faction, joined by at least some members of the centrist New Regional Policy group, made their support for the amnesty package contingent on the inclusion of a "Memorandum of Accord," essentially a political declaration calling for round table talks on economic and political issues and recommending amnesty as a step toward "national reconciliation" (Interfax, 23 February). Even with the inclusion of the Memorandum of Accord, however, this "small" amnesty package did not have enough support to pass. Only two PRES deputies voted for the "small" package. When the decree abolishing the commission was added to the "large" compromise package, it gained the votes of 16 more PRES deputies (of 24 present to vote). Similarly, 35 deputies from the New Regional Policy group voted for the "small" package, but an additional 12 members voted for the final compromise that abolished the commission. Other centrist deputies voting for the final compromise included all 22 members from Women of Russia and all 14 deputies from the Nikolay Travkin's Democratic Party of Russia faction who were present to vote (Sovetskaya Rossiya, 26 February). The compromise package appears to have deepened divisions among reformers, pitting the pro-Yeltsin Russia's Choice faction against PRES and splitting the moderate reformist Yabloko bloc led by reform economist Grigoriy Yavlinskiy. Russia's Choice held together in its opposition to the political amnesty, with only one of its members--Ivan Starikov of Novosibirsk--willing to vote for the final compromise (Moskovskiy Komsomolets, 2 March). However, only 57 of its 75 members were present to vote. Most of the Yavlinskiy bloc--16 of the 22 who were present at the vote- -either abstained or voted against both amnesty packages, but the other six took a strong anti-Yeltsin stand, voting only for the "small" package and against the final compromise (Sovetskaya Rossiya, 26 February). Their position appears related to the stance voiced by some members of the bloc following the October rebellion. (See Note 1) (Note 1) During the election campaign, Vladimir Lukin, a coleader of the Yabloko bloc, advocated a full investigation into the events of 21 September-4 October, though lie acknowledged that extremists in the Supreme Soviet had "started this carnage" and had "brought about dozens of human casualties" (Literaturnaya Gazeta, No. 47, 24 November 1993). Shortly after the election another bloc member, Valeriy Borshchev (of the Christian Democratic Union), expressed the bloc's intention to promote the establishment of a parliamentary commission to conduct the investigation (Segodnya, 23 December 1993). Lukin's support for the commission evidently caused him, as well as other Yabloko deputies Viktor Sheynis and Nikolay Petrakov, to abstain from the vote for the final compromise package (Moskovskiy Komsomolets, 2 March). Background to the Amnesty Issue Since convening, the Duma has debated two kinds of amnesty proposals, one a criminal amnesty aimed at minor offenders and the other a political amnesty for the 1991 coup plotters and participants in the 1993 Supreme Soviet uprising. During the first week of the Duma's session, hard-line deputies made their first move toward securing a political amnesty for their political allies, but their failure to coordinate with the LDPR, which was pressing its own political amnesty proposal, caused the move to fail (ITAR-TASS, 17 January; Sovetskaya Rossiya, 25 January). Yeltsin revived the amnesty issue when he submitted a proposal for a criminal amnesty "in connection with the adoption of" the constitution (Rossiyskaya Gazeta, 25 January), continuing a Soviet-era tradition of declaring amnesties to mark major holidays and significant political milestones. In retrospect, this move was doubly unfortunate for Yeltsin. His proposal failed to attract support from reformers and gave hardliners another opportunity to raise the issue of a political amnesty. -- On 17 January, Vasiliy Lipitskiy, a close associate of Rutskoy, proposed putting the political amnesty issue on the Duma's agenda, but the motion fell 18 votes short of a majority, reportedly because the LDPR did not back him (ITAR-TASS, 17 January; Sovetskaya Rossiya, 25 January; Nezavisimaya Gazeta, 27 January). At the time, the LDPR was advocating an amnesty that would have freed anyone sentenced on "political or economic charges" after April 1985 and also would have released from jail Rutskoy, Khasbulatov, and other participants in the October uprising but placed them under house arrest (Interfax, 31 December 1993; ITAR-TASS, 4 January). -- Yeltsin's proposal, submitted shortly after he signed it on 21 January, quickly ran into trouble. The CPRF and Agrarian Party were unwilling to consider it because it did not amnesty their political allies, and the LDPR stood by its version. Even Russia's Choice--the faction most likely to support the president--was unwilling to back the bill, apparently in an effort to erase public perceptions that it is soft on crime. Faction leader Yegor Gaydar stated that Russia's Choice could not support Yeltsin's initiative because "we are very doubtful about the provisions . . . which reduce punishments for serious criminal offenses" and pointedly drew attention to the "existing criminal situation in the country" (ITAR-TASS, 21 January, 7 February). In a further indication of trouble for Yeltsin, his proposal was assigned to the Committee for Legislation, Judicial, and Legal Reform, headed by Vladimir Isakov--a staunch Yeltsin foe from the Agrarian Party (ITAR-TASS, 24 January). -- The amnesty issue was scheduled to come up for debate in the Duma's 4 February plenary session, but the Duma's Council postponed the debate, probably in recognition that none of the competing proposals would win a majority (Interfax, Segodnya, 3 February). According to the Duma's First Deputy Chairman Mikhail Mityukov (Russia's Choice), the Council postponed debate because "certain factions" wanted to "play the amnesty card for political purposes" (Izvestiya, 5 February). By that time, Isakov's committee had drafted its own decree to amnesty the participants in the 1991 coup attempt and the October uprising (Segodnya, 4 February). -- By mid-February, elements of the final compromise began to emerge as the Duma agreed to examine both Yeltsin's criminal amnesty proposal and an apparently revised LDPR political amnesty proposal. The Duma took no direct action on Yeltsin's criminal amnesty proposal during its 16 February debate, possibly because the debate made it clear that it lacked majority support (Nezavisimaya Gazeta, Kommersant-Daily, 17 February). The Duma then decided to consider separately two draft decrees--Yeltsin's on a criminal amnesty and an LDPR proposal on an economic and political amnesty (Interfax, ITAR-TASS, 16 February). More ominously for Yeltsin, the PRES and Women of Russia factions offered conditional backing for the political amnesty, reportedly insisting on "circulating" a "clarification document" --evidently a reference to the Memorandum of Accord that the Duma later adopted in the final compromise package--making it clear that the factions supported the amnesty as a step toward "national reconciliation" and not simply for the sake of freeing Rutskoy and Khasbulatov (Segodnya, 16 February). On 17 February the LDPR's political amnesty proposal fell 23 votes short of adoption and was sent back to committee for "improvement," this time going to the security committee, headed by Yeltsin foe Viktor Ilyukhin (CPRF), as well as to Isakov's legislation committee (Interfax, ITAR-TASS, 17 February). Disarray in the Yeltsin Camp The varied responses from Yeltsin's advisers to the Duma's passage of the amnesty suggest that the event caught them unprepared, even though the approval of the compromise package by the Duma's Council on 22 February should have given them some warning of its improved prospects. (See Note 2) National Security Adviser Yuriy Baturin opted for a confrontational stance, arguing that the amnesty was unconstitutional because it was in fact a pardon, which is a presidential prerogative (ITAR- TASS, 24 February; Rossiyskaya Gazeta, 25 February). By contrast, Aleksandr M. Yakovlev, Yeltsin's official representative to the legislature, responded in sanguine fashion, contending that the amnesty was "completely in keeping with the constitution from a judicial point of view" (Russian TV, 24 February). Georgiy Satarov, a Yeltsin adviser on legislative relations, did not weigh in until two days after the vote, when he indicated that Yeltsin was preparing a "calm and businesslike letter" asking the Duma to reconsider its stance (Interfax, Moscow radio, Ostankino TV, 25 February). (Note 2) Much of the disarray in the Yeltsin camp may be attributed to the absence of presidential Administration Leader Sergey Filatov, who was apparently in Switzerland at the time (ITAR-TASS, 27 February). Yakovlev, Satarov, and Baturin are all relatively new to the Yeltsin team, and their inexperience may have contributed to their uncoordinated response (For more on Yeltsin's advisers, see the Trends of 9 March 1994, pages 4-12). Yeltsin himself responded too late to postpone or block implementation of the political amnesty. On 26 February he sent a letter to Duma Chairman Ivan Rybkin, drawing upon Baturin's line of argument and reportedly asserting that the deputies had confused the constitutional principles of amnesty and pardon. The letter urged the Duma to "improve" the decree to bring it in line with the constitution. Yeltsin also proposed that the Duma adopt a "system of criteria" defining the responsibility of state institutions and politicians "for decisions [that] hamper our joint policy towards national reconciliation, civil peace, and accord"--evidently an attempt to impress upon the Duma its accountability for the actions of individuals released under the amnesty (ITAR-TASS, 26 February). Satarov reportedly delivered Yeltsin's letter to Rybkin on the afternoon of 26 February, when Rutskoy, Khasbulatov, and other prisoners arrested after the October uprising were already walking out of Lefortovo prison (see box 2) (ITAR-TASS, 26 February; Rossiyskaya Gazeta, Izvestiya, 1 March). After the futile letter to Rybkin, Yeltsin appeared to waver between taking a confrontational approach and trying to defuse political tensions. At first he was confrontational, with S,,atarov announcing on 28 February that Yeltsin was preparing certain actions aimed at defending the democratic state and society" (Russian TV, 28 February). Satarov's comments and others by Baturin and presidential press secretary Vyacheslav Kostikov fueled speculation that Yeltsin would address the country that night in a special televised appeal (ITAR-TASS, 28 February). Nezavisimaya Gazeta's Ivan Rodin reported (2 March) that Yeltsin was to have announced on television an edict that, while not containing "any specific tough measures," nonetheless brandished a "menacing" tone. Rodin also suggested, however, that threatening a tough presidential response may have been a deliberate tactic to bring pressure on Rybkin before a meeting held the same day between Yeltsin's advisers--including the newly returned Head of Administration Sergey Filatov--and Rybkin. Rybkin and Filatov reportedly discussed ways to improve "interaction" between the two branches, paving the way for Yeltsin to meet with Rybkin the following day (ITAR-TASS, 28 February). After his meeting with Rybkin, Yeltsin appears to have adopted a position of accepting the amnesty and placing the burden of responsibility for it--and for the actions of the released prisoners--squarely on the Duma. At their 1 March meeting, Rybkin reportedly promised Yeltsin that the Duma would "ensure a more balanced approach" when adopting decrees likely to have "serious political and moral consequences" (ITAR-TASS, 1 March). Yeltsin apparently also extracted a pledge from Rybkin that he would urge the Duma "probably in the near future" to adopt a memorandum on the "responsibility of state institutions and politicians for preserving civic calm in Russia" (Moscow radio, 1 March). In return, Yeltsin assured Rybkin that he had opted against "immediate tough measures," but he warned that he would not tolerate misbehavior by his amnestied foes, saying: "Should the slightest attempt be made at destabilizing the situation in the country, [the amnestied prisoners] will be arrested straight after" (ITAR-TASS, 1 March). As a result of the initial confused reaction by his advisers and the conflicting signals about his course of action, Yeltsin appears to have lost political stature in the aftermath of the amnesty vote. His acceptance of the amnesty conflicts with his repeated assertions--most recently stated at the 4 March Government meeting--that the Duma's amnesty is unconstitutional (Moscow radio, 4 March). In an effort to counter press accounts of executive disarray (Rossiyskaya Gazeta, Izvestiya, 1 March) as well as criticism of his handling of the amnesty by Russia's Choice members (Izvestiya, 3 March), Yeltsin apparently saw the need to verbally assert his presidential authority after meeting with Rybkin: "I . . . am in full control of the social and political situation" (ITAR-TASS, 1 March). Implications The Duma's successful passage of a political amnesty suggests that Yeltsin and his team of advisers have learned little since the confrontation with the old Supreme Soviet about how to manage relations with the legislative branch, much less to effectively advance a presidential agenda. By contrast, the Duma has again demonstrated its ability to compromise effectively on issues it considers important, with the Duma Council apparently playing a key role. By postponing debate when it recognized that the Duma lacked consensus on the issue and brokering the final key compromise, the Duma's leadership demonstrated a knack for managing the legislative process. Rybkin personally appears to have emerged from the amnesty vote with enhanced political stature. His meetings with Filatov and Yeltsin and pledges to improve legislative-executive coordination suggest the makings of an effective political player, at least for as long as his Communist-Agrarian colleagues are willing to back such conciliatory politics and allow Rybkin to deliver on his pledges. Box 1 The "Large" Compromise Package Resorting to the kind of package compromise that has worked for the Duma in the past,* deputies voted on a total of five documents, all of which came into effect after their publication in Rossiyskaya Gazeta on 26 February. The decree overturning the Duma's investigative commission into the October crisis was not included in an earlier "small" package that failed to pass: -- "On Declaring an Amnesty in Connection With the Adoption of the Russian Federation Constitution." This decree, based largely on the draft amnesty bill that Yeltsin submitted to parliament (Rossiyskaya Gazeta, 25 January), amnesties criminals convicted of minor offenses as well as certain groups of offenders, such as women and invalids. According to Minister of Internal Affairs Viktor Yerin, the criminal amnesty affects "less than 10 percent" of convicted criminals, and another MVD general put the number at about 20,000 (Argumenty i Fakty No. 6, February; Pravda, 26 February). -- Decree outlining the procedures for implementing the above decree. -- "On Declaring a Political and Economic Amnesty." This document--the one opposed most bitterly by Yeltsin supporters- -specifically terminates legal proceedings against the 1991 coup plotters and hardliners arrested after the violent 1 May demonstrations in Moscow and the October 1993 Supreme Soviet uprising and stipulates that their release from prison take place "immediately." In an apparent effort to gain the support of some reformers and the Liberal Democratic Party of Russia (LDPR), it also amnesties criminals sentenced for various Soviet-era economic crimes. -- "On the Adoption of the Memorandum of Accord." This decree formally approves the "Memorandum of Accord" put forward by PRES, the Women of Russia, and the New Regional Policy factions calling upon the legislative and executive branches to consider "jointly" problems presented by "political, economic, and social reforms in society" and urging authorities to wage their "political struggle within a legal framework." The memorandum also suggested that a political amnesty could serve as an "integral part" of the process toward "national accord." Duma Chairman Ivan Rybkin has repeatedly called this memorandum the most important document of the package (Pravda, 1 March; Komsomolskaya Pravda, 2 March). "On Overturning a Decree of the State Duma." This decree reportedly over turns the 9 February decision of the Duma to set up a commission to investigate the events of 21 September-4 October, although its wording is somewhat ambiguous. It annuls a 16 February decree on the "composition" of the commission, leaving open the possibility that the commission has not formally been disbanded. *See the Trends of 9 February 1994, pages 15-25. End Box 1 Box 2 Prosecutor Protests Yeltsin Pressure on Amnesty Judging by comments made after the prisoners' release, both the Yeltsin team and Duma Chairman Ivan Rybkin were counting on Prosecutor General Aleksey Kazannik to block or delay implementation of the amnesty. Kazannik's office reportedly made an "inquiry" to the Duma about certain provisions in the amnesty, and Rybkin indicated in his meeting with Satarov on 26 February that the Duma's legislation and security committees were responding to the inquiry and that no prisoners would be released until the questions were cleared up (ITAR-TASS, 26 February). At a meeting of parliamentary officials on 28 February, Rybkin charged that the prosecutor's office acted on the amnesty with undue haste" and without waiting for a response to its questions (Interfax, Radio Rossii, 28 February). He later appeared to change his story somewhat--possibly in an attempt to deflect blame from the security and legislation committees--when he contended that the committees had "clarified every point" of Kazannik's inquiry by 26 February (Pravda, 1 March). Yeltsin reportedly tried to pressure Kazannik to delay implementing the amnesty, but Kazannik, while declaring his distaste for the amnesty, said that he had no legal authority to block it and resigned rather than submit to Yeltsin's pressure. Kazannik had implicitly warned Yeltsin that he would not bow to political pressures over the amnesty issue when he stated that his office does not give "political assessments" to various laws but only ensures their "lawfulness and strict fulfillment" (ITAR- TASS, 24 February). In his resignation statement, Kazannik charged that Yeltsin had appealed to him to "suspend" the amnesty process, and though he indicated that he personally agreed with the "civic attitude" of Yeltsin's appeal, he made clear his professional and political independence: "The prosecutor in Russia does not have the authority to suspend an amnesty act [or] to appeal to the State Duma for a resolution to be reconsidered" (ITAR-TASS, 26 February). Despite his refusal to delay implementing the amnesty, Kazannik appears to harbor no sympathy for the amnestied prisoners, asserting in his resignation statement that he considered the Duma's vote for political amnesty a "black page in the history of Russian parliamentarianism" (ITAR-TASS, 26 February). * Kazannik has now changed his mind about resigning and has indicated that he will ask the Federation Council, which has the constitutional authority to confirm the appointment and dismissal of the prosecutor general, not to accept his 26 February resignation (Russian TV, Izvestiya, 12 March). Yeltsin, however, appears intent on securing Kazannik's resignation. On 14 March he issued a decree affirming his acceptance of Kazannik's resignation and arguing that because Kazannik was appointed by presidential decree before the new constitution was adopted, his release from office does not require the Federation Council's approval (ITAR-TASS, 14 March). End Box 2 (AUTHOR: O'CONNELL. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ANALYSIS BRANCH, RUSSIA DIVISION, (703) 733-6070.) ENEAG/BLOUGH JEG 16/0145Z MAR

Continuing earlier signs that Beijing would reward France for its accommodating stance on Taiwan arms sales by expanding Sino- French aviation cooperation, Beijing has recently announced contracts with the French-based European consortium Airbus Industrie (Xinhua, 4,6 March). According to a Xinhua report of 6 March, Airbus has reached an agreement worth "tens of millions of U.S. dollars" with China Aviation Supplies Corporation for production of aircraft parts in a move that reportedly will "increase Airbus' share in the potentially huge China market." Xinhua also reported on 4 March that Chinese airlines have recently announced plans to purchase nine aircraft from Airbus (Xinhua, March 4). Following the restoration of bilateral ties in January, and a French pledge to reverse France's previous policy of selling arms to Taiwan, China awarded a major subway contract to a French firm. Beijing had previously shunned French companies to protest a November 1992 French decision to sell Mirage jet fighters to Taiwan. (AUTHOR: SIMON. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, CHINA ANALYSIS TEAM, (703)733-6097.) EAG/BIETZ/CB 16/1608z Mar

SUMMARY While seeking to wrest as many concessions as possible from Israel and the United States in the aftermath of the Hebron massacre, PLO leaders also appear to be maintaining a degree of flexibility in their position on terms for resuming peace negotiations with Israel. In addition, PLO statements aimed at Palestinian audiences appear to be preparing popular opinion for a compromise. END SUMMARY Following meetings in Tunis between Palestinian leaders and delegations from Israel and the United States, PLO Executive Committee member Yasir 'Abd-Rabbuh reiterated PLO demands that Israel must take action against Jewish settlers in the occupied territories before the PLO will agree to resume negotiations. Meetings with U.S. officials, he told an interviewer, "have not achieved progress," and he complained that Washington is seeking to link issuance of a Security Council resolution on the Hebron massacre to PLO acceptance of a date for resumption of negotiations. A Security Council resolution, 'Abd-Rabbuh argued, would be effective only "if it ensures practical steps . . . to guarantee international protection for the Palestinian people" and should not be "a bargaining card to resume talks." More specifically, he called for "ending the settlers' presence in the heart of Hebron" and other areas constituting "hotbeds of tension and explosion," "tackling the issue of the presence of armed settlers . . . in Palestinian towns and villages," and "providing international protection, especially in Hebron" (Radio Monte Carlo, 15 March). Other recent statements by mainstream PLO leaders and media have also stressed that Israel must act against settlers and that security for Palestinians in the territories must be ensured, but the statements appear to have been carefully crafted to avoid taking any uncompromising positions that might threaten resumption of negotiations. For example: --PLO leader Yasir 'Arafat branded Jewish settlements in Hebron as "illegal" in an interview with a French newspaper but said that he is "not asking for them to be destroyed, but moved." He also repeated his call for an "international presence" in the territories to ensure Palestinian security, but appeared careful to couch the demand in terms designed not to offend Israel. Such an international presence, he said, would be consistent with the provisions of the Israel-PLO Declaration of Principles (DOP)--a condition laid down by Israeli leaders. In addition, 'Arafat suggested an armed international force only when questioned explicitly on the subject, asking rhetorically "who will protect this international force? The armed Jewish settlers?" and answering that the observers must "protect themselves." Similarly cautious on U.S. policy, 'Arafat complained that the United States is blocking inclusion of any reference to Jerusalem in the UN Security Council resolution currently under discussion but was circumspect overall in commenting on U.S. policy. "We must . . . wait until the whole U.S. reaction is revealed at all levels and not just in the Security Council," he said, and he asked rhetorically whether the United States will "be up to the responsibilities which it has shouldered since the signing of this DOP." He also demanded that Israel complete withdrawal from the Gaza Strip and Jericho by 12 April in keeping with the DOP, but when asked what he would do if the deadline was not met, he answered only "that would mean that the Israeli Government had decided not to respect our agreements" (Paris Le Figaro, Il March). --Commenting on Israel's decision to ban extremist settler organizations, PLO official Ahmad Quray', a key figure in negotiating the DOP, described the Israeli action as "a good step in the right direction" but "not enough." There must be, he added, "a more substantial solution" specifying that "measures must be taken around the Ibrahimi Mosque [sight of the Hebron massacre] and the locations of settlers" (Ool Yisra'el, 13 March). --A PLO radio commentary excoriated the United States for allegedly blocking a Security Council resolution on the Hebron massacre, but avoided any explicit threats or demands. The United States, the radio charged, is "resisting this desire for justice by the international community" and displaying its "support for, bias toward, and collusion with Israel; that is, in favor of terrorism, crime, and massacre." Washington's "strange and abnormal logic," the commentary added, "runs counter to justice and history" and "destroys the foundations of the peace process," to the detriment not only of Palestinians but of "all parties, including Israel and the protector of its terrorism, the United States" (Voice of Palestine [VOP] in Yemen, 13 March). Preparing Palestinian Opinion for a Deal Two recent commentaries in PLO media addressed to Palestinian audiences strongly suggest that the PLO leadership, mindful of popular Palestinian anger following the Hebron massacre, is attempting gradually to prepare Palestinian opinion to accept an eventual compromise formula on resuming formal peace negotiations with Israel. --A VOP commentary said that 'Arafat "is under strong pressure to leave the peace talks" but argued that the peace process must continue. Palestinians, the commentary said, are seeking "a more effective U.S. role" following the massacre, but it warned that "there are limits to what the Clinton administration can do in its dealing with the Yitzhaq Rabin government" and that "the PLO should be satisfied with achieving limited gains." "What will eventually be required," VOP argued, "is to effect a balance between the Palestinian and Israeli negotiators." Although Palestinian gains may initially be limited, the commentary concluded, "unquestionably the decision to go ahead with the negotiations will achieve more significant gains in the future"- -a conclusion it justified by noting that "for the first time, the . . . issue of settlements . . . is being raised inside the Israeli Government itself" (10 March). --An article appearing in the PLO's weekly news magazine acknowledged that the PLO's demand for a Security Council resolution "condemning the massacre, calling for an international presence in the occupied territories . . . and indicating that Jerusalem is part of the occupied territories as a condition for resuming bilateral talks with Israel" could result in "some sort of confrontation with the United States." Nonetheless, the article continued, the PLO "realizes that the United States has a genuine interest in resuming the negotiations as soon as possible," along with other members of the international community. Moreover, the article argued, "Israel's position is weak," thus giving the PLO a chance for "better political gains than previously offered to it." Under these circumstances, the article concluded, "it is inevitable that the PLO return to the negotiating table." The PLO, it explained, "is not in the business of revenge governed by instant angry reactions, but is seeking a political achievement that may return things to the right track and make up for our loss in the negotiations [on the DOP] in Davos and Cairo" (Filistin Al-Thawrah, 13 March). Implications PLO leaders clearly see an opportunity following the Hebron massacre to extract concessions on some issues, most notably settlements, on which they deferred to Israeli demands during negotiations leading to the DOP. Moreover, they are undoubtedly also concerned that they must be seen to have made significant political gains before returning to negotiations in order to satisfy angry and skeptical Palestinians in the territories. 'Arafat has almost certainly decided that he must eventually continue negotiations on the DOP, but judging by his conduct of the talks leading to the Cairo agreement in February, he will seek to prolong the current diplomatic maneuvering until he is convinced he can make no further gains. (AUTHOR: MORTON. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, NEAR EAST ANALYSIS BRANCH (703) 733-6094.) ENEAG/BLOUGH/CB 16/2148z Mar

BOOKS, JOURNALS, COMMERCIAL DATA BASES, AND OTHER OPEN-SOURCE PUBLICATIONS, OR ON RADIO AND TELEVISION BROADCASTS. SOME OF THE MATERIALS USED IN THIS PUBLICATION WILL APPEAR AS ABSTRACTS OR FULL TRANSLATIONS IN FBIS SERIAL REPORTS. COMMENTS AND QUERIES REGARDING THIS PUBLICATION MAY BE DIRECTED TO THE MANAGING EDITOR (SHARON W. AT (703) 733-6395), THE EDITORIAL ASSISTANT (CHRIS R. AT (703) 733- 6622), OR INDIVIDUALS AT THE NUMBERS LISTED WITH ITEMS. DEVELOPMENTS DEVELOPMENTS highlights worldwide S&T events reported in the foreign media. Items followed by an asterisk will be published in full by FBIS. The contributor's name and telephone number are provided. Aerospace (China) Scientists at the Chinese Academy of Sciences' Institute of Semiconductors in Beijing have developed an aluminum gallium arsenide/gallium arsenide heterojunction solar cell fabricated with a multiwafer extrusion-boat liquid-phase epitaxy (LPE) technique. Up to 20 epitaxial wafers can be grown per cycle, compared with one wafer per cycle with traditional LPE graphite-boat techniques. Full- surface conversion efficiencies for the two best samples were 18.78 percent and 17.33 percent. The new LPE technique is applicable to the fabrication of solar cells, especially for space vehicle power sources, as well as the manufacture of light-emitting and other optoelectronic devices. (ZHONGGUO KEXUE BAO 24 Nov 93)* Thomas T. 733-6342 (China) The Chinese Academy of Sciences' Space Sciences Applied Research Center has developed a 275-kilogram balloon microgravity experimental system under the state's 863 program. The system, which is like those already developed by Japan and Germany, simulates the microgravity environment in space by dropping a capsule from a balloon at an altitude of 35 kilometers in order to maintain a microgravity environment of 10(exp)-4 g to 10(exp)-2 g in free-fall for 31 seconds. In the initial test, which analyzed the characteristics of dust explosion, all on-board instruments functioned well and capsule recovery was successful. Researchers plan to conduct experiments in the areas of materials, life sciences, fluid dynamics, and fuels, as well as on various experimental payloads for satellites and airships. (ZHONGGUO KEXUE BAO 15 Dec 93) Parker H. 733-6336 (Italy) The European Space Agency (ESA) has assigned the development of a robot control system for aerospace applications to an industrial team led by the European space automation and robotic company Tecnospazio. The project is based on an industrial control system developed by Comau (Fiat group) and will be integrated into the Columbus Automation Testbed (CAT) delivered to ESA in 1992. (ANSASERVICE 19 Jan 94) Wendy P. (Brussels Bureau)/Renee McG. 733- 6339 (South Korea/Russia) Daewoo Heavy Industry will open an aviation technology research center near Moscow on 30 March. Daewoo plans to improve upon the design for Russia's 28-passenger helicopters--the MI-8 and the MI-17--and to develop the next-generation transport and 5-ton class multipurpose helicopters. The company plans to use Russia's aviation technology for its own helicopter design, engine manufacturing, and maintenance technologies to produce ready-for- market helicopter products. (MAEIL KYONGJE SINMUN 8 Jan 94) William H. 733-6521 Battery Technology (China) Researchers at the Institute of New Energy Materials Chemistry at Nankai University in Tianjin have developed a high- performance AA-size sealed nickel metal hydride battery. Its key performance indicators include a nominal capacity that exceeds 1,000 milliampere-hours; a 5-ampere discharge-to-0.8-volt average capacity that exceeds 950 milliampere-hours (95 percent of rated capacity); a low-temperature (-18 degrees C) 2-ampere discharge-to-1.0-volt average capacity of 835 milliampere-hours (83 percent of rated capacity); a seven-day self-discharge of 15 percent and a 28-day self-discharge of 29 percent; and a lifetime of more than 500 cycles, based on a 1.75-hour 400-milliampere-charge/1.25-hour 400- milliampere-discharge test. The researchers have completed batch trial production and have built an intermediate testing site with a single-shift annual output of 500,000 units. (GAO JISHU TONGXUN Dec 93)* Thomas T. 733-6342 Biotechnology (Japan) Under the guidance of the Biochemistry Department at the Cancer Institute of the Japanese Foundation for Cancer Research, Otsuka Pharmaceutical Company is conducting human genome research with the intent of cloning genes associated with disease. The company established the Tokushima Research Center within its Diagnostic Medicine Division in May 1993 both to do the research and to develop commercial applications for human genome analysis. Following the installation of eight DNA sequencers at the Tokushima center, Otsuka Pharmaceutical succeeded in cloning a partial sequence of DNA that is complementary to messenger RNA extracted from fetal brain tissue. The company is establishing a library of these cloned complementary DNA fragments, which have been linked to disease. Otsuka researchers, who began complete sequencing of newly discovered genes this year, plan to examine the role of the cloned complementary DNA fragments in the expression of genes associated with disease. Otsuka Pharmaceutical ultimately hopes to develop diagnostic and therapeutic drugs using the results of its research on DNA sequencing and gene expression. (NIKKEI BIOTECHNOLOGY 17 Jan 94)* Ritsuko G. 733-6333 Computers (France) A group of researchers led by Nobel Laureate Jean-Marie Lehn at the College De France in Paris has developed an optical switch consisting of a thiophene molecule. When hit with ultraviolet light the molecule "closes" and allows electrons to pass through; when hit with infrared light it "opens" and blocks the flow of electrons. This molecular "switch" could have applications in the development of optical molecular computers. (ANSASERVICE 29 Dec 93) Wendy P. (Brussels Bureau)/Renee McG. 733-6339 (China) Engineers at the China Aerospace Corporation's (CASC's) Third Academy and at Harbin Institute of Technology have jointly developed the nation's first advanced supercomputer real-time three- dimensional computer image generation (CIG) system. With a peak speed of 300 million operations per second (MOPS), the system can process 80 million pixels per second or generate 200,000 triangles per second. It can also generate in real time lifelike three- dimensional images from a variety of observation points and with up to 16 million color varieties. China's CIG system will have applications in astronaut and flight training, and in missile development. (RENMIN RIBAO OVERSEAS EDITION 15 Dec 93)* Thomas T. 733-6342 (China) The State Science and Technology Commission announced in December 1993 that China's first computer software state engineering research center (SERC) will be established in Shenyang to engage in multimedia software R&D and marketing. The facility will grow out of the Northeast University Software Center, which produced 30 million yuan ($3.45 million) worth of software in 1993. In a separate development, ground was broken for the Southern Software Industrial Park in Zhuhai on 29 November 1993. Funding and construction for this Key State Eighth Five-Year Plan (1991-95) Project are the joint responsibility of the Ministry of Electronics Industry and the Zhuhai Municipal Government. Investment for the 320,000-square-meter park totals almost 300 million yuan ($34.5 million). When first- phase construction is complete in two years, 15 to 20 firms with 1,500 engineers and managers are expected to establish facilities there. Annual sales are projected at 400 million yuan ($46 million), with 70 percent of the products to be exported, realizing annual export revenues of 250 million yuan ($29 million). (KEJI RIBAO 18 Dec 93; JISUANJI SHIJIE 1 Dec 93)* Thomas T. 733-6342 (Japan) An Aizu University research group that includes 20 software specialists from the former Soviet Union is developing the world's fastest massively parallel supercomputer. In Japan, where very few manufacturers have succeeded in developing massively parallel computer technology, this reportedly is the first time a university has pursued R&D in this area without outside participation or support. The university plans to make all developed technology available to other research organizations. (TOKYO SHIMBUN 10 Jan 94) Steve Z. 733-6340 Environment (Russia) The Astrofizika Scientific Production Association is seeking financing for a project to market a military gas detection device converted for environmental monitoring. The self-propelled mobile unit, which was developed for remote rapid detection of the most toxic neuroparalytic gases, scans 25 square kilometers per minute using a lidar laser locator. Astrofizika has created a database containing several hundred thousand spectra for detecting various environmental pollutants. The Russian scientists claim a truck-mounted version of the environmental monitoring device can detect toxic industrial emissions, and a helicopter-transported unit can detect oil and gas pipeline leaks. The Russian Federation Ministry of Science and Technology Policy has promised subsidies for the project, but Moscow reportedly has not yet provided any funds. (IZVESTIYA 9 Oct 93) Roberta D. 733-6331 (Japan) Hosokawa Micron has a contract for nearly 1 billion yen ($9.5 million) to deliver exhaust gas reprocessing equipment to a Russian aluminum refinery by the end of 1994. Hosokawa Micron's affiliate in Germany developed the system, which recycles fluorine waste generated in the electrolysis of aluminum oxide. The equipment previously had been exported to Canada and Europe, but this is the first such equipment to be used in Russia. Hosokawa Micron has also received an order from Russia amounting to about 500 million yen ($4.76 million) for equipment to recycle telephone and electrical power cables. The recycling equipment can break cables down into vinyl, copper, and aluminum and recycle the metals. The first shipment of the equipment, which was developed by a German company now owned by Hosokawa Micron, was to be in January 1994. (NIHON KEIZAI SHIMBUN 23 Dec 93) Junko A. 733-6346 (Japan) Kobe Steel, Ltd. is testing and hopes to market a 300- kilowatt plasma fusion plant that detoxifies low-level radioactive waste generated in nuclear power plants. The company has already delivered a small plasma fusion pilot plant (under 100 kilowatts per hour fusion capacity) to the Central Research Institute of the Electric Power Industry (CRIEPI). Originally developed to treat ash from incinerated urban refuse, plasma fusion technology reduces the volume of waste to one-fifth and the amount of exhaust gas to less than one-thirtieth that produced by combustion. The compact, cylinder-shaped plasma fusion furnace continuously supplies ash and generates ingots, resulting in a low concentration of nitrogen oxide in the exhaust gas. The furnace's plasma torch provides highly efficient heating as well as a choice between transfer-type and non- transfer-type plasma generation. Various non-flammables such as metals and concrete can be processed simultaneously, and continuous processing allows the handling of large amounts of material. Plasma- fused materials are buried in concrete shields, and exhaust gas is treated with high-efficiency particulate air (HEPA) filters and ceramic filters. (KAGAKU KOGYO NIPPO 13 Dec 93) Junko A. 733-6346 Industrial Technology (Russia/Uzbekistan) Moscow State University researchers have demonstrated the feasibility of using alternating nonuniform electromagnetic field energy to accelerate the enzymatic hydrolysis of cellulose for the commercial production of methane, food, and animal feed. The researchers added ferromagnetic particles to a mixture of cellulose and cellulolytic enzymes from the fungus Trichoderma reesei and excited the particles with an electromagnetic field. This agitation increased the speed of hydrolysis by as much as nine times and resulted in a higher concentration of glucose and cellobiose hydrolysis products in one to two hours than did the two- day control experiments. In a related development, the Scientific Research Institute for Chemical Technologies in Tashkent has developed a clean technology for making cellulose from rice straw. The process produces 0.5 ton of cellulose from 1 ton of straw, while reducing water consumption by nearly 90 percent. (DOKLADY AKADEMII NAUK Dec 93; NEZAVISIMAYA GAZETA 5 Jan 94) Roberta D. 733-6331 Lasers (Japan) Mitsubishi Electric Corporation has developed a 24-watt green light laser with twice the power of other Japanese green light lasers. It is part of a solid-state laser system that also includes an yttrium-aluminum-garnet (YAG) laser and a potassium titanate phosphate crystal element that converts the 1,064-nanometer- wavelength infrared (IR) YAG laser light to green laser light with a wavelength of 532 nanometers and 24 watts of power. Previous attempts by Japanese researchers to achieve conversion to such a high output level failed because the strong IR radiation caused crystal damage. Mitsubishi claims to have solved this problem by lengthening the wavelength conversion element, increasing the YAG laser beam's spot size, and finding the optimal phase matching for the adjoining parts of crystals that form the long wavelength conversion element. Commercial applications for this green light laser include compact disc recording. (KAGAKU KOGYO NIPPO 24 Nov 93)* John H. 733-6341 (Japan) Matsushita Electric Industrial Co. has developed a surface-emission laser optoelectronic integrated circuit system that operates at optical switching speeds of up to 10 gigahertz, ten times the speed of conventional systems of this type. The new system uses 64 unique surface-emission lasers arrayed in a 480-micron square cell. All of the lasers operate at a wavelength of 0.98 nanometer and have built-in driver transistors. The company expects this "transistor-on-laser" system to serve as a basic technology in the development of ultrafast high-volume optical communications and optical computers. (KAGAKU KOGYO NIPPO 8 Dec 93)* John H. 733-6341 Microelectronics (France) SGS-Thomson has developed a fuzzy logic microprocessor, based on 0.7-micron complementary metal oxide semiconductor (CMOS) technology. The Weight Associative Rule Processor (WARP) microprocessor integrates over 400,000 transistors on an 88-square- millimeter chip and can process 10 million inferences per second with 40 megahertz clockspeed. This is a complete fuzzy processor that includes "fuzzification," processing of inferences, and "defuzzification." According to the director of SGS-Thomson's Advanced Systems Architectures Group, the WARP microprocessor is capable of evaluating 32 rules with 5 inputs and one output in less than 1.85 microseconds. (For previous reporting on the WARP microprocessor, see PERSPECTIVES Vol. 8 No. 2, 29 Jan 93.) (ELECTRONIQUE INTERNATIONAL HEBDO 18 Nov 93)* Ioan M. 733-6334 Optoelectronics (China) Qinghua University scientists, in collaboration with colleagues from four other domestic research organizations, have developed China's first semiconductor-laser-pumped erbium-doped fiber-optic amplifier. Pumped by both 980-and 1,480-nanometer- wavelength laser diodes, the amplifier has measured optical gains of 28 decibels and 25 decibels, respectively; maximum saturated output power measures 6.3 milliwatts at both wavelengths; and frequency bandwidth measures 26 nanometers and 40 nanometers, respectively. (KEJI RIBAO 16 Dec 93)* Thomas T. 733-6342 S&T Policy (China/Japan) In December 1993, Chinese Academy of Sciences (CAS) Vice President Yan Yixun and Japan's National Space Development Agency (NASDA) Director Masato Yamano signed a bilateral agreement in Tokyo that will allow China to receive and distribute data from Japan's Earth Resources Satellite (JERS-1). According to the agreement, NASDA will transmit data gathered by JERS-1 to the CAS Remote Sensing Satellite Ground Station gratis. (ZHONGGUO KEXUE BAO 20 Dec 93)* Thomas T. 733-6342 Telecommunications (Japan) Hitachi has developed five radio-frequency power modules for use in portable telephones. The new modules result in an improvement of 10 percent or more in operating efficiency and allow a 20-percent increase in communication time compared with previous types. Sample shipments of the modules, which are made using submicron metal-oxide semiconductor field-effect transistor (MOSFET) technology, will begin in 1994. Hitachi, which is aiming to increase its share of foreign markets, will supply analog 6-and 4.8-volt units to original equipment manufacturers (OEMs) in North America and Europe. (DEMPA SHIMBUN 20 Dec 93) Steve Z. 733-6340 (Japan) Sharp is installing a company telecommunications wide area network to facilitate access to patent information and to automate accounting. The network will link 3,000 terminals at 44 locations throughout Japan, including the company's headquarters in Osaka, laboratories, plants, and offices. Local area networks (LANs) are being established at 17 of the locations using integrated services digital networks (ISDN) and other systems. Larger facilities are using 10-million-bit-per-second Ethernet LANs within offices and high-capacity fiber-optic communications between buildings. Sharp is using its own independent and ISDN circuits to connect the LANs. The company is investing more than 1 billion yen ($9.5 million) in the new network, with which Sharp expects to quintuple its communications efficiency. (NIKKEI SANGYO SHIMBUN 21 Dec 93) Steve Z. 733-6340 (France) The Magnetism Group of Thomson's Central Research Laboratory (LCR), which developed a prototype digital magnetic tape recorder using massively parallel technology, has designed a new model for use with VHS tape. (For reporting on Thomson's prototype, see PERSPECTIVES Vol. 8 No. 2, 29 Jan 93.) Whereas the prototype operated at a data transfer rate of 20 megabits per second, the new device operates at a data transfer rate of 500 megabits per second. Its write head can record to 1,000 10-micron-wide tracks. (SCIENCES ET AVENIR Dec 93)* Ioan M. 733-6334 FEATURE ARTICLES FRANCE/ITALY: SMALL SATELLITE LAUNCHER PROPOSED Key Points: Following two years of joint studies, France's National Center for Space Studies and the Italian Space Agency have proposed a four-stage launcher capable of placing satellites weighing 1 ton into low-Earth orbit. Topic Sentence: The European Small Launcher proposed by the French and Italian space agencies would deliver 1-ton payloads to low-Earth orbit. Following two years of study, France's National Center for Space Studies (CNES) and the Italian Space Agency (ASI) have jointly proposed a four-stage launcher capable of placing satellites weighing up to 1 ton into low-Earth orbit, according to a recent article in AIR & COSMOS/AVIATION INTERNATIONAL (20 Dec 93-2 Jan 94). CNES and ASI expect the European Small Launcher (ESL) to fill a need they believe will exist by the year 2000 for a small launcher offering maximum reliability at minimum cost and capable of two to 10 launches a year. The ESL would also allow Europe to compete in this market with Lockheed's LLV minilauncher, due to enter service in late 1994. CNES estimates the ESL could launch 1 ton to an altitude of 700 kilometers for $20 million, which approximates the cost of a comparable launch using the LLV. CNES further estimates the total development cost for the ESL at 1.8 billion francs ($310 million) over four and a half years. COVER GRAPHIC: Color illustration of European Small Launcher Although the European Space Agency (ESA) recently began a market study for a mini launcher, CNES and ASI believe an ESA-sponsored mini launcher is neither politically nor financially feasible, and that it will therefore be up to France and Italy to build and finance the project, with contributions from European industry. Participating companies include Aerospatiale and SEP (France), BPD (Italy), DASA (Germany), Contraves (Switzerland), and SABCA (Belgium). (For previous reporting on Aerospatiale's plans to compete in the minilauncher market, see PERSPECTIVES Vol. 8 No. 8, 31 Aug 93 and Vol. 8 No. 12, 30 Dec 93.) CNES and ASI believe the ESL will meet the need for several launches per year of clusters of 200-to 700-kilogram commercial telecommunications satellites (such as the Iridium and Globalstar systems), to be placed in low-Earth orbit at inclinations of 60 to 90 degrees; one or more 500-kilogram Earth observation satellites to be placed in sun-synchronous orbit at 800 kilometers; at least one 200-to 500-kilogram scientific satellite (such as Sweden's Viking and Freja); and military telecommunications or reconnaissance satellites. The ESL will be capable of launching a minimum payload of 100 kilograms to any orbit, up to 600 kilograms to a 1,400- kilometer orbit, or 1,000 kilograms to a 700-kilometer orbit. With a cylindrical volume of 4.8 meters x 2.2 meters, the launcher's maximum payload will be 1.4 to 1.5 tons. The ESL will attain a maximum altitude of 5,000 kilometers. Launch reliability is expected to be 99 percent and the accuracy of payload insertion into orbit will be 4 kilometers on the semimajor axis and 0.01 degree in inclination. The single or dual payload will be accommodated in a fairing measuring 4.8 meters long with a maximum diameter of 2.2 meters. Acceleration will be 7 g. Because CNES believes a low development cost for the launch vehicle is critical, the ESL's design incorporates as many existing components as possible. The launcher, which measures 25 meters long by 2.6 meters in diameter and weighs 121 tons, was built with technology developed for the Ariane 5. Its first three stages use Ariane 5's hydroxy-terminated polybutadiene (HTPB) solid propellant. The launcher's first two stages are identical in size but have nozzles adapted for functioning on the ground (P50 A) or in space (P50 B). These first two stages each carries 51.2 tons of HTPB in a lightweight carbon-fiber wound casing made using the same technology as that used for France's M5 ballistic missile; thrust for these stages measures 173 and 190 tons, respectively. The third stage, P7, carries 7.2 tons of HTPB in a carbon-fiber casing measuring 2.3 meters in diameter and has a 23-ton thrust. The fourth stage is a liquid-fuel terminal-propulsion module (LM) housed in the equipment bay, which measures 2.6 meters. This stage provides roll and attitude control, final trajectory correction, and orbit circularization. It carries 260 kilograms of hydrazine and its six nozzles provide 400 newtons of thrust. As an alternative to the P7 solid-fuel third stage, DASA has been studying a liquid-fuel third stage (L5) carrying 5 tons of unsymmetrical dimethyl-hydrazine (N(sub)20(sub)4/UDMH). It uses the Aestus engine, which is derived from the Ariane 5's L9.7 third stage and has a thrust of 27.5 kilonewtons. Because it would require a 200-kilogram reduction in payload capacity, DASA's alternative probably will not be used, according to AIR & COSMOS. CNES estimates the ESL can be built in four and a half years, and hopes to get final approval by 1995 in order to begin construction in early 1995 and begin flying in mid-1999. ANSASERVICE (12 Jan 94) reports that the project's definition phase is to be completed by June 1994. Initial plans are for two launches per year from the Ariane 5 launch platform in Kourou, French Guiana, with expectations of increasing the number to between five and ten launches per year. Alexis M. 733-6345 SOUTH KOREA: 1994 S&T BUDGET, 1993 S&T ACCOMPLISHMENTS Key Points: The South Korean Government's 1994 S&T budget of nearly 2 trillion won ($2.5 billion) is the country's largest to date, representing 2.2 percent of the national budget and a 32.7- percent increase over last year. Figures on the 1994 distribution of funds among the ministries, and within the Ministry of Science and Technology (MOST), are provided along with a summary of that ministry's key accomplishments in 1993. Topic Sentence: The largest share of the nearly 2-trillion-won 1994 S&T budget is allocated for R&D. South Korea's 1994 science and technology budget--defined as "direct support" to agencies of the central government for S&T- related activities--has been set at 1.9596 trillion won ($2.45 billion), according to a report in the 5 January CHUGAN MAEGYONG. The amount, which includes R&D, S&T promotion, and administrative budgets, is 32.7 percent higher than the reported 1993 S&T budget of 1.4767 trillion won ($1.846 billion). Government S&T expenditures, which make up 20 percent of the total funds spent by South Korea on science and technology, account for 2.2 percent of the 1994 national budget, compared to 4.7 percent in the United States and 2.9 percent in Japan, according to the report. The largest share of the new S&T budget, some 1.5132 trillion won ($1.892 billion), is allotted to R&D, representing a 30-percent increase over 1993. Specific R&D categories to be funded include: state-funded research expenses 712.2 billion won ($890 million), up 20 percent; R&D subsidies 252.1 billion won ($315 million), up 54 percent; and "testing and research expenses for national testing and research agencies" 243.3 billion won ($304 million), up 17 percent. The largest overall increase of 240 percent will go to the Ministry of Education, followed by the Environmental Agency with a 65.8- percent increase, and the Ministry of Trade, Industry, and Energy whose budget will grow by 49 percent (CHUGAN MAEGYONG). S&T budgets within the Ministry of Science and Technology (MOST), funded by public and private sources, are shown in the following table (MAEIL KYONGJE SINMUN 1 Jan 94). Institute Budget Personnel (billion won) (million $) (PhDs) Korea Institute of Science 67.075 83.84 787 (247) and Technology (KIST) System Engineering Research 28.632 35.79 357 (22) Institute (SERI) Genetic Engineering Research 16.462 20.58 225 (73) Institute (GERI) Research and Development 4.555 5.69 54 (1) Information Center S and T Policy Management 7.609 9.51 114 (22) Research Institute Korea Advanced Institute of 78.215 97.77 852 (311) S and T (KAIST) Korea Res Inst of Standards 28.771 35.96 472 (99) and Science (KRISS) National Astronomical 9.920 12.40 89 (12) Observatory Basic Science Support 10.865 13.58 75 (9) Center Korea Institute of Machinery 52.723 65.90 574 (95) and Metals (KIMM) Korea Aerospace Research 23.674 29.59 127 (33) Institute (KARI) Korea Institute of Nuclear 21.278 26.60 272 (53) Safety Korea Atomic Energy Research 171.200 214.00 1,625 (211) Institute (KAERI) Hospital for Nuclear 38.938 48.67 842 (38) Medicine Nuclear Environment 72.341 90.43 320 (61) Management Center Korea Institute of Energy 19.396 24.25 347 (83) Research (KIER) Resources Research 29.722 37.15 457 (112) Institute Korea Ocean Research and 27.459 34.32 347 (76) Development Inst (KORDI) Korea Electrotechnology 25.437 31.80 325 (45) Research Institute Korea Research Institute of 27.379 34.22 405 (110) Chemical Tech (KRICT) Korea Science Foundation 103.887 129.86 120 (1) Kwangju Science and 23.970 29.96 -- -- Technology Institute Total 889.511 1,111.87 8,786 (1,714) MKS further reports that in late 1993 MOST decided that beginning in March 1994, its institutes will specialize in particular technologies. For example, KIST will focus on three-dimensional image media technology, "human robot systems," and advanced medical treatments. MOST's key technological successes of 1993, published in the 29 December CHUGAN MAEGYONG include: -- A "robot sculptor" by KIST that can produce likenesses of individual human faces in 20 minutes; potential applications are in factory automation; -- A high-temperature superconducting quantum interference device (SQUID) by KRISS; -- South Korea's first indigenous Earth satellite, the "Our Star 2" by KAIST; -- A 1-centimeter x 10-centimeter molten carbonate fuel cell by KIST that produces 100 watts of power; -- A substance, GERI-BP001, developed by GERI from a soil mold, that reduces blood serum cholesterol; -- Development of the chemical compound HFC-134a as a freon substitute, by KIST; -- Precision laser welding equipment, by KAERI; -- A high-temperature (140K) superconductor developed jointly by the Research Institute of Industrial Science and Technology and Pohang Steel in high-pressure mercury vapor; -- Technology by KORDI to produce eicosapentanoic acid (EPA) chemical compounds from marine microorganisms; -- Development of technology by KARI used to manufacture a solid- fuel rocket motor able to lift a 50- to 70-kilogram scientific payload to an altitude of 80 to 90 kilometers; -- Rayon developed by KIST that is twice as strong as the existing material and manufactured without pollutants; -- Technology developed by KRICT to reduce chemical solvent wastes; -- Manufacture by KAIST of an ultrahigh-precision (nanometer-scale) lathe. William H. 733-6521 SOUTH KOREA: INDUSTRY PLANNING MAJOR DRIVE INTO LCD MARKET Key Points: South Korea's large electronics firms are investing heavily in technology and equipment for liquid crystal displays in an effort to make South Korea more competitive with Japan. The South Korean Government expects patent friction to arise as the product line expands. Topic Sentence: Hyundai is developing advanced liquid crystal display products through its US subsidiary, while Samsung benefits from a joint technology agreement with a Japanese firm. South Korean electronics companies are investing heavily in thin- film-transistor liquid crystal displays (TFT-LCDs), with a goal of transforming this into the industry's second highest value-added product after semiconductors, according to the 5 January MAEIL KYONGJE SINMUN (MKS). The newspaper reports that South Korea's three major producers--Goldstar Electron, the Samsung Group, and Hyundai Electronics--in their first three years of work on TFT-LCDs, have already commercialized a number of high-quality products at the super video graphic array (VGA) level. Goldstar plans to invest 500 billion won ($625 million) in new assembly lines to be completed in May 1995 that will have an annual production of 500,000 3- to 12.3-inch units. In November NIKKEI MICRODEVICES reported that $400 million of that investment will go toward the production of 10-inch panels. MKS meanwhile reports that Goldstar has become the second company in the world to develop a high-resolution 12.3-inch LCD panel. MKS and NIKKEI report that Goldstar will spend an additional $250 million by 1997 to raise its annual LCD production capacity to 1 million units. South Korea plans to invest another 140 billion won ($175 million) in R&D to improve product quality "beyond that of its Japanese competitors," according to MKS. NIKKEI and MKS also report that in 1992 Hyundai began developing 10.4-inch TFT-LCD color panels at its US research subsidiary, Image Quest Technology. It has completed preparations for trial runs at its US pilot plant and expects to begin production in South Korea by 1995. According to the 5 January MKS, Samsung, which is already producing small quantities of TFT-LCDs on a pilot line for use in its own notebook PCs, is planning to expand its TFT-LCD production, with the ultimate goal of completely indigenous production. MKS reports the group will invest 450 billion won ($562.5 million) in LCDs in 1994. The 8 November MKS said that Samsung Electron Devices, one of the group's subsidiaries, was investing 300 billion won ($375 million) to increase annual LCD production by 100 percent to 2 million units by 1994, and to 5 million units by the year 2000. Samsung's efforts to assume a more prominent position in LCD R&D probably will be bolstered by cooperation from Japanese industry. For example, according to the 8 November MKS, Samsung Electron Devices was planning to set up a research institute in Japan to obtain LCD technology, and to proceed with arrangements for LCD technology transfer from Japanese companies. Late last December Samsung announced its agreement with Japan's Toshiba to jointly develop integrated circuits for LCDs by merging its own basic technology with Toshiba's production technology (MAEIL KYONGJE SINMUN 28 Dec 93). The two companies reportedly will cooperate throughout all stages of development, from basic standards through final reliability tests to create a product that "stands at the forefront of world technology." According to MKS, Samsung believes the arrangement will help the company expand sales in the United States, Europe, and Japan, while at the same time helping to strengthen South Korea's position in the development of nonmemory semiconductors. Tokyo DENPA (28 December 93) reported that work will begin this summer on chips with applications for TFT-LCDs and super- twisted nematic (STN)) LCDs, and that the two companies will also work to standardize pin arrangements, which has been an industry bottleneck. South Korea's move into LCDs is raising concern there about the need to devise "countermeasures" in anticipation of a foreign patents offensive," according to the 13 January MKS. Although LCD- related patent disputes have not yet surfaced, the newspaper expects friction to arise in 1996 when South Korean firms begin mass- producing advanced devices. According to the South Korean Patents Administration, foreign patent applications in this field numbered 862 between 1976 and 1992, with Swiss, British, and German companies already demanding royalties from South Korea for premium color LCDs, TFT-LCDs, and liquid crystal materials. For their part, South Korean companies have filed 1,350 LCD-related patent applications, most of which have been for black-and-white equipment, so the industry can expect some "hard blows," MKS predicts. The newspaper quotes a Patents Administration official who urges South Korean firms to reduce the potential damage to domestic companies by "signing licensing agreements beforehand" for technology about which there is concern over patent infringement." Commenting on South Korea's LCD efforts overall, the 1 December SILMUL KYONGJE, a Korea Institute for Industrial Economics and Trade (KIET) publication, notes that South Korea's 1992 LCD production amounted to $88 million or just 2 percent of the world market. Current investment plans, however, will cause the domestic LCD industry to grow, on average, 51 percent annually between 1994 and 2001, by which time South Korea will have 14 percent of the world market and will rank second only to Japan. KIET estimates the level of domestic production technology for LCD's at 90 percent that of Japan's, although design and basic technology are only about half. South Korean companies have the technology to mass-produce twisted nematic LCDs at 90 percent of Japan's rate, STN LCDs at 40 percent, and TFT-LCDs at slightly less than 70 percent of Japan's rate, according to SILMUL KYONGJE. KIET says it would like to see South Korean LCD manufacturers cooperate in the joint development of components. In 1992, domestic firms reportedly organized a manufacturer's association that has focused its research on displays, which, according to KIET, helped reduce "overlapping investment." In KIET's view, however, competition between South Korean firms will continue to stand in the way of joint efforts. NIKKEI MICRODEVICES notes as well that plans by Samsung and Goldstar to manufacture their own components for TFT panels is at odds with the Ministry of Trade, Industry, and Energy's policy of apportioning parts and materials production to small and medium-sized businesses. William H. 733-6521 REPORTS REPORTS surveys science and technology trends as detailed in articles, books, and journals. It also includes summaries and listings of articles and books that may serve as potential sources for future research. JAPAN: HOPE ALFLEX WIND TUNNEL TESTS The National Aerospace Laboratory (NAL) and the National Space Development Agency (NASDA) are preparing the automatic landing flight experiment (ALFLEX) as part of the H-2 orbiting plane (HOPE) program. (HOPE, an unmanned space plane, is to be launched by an H-2 rocket in 1999.) The ALFLEX experimental plane is now in the design phase and its maiden flight is scheduled for fiscal year 1995. The plane's developers have been conducting ground effect tests at the Gust Wind Tunnel in Chofu Airfield Branch since June 1993, in order to assess the plane's aerodynamic behavior during high-speed landing and at high angles of attack during flare. GRAPHIC: Color Drawing CAPTION: ALFLEX experimental plane GRAPHIC: Line Drawing CAPTION: ALFLEX experiment According to a report in KOGIKEN NYUSU (Sep 93), engineers are using rapid prototyping techniques to construct wind tunnel models out of photosetting resin using data generated with three- dimensional computer-aided design. Using off-the-shelf technology developed for industrial robots, NAL has built a six-degree-of- freedom robot with a 150-kilogram load capacity that functions as a support structure and positioning system for the wind tunnel test models. The ALFLEX test model is attached to the sting at the tip of the robot arm, allowing adjustments in angle of attack, yaw, and roll. Variation in the positioning of the models is less than 0.1 millimeter and variation in the re-creation of positions is 0.5 millimeter. GRAPHIC: Line Drawing CAPTION: ALFLEX wind tunnel test model During the wind tunnel ground effect tests, researchers took 10 measurements of variation in lift and drag after making incremental changes in the model's altitude relative to a plate simulating the ground. In the dynamic test, measurements were made while the model was being moved continuously from the highest altitude to the lowest altitude (KOGIKEN NYUSU Sep 93; NATIONAL AEROSPACE LABORATORY 1993- 1994 Oct 93). Junko A. 733-6346 JAPAN: NEC DEVELOPS SEMICONDUCTOR LASER WITH LOW OPERATING CURRENT Nippon Electric Co., Ltd. (NEC) has developed a new type of semiconductor laser that begins to emit infrared radiation when stimulated by an electric current of 190 microamperes, according to a report in NIKKEI SANGYO SHIMBUN (5 Jan 94). This amperage--the world's lowest operating current--is reported to be less than one tenth the current used by conventional semiconductor lasers and NEC expects it to lead to a large reduction in electric power consumption by high-speed optoelectric integrated circuit devices used in optical communications and optical computers. The NEC laser is a "sandwich" of crystalline film layers stacked on a substrate by molecular beam epitaxy. Infrared radiation with a wavelength of 1 micron generated in the optically active middle layer is emitted from the top surface of the laser in a direction perpendicular to the substrate instead of horizontally from the side of the laser, as is the case with conventional semiconductor lasers. Unlike the latter, the NEC laser is easily focused and can be integrated with optoelectronic devices, in a fashion analagous to an ordinary transistor. In experiments the NEC laser began to emit radiation when the injection current reached 190 microamperes. When the current was raised to 2 milliamperes, optical output power reached 50 microwatts. The NEC researchers kept radiation loss to a minimum by making the thickness of the active layer equal to the radiation wavelength. The laser is limited to pulsed emission operation, but NEC intends to develop a method to reduce the laser element's resistance in order to make it suitable for continuous emission. John H. 733-6341 JAPAN: QUANTUM BOX LASER The Tokyo Institute of Technology has conducted experiments at -196 degrees C on a quantum box laser that generates pulses of infrared radiation at a wavelength of 1.3 microns and requires only 1.3 amperes of current for oscillation. The laser element consists of a plane-surface indium gallium arsenide (InGaAs) film with many microscopic particles of InGaAs arranged in a grid pattern and embedded in the film. The particles are 70 nanometers apart and each is 30 nanometers in diameter and 12 nanometers thick. The InGaAs- film laser element is sandwiched between insulating layers of indium phosphide. Unlike electrons in the thin-film layers of conventional semiconductor lasers, electrons confined in the point-like particle boxes of the new laser cannot move in any dimension, so they can emit radiation with virtually no waste, according to the researchers. After development is complete the laser is expected to perform at room temperature. Researchers believe the ultrahigh radiation efficiency will make it possible to operate it using only a few tenths of the electric power required by conventional semiconductors. The institute expects that the new laser will be used in optical communications and optical computers because it consumes little power and generates little heat, even when several lasers are grouped together (NIKKEI SANGYO SHIMBUN 19 Nov 93). John H. 733-6341 FRANCE: RESEARCH ON LOW-TEMPERATURE SUPERCONDUCTIVITY Two groups of French researchers are focusing their research and development efforts on low-temperature superconductors that operate at temperatures between -63 degrees C and 7 degrees C. For example, researchers at the Paris School for Advanced Physics and Industrial Chemistry have developed semiconductors that exhibit superconductivity at -23 degrees C, according to IL SOLE-24 ORE (11 Jan 94). The semiconductor is composed of five to 10 layers of copper oxide produced using molecular beam epitaxy deposition techniques at low temperatures. Possible applications are in electronics and computers. In related research, a team from two National Scientific Research Center (CNRS) laboratories in Grenoble--the Center for Research on Very Low Temperatures and the Crystallography Laboratory--has observed superconductivity in mercury cuprate compounds at temperatures ranging from -63 degrees C to 7 degrees C, at normal pressure. According to AFP SCIENCES (23 Dec 93), this breakthrough follows the team's September 1993 experiment, which achieved superconductivity at 157 K and 245 kilobars of pressure, and which demonstrated that critical temperature rises at the rate of 0.05 K per kilobar as the atomic density of cuprates increases with increasing pressure. (Previous research achieved the same result by replacing certain atoms in a compound with others.) The experimental samples were 10 cubic millimeters in size and consisted of mercury, barium, calcium, and copper oxide phases. A dramatic drop in electrical resistance was observed in seven samples and diamagnetism was observed in 15 samples, at temperatures ranging from 190 K to 280 K depending on the compound, with the highest critical temperature occurring in 1 percent of the sample. Future research will focus on identifying the structure of that portion of the sample. Alexis M./Wendy P. (Brussels Bureau) 733-6339 RUSSIA: ANTICANCER, POTENTIAL AIDS DRUG PATENTED In June 1993 Russian officials granted four patents to a Russian chemist who developed Viturid, an immunostimulant said to be ten times more effective against second- and third-stage cancers than current US and Russian therapies for the disease. After declining an offer from a US hospital to conduct clinical trials of the pharmaceutical in exchange for rights to its use, the scientist founded her own testing firm in the United States but later returned to Russia following the collapse of the former Soviet Union. Clinical trials in Russia showed that malignant tumors became benign and ultimately regressed completely following treatment with Viturid. The drug's developer also claims it is effective in treating human immunodeficiency virus (HIV) prior to the onset of immunodeficiency. Russian Health Minister Nechayev has authorized doctors to begin treating some unspecified diseases with Viturid in order to finance further testing (NEZAVISIMAYA GAZETA 6 Jan 94). Roberta D. 733-6331 JAPAN: SYNCHROTRON ORBITAL RADIATION FACILITY FOR CIRCUIT ETCHING Mitsubishi Electric has completed construction of a synchrotron orbital radiation (SOR) facility designed for circuit etching of future-generation semiconductor chips. It includes a linear accelerator, a synchrotron, and an accumulator ring for the storage of electrons after they have been accelerated to relativistic speeds. Superconducting electromagnets in the ring are used to deflect the electrons from their orbit, thereby causing them to emit the intense radiation required for the ultrafine processing of future-generation 256-megabit dynamic random access memory (DRAM) chips. The compact SOR facility, which cost several billion yen, is designed to supply radiation simultaneously to 20 processing units. The circumference of the electron beam orbit in the SOR ring is only 9.2 meters, and the amount of liquid helium required to cool the superconducting coils is reported to be only a "fraction" of the amount necessary for conventional SOR facilities. Mitsubishi, which is currently using the SOR facility for the development of semiconductors within the company, is also planning to market it externally (NIHON KEIZAI SHIMBUN 18 Nov 93). John H. 733-6341 SPECIAL PUBLICATIONS JAPAN: SPACE INDUSTRY A special issue of the JPRS report series SCIENCE & TECHNOLOGY/JAPAN entitled "New Outlook for Space Industry" (JPRS- JST-94-009-L, 22 Feb 94) includes the views of MITI officials and corporate executives on the outlook for Japan's space industry. Parker H. 733-6336 JAPAN: NATIONAL AEROSPACE LABORATORY A special issue of the JPRS report series SCIENCE & TECHNOLOGY/JAPAN entitled "National Aerospace Laboratory (1993- 1994)," (JPRS-JST-93-025, 22 Nov 93), provides information on NAL's budget, personnel, and current high-priority research projects. Junko A. 733-6346 JAPAN: AIRCRAFT COMPUTATIONAL AERODYNAMICS A special issue of the JPRS report series SCIENCE & TECHNOLOGY/JAPAN entitled "Selections from the Proceedings of the 9th NAL Symposium on Aircraft Computational Aerodynamics" (JPRS-JST- 94-002, 7 Feb 94) presents research from the National Aerospace Laboratory. Parker H. 733-6336 JAPAN: NUCLEAR POWER DATABASES A special issue of the JPRS report series SCIENCE & TECHNOLOGY/JAPAN entitled "Nuclear Power Technology Database and Information Network Systems" (JPRS-JST-94-003-L, 18 Jan 94) provides selected articles from GENSHIRYOKU KOGYO, a monthly nuclear engineering magazine, on nuclear-related databases including ATOMNET, NUCLEN, NUCIS, SANTA, NICS, and DATA FREEWAY. Junko A. 733-6346 GERMANY: BMFT SUBSIDIES A translation of a report from the German Federal Ministry for Research and Technology (BMFT) entitled "Information Technology Subsidy Program 1993-1996" was recently published as a special issue of the JPRS report series SCIENCE & TECHNOLOGY EUROPE/INTERNATIONAL (JPRS-EST-93-040, 1 Dec 93). The report outlines the principal areas targeted for support by the BMFT from 1993 to 1996 and R&D promotion efforts sponsored by the European Union. Tom A. 733-6327 JAPAN: S&T BUDGETS A special issue of the JPRS report series SCIENCE & TECHNOLOGY/JAPAN entitled "Fiscal Year 1993 Budgets for Science and Technology" (JPRS-JST-94-001, 24 Jan 94) presents the S&T budgets for government agencies for fiscal year 1993 (April 1993 through March 1994). Stephen M. 733-6343 JAPAN: PUBLIC LABORATORIES, RESEARCH ORGANIZATIONS A special issue of the JPRS report series SCIENCE & TECHNOLOGY/JAPAN entitled "National Laboratories and Public Research Organizations in Japan" (JPRS-JST-093-027, 13 Dec 93) provides information on Japan's government and quasi-public laboratories. Stephen M.733-6343 FRANCE: STEALTH, FUSION RESEARCH A special issue of the JPRS report series SCIENCE & TECHNOLOGY/ EUROPE entitled "France: CEA Discusses Stealth, Fusion Research" (JPRS EST-94-004-L, 2 Feb 94) features articles from CHOCS, a journal published by the French Atomic Energy Commission's Directorate of Military Applications. Topics covered include stealth materials, advanced ceramics, beryllium, polymer-based absorbant materials, uranium and uranium alloys, and tritium fusion technology. Tom A. 733-6327 BRAZIL: TECHNOLOGICAL LAG EXPLAINED A recent issue of the JPRS report series SCIENCE & TECHNOLOGY EUROPE/INTERNATIONAL (JPRS-EST-93-042, 20 Dec 93)) entitled "Brazil: Causes and Dimensions of the Technological Lag," discusses the reasons Brazil has lagged behind other nations in science and technology. Tom A. 733-6327 RUSSIA: ELECTRONIC INTELLIGENCE A full translation of the 168-page book RADIOELEKTRONNAYA RAZVEDKA (2nd edition) published in Moscow in 1991 by Voyennoye Izdatelstvo is available in the final issue of the JPRS report series SCIENCE & TECHNOLOGY/CENTRAL EURASIA: ELECTRONICS AND ELECTRICAL ENGINEERING (JPRS-UEE-93-008-L, 31 Dec 93).* The book describes the theory and practice of electronic intelligence and surveillance, including radar, laser, infrared, video,and photoreconnaissance, with emphasis on the scientific and technical aspects of the processes described. Gary T. 733-6325 FOOTNOTE: *Electronics and electrical engineering translations and abstracts are now available in a new JPRS report series entitled SCIENCE & TECHNOLOGY/CENTRAL EURASIA. JAPAN: LOW-EMISSION VEHICLES A special issue of the JPRS report series SCIENCE & TECHNOLOGY/JAPAN entitled "Transport Ministry Study Committee Report on Popularizing Low-Pollution Vehicles" (JPRS-JST-94-003, 8 Feb 94) presents information on electric, methanol, natural gas, and other low-emission vehicles. Stephen M. 733-6343 JAPAN: FUEL CELL TECHNOLOGIES A special issue of the JPRS series SCIENCE AND TECHNOLOGY/JAPAN entitled "Development of Fuel Cell Technologies" (JPRS-JST-94-001-L, 7 Jan 94) presents information on government and corporate efforts in this field. Ritsuko G. 733-6333 CHINA: NANOMATERIALS An upcoming special issue of the JPRS report series SCIENCE & TECHNOLOGY/CHINA entitled "Nanomaterials" (JPRS-CST-94-003, 3 Mar 94) will feature a collection of articles and abstracts on Chinese nanomaterials research. Topics covered include nanoscale direct etching on a graphite surface, ZnO nanocrystalline sensitive material, TiO(sub)2 ultrafine particles, CdS-glass 0-3-nanometer composites, ultrathin PMMA Langmuir-Blodgett x-ray high-resolution lithography films, and Cu(sub)2 nanocrystals. Thomas T. 733-6342 FOREIGN MEDIA NOTES CHINA: MAJOR NEW INTELLIGENT COMPUTER SYSTEM Beijing University of Aeronautics and Astronautics has developed an intelligent workstation system with twice the performance of Mitsubishi's Fifth-Generation Computing Project PSI-II system. Technical specifications for the Chinese system are included. (FB PN 93-460, 16 Dec 93) Thomas T. 733-6342 GRAY LITERATURE Technology Issues Division has acquired the conference proceedings and corporate reports listed below, copies of which are available upon request for a period of six months from the date of this PERSPECTIVES--contact Cathy G. (703) 482-4182. All contractor requests must be received in writing, by letter (FBIS/CSG/PPD, GE47 OHB, Washington, DC 20505) or by fax ((703) 734- 9408), on the sponsoring agency's letterhead and signed by the contracting officer technical representative. Please use the number in parentheses at the end of the paragraph when requesting proceedings. PROCEEDINGS SIXTH INTERNATIONAL SYMPOSIUM ON SUPERCONDUCTIVITY, held from 26 to 29 October 1993 in Hiroshima, Japan. A 192-page volume of English abstracts includes 57 oral presentations and 304 poster presentations by members of industry, government, and academic institutions in Japan and other countries. Topics include wire, tapes, bulk, thin films, flux pinning, systems applications, device applications, and superconductivity-related physics and chemistry. (v9no2-1) JISSE-3, THIRD JAPAN INTERNATIONAL SOCIETY FOR THE ADVANCEMENT OF MATERIAL AND PROCESS ENGINEERING (SAMPE) SYMPOSIUM, hosted by the Japanese chapter of SAMPE from 7 to 10 December 1993 in Chiba, Japan. The proceedings contain over 400 papers in English from 20 different countries and include a review of the current status of advanced materials industry R&D as well as problems associated with practical applications of advanced materials, including ceramic and metal matrix composites, polymer and carbon/carbon composites, and intermetallic compounds. (v9no2-2) EIGHTH INTERNATIONAL CONFERENCE ON RAPIDLY QUENCHED AND METASTABLE MATERIALS, held 22-27 August 1993 in Sendai, Japan. The 199-page proceedings contains abstracts in English by authors from government, industry, and academic institutions in Japan and other countries. Topics covered include the formation of amorphous and metastable phases; stability and phase change; structural characterization; nanocrystalline, high-strength, and low-density materials; quasi-crystals; electrical, magnetic, mechanical, and chemical properties; advanced materials processing; and industrial applications. (v9no2-3) CORPORATE REPORTS: BRAZIL A 30-page English-language version of the 1992 annual report of the Brazilian telecommunications agency Embratel provides some technical information on telecommunications services and installed capacities as well as the agency's financial results. The 1992-93 "Telecom Annual" contains a listing of companies, services, and products in the Brazilian telecommunications industry. The 1993-94 "Information Science Today Annual," subtitled "Brazilian Computer Directory," provides information on the 200 largest companies in the computer industry as well as on their hardware and software products. GIG/McGinnis/CL 15/2153Z MAR

SUMMARY None of the leaders of the former Yugoslavia, whether Serb, Muslim, or Croat, has expressed any interest in seeing the Serbs join the Muslim-Croatian federation in Bosnia-Herzegovina that was called for in the 1 March Washington agreement. Serbian leaders, while rejecting a federation, have suggested forming a confederation loosely linking the Serb entities, Croatia and the proposed federation of Muslims and Croats in Bosnia. However, Croatian and Muslim leaders have rejected any confederal relations between Bosnia and the so-called Federal Republic of Yugoslavia (FRY, Serbia and Montenegro). END SUMMARY Having already expressed their strong opposition to joining the proposed Muslim-Croatian federation in Bosnia-Herzegovina, Bosnian Serb leaders, along with the Serbs of Croatia, are pressing for at minimum a confederation of all Serb-populated territories in former Yugoslavia. Serb leaders in Bosnia and Croatia have reiterated their longstanding claims that their respective territories never seceded from Yugoslavia--as did the Bosnian and Croatian republics--and thus have the right to remain united with the FRY. For example, Nikola Koljevic, "vice president" of the so-called Republic of Srpska (RS), demanded the right for the Bosnian Serbs to have "very close links" with the FRY since, "legally speaking," they "never left Yugoslavia" (Belgrade radio, 14 March). Similarly, Milan Martic, "president" of the so-called Republic of Serbian Krajina (RSK) in Croatia, maintaining that the RSK never seceded from Yugoslavia, has called for establishing "everlasting connections with the FRY" (Politika, 10 March). This apparently represents a significant and possibly coordinated shift in emphasis, since leaders of both entities had recently emphasized their contrary claims that their "republics" should be recognized as separate, sovereign states. The Bosnian Serbs have not ruled out some type of future political links with the Muslim-Croatian federation in Bosnia- Herzegovina and Croatia. Bosnian Serb "President" Radovan Karadzic suggested that the RS is willing to consider "broader integration" of the territories of former Yugoslavia, broaching the idea of joining Croatia and the FRY together "into some relationship" with the RS and the RSK (Tanjug, 14 March). Similarly, although Momcilo Krajisnik, president of the Bosnian Serb assembly, described the prospect of the Serbs joining the Muslim-Croatian federation as "unnatural, illogical, and unacceptable," he said the Serbs would "accept" talks on a "future modality" for linking the three peoples (Tanjug, 12 March). At the same time, another Bosnian Serb official set conditions for joining the negotiations on the fate of Bosnia-Herzegovina that would almost preclude Serb participation. After delivering what Krajisnik said would be the "official" Serb position to Russian special envoy Vitaliy Churkin in Belgrade on 14 March (Tanjug, 13 March), Koljevic insisted that the Serbs would participate in talks with the Croats and Muslims only "on an equal footing, which would mean without sanctions" on the FRY. (Belgrade radio, 14 March). Suggesting that he would prefer to see the Washington agreement derailed, Karadzic has called for a return to the Geneva negotiations, with the EU taking the lead back from the United States (Tanjug, 15 March). Belgrade's Stance Although the leadership of the FRY, including Serbian President Slobodan Milosevic, has not rejected the Washington agreement out of hand, Belgrade has not indicated any willingness to negotiate within the terms of the plan. Milosevic stopped just short of rejecting the plan after talking with Greek Foreign Minister Karolos Papoulias, releasing a statement that made no mention of the plan but endorsed a peace settlement based on the November 1993 European Union plan for a union of three sovereign states in Bosnia-Herzegovina (Tanjug, 11 March). At the same time, apparently not wanting to be held responsible for rejecting the Washington agreement, Milosevic maintained what Churkin called a "flexible attitude" toward a Bosnian settlement at their 14 March meeting, a point that was stressed on Milosevic-controlled Belgrade television (Belgrade TV, 14 March). Other comments from Yugoslav leaders and media have reiterated the position that the Serbs do not oppose a Muslim-Croatian federation as long as it does not threaten Serbian interests, while at the same time expressing skepticism that such a federation can long survive (Belgrade radio, 3 March; Belgrade TV, 12 March). Bosnian Government Stand The Bosnian Government has rejected Serbian proposals for confederal ties linking Bosnia-Herzegovina with the FRY and insisted that the Serbs will not be allowed to alter the borders of the country by seceding with the territory they control. While inviting the Serbs to sign on to the Washington agreement, President Alija Izetbegovic flatly declared during an interview with Zagreb television that a confederation between Bosnia- Herzegovina and the FRY is "out of the question." He also warned that the Serbs would not be allowed to "snatch away part of Bosnia and attach it to Serbia." Although he did not rule out the possibility of "certain forms of cooperation"--specifically "economic cooperation" --between the states of the former Yugoslavia, he contended that no "serious, responsible people" were considering the creation of a "new Yugoslavia" (Zagreb TV, 9 March). Croatia's Stance The Croatian Government has also rejected the possibility of confederal ties between the FRY and either Croatia or Bosnia- Herzegovina. Asked about Krajisnik's proposal to link the Serbian "states" with Croatia and Bosnia-Herzegovina, Foreign Minister Mate Granic flatly declared it "absolutely impossible" to accept. He further stressed that "under no circumstances" would Croatia consider "any kind of relationship" linking it "directly or indirectly" with the FRY. Attributing the proposal to Churkin, Granic said that he had conveyed his negative views "very firmly" to both the Russians and the Bosnian Government (Zagreb TV, 13 March). Although President Franjo Tudjman has not directly rejected ties between the Bosnian state and the FRY, he did offhandedly dismiss the idea during a 7 March press conference in responding to a question on the subject (Zagreb radio, 7 March). Implications The Croat and Bosnian Governments' refusal to accept a confederal relationship between the Bosnian Serbs and the FRY appears to doom any possibility, however remote, that the Serbs will agree to the Washington plan. In the near term, the Serbs are likely to continue combat operations to secure territory linking their enclaves into one entity, with the aim of declaring the new lines of demarcation to be the borders of their republic. Although they may be willing to make territorial concessions in exchange for concessions from the Bosnian Government and the international community--particularly lifting the UN sanctions on Belgrade- -they are likely to continue to pursue the goal of eventual union with the FRY and the RSK. (AUTHOR: NASH. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF ANALYST, EUROPE/LATIN AMERICA GROUP - (703) 733-6120) CB 16/2003z Mar

SUMMARY Pyongyang appears to be trying to grant the IAEA just enough access to its nuclear sites to prevent the collapse of U.S.-DPRK talks, a strategy that may be aimed at retaining maximum bargaining leverage with Washington. END SUMMARY Although Pyongyang media have not yet commented on the outcome of the IAEA inspection team's just-completed visit to North Korea, the South Korean news agency Yonhap on 16 March cited IAEA spokesman Hans Meyer as saying that although the IAEA inspection team was allowed to inspect North Korea's seven declared sites, it was not permitted to examine every item on its original agenda. Similarly, Seoul's KBS-I radio the same day cited the IAEA team as reporting that compared with past inspections, there had been "improvement" in inspection activities allowed during the IAEA team's latest visit. However, the team could not extract enough samples to prove definitively whether or not North Korea had diverted nuclear materials for uses other than what it had declared, according to the radio. Not surprisingly, Pyongyang is pursuing an equally minimalist strategy in its talks with South Korea. Pyongyang radio on 16 March accused Seoul of attempting to obstruct upcoming DPRK-U.S. high-level talks by blocking progress at the latest round of inter-Korean talks. According to the radio, at the latest round the North adhered to its "reasonable" insistence that the sides issue a joint communique declaring their basic intent to realize an exchange of special envoys at an early date. Pyongyang radio also asserted that the South had refused to accept the North's version of a draft agreement on procedural matters and claimed that Seoul is "deliberately" creating difficulties, bent on "putting the brakes" on DPRK-U.S. talks, tentatively set to start in Geneva on 21 March. Pyongyang seems to be calculating that by making limited concessions at the North-South talks, it can cast the South in the role of obstructing the planned talks with Washington. For example, according to Pyongyang radio accounts of the 16 March meeting, the North Korean chief delegate juxtaposed the North's "broad-minded and epoch-making" willingness to lift four demands that North Korea previously advanced in the talks to the South's "sanctimonious" rejection of North Korean proposals. Interest in Foreign Trade Despite its stance on IAEA inspections and North-South contacts, Pyongyang also seems to be tempering its hardline stance by carefully signaling that its long-term goal is to reach a peaceful settlement of the nuclear issue. To this end, the North Korean news agency KCNA waited until 15 March--the day a Foreign Ministry spokesman issued a threatening statement about U.S. preconditions on DPRK-U.S. talks--to publicize a set of free trade zone regulations that had been adopted on 21 February. The regulations concern the operation of foreign businesses within North Korean free trade zones. Similarly, the next day KCNA reported on regulations, also adopted on 21 February, for the implementation of the tax law on foreign enterprises. Both sets of trade regulations presuppose an influx of foreign investment into North Korea, an event not likely to occur without a peaceful resolution of the nuclear issue. Implications Pyongyang media treatment of recent developments concerning the nuclear issue suggests that the North Korean leadership may believe that it has already given Washington enough incentives so that it would not be willing to risk the heightening of tensions on the Korean peninsula by breaking off U.S.-DPRK talks. Pyongyang appears to be trying to retain as much of its "nuclear card" and control over the inter-Korean issues as possible in order to enhance its position at any future bilateral negotiations with Washington. (AUTHOR: YIM. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM, (703) 733-6534.) EAG/BIETZ/CB 16/2014z Mar

SUMMARY As Ukraine enters the final weeks before the 27 March Supreme Soviet election, a very large number of candidates are competing for most of the 450 parliamentary seats, guaranteeing many runoffs and even raising the possibility that not enough deputies may be elected to form a parliament. Activity by parties varies widely--strong in Lviv and Donetsk but weak in many other places. With nationalist and democratic parties likely to run well in the west, leftist and liberal parties in the east, but non-party candidates likely to win the most seats nationwide, prospects are for a badly splintered Supreme Soviet with weak parties and little ability to resolve the country's tough problems. END SUMMARY Easy filing requirements and lax filing deadlines contributed to the flood of candidates. According to the election law, candidates had to file only 10 signatures by 60 days before the election (late January) to become a "candidate for candidate" and then 300 signatures by 45 days before the election (i.e., 10 February) to become a registered candidate (Vidomosti Verkhovnoi Rady Ukrainy, 30 November 1993). Although plenty of candidates had already qualified, the Central Electoral Commission (CEC) allowed registration to continue after 10 February (Nezavisimost, 11 February), apparently until individual local electoral commissions decided to close it. Robitnycha Hazeta reported on 18 February that registration had ended in 211 of the 450 districts, and Holos Ukrainy reported on 23 February that all registration had finally ended on 17 February. In late February the CEC reported that 5,833 (86 percent) of the 6,750 "candidates for candidate" had been registered as final candidates (Holos Ukrainy, 2 March). The lists of candidates began appearing in local papers in mid-February, and candidates began appearing on local television in groups--for example, the 16 candidates for Kiev city district no. 14 were slated to make the first joint appearance on 14 February (Vecherniy Kiev, 12 February). Parties' Role Limited Parties played a limited role in putting forward candidates, formally nominating only a small percentage of the candidates in most districts. Groups of voters nominated 3,633 (62 percent), work collectives 1,557 (27 percent), while parties nominated only 643 (11 percent), according to the 2 March Holos Ukrainy. However, some areas, such as Lviv and Donetsk, had a much higher proportion of party nominees than the republic-wide 11 percent (See Box 1). In reality, however, there are far more party-affiliated candidates on the ballot than party nominations would indicate because some who were identified with a party in local papers were nominated by groups of electors or collectives. In Kiev Oblast, only 12 candidates were nominated by parties, but 46 candidates actually belong to parties (Kiyvska Pravda, 28 January). And in Donetsk, lists of candidates for the first 10 districts in Vecherniy Donetsk identified one third to one half of the candidates in most districts as affiliated with parties, far more than the number nominated by parties. At the same time, not all candidates affiliated with a party are endorsed as candidates by the party. A DemPU (Democratic Party of Ukraine) candidate is running against former Defense Minister Kostyantyn Morozov in Kiev district No. 1 but DemPU itself is backing Morozov (Samostiyna Ukraina, 23-28 February). So far, no parties have published republic-wide lists of their candidates, and though several publicly set a goal of running candidates in all districts, it appears none came close. Few parties have even provided numbers of their candidates. The paper Rada (published by Rukh Chairman Vyacheslav Chornovil) on 3 March carried an article reporting that Rukh members were running in 260 of the 450 districts and that there also were dozens of independent candidates "who support Rukh and promise to join Rukh's faction if elected." The URP's paper Samostiyna Ukraina (23-28 February) reported that the URP had registered 132 candidates (including 17 in Lviv, 17 in Kiev, 10 in Ternopil, and 8 in Ivano-Frankivsk), while the DemPU was running fewer (including only 6 in Kiev city). The Post-Postup News Agency reported that a 24 January UNA (Ukrainian National Assembly) press conference announced 60 candidates (15 in Kiev, 15 in Poltava and Cherkassy, 12 in Donbass, 4 in Rivne, 3 in Kiev Oblast, 2 in Odesa, Ternopil, Mykolaiv, Kherson, and Vinnytsa). The Central Electoral Commission announced that the CPU was running the most candidates--6.7 percent of all, followed by Rukh (4.1 percent), SPU (3.11 percent), URP (2.42 percent), Liberal Party (1.43 percent), and DemPU (1.28 percent), but that there were also many "hidden" party candidates (Holos Ukrainy, Nezavisimaya Gazeta, 4 March; Demokratychna Ukraina, 5 March). Joint Candidacies Another of the reasons for the limited number of party-nominated candidates may be agreement among parties to back each others' candidates to avoid fratricidal contests between like-minded parties. In the initial months after announcement of the election, success at uniting parties behind candidates was very limited. More recently, Levko Lukyanenko, head of the "Ukraine" Democratic Union (the latest name for the coordinating organ set up by democratic parties in December), has claimed that democratic parties have made great progress in agreeing on candidates. He said at a February press conference that democratic parties had "agreed on a single candidate" in over 320 of the 450 districts (Kiyvska Pravda, 22 February). In another version of his remarks--given in the 22 February Silski Visti and 23 February Khreshchatyk--he reportedly said there were "agreed" candidates in 342 districts. He named candidates in 6 Kiev Oblast districts that the "Ukraine" union would back with both organizational and financial support (Kiyvska Pravda, 22 February). Rukh Chairman and longtime Lukyanenko foe Vyacheslav Chornovil took a more pessimistic view than Lukyanenko of democratic parties' success in uniting behind agreed candidates. In a 15 February Sribna Zemlya interview, Chornovil said that the "Ukraine" union was mainly just Rukh, the URP, and DemPU. The PDVU, New Ukraine, social democrats, liberal democrats, christian democrats, and the "left center" had not joined, he said. He also complained that in Lviv the URP had fielded too many candidates. Moreover, even Lukyanenko admitted that democrats had been unable to agree on candidates in 38 districts--mainly in Lviv, Ivano- Frankivsk, and Ternopil (Silski Visti, 22 February). In these areas, where democrats are virtually sure to win, they apparently felt less need to unite and more opportunity to win on their own. When the Lviv democratic coordinating council finally announced its list of candidates, it was able to endorse an agreed candidate in only 2 of the 23 districts; in the rest it endorsed more than one candidate or noted that some member-parties were backing candidates other than the council's (Vysokyy Zamok, 5 March). Lukyanenko also acknowledged that democrats had been unable to field any candidates in 18 districts, mainly in the east--5 in Odesa, 4 in Donetsk, 4 in Luhansk, 2 in Zaporizhzhya, 2 in Krym, and 1 in Poltava (Khreshchatyk, 23 February). Prospects Vary in Regions Lists of candidates and reports on party activity in local Kiev, Lviv, and Donetsk papers provide a sample of the varied and complex picture in Ukraine's regions. Kiev Party strength among candidates for Kiev city's 23 seats is hard to measure because in listing candidates local papers often failed to indicate if candidates were associated with a party. Among the few candidates identified with parties in the papers, 8 were from the CPU, 6 from the SPU, 5 from Rukh, 5 from the PDVU, 3 from the UNA, 3 from the tJKRP (Ukrainian Conservative Republican Party), and only 1 from the URP and the Liberal Party, and none from DemPU or New Ukraine. Fifty-eight were specifically identified as nonpartisan. Most of the rest of the almost 500 candidates listed in the paper Khreshchatyk were not identified with any party or even identified as nonpartisan. Although few Kiev candidates bear the Rukh label, Rukh should win some seats because it has some big names--Chairman of the Supreme Soviet's democratic faction, Narodna Rada, Ivan Zayets, outspoken Rukh leader Serhiy Holovatyy, and Minister of Environmental Protection Yuriy Kostenko. Democrats in general should do well since some of their prominent candidates look like easy winners- -former Defense Minister Kostyantyn Morozov, city soviet chairman Vasyl Nesterenko, popular maverick Kiev leader Ivan Saliy (who was fired by Kravchuk as presidential representative for the city), outspoken Vecherniy Kiev editor Vitaliy Karpenko, and economic reformer and former Deputy Premier and Minister of Economy Volodymyr Lanovyy. Morozov, Karpenko, Zayets, Holovatyy, and Kostenko were endorsed by several nationalist democratic organizations (Vecherniy Kiev, 6 January). Democratic parties could not reach agreement on single candidates in many districts, however. When the "Ukraine" Democratic Union issued its list of approved candidates, it endorsed candidates for only 14 of the city's 23 districts (Vecherniy Kiev, 10 March). In general, though, Kiev city appears likely to produce fewer prominent deputies than in the past. Many big names on the incumbent Kiev Supreme Soviet delegation are running for reelection in other regions where they apparently rate their chances for election better. VNRU (National Rukh of Ukraine--the anti-Chornovil Rukh) leader Larysa Skoryk and Rukh leader Les Tanyuk are running in Lviv, democrat Pavlo Movchan in Ivano- Frankivsk, former Premier Vi told Fokin in Cherkassy, and URP leader Oles Shevchenko in Kiev 'Oblast. Lukyanenko complained that too many Kiev democrats were running in the west, where it is easier to win (Kiyvska Pravda, Khreshchatyk, 22 February)- -although Kiev city has also been relatively receptive to democrats in the past, since 17 of the 22 deputies elected from Kiev city in 1990 joined the democrats' Narodna Rada shortly after the election. Lviv Lviv will remain the main stronghold for democrats and nationalists. Its present delegation has many prominent democrats and nationalists--Chairman Mykhaylo Horyn, UKRP chairman Stepan Khmara, former Deputy Premier for economic reform Viktor Pynzenyk, former First Deputy Premier Ihor Yukhnovskyy, Rukh Chairman Chornovil, city Mayor Mykola Horyn, nationalist Iryna Kalinets, and PDVU leader Taras Stetskiv. Now, with others from outside--Skoryk, Tanyuk, prominent Rukh economist Volodymyr Chernyak, and Rukh Deputy Chairman Oleksandr Lavrynovych added, the field has become crowded. Despite Lukyanenko's complaint that Kievites are running in Lviv because it is easier to win there, Tanyuk reportedly dropped out of a Kiev race to clear the way for an URP candidate (Za Vilnu Ukrainu, 4 January), probably as part of efforts to coordinate candidacies. Rukh Chairman Chornovil actually went against the trend, deciding to run in Ternopil, not Lviv, this time. He explained that he was not running in Lviv district 266 in order to help clear the way for election of Rukh candidate Mykhaylo Boychyshyn (who was kidnapped a few weeks ago and is still missing) or in district 267 to make way for Tanyuk (Kievskiye Novosti, 18 February). Rukh, URP, and New Wave have coordinated some candidates, and democratic candidates are prominent enough to probably win on the first ballot in several Lviv districts. Probable first round winners include Yukhnovskyy (New Wave), Pynzenyk (New Wave), Tanyuk (Rukh), Chernyak (Rukh), Lavrynovych (Rukh), Ihor Hryniv (backed by New Wave, Rukh, and the PDVU--Vysokyy Zamok, 11, 20 January, 3 February; Za Vilnu Ukrainu, 12 January), Lviv tJRP Chairman Oleh Pavlyshyn, Lviv Rukh Chairman Yuriy Klyuchkovskyy, and Supreme Soviet member Mykhaylo Kosiv (backed by Rukh, New Wave, URP, and other organizations--Vysokyy Zamok, 5 February; Rada, 10 February). In contrast, the many extreme nationalist candidates (KUN, OUN, UNA, UKRP, and SNPU) will probably splinter the ultranationalist vote. These parties appeared to make little attempt to coordinate, with the SNPU (Social National Party of Ukraine) nominating 21 candidates for Lviv's 23 districts (Kievskiye Vedomosti, 5 March), KUN 14 (Za Vilnu Ukrainu, 4 January) and the UKRP 9 (Za Vilnu Ukrainu, 5 January). District races in Lviv include some notable contests between prominent figures, sometimes pitting democrats against ultranationalists: URP Chairman Mykhaylo Horyn is facing controversial ultranationalist UKRP Chairman Stepan Khmara in district no. 261; PDVU leader Taras Stetskiv opposes KUN leader Iryna Kalynets in district no. 273; and oblast soviet Chairman Mykola Horyn (Rukh) is running against UNA leader and commander of UNA's paramilitary arm UNS0 (Ukrainian National Self-Defense) Oleh Vitovych in district no. 275. Donetsk Judging by identifications in the Donetsk press, leftist parties (CPU, SPU, and the Party of Labor) and the more centrist Liberal Party and Party of Justice have been the most active in nominating candidates, while Rukh has some candidates, but few PDVU, URP, DemPU, or ultranationalists are running. The 138 candidates for the 10 districts (listed in Vecherniy Donetsk on 19 February) include 11 Liberal Party affiliated candidates, 9 CPU, 8 SPU, 5 Party of Labor, and 5 Party of Justice, but only 3 Rukh, 2 KUN, 1 URP, 1 DemPU, and 1 PDVU. Holos Ukrainy on 8 February said the largest number of the party candidates in Donetsk are Communists and Liberals, followed by the Party of Labor, but most candidates were nominated by groups of electors. CPU leaders Petro Symonenko and Yevhen Marmazov are running here (Pravda Ukrainy, 18 January). Democrats, at least nationalist democrats, are clearly weak in Donetsk. Lukyanenko said that there are few democrats running in general and none at all in 4 Donetsk districts (Khreshchatyk, 23 February). Post-Postup reported a 15 January Rukh conference had managed to nominate 12 candidates for Donetsk's 47 districts. The lists of candidates, at least in the first 10 districts, not only showed few Rukh, URP, and DemPU candidates, but also few or no candidates from the non-nationalist democratic parties or blocs that should be strong in the east--New Ukraine, PDVU, the Labor Congress of Ukraine, and the Interregional Bloc for Reform set up by former Premier Leonid Kuchma and former Supreme Soviet Deputy Chairman Volodymyr Hrynyov, which appears active in Kharkiv and Dnipropetrovsk. A new local Donetsk bloc has also sprung up recently and nominated many candidates. The "People's Congress of Donetsk," which backs Ukrainian independence but opposes what it calls the present "speculative anarchy" and wants more state control and social protection for the public, registered candidates in most Donetsk districts, according to a 3 February Demokratychna Ukraina article. Dangers in Electoral Process The large number of candidates and limited ability of parties to organize support for candidates and provide some sort of order to the competition indicates there may be few winners on the first ballot, necessitating runoffs in many districts. To win, a candidate has to get over 50 percent of the votes cast and votes of at least 25 percent of registered voters (according to the election law in the Vidomosti, 30 November 1993). For the election itself to be valid, 50 percent of the registered voters have to vote, according to the Ukrainian law. These requirements apply to all rounds of balloting. If no candidate qualifies as a winner on the first round, the two highest vote-getters run in a runoff, which must be held within two weeks after the first round. In the 12 December Russian parliamentary election, only a plurality was needed, so almost all seats were filled on the first ballot. In addition to the difficulty of getting enough voters out to vote and of candidates garnering a majority of the votes cast, the voting procedures may produce many invalid votes, which also could prevent anyone winning. As in past elections, voters have to cross off all candidates except the one they wish to vote for. With 25 or 30 candidates in many districts, the voter has to cross off a large number of names, and if he inadvertently leaves more than one name not crossed off, the ballot will be invalid. If a voter crosses off all names, his vote is valid, however. In the 12 December Russian election, Russia changed over to positive voting, whereby voters put a mark only by the names of those they wished to vote for. The prospect of many runoffs has led to concern that voters will lose interest and too few will vote in the second round to meet the requirements for a valid election or that even in the runoff no one will win a majority (if a substantial number of voters cross out both candidates). In this case, the election rules provide for new elections within a month of the original election in which all candidates in the original election would be barred (Vidomosti, 30 November 1993). With the need to quickly come up with new candidates who had not participated earlier, it seems likely that the quality of the candidates would decline and voter interest may drop further, producing more invalid elections and leaving many seats unfilled--perhaps even enough to prevent the formation of a new Supreme Soviet. Outlook Although most news reporting on the Ukrainian elections has focused on the activity of parties and their candidates, most candidates are unaffiliated, and presumably they will win most seats, especially in rural areas where parties are weakest. Many of these unaffiliated may be conservative-leaning representatives of interest groups, lobbies, or behind-the-scenes power structures. While democrats are strong in west Ukraine, they appear to have little organization or support in much of the rest of the country, further adding to the prospect for returning a conservative legislature. There is also a danger that low voter turnout could void the balloting in enough districts to prevent formation of a new Supreme Soviet, raising the prospect of a paralysis of government. Box 1 Regional Variations in Party Activity In Lviv, parties were very active, judging by reports in local papers of meetings by Rukh, KUN (Congress of Ukrainian Nationalists), New Wave, UKRP (Ukrainian Conservative Republican Party), and the Ukrainian Peasant Democratic Party that nominated candidates for Lviv's 23 districts (Za Vilnu Ukrainu, 4, 12 January; Vysokyy Zamok, 4, 6, 18 January). Although lists of candidates in Lviv papers often did not report the organization nominating, a relatively large proportion of candidates were identified as affiliated with a party--in most districts about half the candidates. Many of these candidates, however, were nominated by groups rather than parties. In Donetsk, which encompasses 47 districts as the most populous oblast of Ukraine, a high proportion of candidates were identified with parties and parties nominated numerous candidates. The 19 February Vecherniy Donetsk report on the first 10 Donetsk districts* identified 51 of the 138 candidates with parties and listed 7 candidates nominated by the CPU (Communist Party of Ukraine), 6 by the SPU (Socialist Party of Ukraine), 6 by the Liberal Party, 4 by the Party of Labor, 3 by Rukh, 3 by the Party of Justice, 3 by the Peoples Congress of Donetsk, and 1 by the URP (Ukrainian Republican Party). In Zaporizhzhya (18 districts) 20 percent of the candidates were nominated by parties (18 by Rukh, 18 by the SPU, 12 by the CPU, 7 by the Liberal Party, and 4 by the Labor Party), according to the 8 February Holos Ukrainy. On the other hand, in Kiev Oblast (17 districts) only 12 of the 264 candidates were nominated by parties (Kiyvska Pravda, 22 February)--about 5 percent. Kiyvska Pravda on 20 January identified the 1JRP as the most active party in nominating candidates. In Dnipropetrovsk (34 seats) only 17 candidates were nominated by parties, versus 129 by groups of voters and 58 by collectives (Pravda Ukrainy, 27 January)--about 9 percent. In Krym (23 seats), parties--the URP, CPU, PDVU (Party of Democratic Revival of Ukraine), and the Party for Economic Revival of Krym- -nominated only 26 of the 140 candidates (Nezavisimaya Gazeta, 23 February). *The subsequent Donetsk papers listing the candidates in the other 37 districts have not yet come in. End Box 1 Box 2 Roster of Parties Mentioned Leftist: CPU (Communist Party of Ukraine), led by Petro Symonenko. Party of Labor, led by Mykola Azarov, anti-nationalist, pro- socialist. SPU (Socialist Party of Ukraine), led by 0leksandr Moroz, pro- communist. Non-nationalist democratic centrist: LPU (Liberal Party of Ukraine), led by Ihor Markulov, pro- business, pro-privatization, based predominately in east Ukraine. New Ukraine, led by Volodymyr Hrynyov, pro-reform, anti-Kravchuk. PDVU (Party of Democratic Revival of Ukraine), led by Volodymyr Filenko, anti-Rukh, anti-Kravchuk, pro-reform. People's Congress of Donetsk. (The stance of this new bloc is not clear, but it appears fairly centrist, reportedly favoring Ukrainian independence and also more state control and social protection of the public, according to a 3 February Demokratychna Ukraina article). TKU (Labor Congress of Ukraine), led by Anatoliy Matviyenko. Ukrainian Party of Justice, led by Mykhaylo Hrechka. (Classified as "liberal centrist," along with the Liberal Party and Labor Congress, by an 8 February Moloda Ukraina article). Nationalist democratic centrist: DemPU (Democratic Party of Ukraine), led by Volodymyr Yavorivskyy, pro-Kravchuk, anti-Chornovil. New Wave, created in Lviv by some PDVU, Rukh, URP and other democrats as an election bloc. (See The Trends of 2 February 1994, page 30.) Rukh, led by Vyacheslav Chornovil, anti-Kravchuk, pro-reform. USDP (Ukrainian Peasant Democratic Party), led by Serhiy Plachynda, close to Rukh. URP (Ukrainian Republican Party), led by Mykhaylo Horyn, pro- Kravchuk, anti-Chornovil. VNRU (National Rukh of Ukraine), led by Larysa Skoryk, pro- Kravchuk, anti-Chornovil. Ultranationalist: KUN (Congress of Ukrainian Nationalists), led by Yaroslav Stetsko. OUN (Organization of Ukrainian Nationalists), led by Mykola Slyvka. SNPU (Social National Party of Ukraine), formerly called National Socialist Party of Ukraine, semi-fascist. UKRP (Ukrainian Conservative Republican Party), led by Stepan Khmara, anti-Kravchuk. UNA (Ukrainian National Assembly), led by Yuriy Shukhevych, militantly nationalist. End Box 2 Box 3 Nomination of Prominent Leaders Supreme Soviet: Chairman Ivan Plyushch, at present representing Kiev Oblast, is now registered as a candidate in Chernihiv (Kiyvska Pravda, 22 February), while Deputy Chairman Vasyl Durdinets is running in Kirovohrad (Holos Ukrainy, 22 January), where he was elected before--apparently safe districts. Most of the Supreme Soviet's incumbent deputies are not running, however. The Central Electoral Commission announced that only 145 current deputies are running, while 42 others had been candidates for candidate but had dropped out (Demokratychna Ukraina, 5 March). Presidential hopefuls: Former Premier Kuchma switched from his native Dnipropetrovsk to run in Chernihiv (Rada, 3 March; Demokratychna Ukraina, 5 March), former Supreme Soviet Deputy Chairman Hrynyov is again running in his home oblast of Kharkiv, and Rukh Chairman Chornovil switched from Lviv to Ternopil. Leaders of parties: SPU leader Oleksandr Moroz is apparently running again in Kiev 0blast, UKRP leader Khmara again in Lviv, TKU (Labor Congress of Ukraine) leader Anatoliy Matviyenko again in Vinnytsa, CPU leader Petro Symonenko in Donetsk, URP leader Mykhaylo Horyn again in Lviv, and DemPU leader Volodymyr Yavorivskyy again in Kirovohrad. Liberal Party Chairman Ihor Markulov announced he would not run for parliament (Pravda Ukrainy, 1 February). Members of the government: Many officials are registered as candidates even though they apparently cannot retain their jobs if elected, since the new Supreme Soviet is supposed to be a fulltime job--to avoid the present frequent absences by deputies with other jobs. The election law stipulates that candidates must file a statement promising to give up other jobs if elected. Despite this, acting Premier Yukhym Zvyahilskyy and Deputy Premier Valentyn Landyk were nominated in their native Donetsk, and in all, 4 deputy premiers and 37 ministers and deputy ministers are registered as candidates (Nezavisimaya Gazeta, 4 March; Demokratychna Ukraina, 5 March). President Kravchuk was nominated in several districts but, pointing out that the law does not allow the president to run for the Supreme Soviet, declined the nominations (Ukraina Moloda, 15 February). End Box 3 (AUTHOR: HAHN. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ANALYSIS BRANCH, RUSSIA DIVISION, (703) 733-6070.) ENEAG/BLOUGH/CB 16/2050z Mar

SUMMARY Damascus turned the unprecedented visit of an Israeli Arab delegation to Syria into a major media event, eliciting from the visitors strong rhetorical support for Syrian policies. President Hafiz al-Asad also used the event to restate Syria's overall position on the peace process. The visit itself, and the fact that the delegation head was permitted to use Syrian media to portray a relatively positive image of the Israeli public and government, marks a significant, albeit limited, step in the very gradual thawing of Israeli-Syrian ties--a step that Damascus probably hopes will play well in Washington and Israel. END SUMMARY Both Damascus and the 57-member delegation of Israeli Arabs professed that the delegation's 7-10 March visit was for the sole purpose of extending condolences to President Hafiz al-Asad on the death of his son Basil in January. (For example, Jerusalem Qol Yisra'el, 18 February; Damascus radio, 7 March); nonetheless, the event was also viewed by both sides as having clear political significance. For their part, Syria's tightly controlled media gave the visit far more extensive coverage than they did a visit of a large Druze delegation from the Golan Heights in September 1992. Reflecting the political nature of the visit, both President al-Asad and delegation head 'Abd-al-Wahhab Darawshah- -leader of the Arab Democratic Party and Knesset deputy--spoke only briefly about the death of al-Asad's son, focusing instead almost entirely on the Arab-Israel peace process, in televised speeches (Damascus Television, 9 March). A Show of Support for Syria Syria orchestrated the visit as a show of support for its own policies, from the peace process, to the PLO, to Syrian Jews. Damascus elicited the visitors' vocal support via the Syrian media, which carried numerous statements by Darawshah extolling Syria and scoring Israeli policies. For example: -- According to Damascus radio, Darawshah called the destruction of Qunaytirah1--which the delegation visited on its second day in Syria--"a deplorable crime" and "praised the heroic struggle of the Syrian Armed Forces supported by the heroic Syrian people in defense of Arab territory" (8 March). In his address to al-Asad, he asserted that "we share the same position with you" on the peace process. -- Damascus radio quoted Darawshah as saying that the purpose of his delegation's visit with Syrian Jews was "to clarify some Israeli political and public opinion issues" and "prove to all who seek to distort the truth that Syria does not discriminate against the Musawi community" [community of the followers of Moses]. -- In an interview with Damascus radio, Darawshah said the delegation had found that in Syria "everything is abundant, freedom is available, and loftiness and dignity characterize every action by Syria, led by President Hafiz al-Asad, may God preserve him" (9 March). -- Delegation member and Knesset deputy Talib al-Sani' was even quoted as scoring Israel for trying to "penetrate the Arab world economically and to propagate the idea of a Middle East market" (Damascus radio, 10 March)--a recurrent theme in Syrian media in recent months (for example, a Tishrin editorial, as reported by Damascus radio on 8 February). Even Syria's choice of personalities to greet the delegation on arrival at the airport was clearly meant as a statement: Khalid al-Fahum, head of a Syrian-backed umbrella group of Palestinian rejectionists opposed to the PLO, was the only figure reported to accompany the governor of Damascus to the airport (Damascus radio, 7 March). The Syrians thus created the appearance of an affinity between Israeli Arabs and Palestinians supported by Damascus, while giving the PLO--still scorned by the Syrians because of the 13 September Israeli-PLO declaration of Principles--a symbolic jab. 1Qunaytirah was captured by Israel in 1967 and returned to Syria in ruins following the conclusion of a disengagement of forces agreement in 1974. Al-Asad Uses Visit for Peace Message While the visitors were used as channels for extolling Syrian policies, the visit also afforded Damascus an opportunity to send some signals on the peace process for foreign--particularly U.S. and Israeli--consumption. Al-Asad used his meeting with the delegation as a platform for his first policy statement since the death of his son. While breaking no new ground, al-Asad stressed Syria's commitment to peace, at times echoing his now famous "peace of the brave" speech to the 1992 Druze delegation (Damascus radio, 9 September 1992). He told the Israeli Arabs: "We seriously seek peace, and the Israeli officials know this," adding, "In light of what they [Israel] are proposing, it seems that their vision of peace is not the same as ours. Therefore, we will struggle until their peace becomes identical with our peace . . . . Peace means rights. In other words, each party has its rights and each party is the master of itself and its interests . . . . When we said the peace of the brave, we meant that each party will achieve full peace with all its rights, and that neither party will humiliate the other." A Limited Opening to Israel The visit itself marked a symbolic though limited advance in Syrian willingness to take small steps toward opening contacts with Israel. It follows such modest advances as an evidently officially sanctioned series of meetings outside the Middle East between Syrian and Israeli academics reported by Israeli and international media (for example, Jerusalem Qol Yisra'el, 31 December 1993; Yedi'ot Aharonot, 2 January 1994), and the 1992 visit by the Druze delegation, which crossed into Syria directly from the Golan Heights and--according to Israeli Prime Minister Yitzhaq Rabin--included some Israeli passport holders (Jerusalem Qol Yisra'el, 1 September 1992; Tel Aviv Bamahane, 23 September 1992, respectively). The fact that Darawshah and al-Sani' are not only Israeli citizens but also members of Knesset made the symbolism of the visit still more salient. In addition, coverage of the visit for Israel radio by Israeli Arab correspondents who filed a series of live dispatches from Damascus was another unprecedented event. Damascus took pains to prevent the visit from appearing as a precedent for normalization with Israel but nonetheless allowed the visit's symbolism to be clearly conveyed to the Syrian public. On the one hand, delegation members were forced to travel to Syria via Cairo rather than directly from Israel and were barred from using Israeli passports (Cairo MENA, 7 March, Qol Yisra'el, 1O March). In addition, Syrian media--and even the delegation members--avoided any explicit reference to the group's citizenship, referring to the visitors repeatedly as "1948 Palestinians." On the other hand, the political status of the delegation members was made perfectly clear on Syrian media. For example, Darawshah was quoted by the official Syrian news service SANA as saying on arrival in Damascus: "We represent the Palestinians in the Galilee, in the Negev, and other cities" (7 March). Moreover, Syrian media's airing of remarks by Darawshah even made it clear that he is a Knesset member. For example, after calling in a Damascus television interview for Israeli withdrawal from all the occupied territories, Darawshah declared: "We say this from Damascus, and we also say the same thing in the Knesset in Jerusalem." The visit also brought somewhat greater openness in Syrian media's treatment of Israel, as Darawshah was permitted to use Syrian television to convey an unusually detailed and relatively sympathetic portrayal of the Israeli government, the internal Israeli political situation, and Israeli public opinion. After calling in his televised address for an Israeli commitment to withdraw from the occupied territories, Darawshah asserted that "of late, many people in Israel have begun to express stands supportive of this formula" and that their numbers are "increasing." In his 1O March television interview, Darawshah depicted the government as interested in making further concessions but constrained by domestic political factors. He noted that the current Israeli coalition government "is supported by the Arab parties" and that an expanded coalition "would enable the government to continue the peace process and to make concessions that will respond to the true Arab demands." He also described what he said was "a rational trend" in Israel that is "strong indeed" and which believes that "we must end occupation." He observed that "the demonstrations staged by tens of thousands of people" in the wake of the Hebron massacre "was a joint demonstration by the Arab and Jewish pro-peace forces," adding that "we participated in it." Although the Syrian television host openly took issue with some of Darawshah's remarks--such as the notion that there are doves in Israel--the visitor's overall message was evidently agreed on in advance, as suggested by the manner in which the interviewer appeared to pave the way for Darawshah's comments. For example, he asked Darawshah, "What is new in Zionist thought and direction?" Further Visits? The delegation's visit has prompted reports in Israeli media that there will be future visits to Syria by other Israeli citizens, but there have been no such reports in Syrian media. Evidently based on comments by an Israeli Arab journalist who was part of the delegation, Qol Yisra'el reported that Foreign Minister Faruq al-Shar' had told the group the delegation's visit "is an opening for additional visits to Syria by Israelis" (11 March). Ool Yisra'el reported the same day that a delegation led by Ibrahim Nimr Husayn, chairman of Israel's National Committee of Arab Local Councils, and Ahmad al-Tibi, an Israeli citizen and adviser to PLO chief Yasir 'Arafat--"may soon leave for Syria." Another Qol Yisra'el report claimed that a 170-member delegation of Golan Druze was being permitted by Israel to visit Damascus to extend condolences to al-Asad on his son's death, but that the Syrians had not yet approved the visit (15 March). Implications The very fact that Darawshah was given a forum for his more favorable statements on Israel suggests that Syria wants the visit to be seen as a significant indication of a genuine Syrian openness to peace with Israel and as meeting Israeli demands that such openness be conveyed more clearly to the Syrian public. Now that the barrier to visits by Israeli Arabs has been lifted, there may well be more such visits. But, considering Syrian sensitivity over even the appearance of normalizing relations with the Jewish state, and given Syria's repeated objections to Israeli demands for a commitment to such normalization in the future, similar visits by Jewish citizens of Israel are probably not imminent. (AUTHOR: BROWN. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, NEAR EAST ANALYSIS BRANCH (703) 733-6094.) CB 16/2120z Mar

SUMMARY The Japanese Government appears to be making only slow progress on the package of measures it is drawing up to demonstrate to the United States that it is willing to open Japanese markets and deregulate the Japanese economy. This slowness is apparently due in part to divisions within the government over prospective parts of the package, such as increases in long-term investment and tax cuts. Infighting within the coalition government and a growing perception that Prime Minister Morihiro Hosokawa's government is ineffective also appear to be slowing progress on the market opening package. END SUMMARY Japanese Government leaders continue to send signals that progress on the package of market opening measures that Tokyo is drawing up is proceeding slowly and will not be completed by the originally projected date at the end of March. According to the 16 March Nihon Keizai Shimbun, Chief Cabinet Secretary Masayoshi Takemura told a news conference on 15 March that a final package of measures would not be presented to the United States until the G-7 Summit in July. Although earlier reporting indicated that an interim package might be ready by the end of March, the 16 March Nihon Keizai Shimbun report did not quote Takemura as saying anything about such a package. Similarly, the 16 March Mainichi Shimbun quoted Minister of International Trade and Industry Hiroshi Kumagai as telling reporters on 15 March that it would be "impossible" to complete measures designed to deregulate the Japanese economy by the end of March. Kumagai reportedly added that it would "probably take until the end of June to resolve" issues connected with the measures. One of the factors delaying progress on the package appears to be that the government is divided over several of the most important measures in the package. One of these measures is reportedly a plan to increase investment under Japan's current 10-year plan for investment in public works projects by about 100 trillion yen over the current 430 trillion yen. This plan appears to have support from several cabinet ministers, including Director General of the Economic Planning Agency Manae Kubota, Construction Minister Kozo Igarashi, and Transport Minister Shigeru Ito, all of whom belong to the Social Democratic Party of Japan (SDPJ), the largest party in the ruling coalition. According to a 4 March Nihon Keizai Shimbun report, Kubota came out in favor of increasing the investment plan during a 4 March news conference, arguing that the increase would help jump start the sagging Japanese economy. A 4 March Kyodo report indicated that Igarashi supported Kubota and advocated increasing investment to 600 trillion yen. The 10 March Yomiuri Shimbun identified Ito as another supporter of the plan. In addition, Japan's two leading business groups, the Federation of Economic Organizations (Keidanren) and the Japan Association of Corporate Executives (Keizai Doyukai) have also supported the increase, according to 7 March Kyodo and 8 March Nihon Keizai Shimbun reports. The Ministry of Finance (MOF), however, reportedly opposes the increase because there are no clear sources of revenue to finance it. The 1O March Yomiuri Shimbun quoted Minister of Finance Hirohisa Fujii, a member of the Shinseito, a key party in the ruling coalition, as telling a 9 March news conference that discussions of the increase, "including financial resources, are just beginning and there is no need to change our pace." The paper also cited an unnamed MOF official as stating that "it would be irresponsible to make a pledge to expand investment when there is no hope of securing financial resources." According to Yomiuri Shimbun, MOF is particularly concerned about increasing investment in public works when reform of the tax system is still under debate. In addition, the paper reported that unnamed officials in MOF are arguing that there was no need to include an increase in the 1O-year investment plan in the measures the government is currently drawing up in the wake of the collapse of U.S.-Japan trade talks because the United States "has not once asked for expansion of public investment during the framework talks." Tax Reform Another contentious issue among the market opening measures is tax reform, particularly the timing and scope of proposed tax cuts. Some ministries and some bureaucrats, including some officials in the Ministry of International Trade and Industry (MITI), appear to be pressing the coalition to decide quickly on a tax reform package to include in the package of market opening measures. An unnamed senior MITI official told an Asahi Shimbun reporter on 10 March that the ruling coalition should make a "quick decision" about tax system reform and include tax reform plans in the market opening measures (Asahi Shimbun, 11 March). Speaking at a news conference several days later, MITI Minister Hiroshi Kumagai also reportedly pressed for a rapid decision on tax cuts, stating that the government must come up with a plan by the end of June. The SDPJ has also been widely reported to be a strong supporter of tax cuts. Here too, however, the MOF appears to be blocking progress. The ministry apparently continues to oppose any measures to cut taxes unless sources of revenue other than deficit financing bonds can be identified to offset the cuts. During a news conference on 11 March, Finance Minister Fujii argued that the Japanese Government should not make hasty decisions about tax reform or tax cuts only in order to include them in the package of measures designed to address U.S.-Japan trade friction, according to an 11 March Kyodo report. Bureaucratic Resistance Resistance from elsewhere within the government bureaucracy may also be stalling work on some of the market opening measures, particularly those designed to deregulate the Japanese economy. The 10 March Asahi Shimbun quoted unnamed officials in the Cabinet Councilors' Office on Internal Affairs, which is reportedly charged with compiling deregulation measures, as complaining that the ministries were "reluctant" to draw up any measures beyond those that they have already presented to the Hosokawa administration. Similarly, according to the 10 March Yomiuri Shimbun, many government ministries and agencies are arguing that they have already implemented as many measures to deregulate their operations as they are currently capable of doing. Coalition Infighting A fourth factor delaying progress on the market opening package appears to be infighting within the ruling coalition government over the handling of the package. In particular, tensions between Prime Minister Hosokawa and Shinseito Secretary General Ichiro Ozawa on the one hand and Chief Cabinet Secretary Takemura on the other seem to be spilling over into the handling of the market opening package. According to the 10 March Asahi Shimbun, Takemura was charged with overseeing work on the market opening package. However, because of the tension between Hosokawa and Takemura, some government offices seem to have been reluctant to work with the Chief Cabinet Secretary. The 10 March Asahi Shimbun reported that some ministry officials question whether he has Hosokawa's confidence. Tensions between Ozawa and Takemura and also between the coalition and the bureaucracy may have derailed Ozawa's planned trip to Washington at the end of March to discuss market opening measures. According to the 16 March Yomiuri Shimbun, both Ozawa and Takemura appear to have been working from different directions to resolve bilateral trade frictions, and Takemura may have seen Ozawa's trip as as undercutting Takemura's official role in coordinating work on the market opening package. In addition, the Ministry of Foreign Affairs (MOFA) appears to have resented Ozawa's plans to get involved in bilateral relations. The 13 March Nihon Keizai Shimbun quoted MOFA and Japanese Embassy officials as claiming they never heard of plans for Ozawa's trip and denying that it had been approved by the Japanese Government. According to the 16 March Nihon Keizai Shimbun, MOFA officials were miffed that they were not consulted about the trip. Outlook The divisions within the government, the resistance of parts of the bureaucracy, and infighting within the coalition will probably not only continue to delay progress on the market opening measures, but also to limit the scope of any measures that are ultimately drawn up. Some of the steps being debated, such as tax reform, involve deep, long-standing divisions among the parties in the ruling coalition that will probably be very difficult to resolve in the near future. In order to incorporate such steps in the market opening package without threatening the unity of the already splintering coalition, the coalition parties will probably have to work out compromises that will water down the measures to the point that they will have relatively little impact. (AUTHOR: BOUNDS. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM, (7O3)-733-6534.) EAG/BIETZ cka 17/0005z mar

SUMMARY A lengthy statement attributed to the imprisoned Shining Path leadership, published recently in a leading opposition newspaper, provides what appears to be a strategic rationale for the peace proposal made by the insurgents last fall. While the newspaper has accepted the document as an authentic call for peace by the Shining Path, the paper has also stressed that the peace called for in the statement is nothing more than a temporary tactical retreat by the Shining Path leaders and is not, as President Alberto Fujimori has contended, an implicit admission of defeat. END SUMMARY Although La Republica, a prominent anti-Fujimori daily, provided little information on the origins of the "important and unusual" document that it published in a special 25 January supplement, it assured its readers that the lengthy ideological tract explaining the Shining Path's "struggle for a peace agreement" was a genuine Shining Path statement. The paper claimed that the "anonymous sources" who supplied the "secret" document provided "full authentication" and that "experts" consulted by the paper also "agreed" that the document was the handiwork of imprisoned Shining Path leader Abimael Guzman (La Republica, 26 January).(See Note 1) (Note 1) La Republica did not assert that the document was actually signed by Guzman. However, the paper did claim that the document was "approved" by imprisoned Shining Path Central Committee members Elena Iparraguirre Revoredo, Osman Morote Barrionuevo, Marta Huatay Ruiz, Maria Pantoja Sanchez and Rosa Angelica Salas de la Cruz (25 January). While the anti-Fujimori daily may have, at least in part, published the document to discredit President Fujimori, it contended that it was motivated by a desire to provide Peruvians with information on the peace proposal that had not been made available by the government. The paper declared that it was "clearly" its "duty" to publish the document "given the mantle of silence that the government has cast" over the peace negotiations (26 January). La Republica's publication of the Shining Path strategy statement follows by three months the October 1993 release by the Fujimori government of letters from Guzman calling for peace talks with the government (Radio Programs del Peru, 1 October 1993; Radio and TV, 4 October 1993; Global de Television, 10 October 1993; Panamericana Television, 30 October 1993). The Shining Path leadership's sudden willingness to pursue peace talks with the government, just as the 31 October national referendum vote was approaching, raised questions in the media about whether the letters really represented authoritative Shining Path policy [see box].(See Note 2) (Note 2) Among other objectives, the narrowly successful referendum was designed to allow the president to serve a second successive term. Tactical Retreat for Guzman Implicitly rejecting Fujimori's claim that the Shining Path's call for a negotiated peace represented an admission of political defeat by the insurgents, La Republica concluded that the movement's leadership saw its call for peace as nothing more than a "temporary ceasefire" (25 January).(See Note 3) According to the daily's 26 January editorial, the Shining Path tract "makes it clear" that in the eyes of Abimael Guzman a "peace agreement" is simply an "armed truce" until after the year 2OOO, at which time the Shining Path "would resume its bloodbath." La Republica offered a possible explanation for the insurgents' tactical retreat in a 3O January interview with a "military and subversion analyst," who suggested-that a temporary withdrawal may offer Guzman an opportunity to preserve his authority as political leader despite the obvious limitations of beings imprisoned. Thee analyst concluded, therefore, that the insurgents' peace strategy represents "an ideological reaffirmation of Guzman's leadership" and "recognition that circumstances have changed." (Note 3) For example, in his presentation of the video recording of Guzman's first call for peace talks, Fujimori claimed that the Shining Path "political" leadership "has tacitly admitted that the Peruvian state has totally recovered the initiative in confronting the Shining Path" (Lima Radio and TV, 4 October 1993). Outlook La Republica's assessment of the Shining Path peace strategy document may quiet doubts about whether earlier letters calling for peace talks actually represented the views of top leaders. At the same time, however, by concluding that the published strategy statement is merely the Shining Path's declaration of temporary retreat, the daily has raised new questions about the credibility of Fujimori's claim that the call for peace represents a victory for the government. While such doubts are unlikely to seriously affect Fujimori's prospects for reelection next year, they may have further tarnished the image of the Peruvian president, already damaged by his narrow victory in the constitutional referendum last October. BOX Media Doubts over Earlier Shining Path Peace Letters -- Following the first Guzman letter calling for peace talks, announced by Fujimori at thee United Nations last October (Radio Programas del Peru, 1 October 1993), the conservative daily El Comercio reported that one seasoned political observer had warned" that Guzman's "reported" desire "to reach a peace agreement" does not mean there is reason "to claim a victory in the ongoing struggle against terrorism" since, according to the observer, the imprisoned insurgent leader may no longer control the Shining Path (2 October 1993). -- Following the second Guzman letter, which supplemented the call for peace talks with what seemed to be praise for Fujimori's economic and political program (Lima Global de Television, 1O October 1993), a commentator for the anti-Fujimori weekly Caretas wrote that the government was using a "broken" Guzman "in the campaign for the 'yes' vote" for the upcoming referendum, adding that "it is no coincidence that the letters . . . have come out during the 3O days prior" to the 31 October vote (14 October 1993). -- Responding similarly to the second Guzman letter, an editorial in La Republica wondered whether "government representatives," working to promote the "yes" vote on the referendum, had not "fallen into a trap" by thinking that Shining Path militants would take seriously such an "unctuous" call for peace talks as appeared in the letter (14 October 1993). -- Also in response to the second letter, Caretas on 14 October claimed that Fujimori was "using" Guzman "in the campaign" to win the 31 October referendum, noting that "with Guzman's letters" calling for peace talks, Fujimori's "promise" to wipe out the Shining Path by 1995 "may gain credibility." END BOX (AUTHOR: ROLLINS. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF ANALYST, EUROPE/LATIN AMERICA GROUP, (7O3) 733-612O.) ELAG/GILISON cka 17/0107z mar

SUMMARY Russian Foreign Minister Andrey Kozyrev hailed the results of his meeting with U.S. Secretary of State Warren Christopher as indicating that the U.S.-Russian partnership is able to surmount recent strains and continue to develop. Kozyrev's reaction contrasted with his recent statements on the bilateral relationship in which he suggested that Russia was being relegated to a subordinate role ill-suited to its capabilities and national interests. END SUMMARY Kozyrev gave an upbeat assessment of the state of U.S.-Russian relations following his 14 March meeting with Secretary Christopher in Vladivostok. He expressed satisfaction with the results of the meeting, emphasizing that the two countries acted as equals during discussions on a broad range of international issues. Dismissing the recent strains in the relationship, Kozyrev asserted that "we are partners and we will continue to work in this direction" (ITAR-TASS, 14 March). He told reporters that "circles" in both Russia and the United States object to the "mature and strategic nature" of the bilateral relationship and that "all sorts of hiccups and problems," like ex-President Richard Nixon's protocol difficulties or "spy fever," are bound to occur, "but we are too serious to give into them" (Interfax, 14 March). Previous Concerns Prior to the meeting, Kozyrev had expressed concerns about the state of U.S.-Russian relations and suggested that adjustments to the partnership needed to be made: -- On the eve of his departure from Moscow for Vladivostok, he told reporters that the aim of the meeting would be to develop the partnership on a "new basis," stressing that there could be no question of a "junior" or"senior" partner, or "more freedom for one to the detriment of the other." Rejecting suggestions that relations had begun to cool, he noted that there can be "differing interests" within the partnership (Moscow radio, 14 March). -- Similarly, in a 10 March television interview he said that he and Christopher would discuss what form of partnership the two countries should have, stressing that "we should agree on this so it does not cause annoyance" or "come as a surprise when Russia comes out with its own initiative." Noting that Russia feels "offended" when U.S. officials launch an initiative that the two countries should have agreed upon together, Kozyrev said that such differences needed to be "clarified" and a "mechanism for interaction" should be "finalized" (Moscow TV, 10 March). -- In an article on U.S.-Russian relations published in Izvestiya on 11 March, he also called for adjustments in the relationship, while at the same time stressing that "there is no reasonable alternative to partnership," which he implied is essential to shape a democratic Russia and "transform the unstable post- communist world into a lasting democratic one." He claimed that Russian and U.S. national interests concerning "the main world problems" not only "do not conflict" but "complement each other." He stressed, however, that "certain illusions" such as a Western view that "if the Russians are good they must follow us in everything," or a Russian view that partnership "is an idyllic situation without conflicts and problems" must be abandoned. He contended that partnership "based on common values and sympathies" does not mean renouncing "competition and disputes" or "a firm or aggressive policy of upholding your own national interests." He cautioned, moreover, that agreeing to play a subordinate role would be as "unwarranted as it is politically dangerous" for Russia in view of the "extreme nationalist and reactionary [domesticj forces" who would "immediately take advantage" of such a stance. Warning that exponents "of gloomy self-fulfilling prophecies" would exploit U.S.-Russian disputes if they continue, he called upon the two countries to develop a strategy and instruments for partnership, and particularly a mechanism "for coordinating their actions" on international problems. Media Concerns About Relationship Russia media commentary on the Vladivostok meeting has so far been sparse, but its thrust has been to dismiss the upbeat official assessments of the meeting and continue to focus on problems facing the relationship. A 15 March commentary in the reformist newspaper Kommersant-Daily dismissed the official line that the meeting "plastered over the cracks" in the relationship, asserting that despite "the upbeat tone of the joint statement," "more cracks may develop soon." Commenting on Russia's new involvement in the Middle East, the article noted that U.S. actions in the region were "emphatically independent from Moscow" and warned that "there is an obvious rivalry in Middle East peacemaking between Moscow and Washington." In a 16 March article in the reformist newspaper Segodnya, a commentator, chiding the "incompetence" of both U.S. and Russian officials, contended that the Russian Foreign Ministry, by displaying the "most intense activity possible," had created a "legend" about "stunning foreign policy successes" that could trigger U.S. ideas about "containment." The commentator said that Washington appeared "ready to go to any lengths" to prevent a return to a "global nuclear standoff," but warned that the "stabilization in bilateral relations" proclaimed at Vladivostok "may be shortlived." Before the meeting, Russian media commentators had speculated about whether or how badly U.S.-Russian relations had been damaged in the wake of controversy over Bosnia, the Ames spy case, the Nixon visit, and other differences. Some commentators, echoing Kozyrev, tried to minimize any coolness or weakening in the partnership while others, ignoring the Vladivostok meeting, contended that the United States had already changed its policy toward Russia: -- Echoing the government line, Moscow radio commentaries on 12 March played down any differences. Commentator Yuriy Solton said Secretary Christopher had refuted reports that Washington was dissatisfied with Moscow's active policy in Yugoslavia, noting that he had said the United States welcomed Russia's initiatives, in Bosnia and elsewhere. Solton stressed that statements that U.S.-Russian relations had become "more strained" or "in poor condition" were "absolutely groundless." Admitting that each country "wants to pursue its own end," Solton emphasized that Moscow and Washington were doing this "in close cooperation with each other" and without any of the "rivalry" of the Cold War. Contending that both Moscow and Washington saw their main task as consistently improving their relationship, Solton said this task would "define" the atmosphere at Vladivostok. Likewise, commentator Valentin Zorin, dismissing the recent disputes as occurring in a period marked by "the loss of illusions" on both sides, stressed that "global confrontation" between the two countries is "a thing of the past" and that "what unites them is so much more important that frictions that may emerge." -- In contrast, a 5 March article in the mass-circulation newspaper Komsomolskaya Pravda took issue with Secretary Christopher's reported statement that Russia could not act unilaterally in responding to appeals for military assistance from countries of the former Soviet Union, but could only respond under the auspices of the United Nations or other international organizations. The article also alleged that the Secretary had commented on Russian President Boris Yeltsin's 24 February speech, which had spoken of Russia's right to act to ensure stability and protect Russians in the near abroad, "with some scorn." Contending that the warnings from Washington were an attempt to keep Russia in the inferior state to which it had been reduced in recent years, often by the "shortsightedness of [Russian] diplomats," and to "guarantee" Washington's "superpowerdom," the article advised Kozyrev to have a "serious talk" about this with Secretary Christopher in Vladivostok. -- A 12 March article by prominent foreign affairs commentator Aleksandr Golts in the Defense Ministry's newspaper, Krasnaya Zvezda, titled "The Chill Must Not Develop Into Confrontation," warned that "conflicts and microcrises" in U.S.-Russian relations had been following each other "virtually without interruption and in ever-increasing intensity." Criticizing Washington for, among other things, intensifying U.S. involvement in CIS affairs in order to prevent the revival of a dreaded Russian "empire," Golts charged that such an approach not only was inappropriate for states "that only yesterday were calling themselves allies," but went "beyond the bounds of common sense" and could scuttle efforts to settle conflicts. Taking issue-with Secretary Christopher's remarks on Russian peacekeeping efforts, Golts asked with evident sarcasm if the United States allowed its own freedom of action to be restricted "anywhere at all" by consultations with international organizations. Golts contended that Russia's active involvement in trying to end conflicts both in the former Soviet republics and elsewhere was important not only because Moscow was "offering sensible ways to end the suffering of thousands," but also because it strengthened Russia's self-esteem by demonstrating that Russia was a state that could resolve global problems. While asserting that US.- Russian differences were "not insoluble," Golts warned that neither Russia nor the United States can afford the "luxury of a new confrontation" while they search for a new model of mutual relations, and he called upon both states to use the Vladivostok meeting to "prevent undesirable developments." -- A 12 March article in the pro-Yeltsin newspaper Izvestiya headlined that U.S.-Russian relations are experiencing "the most serious crisis of recent years." In describing the reasons for the "time of coolness," the article supported Moscow's "proper" response to the Nixon visit and diplomatic activism in the Balkans, the Middle East, and the "near abroad," but fretted over how Washington might react to such policy "changes." For example, the article cited a "Western diplomat" as complaining that after the reformers' poor showing in the December parliamentary elections, the Yeltsin administration adopted the "slogans of the opposition," adding it was difficult to know who was making foreign policy pronouncements--Kozyrev or Communist leader Gennadiy Zyuganov. Ending on an optimistic note, the article reported that the Russian Foreign Ministry would "strive to avoid confrontation with Washington" at Vladivostok and quoted an "informed" ministry source as saying "there are no major reasons for exacerbating" U.S.-Russian relations. -- Ignoring the upcoming meeting entirely in a 12 March article in procommunist newspaper Pravda, commentator Vladislav Drobkov reported on what he called "Washington's change of direction" and "campaign" to reevalute relations with Russia and develop ties with other countries of the former Soviet Union. Claiming that all his Washington interlocutors had "invariably" said that "coolness" had set in between Moscow and Washington, Drobkov backed up his argument by quoting alleged statements about Russia by U.S. officials. For example, he quoted Senator Richard Lugar as saying "[The United States] is not Russia's partner, we are bitter rivals." Implications Kozyrev's efforts to play down any substantive differences with Washington probably reflect Moscow's determination to keep bilateral relations on track, but his emphasis on achieving equality in the relationship indicates an equally strong determination that Russia not be relegated to what Russians would view as an inferior role. The media's continuing preoccupation with the differences and disputes between Washington and Moscow suggests an ongoing tension between pride that Russia is resuming what is perceived as its rightful role as a global power and concern that a confrontation with Washington might revive a Cold War-like climate. (AUTHOR: BELLINGER. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ANALYSIS BRANCH, RUSSIA DIVISION, (7O3) 733--6O7O.) ENEAG/BLOUGH cka 16/2352z mar

SUMMARY The Japanese Government appears to be interpreting portions of the 12 March agreement to expand Motorola's access to the Japanese cellular phone market in ways that differ significantly from the reported U.S. reading of the accord. Tokyo's divergent interpretation may reflect an attempt to keep the agreement from serving as a precedent for Tokyo's acceptance of targets for measuring its trade performance in other sectors. END SUMMARY In comments to the Japanese press, a number of Japanese Government officials have taken issue with reported statements by various U.S. officials on the 12 March cellular telephone agreement. These differences with U.S. officials' interpretations focus on language that commits the Japanese Government to ensuring that the Japanese telecommunications company Nippon Idou Tsushin (IDO) carries out its pledges to increase market access for the U.S. firm Motorola. -- According to the 14 March Nihon Keizai Shimbun, when the agreement was announced on 12 March, Vice Minister of Posts and Telecommunications Takenori Kanzaki specifically denied that the Japanese Government had accepted any sort of numerical targets. -- The 14 March Nihon Keizai Shimbun also reported that Ministry of Posts and Telecommunications (MPT) General Affairs Councillor Masahito Tani on 13 March took issue with comments reportedly made by U.S. Trade Representative Mickey Kantor that the agreement represented a victory for the U.S. Government's results-oriented policy in dealing with U.S.-Japan trade issues. Tani reportedly said that in the Japanese Government's view, IDO's commitment to increase the number of base stations capable of handling Motorola equipment was "neither a numerical target nor an objective criterion. It is nothing but a private corporation's contract." -- According to the 15 March Nihon Keizai Shimbun, Vice Minister of Foreign Affairs Kunihiko Saito attempted to play down a clause in the agreement between the U.S. and Japanese Governments which states that Tokyo will use "all available measures" to ensure that IDO fulfills the agreement. The paper quoted Saito as stating that "All this means is something like conducting regular checks on the degree of progress being made in dealings between the private companies." Saito also reportedly told Kyodo on 14 March that the Japanese Government was in no position to intervene in the affairs of private companies and asserted that any difference in the U.S. and Japanese interpretation of the agreement was because of Washington's misunderstanding of the accord. -- Similarly, Vice Minister of Posts and Telecommunications Futoshi Shirai, in comments to Kyodo on 14 March, took issue with reported remarks by U.S. officials, stating that the Japanese Government had in no way agreed to guarantee that IDO would meet the target of building 159 base stations using Motorola technology as stipulated in the cellular phone agreement. -- An unidentified senior Ministry of International Trade and Industry MITI) official reportedly told Kyodo on 15 March that the Japanese Government had provided no guarantee that IDO would fulfill its commitments. Concern Over Precedent One of the major reasons for the Japanese Government's efforts to limit the way in which the cellular phone agreement is interpreted appears to be a concern that the United States will attempt to use the agreement as a model for setting numerical targets for market opening measures in other sectors. A 15 March Kyodo report quoted an unidentified senior MITI official as stating that Japan could not accept any interpretation of the agreement that would lead to the setting of numerical targets. According to the 15 March Nihon Keizai Shimbun, MITI is particularly worried that the United States might try to use the model of the cellular telephone agreement in the auto sector, asking Japanese Government to provide guarantees for voluntary targets for imports of U.S.-made automobiles and auto parts that Japanese automobile companies are reportedly currently drawing up. In a 16 March speech, MITI Vice Minister for International Affairs Sozaburo Okamatsu reportedly specifically stated that the cellular telephone agreement could not be applied to the automobile sector. According to a 16 March Kyodo report, Okamatsu stated that while the telecommunications sector was regulated by government licenses, the auto and auto parts industries were "completely free trade areas" which could not be controlled by the government. The cancellation of a planned visit to Washington by Ichiro Ozawa, Secretary General of one of the key parties in the ruling coalition and the Japanese politician widely reported to have been instrumental in framing the cellular phone accord may also reflect the Japanese Government's desire to limit the impact of the cellular phone agreement. The 16 March Yomiuri Shimbun quoted senior members of Ozawa's party and other Japanese officials as stating that the United States pinned too high hopes on Ozawa, expecting that he would come to Washington with "a bag packed with a lot of gifts." Outlook Japanese officials will probably do everything possible to keep the cellular telephone pact from serving as a precedent for the setting of numerical targets in other sectors. The difference in interpretation with the United States, however, has the potential to create further friction in bilateral relations. In the past, Tokyo has differed with the United States over the wording of such agreements as the 1991 U.S.-Japan Semiconductor Agreement and the agreement setting up the U.S.-Japan framework talks reached by former Prime Minister Kiichi Miyazawa and President Clinton in July, 1993. In the semiconductor agreement, Tokyo has consistently argued that the United States has misinterpreted a pledge that the foreign share of the Japanese semiconductor market would reach 20 percent by the fourth quarter of 1992 as a formal commitment, when the Japanese government intended it only as a goal. Similarly, in the framework agreement, the Japanese government has consistently disagreed with the United States over how to define the "objective criteria" which the agreement stated would be established to measure Japan's trade performance. (AUTHOR: BOUNDS. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ASIA DIVSION ANALYSIS TEAM, (703)-733-6534.) EAG/BIETZ cka 17/0009z mar

SUMMARY Reflecting concern within the European Union (EU) that the U.S. revival of the Super 301 trade law provision could eventually have a negative effect on Europe and that U.S. bilateral deals with Japan could hurt European business, EU leaders reacted sharply to the U.S. move and its threat of sanctions against Japan. Apparently anxious not to be left out of any deals, however, EU leaders, as well as French and German officials, have tempered their criticism and urged a "trilateral" U.S.-EU- Japanese approach to efforts to remove barriers in Japan. French and German media likewise criticized U.S. trade policy measures but have revealed a strong current of sympathy for U.S. efforts to open Japan's markets. END SUMMARY EU Commissioner Leon Brittan, along with French and German leaders, have criticized the U.S. reinstatement of its Super 301 trade law and the U.S. threat of sanctions against Japan, charging that the measures run counter to multilateral agreements and that they border on "managed trade" because they aim at setting numerical market share targets: --EU Trade Commissioner Leon Brittan charged that the U.S. strategy of negotiating market shares with Japan posed a risk for Europe, suggesting that if the Japanese complied it would be at Europe's expense (AFP, Reuter, 17 February). Saying that the U.S. threat to impose sanctions amounted to "managed trade," he called the U.S. decision to reinstate Super 301 "disappointing" and said the EU would be studying the move carefully to see if it violated U.S. trade commitments (AFP, 4 March). On 10 March, Brittan charged that the United States was pursuing "counterproductive and discriminatory tactics" in the trade policy dispute with Japan (Reuter, 10 March). --EU foreign ministers meeting on 7 March issued a statement saying Super 301 was "contrary to the spirit" of the GATT and calling on the EU Commission to "thoroughly investigate" whether the U.S. trade sanctions against Japan are a violation of GATT (AFP, 7 March). French and German Reactions As has charactistically occurred in recent trade differences between the United States and its European allies, the official French reaction to the reinstatement of Super 301 was more blunt and direct than the German response: --French Prime Minister Balladur, tying Super 301 to U.S. threats to impose sanctions on French goods in retaliation for France's blocking of U.S. fish exports, accused the United States of "not playing by the rules" of international trade, but he also hoped a "reasonable" solution could be found (AFP, 5 March). --In an interview with Le Figaro following his 9-12 March trip to Japan, French Trade and Industry Minister Gerard Longuet said France "condemns any kind of unilateralism" such as the U.S. reinstatement of the "Super 301," calling instead for "dialogue." He also said Europe would take care to ensure that settlement of the U.S.-Japan trade dispute did not have "adverse effects" on European exports (15 March). --In contrast, German Economics Minister Guenter Rexrodt's opposition to U.S. trade measures has been very muted. He told an interviewer on 15 February that he "opposed numerical targets" because they were "clearly against GATT" and free trade (Reuter, 15 February). Similarly, on 4 March, he said Germany wanted "better access" to Asian markets but rejected "unilateral action" such as introducing sanctions because they "cannot be reconciled" with the Uruguay Round (DPA, Reuter 4 March). Seeking Cooperation In spite of their critical remarks, EU leaders have also indicated a desire to defuse the trade conflicts and to join with the United States in opening up Japan's markets, stressing that they prefer a nonconfrontational approach that focuses on ways to make European products attractive to the Japanese market rather than merely on gaining market shares: --On 4 March, Brittan repeated an EU proposal he had made on 17 February for a "trilateral" EU-U.S.-Japan approach to opening Japan's markets that would identify and remove specific Japanese barriers and would accept global targets, but not quotas or targets for individual sectors. Such an approach would be in line with the EU's approach exemplified by its "Gateway to Japan" initiative, aimed at making European goods more attractive to the Japanese and using diplomatic pressure to overcome market access difficulties (AFP, 4 March, 17 February). --Longuet seemed to adopt a more conciliatory posture toward the U.S. in an interview with La Tribune Desfosses on 9 March. Justifying the EU foreign ministers' "rather sof t condemnation" of the Super 301 action at their 7 March meeting, he also remarked that Kantor had "let us know" that the U.S. decision on Super 301 had been made to avoid more radical measures, given the views of the U.S. Congress. Longuet reportedly also had expressed some sympathy for the U.S. threat of sanctions against Japan, telling Reuter on 3 March that the United States was "right to remind the Japanese that trade is not a one-way business" (Reuter, 4 March). --Rexrodt also said that Germany was "alongside" the United States in pressing Japan to open its markets and was doing its best to convince the Japanese that they need "to restructure their society and their business structures." Germany would discuss "every measure and every pressure" on the Japanese, insisting that they must not just "bow and promise" but must also make "commitments," he said. Nevertheless, he added, "numerical targets" were "clearly against GATT" and free trade (Reuter, 15 February). French Media Reaction French media reaction reflected concern that U.S. trade measures could also be aimed at Europe but media commentary also indicated some sympathy for, and even approval of, U.S. pressure on Japan. --The influential Liberation of 4 March said President Clinton had pulled out the "heaviest weapon" from his "arsenal," Super 301, following pressure from industrial lobbies and Congress to force the Japanese to reduce their trade surplus. It also noted that while EU countries are publicly criticizing the unilateral U.S. approach, some leaders "in private understand the American anger." --The business daily Les Echos of 7 March voiced concern that U.S. Super 301 could be "aimed at Europe or any other country" and said it was "unlikely" the United States would give up any of its "bilateral defense weapons in international trade. A commentary in the 16 February issue, on the other hand, viewed the U.S. threat of sanctions against Japan as a "sign of moderation" because it provided time "to find a compromise" and expressed the hope that it would serve as a "warning shot" to Japan without opening "excessive hostilities." German Media Reaction Although the leading German press criticized U.S. reinstatement of Super 301 as being contrary to the spirit of GATT and as a possible threat to European trade with Japan, some papers also expressed sympathy for the U.S. moves to break down Japanese trade barriers: --The influential German daily Frankfurter Allgemeine called U.S. concern about the "horrendous" Japanese trade surpluses "understandable" but said that minimum import quotas are a "bad relapse" into "state-regulated foreign trade" (7 March). It is "clear and natural," the daily said, that Washington is urging the Japanese to remove their barriers to import competition, but the United States is trying to "forcibly" clear a path for U.S. firms and "manipulate trade," taking measures that "ignore" GATT principles (14 March). --The business daily Handelsblatt noted that U.S. patience was "apparently exhausted" because of the lack of progress in reducing Japanese trade surpluses. Nevertheless, it called such "unilateral measures," incompatible with the "complexities" of world trade, saying that the "dangerous aspect" is that Super 301 can be used not only against Japan but also against other trading partners (7 March). --The left-of-center Frankfurter Rundschau of 19 February said Europe "should not be fooled." The U.S. "first and foremost" wants access to the Japanese consumers for itself and not for everybody, it charged, saying that President Clinton "spoke for the United States and not for GATT." (AUTHOR: SHAVER. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF ANALYST, ELAG, (703) 733-6120). ELAG/GILISON cka 17/0136z mar

SUMMARY Despite persistent Jordanian efforts to repair relations with Saudi Arabia--seriously strained since the Gulf crisis--King Husayn's religious pilgrimage to Mecca and Medina on 8 March yielded a sharp rebuff when King Fahd pointedly failed to receive Husayn and his top-level delegation. Indicating official Jordanian embarrassment over the Saudi snub, subsequent Jordanian media treatment of the visit suggests an effort to limit the political fallout by putting the best face possible on the visit. END SUMMARY Although King Husayn officially traveled to Saudi Arabia to perform the 'umra, or minor pilgrimage, he evidently hoped to effect a public reconciliation with Fahd and overcome Saudi anger over Husayn's alleged sympathy for Iraq during the Gulf crisis. Indicative of the trip's political dimension, a large delegation accompanied the king on his first visit to Saudi Arabia following a four-year hiatus. In addition to Princes 'Abdallah, Talal, and Ghazi; the prime minister; the chief of the Royal Court; the king's adviser; the chief chamberlain; and the king's private secretary, the delegation included the chairman of the Joint Chiefs of Staff and "a number of top state and military officials" (Amman radio, 8 March). Moreover, in the months prior to King Husayn's arrival in Saudi Arabia on 8 March, the Jordanian leadership made many flattering and conciliatory references to Saudi Arabia, revealing Amman's strong desire for a rapid reconciliation and laying the groundwork for the king's visit. --During a news conference in Washington in January, the king said he hoped Amman-Riyadh relations would "return to their warmth." Although he has always stopped short of an official, public apology for Jordan's refusal to join the international coalition against Iraq--something Riyadh evidently expects as a condition for restoring ties--Husayn said that he hoped "our brethren in Saudi Arabia will realize that we never meant them any harm, nor did we cause them any harm at all" (Amman TV, 27 January). --In a departure from previous Jordanian criticism of Saudi sponsorship of renovation projects for Islamic shrines in Jerusalem (See Note 1), Crown Prince Hassan welcomed Saudi Arabia's announced campaign to raise funds for the renovation of the Dome of the Rock and the al-Aqsa mosques, lavishing praise on the "initiative" by King Fahd, which "clearly contributes to realizing Arab solidarity" (Amman radio, 22 February). Hassan's remarks were echoed by the daily Al-Dustur, which hailed the "well-timed Saudi step" (23 February). (Note 1) In May 1992, Jordan's information minister responded to news of a Saudi donation to UNESCO on behalf of Jerusalem's Islamic shrines with a warning against "any attempt to weaken the legitimacy of the Jordanian role in Jerusalem" (Amman radio, 20 May 92). Likewise, the English-language weekly The Star criticized the Saudi move as "myopic and rash" (21-27 May 92), while the weekly Shihan denounced Riyadh's contribution to the shrines as "a direct threat to Jerusalem and its Arab character" (16 May 92). At the time of the trip itself, monitored reports on Husayn's pilgrimage broadcast by Jordan's state-run radio and television refrained from discussing the political potential of the visit, focusing instead on factual accounts of the king's religious activities. However, articles appearing in the semi-independent press during the king's pilgrimage undoubtedly fueled speculation about a Saudi-Jordanian reconciliation. --A column in the daily Sawt al-Sha'b indicated optimistic expectations, stating that "there is no denying we entertain high hopes" for a reconciliation, and that "we fervently hope to see Amman and Riyadh embrace in a long hug after a long estrangement." The column also suggested that Arabs would suffer "further ignominy, humiliation, and division" without moves toward reconciliation (9 March). --On the day of King Husayn's departure for Jeddah, the weekly Al-'Ahd, organ of the conservative al-'Ahd political party, speculated about "the meetings that will be held" during the king's visit, adding that Jordanian "nationalists" had "hope and confidence in our ability to put the Gulf crisis behind us." The article underscored "the big role the Saudi brothers can play" in giving Arab-Israeli peace negotiations added impetus (8 March). --An editorial in the daily Al-Ra'y on 9 March--evidently published prior to the news that Fahd did not meet Husayn- -optimistically opined that the king's minor pilgrimage would not be "limited to the religious aspect in terms of its importance," and anticipated that the Jordanian and Saudi "brothers" would find the "right moment to meet, settle differences, and reaffirm that they have absorbed the lessons of past stages and the dangers of each upcoming stage." Damage Control Smarting from the Saudi snub and sensitive to possible public disappointment, the Jordanian government has not been observed to comment officially on the trip. Media reports on the visit have been meager, although this was partially because of the non- publication of most Jordanian newspapers over the 'Id al-Fitr holiday. Those reports that disclosed official disappointment with the trip cited only unnamed government sources, while other articles evidently sought to mask the negative outcome by playing up the religious nature of the king's sojourn. Still other reports claimed favorable results from the trip, giving King Husayn credit for his initiative and indicating that the ball was now in the Saudi court. --The English-language daily Jordan Times cited a source "close to the palace" as expressing disappointment that "the king was reaching out in reconciliation, but King Fahd did not respond." Although there was no monitored official confirmation of a planned Fahd-Husayn meeting, the Times cited official sources as having told the paper "privately" that the two kings had been slated to meet on 8 March for the first time since the outbreak of the Gulf crisis. Another anonymous "well-placed source" cited by the Times said the king was aware his trip to Saudi Arabia would be a "purely spiritual visit." Nonetheless, the same official credited the king with having broken "a psychological barrier" with Saudi Arabia by making the trip after four years of staying away (10 March). --The weekly Akhbar Al-Usbu' published an unsigned article playing down the disappointing outcome of Husayn's visit, and giving the king credit for his effort. Jordan, it said, had chosen to rise "above the pan-Arab wounds to heal the rift which afflicted the Arab homeland after the Gulf war, for the sake of restoring Arab solidarity and reactivating joint Arab action that can confront the serious challenges threatening the Arab and Islamic nation." The king's "gesture," it noted, was "not new," but stemmed from "the continuous role the Hashemites have played in unifying the Arabs and Muslims throughout the ages" (10 March). Saudi Media Response In line with the government's silence, official Saudi media were not observed to report or comment on King Husayn's arrival, pilgrimage activities, or departure. Domestic Saudi newspapers were similarly observed to contain no mention of the king's visit. Curiously, two London-based Saudi-owned papers--which exercise somewhat more editorial flexibility than their domestic counterparts--evidently anticipated that a Fahd-Husayn meeting would occur, perhaps influenced by speculation on the matter within the diplomatic community. Al-Sharq Al-Awsat on 8 March quoted King Husayn's alleged "personal apologies to King Fahd" for their adversarial Gulf war relationship, while Al-Hayah on 9 March actually reported that King Fahd had "received the Jordanian monarch" the previous evening "in holy Mecca." Implications The public optimism regarding hopes for a reconciliation with Saudi Arabia appears to have embarrassed the government in the wake of the king's return to Jordan without having met with King Fahd. Although prospects for a reconciliation were never officially confirmed, the widespread media speculation clearly indicated that a Fahd-Husayn meeting had been expected by the government--particularly since Fahd had received former Gulf war adversary PLO Chairman 'Arafat during the latter's minor pilgrimage in January. Nevertheless, Fahd's decision not to receive Husayn, as well as the complete silence of Saudi Arabia's official media, suggest that Saudi Arabia will expect further measures--such as a more explicit public expression of Jordanian contrition for its stance during the Gulf war--if the longstanding impasse is to be broken. Following this episode, any further attempts by King Husayn to mend fences with Saudi Arabia will likely be through private and diplomatic channels, and will carry a low media profile--at least until the prospects for success are guaranteed by Riyadh. (AUTHOR: MURRAY. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, NEAR EAST ANALYSIS BRANCH (703) 733-6094.) ENEAG/BIETZ CS 18/0041z mar

SUMMARY President Boris Yeltsin continues to face serious opposition from certain regions in his efforts to define a division of central and local authority. Several republics failed to approve the federal constitution in the 12 December referendum and have since taken fresh steps toward enacting republic constitutions that claim greater powers for local authorities. In the case of Tatarstan, Moscow has dealt with the conflict by signing a bilateral treaty after prolonged negotiations, but it is not yet clear if Moscow is willing to conclude such treaties with other republics. END SUMMARY Rejection of the federal constitution by voters in several republics in the 12 December referendum and recent moves to approve republic constitutions that assert regional authority in ways incompatible with the Federation constitution demonstrate that the republics' constitutional conflict with Moscow remains a serious issue: -- The Tuvan republic held a referendum to approve the republic's constitution on 12 December, the same day as the referendum on the federal constitution. While the Tuvan constitution, approved by 53.9 percent of the voters in the referendum, formally acknowledges the republic to be part of the Russian Federation (Ostankino TV, 27 October 1993), it also "envisages the right to self-determination" (ITAR-TASS, 16 December 1993). It provides for a 32-member republic parliament, the Supreme Hural, whose membership was also elected on 12 December. The republic's constitution gives parliament authority to decide "problems of war and peace, borders," and to suspend Russian Federation legislative acts which "go beyond the powers envisaged by the constitution of the Russian Federation, the federal treaty or other agreements" (ITAR-TASS, 16 December 1993). Only 30.5 percent of Tuvan voters approved the federal constitution on 12 December. -- The constitution of the republic of Bashkortostan, adopted on 24 December 1993 by 206 out of 227 republic Supreme Soviet deputies (Segodnya, 28 December 1993; Sovetskaya Rossiya, 25 December 1993), claims precedence over the federal constitution, at least in some provisions. The Bashkortostan constitution provides that the republic will voluntarily yield to Moscow certain powers pertaining to interstate relations under terms of an as yet to be negotiated treaty with the Russian Federation but retain authority over its judicial system and prosecutor's office, independent foreign economic and foreign policy affairs, and entrance into interstate associations (Nezavisimaya Gazeta, 28 December 1993). The republic's constitution also asserts "the land, its contents, natural wealth, and other natural resources on its territory" to be "the property of its multinational people" (Sovetskaya Rossiya, 25 December 1993). Fifty-three percent of the Bashkortostan electorate voted against the federal constitution in the 12 December referendum (Nezavisimaya Gazeta, 16 December). -- Tatarstan also rejected the federal constitution on 12 December as fewer than fourteen percent of the republic's electorate participated in the referendum (Izvestiya, 14 December 1993). In November 1992, the republic Supreme Soviet approved a republic constitution that states that Tatarstan's laws "take precedence throughout its territory, unless they conflict with international commitments of the republic," and that the republic constitution "is an act of the highest legal force of direct effect" and declares the republic a "sovereign state" and "subject of international law" (Sovetskaya Tatariya, 13 December 1992). The constitution associates the republic with the Russian Federation only within the parameters of a bilateral treaty that divides Federation and republic authority (see box) (Interfax, 6 November 1992). Moscow is also engaged in a constitutional conflict with Sverdlovsk oblast over the oblast's bid to claim republic status. Under the leadership of former oblast Governor Eduard Rossel, residents of the Sverdlovsk region are seeking formal recognition for the Urals republic, favored by 83 percent of voters (with a 55 percent voter turnout) in a 25 April 1993 non-binding referendum (Interfax, 1 July 1993) and proclaimed by a decision of the oblast soviet (Izvestiya, 3 July 1993). Despite being fired by Yeltsin for backing the move to claim republic status, Rossel was given a vote of confidence as 61.87 percent of the Sverdlovsk Oblast electorate endorsed him for a seat in the Federation Council (Interfax, 13 December 1993). Rossel has succeeded in getting a debate on approval of the constitution of the Urals Republic on the Federation Council's agenda (Izvestiya, 10 February). Claiming that the establishment of the Urals Republic and adoption of its constitution were made "in full conformity" with the federal constitution, Rossel asserted he is "ready" to appeal to the Constitutional Court to approve the republic constitution (ITAR-TASS, 17 January). Tatarstan Negotiations Moscow's response to the conflict with Tatarstan has been to engage in protracted negotiations with the republic, talks which have ended in mutual agreement on a treaty. Culminating three years of negotiations with Kazan, Moscow's future relations with the republic will be based on the bilateral "Treaty on the Mutual Delegation of Authority and Terms of Reference," signed on 15 February by Yeltsin and Tatarstan President Mintimer Shaymiyev (ITAR-TASS, 15 February) (See Box). The Moscow-Kazan bilateral treaty is supplemented by twelve intergovernmental agreements. According to Kommersant-Daily, the agreements concern oil production, ownership matters, defense industries, customs, transportation of oil products, environmental cooperation, education, the budget, banking system, foreign economic activity, crime, and military organization (5 February). Treaty as a Model Since the signing of the Russia-Tatarstan bilateral treaty, Yeltsin and Shakhray have hailed the treaty as a "precedent" for negotiating similar agreements with other components: -- Following the treaty signing, Yeltsin stressed that "treaties of this kind are, basically, the sole constitutional way of removing contradictions between the Russian Federation constitution and republic constitutions in a civilized way, without twisting anyone's arm" (ITAR-TASS, 15 February). -- Shakhray was quoted as saying that "there is a legal and economic possibility of the conclusion of treaties similar to that with Tataria with each component of the Russian Federation," based on "Article 11 of the Constitution . . . clause 3 of which says that the terms of reference shall be delineated "by this constitution and the Federal and other treaties" (Segodnya, 25 February). According to a 15 February Interfax report, Shakhray would like to see Federal Assembly adoption of a law on power- sharing as a way of regulating the process. Detractors characterize the Russia-Tatarstan treaty as a threat to federalism, saying it will complicate future center-regional relations and unacceptably weaken the center: -- Sergey Baburin, State Duma deputy and leader of the unregistered "Russian Way" faction, viewed the treaty as a threat to federalism and submitted a Duma proposal "On Guarantees of the Federal System and Provision for Territorial Integrity of the Russian Federation On Account of the Signing of the Treaty with Tatarstan," which apparently failed for lack of votes. Explaining his proposal, Baburin was quoted as saying that "for the first time the state signed a treaty with a part of itself" and that the treaty presents "a great danger because it means the state's transition to a confederative system" (Interfax, 16 February). -- In a 16 February article, Segodnya commentator Vladimir Todres suggested that pursuing separate treaties for each region would produce gridlock and confusion. He wrote, "Russia has a further 87 regions, not counting Chechnya. The question "If the Tatars can do it, why can't we?" is quite natural. Why should the other regional leaders swallow this treaty in silence?" Other Republics While Moscow and Kazan were putting the finishing touches on the treaty, Moscow still appeared to be pressing the other republics to revise their constitutions, remaining noncommital on a willingness to conclude other treaties. In the case of at least one republic, Bashkortostan, Moscow appears to have opened negotiations on a set of agreements similar to those it signed with Tatarstan. According to republic Prime Minister Anatoliy Kopsov, the signing of the treaty with Tatarstan "gave the latest impetus" to the resumption of talks between Moscow and Bashkortostan. He said that the negotiators were working on a treaty and a package of bilateral economic, social, and cultural agreements, some of which are "practically ready for signing" (Interfax, 17 March). Moscow officials have not been observed to comment on these negotiations. Before the Moscow-Kazan treaty signing, Moscow urged constitutional reform in a unilateral effort to rein in the regions. Members of the Council of Heads of Administrations under President Yeltsin had reportedly advised the formation of a commission that would bring the constitutions of republics "in line" with the federal constitution. The Council cited "a number of norms" in which component constitutions "contradict" the federation's. Nikolay Medvedev, head of the presidential Administration's Directorate for Work with the Territories, placed "special emphasis" on twelve republics that still have "old" constitutions (See Note 1), and five newly established republics, Adygey, Altai, Ingushetia, Karachayevo-Cherkessia, and Khakassiya, which do not yet have their own constitutions (Interfax, 6 January; Russian Television, 6 January). (Note 1) To illustrate his point, Medvedev reportedly cited the republic of Mordovia, which "by its constitution is still a soviet socialist republic" (Interfax, 6 January). The Mordovian SSR has since been renamed the Republic of Mordovia (Ostankino TV, 26 January). Republics' Response To date, only a few republics have signaled willingness to amend their draft constitutions in response to Moscow's objections and the criticism from the Council of Heads of Administrations: -- In its 11 January issue, Izvestiya reported that the Kabardino-Balkar Republic's parliament approved a package of proposals from republic President Valeriy Kokov to "alter" and "supplement" the republic constitution so that it complies with the federal constitution. -- According to a 19 February Nezavisimaya Gazeta article, the Komi Republic constitution "corresponds" with the federal constitution. Adopted on 17 February by a majority vote of the republic Supreme Soviet, the republic constitution proclaims Komi as a sovereign formation within the Russian Federation (Radio Rossii, 17 February). According to Russian TV, even before its adoption the draft constitution for the Komi Republic was recognized as an attempt to incorporate "the principles of territorial sovereignty on the basis of Russian federalism" (24 January). -- In a 27 February referendum, 97.6 percent of voters approved the constitution of Ingushetia, which declares the republic a "democratic, rule-of-law state, part of the Russian Federation on a treaty basis" (Nezavisimaya Gazeta, 2 March). Employees of the republic Justice Ministry had underscored the need to put the Ingush constitution in line with the federal constitution before the scheduled referendum (ITAR-TASS, 23 January). Ingushetia's conciliatory response may be linked to the federation government's mediating role in an Ingush-North Ossetian territorial dispute as an attempt to gain the federation government's favor. -- The republic of Buryatia reportedly passed a new constitution that appears to follow the model set by Tatarstan. Having received a unanimous vote of confidence by the republic Supreme Soviet, Buryatia's constitution reportedly states that the republic is a "sovereign, democratic, law-governed state within the Russian Federation," and that its relations with Moscow will be "built on a constitutional, treaty-based foundation" (Ostankino TV, 22 February). -- According to republic Supreme Soviet First Deputy Chairman Bagaudin Akhmedov, the new constitution of Dagestan calls for "the building of a single, sovereign, democratic state within the Russian Federation (Segodnya, 1 March). Implications Despite Yeltsin's and Shakhray's endorsements of the Moscow-Kazan bilateral treaty as a model, it is not clear that Moscow is actually prepared to conclude similar treaties with the other republics. Although Shakhray has reemerged as a player in nationality affairs after a period of relative eclipse, his position within the government remains clouded, somewhat diluting the value of his endorsement. The other republics, probably viewing the treaty as a success for Kazan, will likely press Moscow to give them a similar deal. Box The Moscow-Kazan Treaty: Who won? Who lost? Officials have made conflicting statements on the specifics on the bilateral treaty, but media reportage suggests that both Russia and Tatarstan made concessions in the treaty's final draft: -- Although Tatarstan may now "take part in international relations and foreign economic activity" (ITAR-TASS, 15 February) and--according to republic President Mintimer Shaymiyev--the treaty "recognizes the right to self-determination . . . and defense of sovereignty" (ITAR-TASS, 16 February), the words sovereign state" and "subject of international law" were reportedly removed from the treaty draft (Krasnaya Zvezda, 17 February). -- The treaty reportedly gives Tatarstan "exclusive" ownership and use of the land on its territory and its contents, and all property (ITAR-TASS, 16 February). -- According to a 17 February Krasnaya Zvezda article, Tatarstan reportedly had to abandon its plans to establish a "single- channel" taxation system in favor of the "general federal scheme." -- Although Shaymiyev has reportedly described the outcome of the negotiations as "a change in [Tatarstan's] status . . . within Russia" (Krasnaya Zvezda, 17 February), Minister of Nationality Affairs and Regional Policy Sergey Shakhray has countered that the treaty "provides neither for upgrading nor for downgrading the status of Tatarstan" (Interfax, 18 February). Shaymiyev stated that the Moscow-Kazan treaty will not have to be ratified, as the federal and Tatarstan constitutions only require parliamentary ratification of international treaties (Kazanskiye Vedomosti, 22 February). End Box (AUTHOR: NERO. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ANALYSIS BRANCH, RUSSIA DIVISION (703) 733-6070.) ENEAG/BLOUGH/JF 18/1958Z MAR

SUMMARY Clearly alarmed by the swiftness with which the IAEA is calling a Board of Governors meeting, Pyongyang has made a public effort to explain its differences with the IAEA on resolution of the nuclear inspection issue, an effort apparently motivated by concern over the need to salvage high-level talks with Washington and head off possible UN sanctions. END SUMMARY Pyongyang's latest authoritative pronouncement on the nuclear inspection issue, which came in an 18 March Atomic Energy General Department(SEE NOTE) spokesman's press statement, seemed to carefully avoid foreclosing the possibility of a negotiated settlement (Pyongyang radio, 18 March). Although the statement carried the standard warning against applying pressure on Pyongyang and charges of Western plans to "crush" the DPRK, its major complaint seemed to be that the IAEA is convening a Board of Governors meeting--reportedly for 21 March (Yonhap, 17 March)- -"even before" analyzing the results of the just concluded inspections, having "hastily" reached the "unjust" conclusion that "it cannot guarantee" non-diversion of nuclear materials. (NOTE: The department was previously known as the Ministry of Atomic Energy Industry. Pyongyang media have not been observed to report on the apparent reorganization.) The statement, which made it clear that Pyongyang had allowed the IAEA inspection this time solely to facilitate DPRK-U.S. high- level talks,(SEE NOTE) noted areas of basic disagreement with the IAEA. This disagreement is due, the statement claimed, to the inspection team's attempts to go beyond the contents of a 15 March bilateral agreement reached in Vienna with the IAEA. According to Pyongyang: + The IAEA inspection team unfairly maintained that the inspections were being conducted under Nuclear Nonproliferation Treaty (NPT) safeguards. The North Korean statement claimed that Pyongyang had agreed only to allow inspections "purely" to ensure continuity of the safeguards, reiterating Pyongyang's contention that its "special status" of having only "temporarily suspended" withdrawal from the NPT exempts it from normal safeguards obligations. + The IAEA's insistence on 1) extracting samples in sealed-off areas where the seals remained intact; 2) gamma radiation mapping at all points, instead of selected points; and 3) examining "the cooling system," went beyond what is needed to merely ensure continuity of the safeguards. Such inspections, the statement maintained, would have made the inspections "equivalent" to routine and ad hoc inspections required under the safeguards. (NOTE: Underscoring Pyongyang's eagerness to resume high-level bilateral talks with Washington, North Korean Ambassador to Moscow Son Song-pil has reiterated Pyongyang's contention that the DPRK-U.S. talks, once held, will serve as "an important occasion" to solve the nuclear issue and will also lead to "easy resolution" of pending inter-Korean issues (Pyongyang radio, 18 March).) Charges of "Pressure" Tactics The statement complained that the IAEA had sent three messages to Pyongyang during the inspection, "threatening" to "report to the Board of Governors that the agency is not in a position to verify non-diversion of nuclear materials" unless its demands were met. However, in warning against such "pressure" tactics, the North Korean statement said that any attempts at pressuring the DPRK "would lead to a situation in which we would have no choice but to take a decisive measure to counter them." The statement went on to pledge that Pyongyang will watch to see if the IAEA "intends to resolve our nuclear issue fairly or attempts to use it for political aims"--a relatively circumspect formulation that would appear to allow Pyongyang a certain range of latitude in judging IAEA action on the inspection issue. Implications Although the statement seemed to leave little room for compromise, it did stop short of an ultimatum, adopting instead a wait-and-see attitude toward future IAEA action. These caveats suggests that Pyongyang is trying to protect the possibility of engaging in bilateral talks with Washington by somehow preventing referral of the nuclear issue to the UN Security Council. (AUTHOR: YIM. QUESTIONS AND /OR COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM, (703) 733-6534.) EAG/BIETZ/PF 19/0014z Mar

SUMMARY Seeking to exploit what he perceives to be a rift in the coalition that liberated Kuwait, President Saddam Husayn has presented the UN Security Council with a virtual ultimatum, threatening implicitly that if it fails to take significant steps in coming weeks toward lifting the sanctions, Iraq may cease to cooperate with the UN Special Commission and adopt a confrontational posture. Coming amid signs that the sanctions are causing increasing economic difficulties in Iraq, Saddam's move reflects his impatience with the Security Council's failure to lift the sanctions in response to Baghdad's diplomacy and selective compliance, his desire to frustrate effective future monitoring of Iraqi weapons programs, and his unwillingness to make further concessions in compliance with UN resolutions -- such as recognizing the border with Kuwait. END SUMMARY In a 13 March speech, which Iraqi media played up as an ultimatum threatening confrontation if a date for lifting the sanctions is not set, Saddam demanded that the Security Council implement Paragraph 22 of Resolution 687 -- allowing Iraq to resume its oil sales -- "immediately and without any conditions." He warned that if Deputy Prime Minister Tariq 'Aziz returns from the UN Security Council session without the Council's agreement to activate Paragraph 22, then Iraq's people and leadership would have "no choice but to decide what they believe will give them hope . . . in the direction they believe is sound" (Baghdad radio). Media Highlight Speech Tightly controlled Iraqi media immediately began to portray Saddam's speech as an ultimatum and to prepare the Iraqi public for confrontation. For example: -- The daily Babil, owned by Saddam's son 'Udayy, said that Saddam's speech "defined the contents of the decisive Iraqi confrontation with the enemies" (Iraqi News Agency [INA], 17 March). -- The daily Al-Qadisiyah (See Note 1) claimed Saddam's speech gave the Security Council "the last chance . . . to lift the sanctions without delay or conditions" (INA, 15 March). (Note 1) Around mid-September 1993, Al-Qadisiyah was removed from the supervision of the Defense Ministry and affiliated with the Information Ministry, which now controls this paper as well as Al- Jumhuriyah (Al-'Iraq, 18 September 1993). Probably more than an economy measure, this change, made by a Revolution Command Council decree, may have been designed to limit the political power of the Defense Ministry. -- Interpreting Saddam's speech as threatening an end to or reduction in Iraqi cooperation with the United Nations, the Ba'th Party daily Al-Thawrah said that if the Security Council does not lift the sanctions, Iraq will choose "a new road, different . . . in terms of its approach to [UN] resolutions and committees," a road that will prove Iraq has "other options" aside from cooperating with "colonialist interpretations of UN resolutions" (INA, 15 March). Earlier Signs Saddam had already foreshadowed a possible change of policy in his 16 January Gulf war anniversary speech, in which he pledged that "we will not relinquish our people in the northern part of the homeland, nor will we stand idle toward the continuation of the blockade and the violation of our sovereignty in southern Iraq." In that speech, he also warned "all evildoers, masters and satellites" - and especially "some evildoers from Saudi Arabia and Kuwait" -- not to "miscalculate" because "the punishment of the criminals is an eye for an eye and a tooth for a tooth" (Baghdad radio). Explaining the Shift In his 13 March speech, Saddam explained that a shift from diplomacy to confrontation may prove necessary because Iraqis who advocated concessions seem to have been wrong while Iraqi hardliners seem to have been right. He said Iraq had "thus far" employed "diplomatic efforts" to achieve "a better level of understanding by the Security Council" because "many people in our country" had "expected" that this policy "would make some people, whose hearts have no feeling, show a flexible position and open the doors again to the Iraqi people." Saddam contrasted Iraqis who favored the diplomatic policy with other Iraqis who were "quite convinced that the criminal level of aggression and the way sanctions were implemented . . . came from minds without any conscience." He said these Iraqis, evidently now including himself, believed that "despite Iraq's offers and responses," its diplomats would discover that "there is nothing being given in return" and that the Security Council's Paragraph 22 is being used merely as a "tactical cover to make Iraq fulfill its obligations" while the Security Council fails to fulfill its own obligations. Minimum Demands Indicating his minimum demands, Saddam castigated UN Special Commission Chairman Rolf Ekeus for failing to provide a timetable stating when the probationary period for monitoring Iraqi weapons production would begin and end. Saddam insisted that the Iraqis must know when they can start selling oil so that they "will be able to make their plans, see what they can do, and prepare themselves psychologically and economically for the required duration." Saddam also revealed his resentment that Ekeus was working to turn UN Security Council Resolution 715 into an effective monitoring instrument. He claimed Ekeus had said that as soon as Iraq approved of 715, he would write a report to the Security Council, but when Iraq approved it, Ekeus said, in Saddam's words, "we must first start monitoring and make sure that Iraq is implementing 715 the way we want -- the way Ekeus wants -- in order to make sure Iraq is committed." Saddam claimed that the probationary monitoring period should have started as soon as the two cameras to monitor missile testing were installed and turned on. 'Aziz Letter In a letter to the UN Security Council president on 16 March, 'Aziz reiterated that Iraq "demands" that the Council apply Paragraph 22 "immediately and without any additional restrictions or conditions" and that it "reject the tendentious political interpretations of its resolutions that some states are seeking to impose on the Council." Rejection of Iraq's demand, he said, would "certainly lead to a reassessment of the situation and to an action [tasarruf] that will protect the Iraqi people from the harm to which they are being exposed." Indicating that at least for now Iraq will not recognize Kuwait and the Iraq-Kuwait boundary, as required by UN Security Council Resolution 833, 'Aziz said that if the sanctions and the no-fly zones are lifted, the issue of Kuwait "could then be discussed in accordance with the rules regulating relations among states" (Baghdad radio, 17 March). (See Box 1) Perceived Rift Baghdad appears to believe that now is an opportune moment to exploit what it perceives as a serious rift within the alliance that liberated Kuwait. For example, the Information Ministry's mouthpiece Al-Jumhuriyah has claimed that the United States has become "virtually isolated in its calls for the continued enforcement of sanctions against Iraq, particularly since it has seen with its own eyes the disintegration of its international coalition" (INA, 6 March). Iraqi media have recently listed France, Russia, and China as among the countries showing understanding for Baghdad's position. In a recent article, Saddam's press secretary 'Abd-al-Jabbar Muhsin advocated using a policy of "intimidation" and "temptation," denying trade benefits, priority in debt payments, and other benefits to "any country not currently adopting a just and equitable stand" and offering corresponding benefits to countries now helping Iraq to lift the sanctions (Babil, 24 February). Information Ministry First Under Secretary Nuri Najm al-Marsumi argued in Al-'Iraq -- the daily of the pro-Saddam Kurds -- that Iraqi diplomacy and U.S. mistakes had helped create "a serious fissure within the anti-Iraq alliance" and that "current international and regional circumstances" provide Iraq with "a serious and true opportunity for lifting the unfair embargo." Therefore, he said, Iraq must "draw the world's attention" to its determination and capability "not to remain idle" if the sanctions continue and to its current "rallying" around Saddam "to thwart the aggression once and for all and to achieve the decisive victory" (8 March). (See Box 2) Implications Saddam clearly is unwilling to recognize Kuwait, as required by UN Security Council Resolution 833, unable to stay in power without repressing his people, as required by Resolution 688, and surprised by Ekeus' determination to treat Resolution 715 as an effective means of monitoring Iraqi weapons. Nevertheless, he seems to believe that to protect his proclaimed status as "Iraq's historic leader" and to avoid being perceived as weak, he needs to manipulate the Security Council into setting a date for Iraq to resume selling its oil. He is therefore hoping that his threat to adopt a new, presumably more confrontational policy will break up the U.S.-led coalition and erode the sanctions. If his ultimatum is rejected, Saddam will almost certainly feel compelled to do something to carry out his threat. He may be content with an intensified propaganda campaign, directed in particular to Arab and Islamic countries, and with repeatedly threatening and then carrying out a gradual reduction or sudden cessation in Iraq's present degree of cooperation with the United Nations. However, one cannot rule out Saddam's giving up on efforts to lift sanctions and therefore seeking a victory in another area, such as a move to regain control of Iraqi Kurdistan. Box 1: Denying Kuwaiti Legitimacy Saddam's consideration of a change of policy is based partly on his unwillingness to go any further to comply with UN resolutions. For example, Iraqi leaders and media have signaled their continuing intention not to recognize the legitimacy of Kuwait, its government, or its border with Iraq. -- In an address to pro-Saddam foreign visitors on 18 January, Saddam personally denied the legitimacy of the Kuwaiti rulers, claiming that by their own actions they had lost the right to rule. After accusing them of lying in 1990 in order to make the U.S. public "accept the idea of war" against Iraq, he said that "when a Muslim ruler lies, then he has lost every legitimate right to be a ruler" (INA). -- Commenting on Saddam's statement in his 16 January Gulf war anniversary speech that "we will not turn wisdom into a prelude for weakness and despair," Information Ministry First Under Secretary al-Marsumi explained that, while "wisdom and necessity" have led Iraq to accept UN Security Council resolutions, Iraq will not simply agree to "whatever it is asked for." In particular, it will not "guarantee the security of the bandits, the rulers of the Kuwait governorate and Saudi Arabia" despite the fact that this is what "the Americans want" (Babil, 2O January). -- The practice of referring to Kuwait as the [Iraqi] "governorate of Kuwait" has continued (for example, Al-Jumhuriyah editor Salah al-Mukhtar in an article in Babil, 3O January; Babil, 1O and 12 February). More recently, Saddam's press secretary 'Abd al-Jabbar Muhsin has repeatedly referred to Kuwait as "Kazimah," the Iraqi-imposed name for Kuwait City under the occupation (Babil, 10 March). End of Box 1 Box 2: Economic Deterioration Official efforts to prepare the public for a change in policy have come amid signs of increasing economic deterioration that Baghdad perceives as a threat to Iraqi steadfastness and morale. For example: -- A Babil editorial under a pseudonym used by Saddam's son 'Udayy castigated the Cabinet for decisions that allegedly caused the dinar's exchange rate to plummet between September 1993 and January 1994, thereby allowing Iraq's "enemy" to make "some gains in the arena of the economic battle." The editorial, citing a UN statement that called for deferring any discussion of lifting the embargo until Iraq's good will had been tested for a year, implied that Iraq could not last another year unless the dinar's slide is reversed. It therefore suggested that the success or failure of a ministry should be judged by its contribution to the strength or weakness of the dinar (2O January). -- Saddam's press secretary 'Abd-al-Jabbar Muhsin attacked "a handful of misled Iraqis" who "raise prices whenever the enemy escalates its onslaught and its conspiracies" and who have become a danger to Iraqi "morale and steadfastness" (Al-Qadisiyah, 22 February). -- The 1994 budget and investment plan was 25 percent below the 1993 figures (Baghdad radio, 29 December). End of Box 2 (AUTHOR: BUDER. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, NEAR EAST ANALYSIS BRANCH (703) 733-6094) pf 19/0026z Mar

SUMMARY In a string of confrontational actions and pronouncements, Pyongyang has raised the stakes further in its high-stakes nuclear issues game by threatening to withdraw from the Nuclear Nonproliferation Treaty (NPT). Although apparently unwilling to publicly concede that its own recent actions have damaged the chances for resumption of high-level U.S.-North Korea dialogue, Pyongyang appears to be trying to somehow salvage bilateral talks with Washington. END SUMMARY Pyongyang Threatens NPT Withdrawal, Calls for U.S. Talks Pyongyang's threat to withdraw from the NPT came in an authoritative Foreign Ministry spokesman's statement issued on 21 March (Pyongyang radio, 21 March). In the statement Pyongyang said it will "carry into practice" its declaration of NPT withdrawal announced on 12 March 1993 under certain conditions: + If the United States refuses bilateral talks with North Korea and resumes Team Spirit, thereby "increasing its nuclear threat" against the DPRK. + If the IAEA "further expands it unfairness" by "distorting" the results of its recent inspections in North Korea and resorts to "forcible measures and pressures." The 21 March statement, which for the first time acknowledged that the DPRK-U.S. talks scheduled for the same day in Geneva did not take place, also repeated familiar North Korean charges of U.S. violations of previous agreements with North Korea and declared that Pyongyang will "no longer" be duty-bound to ensure continuity of NPT safeguards. Hint of Moderation Possibly seeking to soften its threat--and thus somehow leave the door ajar for dialogue with Washington- -the statement seemed to imply that as long as there is any hope of resuming bilateral talks with Washington, Pyongyang may refrain from taking the final step of NPT withdrawal. North Korean withdrawal from the NPT, the statement said, would occur only if the United States "persists in avoiding" bilateral talks "to the end." Underscoring Pyongyang's reluctance to definitively rule out future talks, the statement asserted that the DPRK is "in no hurry at all"--presumably, to foreclose avenues of dialogue with Washington--"even if the DPRK-U.S. talks are not held." In addition, in contrast to North Korean pronouncements on the inter-Korean talks (see following article), the statement, like previous pronouncements on Washington's policy, refrained from extreme polemical attacks on Washington. Pyongyang media also appeared to react with similar circumspection to recent statements by high U.S. officials criticizing the North. For example, monitored North Korean media so far have not reported or commented on CIA Director Woolsey's charges that Pyongyang has been exporting weapons of mass destruction, is supporting terrorism, and may already possess nuclear weapons (Yonhap, 18 March). Implications Pyongyang clearly prefers to deal only with Washington on the nuclear issue. However, it seems unwilling or unable to acknowledge that its own dilatory and confrontational tactics are damaging the prospects for the dialogue it is seeking. Pyongyang Breaks Off Talks With Seoul, Threatens War SUMMARY Accusing Seoul of engaging in pressure tactics, Pyongyang has abruptly broken off bilateral talks and issued threats of war- -threats that it subsequently appeared to moderate. North Korea apparently hopes to gain from what it sees as differences within the ROK Government and between Seoul and Washington on the nuclear issue. END SUMMARY The North came to Panmunjom on 19 March clearly prepared to break off the ongoing negotiations with the South on the exchange of presidential envoys. The North Korean chief delegate--identified in Seoul media as Pak Yong-su--not only reinstated demands that he had previously indicated would be retracted, but also insisted that the ROK Government "apologize" to all Koreans--a formulation Pyongyang had typically used in the past to signal its noninterest in dialogue with Seoul and Tokyo--this time for allegedly obstructing DPRK-U.S. high-level talks (Pyongyang radio, 19 March). The North's main complaint against the South focused on what Pak described as Seoul's "sudden change of attitude" toward adoption of "tough measures" against Pyongyang. In particular, Pak said that North Korea's pique was based on reports of the 17 March "high-level strategic meeting" in Seoul, which had reportedly discussed holding Team Spirit, the deployment of Patriot missiles, and international sanctions. Pak equated this alleged change in the South's attitude to "a grave crime" and claimed that it necessitated the reimposition of the four demands made earlier by the North--demands that Pak had previously admitted were "barriers" to envoy exchanges erected by Pyongyang itself. (The North had demanded that the South refrain from 1) staging large-scale nuclear exercises, 2) introducing new weapons, including the Patriot missile, and 3) using threats of international sanctions. The North had also demanded previously that 4) the South retract ROK President Kim Yong-nam's remarks about not shaking hands with North Korean officials.) Demand for Apology Signaling that Pyongyang is no longer interested in continuing dialogue with Seoul, Pak accused the South of having used the envoy exchange talks "solely" for the purpose of derailing DPRK-U.S. high-level talks. He went on to "strongly insist" that the South "frankly admit" this "dark intention" and "apologize before the nation." Attempting to place the onus of any breakdown of dialogue on the South, Pak further accused Seoul of having in effect adopted "a declaration of abandonment of the special envoys exchange, a declaration of an all-out confrontation with us, and a declaration of war." Pyongyang radio on 19 March depicted Pak as making his most provocative remarks only in response to remarks the South made at the 19 March session. According to the radio, the South side had said that should the envoy exchange talks be discontinued, "there is no knowing what danger would materialize." To this Pak reportedly replied, "Don't worry about it. What do you think the South is? If the North suffers damage, do you think the South will go unscathed?" Pak went on to pledge unspecified "immediate and decisive countermeasures of self-defense" in case "some powers impose sanctions on us or otherwise provoke us." The radio said Pak coupled his pledge with a "stern warning" not to take the North Korean threats lightly, quoting him as saying, "we do not know how to engage in idle talk. "(SEE NOTE) (NOTE: Seoul's government-run KBS-1 television on 19 March broadcast video recording of even more inflammatory remarks by Pak that were captured by closed-circuit television coverage of the meeting. In the video, Pak told his Southern counterpart, Song Yong-tae, to "give a careful consideration to the consequences of a war," and warned that "Seoul is not far from here. If war breaks out, it will turn into a sea of fire. Mr. Song, it will probably difficult for you, too, to survive." Pyongyang media have not been observed to report on this portion of Pak's remarks.) Moderation of Threats Pyongyang subsequently appeared to backpedal a bit on its threats of war. In a 21 March statement issued in the name of the North Korean delegation to the inter- Korean contacts, which again chastised the South for "suddenly" assuming what it described as a hardline stance, the North made only passing references to the possibility of war, implying instead that the downfall of the ROK government will come from revolt within the South (Pyongyang radio, 21 March). The statement warned the ROK to realize that "no dictators" in the South had "survived committing the antinational act of betraying fellow countrymen in collusion with outside forces" and that "these flunkeyist, nation-sellers have met a bitter end." North Korean Motives Pyongyang may calculate that its brinksmanship will sufficiently split opinions within the South Korean government to make a firm stand against the North difficult. For the past few months, Seoul media reporting on relations with the North has indicated that there are serious divisions within the Seoul government over how to deal with Pyongyang. The latest of these indications came shortly after a 12 March inter-Korean meeting. The Seoul daily Hanguk Ilbo on 13 March cited an unnamed ROK "government official" as saying that the South and the United States "believe" that by failing to agree to the exchange of envoys with Seoul, Pyongyang had "unilaterally invalidated" an agreement reached with Washington on resuming high-level talks in Geneva later in the month. Apparently alarmed by the possible effects such remarks could have on the inter-Korean talks, other "government officials" were cited the next day by the South Korean news agency Yonhap as advocating a different approach (14 March). One of them was quoted as saying that Seoul should not consider it "a violation of the North Korea-U.S. agreement" even if North Korea "refused" the envoy exchange outright. All that would happen, he reportedly said, would be that "the date of the third round [U.S.-North Korea] meeting would be delayed" until the envoy exchange was realized. In addition, there has been intermittent South Korean reporting of a division of views between Seoul and Washington that could have emboldened Pyongyang. Most recently, for instance, Yonhap on 16 March cited Kim Tae-chung, a "retired" opposition leader and former presidential candidate, as "lashing out" at U.S. "hardliners" for allegedly jeopardizing lives of Koreans in their pursuit of confrontation with North Korea on the nuclear issue. Similarly, in an article datelined Washington, the Seoul daily Choson Ilbo on 13 March claimed that the U.S. Congress has concluded that differences between Washington and Seoul over how to deal with the North Korean nuclear issue are serving as a "stumbling block" in the U.S. Government's formulation of its policy toward Pyongyang--reporting that could have encouraged Pyongyang to reinforce its constant attempt to drive a wedge between Washington and Seoul. Outlook Pyongyang media treatment of the 19 March meeting seems aimed at portraying the North Korean leadership as fully prepared to face the worst case scenario. By declaring Pyongyang's willingness to destroy Seoul in a conflict, the North Korean leadership may hope to frighten officials in the South into advocating concessions and thus further aggravate a perceived division between the United States and South Korea. (AUTHOR: YIM. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM, (703) 733-6534.) EAG/HEBBEL/sdj 23/0017Z MAR

The Japan Association of Defense Industry (JADI), existing in its present form since 1988 and tracing its origin back to 1951, is an industry association under the supervision of the Ministry of International Trade and Industry (MITI) and the Japan Defense Agency (JDA). JADI promotes the development of Japanese defense technology and equipment, monitors foreign technology, lobbies on behalf of its corporate members for government defense spending, and cooperates with the government on export controls. ASSOCIATION OVERVIEW JADI (Nihon boei sobi kogyokai), an industry association (shadan hojin) of over 130 corporations, promotes the development of a strong Japanese defense industry. According to the latest edition of the annual guide to MITI's public corporations (TSUSHOSANGYOSHO KANKEI KOEKI HOJIN BENAAN 1993 May 93), JADI seeks to "work towards the sound development of the defense equipment industry and, in so doing, contribute to the establishment of Japan's defense base" by promoting research and development of defense equipment and improving production technology. The association's stated activities regarding defense equipment are as follows: conducting surveys and research; gathering and disseminating information, supporting R&D; offering proposals on modernization, greater efficiency, and support for Japan's defense production base; hosting seminars; cooperating with other organizations related to the defense industry; carrying out contract research, helping devise Standards; and cooperating with the government's export control Policies. Central to the association's activities is the promotion of R&D and Japan's independent development of defense technology and product ion capacity (NIKKAN KOGYO SHIMBUN 3 Jun 87, NIKKEI SANGYO SHIMBUN 1O Jan 87). CLOSE TIES TO GOVERNMENT The association has existed at three different levels of organization, each successively closer to the government. In October 1951, five steel companies led the way in establishing the Japan Technology Production Association (Nihon gijutsu seisan kyoryokukai), a private company (kabushiki kaisha). In October 1953, the organization changed its name to the Japan Weapons Industry Association (Nihon heiki kogyokai) and became a voluntary association (nini dantai) (YOMIURI SHIMBUN 26 Sep 88). In September 1988, the organization assumed its present name and status as an industry association under joint MITI and JDA administration. One month prior to the change, NIKKEI SANGYO SHIMBUN (4 Aug 88) reported that the organization had experienced "difficulties" as a voluntary organization in securing long-term loans and government subsidies. YOMIURI SHIMBUN (26 Sep 88) reported that the organization would now receive government subsidies due to its "upgrading" to the status of a legal entity (hojin). Along with the Promotion in status came enhanced government supervision. Chairman Kosaku Inaba, president of Ishikawajima- Harima Heavy Industries (IHI), and the three vice chairmen, all corporate executives, retained their positions. But the insertion of three members of the government "old boy" network signalled JADI's closer ties to the government (ASAHI SHIMBUN 17 Sep 88, NIKKEI SANGYO SHIMBUN 17 Sep 88, YOMIURI SHIMBUN 26 Sep 88). Tomoyoshi Kabaya, a former MITI official who headed the JDA Equipment Bureau, assumed the newly created post of JADI director- general. Takeshi Moriyama, former chief of JDA's Central Procurement Office, assumed office under him as executive director. Both Kabaya and Moriyama continue to hold those positions, according to the latest edition of TSUSHOSANGYOSHO KANKEI KOEKI HOJIN BENRAN 1993 (May 93). In contrast, IHI's Inaba and the three corporate executives under him vacated their seats after serving out their two-year terms. JADI's chairmen and vice chairmen are drawn from the top ranks of Japan's defense industry. Yotaro Iida, chairman of Mitsubishi Heavy Industries (MHI), has chaired JADI since June 1992 (NIKKEI SANGYO SHIMBUN 28 May 92). IHI Vice President Kunio Minamizaki, Fujitsu Vice President Kimio Otsuki, and Asahi Chemical Industry Chairman Nobuo Yamaguchi are listed as the current vice chairmen (TSUSHOSANGYOSHO KANKEI KOEKI HOJIN BENRAN 1993 May 93). The association's chairmen have been chosen from among Japan's top seven defense companies: MHI, Kawasaki Heavy Industries (KHI), IHI, Mitsubishi Electric, NEC, Toshiba, and Japan Steel Works (NIKKEI SANGYO SHIMBUN 12, 28 May 92). Preceding Iida as JADI chairman were KHI President Hiroshi Oba (199O-92) and IHI President Kosaku Inaba (1988-9O). The association's top post has also rotated among companies according to three categories of defense equipment: firearms/special vehicles, ammunition/missiles, and electronics (NIKKAN KOGYO SHIMBUN 29 May 9O, ASAHI SHIMBUN 3O May 87, NIKKEI SANGYO SHIMBUN 2O Mar 85). MONITORING U.S. TECHNOLOGY The association has been monitoring U.S. defense technology as part of its mission to gather and disseminate information on foreign developments. For example, Washington and Tokyo reached an agreement in July 1987 for Japanese corporations to participate in the U.S. Strategic Defense Initiative (SDI). JADI's predecessor organization joined the Keidanren's Defense Production Committee and the Society of Japanese Aerospace Companies (SJAC) in a joint conference to learn the details of Japanese corporate partici- pation in SDI research from MITI, the "point of contact" for Japanese companies interested in the project (NIKKAN KOGYO SHIMBUN 4 Aug 87). The association was also to join SJAC and Keidanren's Defense Production Committee in an "SDI Information Center" slated to begin operations in early 1988. The association would cooperate in gathering information, primarily open-source documents in the United States, on SDI-related technology (NIKKEI SANGYO SHIMBUN 17 Nov 87). Moreover, at a New Year's party in January 1988, association chairman Kosaka Inaba and JDA Equipment Bureau Director- General Masaji Yamamoto gave speeches on Japanese corporate participation in SDI, stressing that companies study the technology involved and maintain liaison with the Japanese Government (NIKKEI SANGYO SHIMBUN 9 Jan 88). LOBBYING GOVERNMENT JADI also lobbies government officials and politicians. Chairman Iida joined SJAC's chief and other representatives of defense- related organizations in an October 1993 "round table discussion" on the Mid-Term Defense Plan (1991-95) with then-JDA Director-General Keisuke Nakanishi. JADI joined the call for increased defense R&D sPending to sustain the employment and expertise of JaPanese researchers and engineers in the field (ASAHI SHIMBUN 19 Oct 93). During the Liberal Democratic Party's (LDP) years in power (1955- 93), JADI kePt channels of communication to the succession of JDA chiefs and LDP defense experts. Among the guests at the association's annual New Year's party, for example, have been then- JDA Director-General Koichi Kato (NIKKEI SANGYO SHIMBUN 10 Jan 86). (AUTHOR: MERCADO. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, PACIFIC RIM BRANCH AT (703) 733-6346) GIG/21MAR/TECHTF/MILF/TID/ta 22/1916z mar

SUMMARY On 16 March Russian Television's (RTV) primetime edition of its Vesti news program launched a scathing attack on media bigwigs, including Aleksandr Yakovlev, head of both the Federal Service of Russia for Television and Radio Broadcasting and the Ostankino Television and Radio Broadcasting Company, and Mikhail Poltoranin, head of the State Duma Committee for Information Policy and Communications. Showing video of the two taking in the performance of an exotic dancer at a club for media elite, the program juxtaposed the officials' expensive and decadent perquisites with state television's acute shortage of operating funds. END SUMMARY Newscaster Svetlana Sorokina began the report by highlighting the continuing financial difficulties Plaguing state television. She noted that Anatoliy Nazeykin, chairman of the Central Committee of the Russian Federation Trade Union of Communications Workers, had recently warned that communications workers may again go on strike, as they did in February, if state television companies continue to fall behind in payments to communications enterprise5 for broadcasting state programming. The report then noted that the "media chiefs" had just attended a meeting of the Russian Union of Journalists where participant5 discussed state televisions financial crisis, and had stopped off at an "elitist" and "bourgeoi" journalists' club on returning from the meeting. Accompanying video showed Yakovlev and Poltoranin conversing at a table and then cut to shots of an "exotic" dancer performing a strip-tease to Western jazz music. The reporter said that the club's patrons, largely bankers and entrepreneurs selected according to "CPSU principles," came to enjoy "expensive foreign drinks" and to experience "Western culture," which is "foreign" to Russians. He concluded the report by noting that the proceeds from the club were supposed to support state television and questioning whether the government would also help. Sorokina then closed the broadcast by sardonically assuring viewers that, "as soon as we learn," Vesti would inform viewers "whom the government will help and how." Implications Coming in the wake of a major media reorganizati0n and statements by Yeltsin on the need to maintain two state television companies, this brash attack may indicate that decision-makers at RTV see Yeltsin himself as their patron and do not fear antagonizing Yakovlev or media officialdom in general. It may be particularly embarrassing for Yakovlev, who himself has recently expressed his opposition to excessive sex and violence in Western television programming aired on Russian television. The attack, however, plays into the hands of Yeltsin's hardline opponents, who often decry the alleged influence and decadence of the West. Finally, by simultaneously titillating viewers with salacious television footage and embarrassing Yakovlev, head of RTV's main rival, Ostankino, the report may indicate that competition between the two major television companie5 for viewers and advertising rubles is heating up. (AUTHOR: CRIMMINS. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ANALYSIS BRANCH, RUSSIA DIVISION (703) 733-6070.) ENEAG/BLOUGH cka 23/0145z mar

Table of Contents FEATURE: France: National Debate On Research Policy POLICY ISSUES Germany Launches New Laser Research Program French Report on Critical Defense Technologies Finnish Support for R&D CORPORATE STRATEGIES DASA, China Sign Telecommunications Satellite Agreement Swedish Research on Hybrid Vehicles Honda Reacts to Sale of Rover SPECIAL PUBLICATIONS FRANCE: NATIONAL DEBATE ON RESEARCH POLICY In recent statements to the press Minister of Higher Education and Research Francois Fillon confirmed that the French Government intends to make research a national priority and that it is relying heavily on major debates now taking place to define the broad outlines of a national policy by June 1994. The national debate on research policy officially got under way on 1 February, when Robert Daulray of the Atomic Energy Commission (CEA) presented to Fillon the "Report on the Trends in Major Aims of French Research." The 60-page document, which the research minister commissioned last September, will be circulated to about 30,000 members of the research community, who will use it as the basis for a major national consultation. " The consultation exercise will be based on six thematic conferences to be held in different regions of the country through mid-March. The results of these conferences will be included in a national debate in Paris on 9 April, to be followed by the drafting in May of a final summary document, which will serve as the framework for parliamentary discussions on the future of French research in June (LE FIGARO). The conferences will address topics such as research and innovation in small and medium- sized enterprises, competitiveness-oriented research and the private sector, basic research, advanced education and research organizations, and international research (AFS SCIENCES). Fillon told LE FIGARO on 2 February that he considers a thorough assessment of the French scientific community indispensable This has not been done for 10 years despite the major changes that have occurred during that time. Fillon considers it important for France to have a more accurate perception of its scientific resources and of the steps it needs to take during the next few years to remain a major player in the global S&T arena. According to Fillon, French research policy over the past five years has failed to define the kind of strong priorities that would encourage "pump-priming" programs to stimulate research in a changed national and international context or that would launch basic research programs today to lay the groundwork for the applied research companies will need tomorrow. AFP SCIENCES has quoted Fillon as saying that France is the only European country whose research budget is increasing, but Fillon asserted in LE FIGARO that, having relinquished much of its leadership role to become merely a source of funding, the French' Government now needs to find a way to target research instead of being satisfied to finance it without having any authority over it. The government needs to be able to make selective decisions, such as supporting a particular laboratory that has achieved a major breakthrough in a field important to France, Fillon said. He hopes the current national debate will result in a policy that will allow researchers the flexibility to assess needs accurately and allocate efforts appropriately. Fillon told AFP SCIENCES he supports proposal5 for a five-year plan or a programming law like that of the Ministry of Defense. (AFP SCIENCES 6 Jan 94; LE FIGARO 2 Feb 94) SW POLICY ISSUES Germany Launches New Laser Research Program--According to FRANKFURTER ALLGEMEINE, the German Ministry of Research is launching the "Laser 2000" program to promote the development of semiconductor lasers. A total of 270 million marks ($159 million) is to be made available by 1997. The program is open to small and medium-sized companies and includes the newly created laser institutes in Berlin- Adlershof and Dresden, as well as existing research institutes in Dresden, Jena, Halle, and Rostock. The program is Particularly aimed at aiding the transition from tube lasers to modern Semiconductor lasers. Germany is two years behind Japan and the United States in building more powerful Semiconductor lasers. For example, one can already buy 100 watt diode lasers in the United States, whereas in Germany only laboratory samples exist. Applications are seen especially in medicine, for destroying kidney stones and gallstones, or in the diagnosis and treatment of tumors. (Frankfurt/Main FRANKFURTER ALLGEMEINE in German 26 Jan 94) BC French Report on Critical Defense Technologies--Faced with shrinking markets and major job cuts in the defense sector, the French Government has published a report on "the future of defenses related industries" that prioritizes 24 technologies considered critical, according to ELECTRONIQUE INTERNATIONAL HEBDO. The report states that France will not be able to remain Self-Sufficient in all areas of equipmens development and will have to enter into cooperative agreements with its European partners but it specifically recommends that funding for basic defense research be maintained at present levels or even increased. The report also suggests that a special budget be created for evaluation and acquisition of foreign technologies The 24 technologies identified in the report are divided into three categories: those that need to be totally independent at a French or European level and whose Proliferation would constitute a risk, those that have intermediate Priority, and those whose specifically dual-use nature makes them "less sensitive." The first category includes nuclear technology, microelectronic and nanoelectronic components for equipment and Subassemblies, navigation equipment, Sensors and signal Processing equipment, Signature-recogniion expertise, and Stealth-related technologies The second category consists of technologie5 such as modular electronic architectures, optical and optronic devices, telecommunications hardware and networks, advanced computer hardware, artificial intelligence and neural networks, sof tware engineering, and advanced computational codes. The technologies identified as dual-use include production software and industrial production systems as well as hardware and software used for security of equipment and weapons systems. (ELECTRONIQUE INTERNATIONAL HEBDO 13 Jan 94) SW Finnish Support for R&D--TEKES, the Technology Development Center, distributed 1.4 billion markkas ($254 million) in 1993 to firms for 108 research and development projects. The total sum in grants and loans was the largest amount ever given in one year. TEKES, which operates with government funding, distributed more than half of the grants to small and medium-sized companies. Projects receiving the most support were those dealing with information technology, process technology, manufacturing automation, construction and Space technology. Many of the technological development projects dealt Specifically with improving the environment. (Helsinki HELSINGIN SANOMAT 10 Feb 94) RB CORPORATE STRATEGIES DASA, China Sign Telecommunications Satellite Agreement--In November 1993, Germany's Deutsche Aerospace (DASA) signed a cooperation treaty with the China Aerospace Corporation (CASC) for the development, manufacture, and sale of telecommunications, meteorological, and earth-observation Satellites and ground stations. The agreement calls for development of an estimated 20 telecommunications Satellites over 8 to 10 years for a total worth of about 1 billion marks ($580 million). Initial projects will include: (1) development of new modules for China's DFH-3 telecommunications satellite (which DASA helped build as part of a previous agreement), scheduled for launch in mid-1994, and (2) design of a new-generation telecommunications Satellite (DFH-4) during 1994 for launch in 1997. In addition, a jointly owned (50-50 percent) company with capital assets of DM 20 million ($11.6 million) will be established, with headquarters in Munich and a liaison office in Peking. Finally, a study will examine the feasibility of setting up a joint Satellite-operations service agency. The DASA/China treaty will be in direct competition with the Alliance--the industrial association formed in 1992 by DASA, France's Aerospatiale and Alcatel Espace, and Italy's Alenia Spazio for the construction of civil and military Satellites, in particular telecommunications Satellites--and may deal it a fatal blow, since China can manufacture satellites and launchers at prices lower than those of its European competitors. (Paris AIR & COSMOS/AVIATION INTERNATIONAL 22/28 Nov 93) AM Swedish Research on Hybrid Vehicles--The Swedish Government intends to spend a total of 120 million kronor ($15 million) on research concerning electric and hybrid (electric and gas powered) vehicles. The project will last until 1997 and cover more than 120 vehicles. Research will be concentrated on hybrid vehicles. (Stockholm DAGENS NYHETER 11 Jan 94) RB Honda Reacts to Sale of Rover--On 31 January, British Aerospace announced the sale of Rover to BMW for close to $1.2 billion, although Honda, which held a 20 percent share of Rover, was considered to have been the most likely Purchaser. After the failed Renault-Volvo merger, the deal marked a new stage in the effort to restructure the European automobile industry, according to LE MONDE. The Honda-Rover alliance was concluded in 1979. The Japanese side Specifically aimed at using this relationship to get Honda automobiles into the European markets. Subsequently, most Rover models became Simply "Europeanized" Hondas, while the British company acquired 20 percent capital of Honda U.K., the Japanese company's manufacturing subsidiary in Great Britain. The Honda CEO, who was informed about the deal only on January 28, expressed his disappointment, saying that this alliance "will negate both Honda's and Rover's efforts to provide a solid future for Rover as a British--and independent--company", according to LE MONDE. By affirming that the deal with BMW should not adversely affect Honda's policies in Europe, Mr. Kawamoto, in fact, expressed his reservations on the future of his company's collaboration with Rover, according to LE MONDE. Honda apparently intends to continue its participati0n in the British company unchanged, with the goal of establishing a viable foothold in Europe. However, the attitude of BMW may well determine either the Success or failure of the Japanese plans. (Paris LE MONDE 2 Feb 94) IM SPECIAL PUBLICATIONS Copies of the annual reports listed below are available upon request for a period of six months from the date of this Foreign Media Note from Cathy Grant at (703) 482-4182. *Aerospatiale 1992 annual report, 90 pages, in English. *ASEA Brown Boveri 1992 annual report, 68 pages in English. *Bofors 1992 annual report, 44 pages, in English. *BT 1992/93 annual review, 28 pages, in English. *Bull 1992 annual report, 40 pages, in French. *Carl Zeiss 1991/92 annual report, 87 pages, in English. *CASA 1992 annual report, 51 pages, in English. *CEA 1992 annual report, 72 pages, in French. *Daimler-Benz 1992 annual report, 90 pages, in English. *Dassault Aviation 1992 annual report, 67 pages, in French. *Delft Instruments 1992 annual report, 46 pages, in Dutch. *Dornier (Deutsche Aerospace) 1992 annual report, 59 pages, in English. *Ericsson 1992 annual report, 65 pages, in English. *IFREMER 1992 annual report, 80 pages, in English. *Incentive 1992 annual report, 80 pages, in English. *Intertechnique 1992 annual report, 85 pages, in French. *Kockums Group 1992 annual report, 23 pages, in English. *Olivetti Group 1992 consolidated financial Statements, 110 pages, in English. *Philips 1992 annual report, 76 pages, in English. *Rheinmetall 1992 annual report, 78 pages, in English. *S.A.B.C.A. 1992 annual report, 24 pages, in French and Dutch. *SAT (Societe Anonyme de Telecommuncations) 1992 annual report, in French. *Simrad Optronics 1992 annual report, in Norwegian/Engli5h. *SNECMA 1992 annual report, 71 pages, in French. *SNPE 1992 annual report, 49 pages, in French. *Teldix GmbH, 1992 annual report, 11 pages, in English. *Volvo 1992 annual report, 69 pages, in English. (AUTHOR: COX. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, EUROPE BRANCH AT (703) 733-6337) GIG/22MAR/ECONF/TID cka 23/0141z mar

SUMMARY In a move having potentially serious implications for the future of Sino-U.S. relations, Chinese leaders made it clear during U.S. Secretary of State Warren Christopher's 11-14 March visit that Beijing will not meet U.S. demands on human rights, even under the continuing threat of loss of its most-favored-nation (MFN) trading status. Despite the apparent finality of this rejection of linkage between human rights and trade--a position provoked in part by internal political pressures--Beijing indicated that it is willing to move forward on a number of issues of concern to Washington, including the emigration and prison labor questions, and hopes to reach an accommodation that will prevent the loss of MFN and lead to the continued development of Sino-U.S. ties. END SUMMARY Using unusually candid language during more than 12 hours of meetings with the Secretary, PRC Foreign Minister Qian Qichen, Premier Li Peng, and Chinese Communist Party General Secretary Jiang Zemin conveyed this apparent hardening of Beijing's position on human rights, rejecting U.S. demands that Beijing improve its record on human rights as a condition for renewal of China's MFN trading status. According to Xinhua accounts, Qian went beyond China's usual criticisms of the U.S. human rights position in talks on 12 and 14 March and bluntly told Secretary Christopher that U.S. laws and the U.S. President's Executive Order, which was issued last year detailing Washington's conditions for the renewal of China's MFN status, are "not applicable" to China and that Beijing has "no obligation" to implement them. China, he stressed, "can only do what Chinese law permits" (Xinhua, 12, 14 March). Qian went on to declare that Washington and Beijing will continue to have ''differences over human rights for a "long time to come," warning that it is "futile and harmful" to pressure China on this issue. Turning to the question of the renewal of China's MFN status, Qian suggested that Beijing is prepared to forego this benefit. Pointing out that China "will not become another United States, the foreign minister rhetorically asked how China can be expected to "accept the American way of doing things for the sake of trade." Judging by the Xinhua accounts of their meetings with Secretary Christopher, Li and Jiang were equally brusque in expressing Beijing's shift to a harder line on U.S. human rights demands. Like Qian, Li, in his meeting on 12 March, told Secretary Christopher that it is "not fair" for the United States to try to "impose" its concepts on Beijing and vowed that China will "never accept" them. Pointing to the "historic opportunity" for expanding Sino-U.S. economic and trade ties, Li went on to reiterate China's willingness to accept the loss of its MFN status, saying that while Beijing will incur "losses" if Washington revokes its MFN trading status, China "relies mainly on its internal market and has a strong capability of self- reliance." Underscoring the determination of China's leaders in this regard, Li said that the "existence of disputes" between the two countries is a "reality" and warned that these problems will only become "more complicated" if Washington attempts to "exert pressure unilaterally" (Xinhua, 12 March). For his part, Jiang reiterated these warnings expressed by Qian and Li, telling Secretary Christopher, in their meeting on 13 March, that Sino-U.S. relations can only "move forward" so long as both sides view them from the "world perspective" (Xinhua, March 13). Alluding to the detention of Chinese dissidents on the eve of the Secretary's visit, widely reported in Western media but barely touched on in PRC media, he went on to defend China's actions against what he called "a small number of people attempting to subvert the Chinese Government," saying that it is not a question of "human rights" but a "political and legal" issue. He stressed that the "government of every country" has the "responsibility and obligation of upholding law and order and maintaining political stability." Negative Media Treatment of Visit Reflecting these continuing tensions in Sino-U.S. relations, Chinese media portrayed the Secretary's visit in largely negative terms, underscoring the differences between the two sides and noting the failure of the talks to achieve expected results. Xinhua accounts of Secretary Christopher's talks with Chinese leaders, for example, used formulations customarily used to denote disagreement. Thus, Qian's talks with the Secretary on 12 and 14 March were described as "frank (tanshuai) and businesslike (renzhen)," while the talks with Jiang on the 13th were portrayed as "frank and candid." Qian also portrayed the visit in a negative light at his press conference on 16 March, reportedly stating that the visit had not produced as "many results as expected" (Xinhua, 16 March). He went on to take issue with Secretary Christopher's claim that the visit had "narrowed differences" on human rights issues, pointing out that it "can hardly be said" that the two sides have "narrowed their differences in their fundamental viewpoints on human rights." The PRC-owned Hong Kong media went even further in portraying the visit in a negative light. A signed commentary carried by the PRC-owned Hong Kong based wire service Zhongguo Tongxun She on 14 March, for example, castigated Washington for not "respecting" Chinese law and complained that the United States "automatically" views laws in other countries that contradict U.S. laws as "wrong or in some way not perfect." Washington's continued "interference" in China's human rights, the commentary concluded, only shows that the United States "still has a hegemonic mentality." A 14 March editorial in the PRC-owned Hong Kong daily Wen Wei Po took a slightly different tack in criticizing the Secretary's visit, portraying China as having soundly rebuffed U.S. efforts to "wield the human rights club." It went on to suggest that Secretary Christopher had thrown away a golden opportunity to promote" trade and economic relations and had left China with "empty hands" because he failed to adhere to the strategy of taking the "long view" of Sino-U.S. ties. Suggesting that the hardening of Beijing's line may have as much to do with internal events in China over the past several weeks as with U.S. policy, China's decision to cast the Secretary's visit in a negative light stands in stark contrast to Beijing's efforts in recent months to put a positive gloss on Sino-U.S. relations. Beijing was, for example, upbeat in portraying the November meeting between U.S. President Bill Clinton and Jiang Zemin at the Asia Pacific Economic Cooperation Conference, calling the meetings "positive and constructive." Beijing also cast Qian's talks in late January with Secretary Christopher in a more positive light, even though they dealt with the same topics- -bilateral relations, disarmament, nonproliferation, and human rights--that were raised during the March visit (Xinhua, 24 January). PRC media described the January talks as "positive and constructive" and claimed that they had maintained the "momentum of improved Sino-U.S. relations." Reemergence of Hardline Themes Perhaps reflecting a reassertion of hardline influence in the leadership and pressures on reformers to demonstrate their resolve to tighten social control as inflation, social discontent, and dissident activity have increased in recent weeks, less authoritative central media commentary has featured highly nationalistic rhetoric that undercuts this positive treatment of Sino-U.S. relations before Secretary Christopher's visit. A 21 February article in Beijing's reformist current affairs weekly Liaowang, for example, pointed to alleged beatings of Chinese citizens in Beijing by foreigners to denigrate those who have "doted on foreigners" and do not "dare to stand upright" in the face of foreign pressure. This xenophobic line was also evident in a signed article in Renmin Ribao on 2 March which was pegged to an incident at the recent Olympics involving an altercation between a Chinese speed skater and an American competitor. Underscoring the need to stand up to foreign pressure, the article pointedly noted that the Chinese people, because of their past experiences, realize that "concessions do not win understanding and sympathy but result in endless bullying." Signs of this harsh line were also prominent in both domestic Chinese media and in the PRC-owned Hong Kong press just prior to Secretary Christopher's visit. A PRC Foreign Ministry spokesman on 10 March, for example, in commenting on the defeat of an anti- China resolution at the UN Human Rights Commission meeting in Geneva, warned that the "days when China was subjected to willful bullying and humiliation and outside interference are gone" (Xinhua, 10 March). Similarly Minister of Foreign Trade and Economic Cooperation Wu Yi was quoted by the PRC-owned Hong Kong daily Hsin Wan Pao on the eve of the Secretary's arrival in China as saying that Beijing "simply cannot accept the human rights question being raised" (10 March). A 7 March Ta Kung Pao editorial which blasted Washington for using "human rights diplomacy" to interfere in China's internal affairs was typical of the barrage of anti-U.S. rhetoric that appeared in the the PRC-owned Hong Kong press on the eve of Secretary Christopher's visit predicting that such an approach would be rebuffed. Prospects for Bilateral Ties Despite its blunt rejection of U.S. demands on human rights, Beijing has not portrayed its position as necessarily leading to a further souring of Sino-U.S. ties at this time, but has stressed that the future of Sino-U.S. relations depends heavily on Washington's decision later this year on renewing China's MFN trading status. Sounding an optimistic note about the future at his press conference on 16 March, Qian said that if differences between the two sides are approached in a "realistic" manner they can be solved. In addition, he indicated that, although China is not "obliged" to fulfill the conditions of the President's Executive Order to gain renewal of its MFN status this year, one of the order's requirements--the question of Chinese exports of goods made with prison labor--"has been settled," and another- -the emigration issue--"is not a problem as far as the Chinese are concerned." Premier Li Peng was also upbeat in assessing the prospects for Sino-U.S. ties in remarks at a reception on 22 March, saying that he did not feel "pessimistic" about the prospects for bilateral ties (Xinhua, 22 March). Underscoring Beijing's commitment to the continued development of relations, Li went on to stress that, while China "will never make a deal by sacrificing principles," the PRC will continue to make "great efforts" to improve ties. At the same time, although Chinese leaders clearly desire to preserve Sino-U.S. ties, they have stressed that the future of the relationship will be determined by Washington's decision on China's MFN status. Speaking at the press conference on 16 March, Qian for example, said that "trade can hardly be carried on if MFN is not renewed (Xinhua, 16 March). In addition, he suggested that the "deterioration" (ehua) in economic relations, which would follow the loss of MFN, would also cause a "deterioration" (ehua) in political ties. Four days earlier Xinhua had reported that Qian, in his talks with the Secretary on the 12th, had predicted that the loss of MFN status would have an even stronger, albeit more limited, effect on Sino-U.S. ties, "ruining (duan song) the prospects of Sino-U.S. trade relations." Jiang and Li also claimed to see the loss of MFN as having an effect on bilateral relations. For his part, Jiang, according to Xinhua, told Secretary Christopher that bilateral ties would meet with "difficulties (kunnan) and setbacks (cuozhe)" if Washington failed to view Sino-U.S. ties from a "world-wide perspective and to "transcend their differences in ideology." Li went even further in outlining the consequences of the loss of MFN status in his meeting with Secretary Christopher on the 12th. Pointedly noting that the United States is a "strong power" in areas that China has identified as "priorities" for development--transport, energy, and communications--Li said that the United States will "lose a vast market" if it fails to handle the MFN issue properly. Implications Despite its tough position on human rights, Beijing has signaled its desire to prevent the human rights issue from scuttling relations with the United States. While asserting that it is willing to accept the loss of its MFN status, if need be, Beijing appears to have confidence in the likelihood of MFN renewal, given the growing economic and trade ties between the two countries and Washington's desire to gain Chinese support on the North Korean nuclear issue and other international problems. Internal political pressures stemming from renewed dissident activity, economic dislocations resulting from economic reform, and the potential for social unrest against the backdrop of the leadership struggle to succeed senior leader Deng Xiaoping make it unlikely that Beijing will back away from its uncompromising position on human rights. (AUTHOR: HEBBEL. QUESTIONS AND/OR COMMENS, PLEASE CALL CHIEF, CHINA ANALYSIS TEAM, (703) 733-6097.) EAG/HEIPLE/DEW 23/1520Z MAR

This issue focuses on recent reporting in the Algiers and Paris French-language press on the Armed Islamic Group (GIA). Slain GIA Members Identified The 28 February edition of EL WATAN reported that GIA leader Si Ahmed Mourad, known as El-Afghani, and IO GIA members were killed by police forces in Bouzareah. According to EL WATAN, among the GIA members killed were Rachid Djabri, Beraf ta Aissa, Daas, and Lounici; the others have not yet been identified. (LIBERTE of 28 February reported that Aissa's death has not yet been confirmed.) EL WATAN reported the following biographical information on the GIA members: Si Ahmed Mourad, a 29-year-old Afghan veteran living in Kouba, had been condemned to death in absentia by the Algier's Special Court. Mourad was reportedly responsible for several assassinations, as well as numerous crimes attributed to the GIA. Mourad, Beraf ta Aissa, Rachid Djabri, and Buezmir Mohamed were said to have been behind the October kidnapping of three French Consulate employees. Five GIA members were killed in the operation, although Mourad, Aissa, Djabri, and Mohamed escaped. Mohamed was later killed by police. (According to the 1 March edition of LIBERTE, Mourad was also known as "Seif Ellah" ("Sayf Allah").) Berafta Aissa, 35, and Rachid Djabri, 29, were both residents of Algiers. An arrest warrant had been issued for their involvement in several murders and other crimes in the Algiers region. Daas had reportedly been GIA head in Bouzareah and was wanted for several murders. Reaction to Slaying of GIA Members According to an article in EL WATAN of 28 February, the slaying of the GIA members on 27 February was not only "a brilliant success for the forces of order but also a significant blow to the organization and structure of the terrorist groups." The deaths of El-Afghani and his followers, considered "the bloodiest and the most radical of the fundamentalist armed groups within the terrorist movement," was viewed as a "decisive turning point" in a three-year struggle against "terrorism." According to EL WATAN, it is "reasonable to think that a considerable slakening" in GIA activity can be expected, although the paper did not rule out retaliatory acts by surviving group members. El-Afghani's refusal to support dialogue between the Islamic Salvation Front (FIS) and the government made his wing of the GIA a "serious barrier to dialogue." Now, according to EL WATAN, "his disappearance should logically open channels for dialogue." Given the GIA's threats under El-Afghani to kill all Islamists who engaged in any kind of negotiations with the government, EL WATAN asserted that his death was probably a priority and a prerequisite for any negotiations between the FIS and the government. An article in the 28 February LIBERTE interpreted the police operation as an indication that Algerian President Liamine Zeroual is "determined" to combat violence: "The successful attack demonstrated that the authorities not only had the intention of not easing up on armed groups, but when necessary also had the means to attack 'terrorism'." According to the article, the incident will "have a great effect on government-FIS negotiations," given El- Afghani's resistence to dialogue. However, the LIBERTE article also predicted that the government would harden its position that eradicating violence is of primary importance. The article also speculates that the government is still in the process of "getting back on its feet" after having recently appointed a new president. New GIA Leadership; Organizational Structure Sayah Attia has replaced Mourad Si Ahmed as chief of the GIA, according to Paris daily LE FIGARO of 9 March. Algiers daily EL WATAN of 1 March reported that Attia's group is one of three operating outside of Algiers under the name of the "Armed Islamic Group." Sayah Attia, the son of a "Harki", operates in Medea, Ksar El Boukhari, and Tissemsilt, according to EL WATAN. The newspaper calls him a "bloodthirsty" individual who prefers hand-to-hand fighting. He reportedly leads a "commando" of armed criminals, which is said to have committed over 200 "savage" terrorist acts. Attia is reportedly responsible for 132 assassinations, and 283 acts of aggression and vandalism. Security services have identified him as the ringleader in the killing of 12 Croats in December, as well as an attack on an official motorcade in Tissemsilt that killed 10 and a 1993 attack on the Boughezoul military barracks. ALGER REPUBLICAIN of 8 March reported that Attia returned to Afghanistan in 1989 with Saudi assistance. After staying in Afghanistan three years, he re-entered Algeria clandestinely in November 1992. Attia is the father of six children, and recently took a 14-year-old as his second wife. Khaled Sehili heads the second "Armed Islamic Group" which operates in Blida, El-Affroun, Chrea, and Boufarik, according to EL WATAN. Sehili is reportedly responsible for the slaying of at least SO police officers and nearly 150 acts of sabotage. He is also reportedly responsible for an ambush which killed about 12 military personnel last September in Chrea. Kada Benchiha, also the son of a "Harki", heads the third "Armed Islamic Group" which operates in Sidi Bel-Abbes. The group is composed of about 20 "elements" who reportedly easily slip through police blockades and escape from police sweeps in the region. Benchiha is reportedly responsible for the assassination of two French surveyors last September and for a fire at ENIE in Sidi Bel- Abbes last August. (QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, AFRICA/LEVANT BRANCH AT (703) 733-6408) ENEAG/23 Mar/POLCHF/TOTF/NEASA Division/DEW 23/1932Z MAR

The ouster of Prime Minister Vladimir Meciar by five diverse opposition parties has led to the establishment of an interim government with no program beyond acting as a caretaker government until early parliamentary elections, scheduled for 31 September and 1 October. Meciar, whose ouster was preceded by a series of defections from his Movement for a Democratic Slovakia (HZDS) and its partner, the Slovak National Party (SNS), has begun his election campaign by portraying himself as the main protector of the country's independence and deriding his opponents in the new government as traitors to Slovakia. Suggesting that substantive changes prior to the fall elections are likely to be minimal, members of the new cabinet have indicated that the heterogenous coalition's main goal is simply to keep Meciar out of office and have emphasized the temporary nature of the governing coalition. Introducing his cabinet members to parliament, new Prime Minister Jozef Moravcik, a former foreign minister and erstwhile Meciar ally, admitted that not all of the government's objectives "can be fulfilled in the time available" and that its main goal is "to get Slovakia to early elections" (Bratislava Radio, 17 March). Moravcik also said the formation of the new government was part of an effort to "unite very divergent and disunited entities" in order to "lay the foundations for a new political culture" (Narodna Obroda, 16 March). More pointedly, the government, in its "statement of intent," described itself as a coalition of "people with different political opinions" united by the "need to overcome the authoritarian way of ruling" practiced by the Meciar government and to "create conditions for respect, tolerance, and cooperation among citizens" (Bratislava TV, 16 March). At the same time, the coalition parties appear to be coalescing in their efforts to prevent Meciar from making yet another comeback, while calling for a preelection truce among themselves. Peter Weiss, the leader of the former communist Party of the Democratic Left (SDL), said that in order to defeat Meciar, the coalition must "convince the electorate" that it is possible to govern "by means of cooperation and reasonable compromises" (CTK, 22 March). Likewise, Christian Democratic Party (KDH) leader Jan Carnogursky said that despite "different views within the government" all of the coalition parties have a "joint objective" and "know what is at stake" (Vienna Kurier, 16 March). It is far from certain that the coalition parties can be held together until the elections solely by their common perception of the dangers of Meciar's return to power. In the past, leaders of the coalition parties frequently clashed over programatic and personal differences. For example, during Carnogursky's tenure as Slovak prime minister in 1991, Weiss accused him of being "blind to problems, deaf to criticism, and asocial when it comes to people" (Zemedelski Noviny, 19 December 1991). In addition, three current ministers -- including the prime minister, a deputy prime minister, and the finance minister -- were leading HZDS members in March 1992, when the HZDS accused Carnogursky's brother of collaboration with the former communist secret police (Mlada Fronta Dnes, 26 March). In ousting Meciar now, the opposition parties--galvanized by President Michal Kovac's parliamentary speech accusing Meciar of corruption (Bratislava Radio, 9 March)--appeared to be reacting to reports that Meciar was rapidly selling off state enterprises to political cronies (Narodna Obroda, 15 March). After Kovac's speech, the former communist Party of the Democratic Left (SDL) agreed to join the Christian Democratic Movement (KDH), along with three new parties consisting of former HZDS and SNS members voted to dismiss Meciar and to form a new governing coalition. The coalition agreed to give the SDL seven cabinet seats, the KDH six seats, and the "Center Bloc" of former "Meciarites" five seats, including the prime ministership. Calling for an investigation into the rapid sell-off of state firms during Meciar's last weeks in office, new Privatization Minister Milan Janicina called the privatization spree a "form of political corruption," comparing it to "when William the Conqueror invaded Britain and handed out property to his beloved Normans" (Bratislava Radio, 17 March). Likewise, Finance Minister Rudolf Filkus, a founding member of the HZDS who was expelled from the party in September 1993, announced that one of the government's first acts will be to "depoliticize the privatization process," which he contended had "become a tool for the political concentration of power" under Meciar (CTK, 16 March). Meciar's Strategy Using what is likely to be the main theme of his election campaign, Meciar reacted to his ouster by portraying himself as indispensable for Slovak independence. In a parliamentary speech just prior to the no-confidence vote, Meciar asserted that by leading the country to independence he has "managed to achieve what no Slovak has succeeded in achieving in several decades or even centuries" (Bratislava Radio, 11 March). Meciar also contended that as prime minister he frequently had to rectify foreign policy mistakes made by President Kovac, such as attempting to sell arms to Croatia, almost provoking an "international crisis" with China by proposing the recognition of Taiwan, and "wasting an opportunity" to improve relations with the United States during President Clinton's January visit to Prague. The day before his ouster, Meciar also claimed that by confronting the chief of the Czechoslovak Army's General Staff in late 1992, he and Czech Prime Minister Vaclav Klaus had prevented a possible "attack against Slovakia" by the Army (CTK, 11 March). In addition, Meciar and the pro-Meciar daily Republika have also suggested that the new government represents a threat to Slovak sovereignty. After his ouster, Meciar said that the new government and the puppet government installed by Nazi Germany in 1939 "might be similar" (Bratislava Radio, 14 March). Republika chief editor Jan Smolec, a Meciar stalwart, called the prime minister's ouster a "Czechoslovakist, communist, and Hungarian conspiracy" (Republika, 12 March)--a reference to the KDH's past opposition to the split of Czechoslovakia, the presence of the SDL in the coalition, and the tacit support of the Hungarian minority deputies for the new coalition. Emphasizing the communist past of Moravcik and the SDL, a front-page article in Republika on 16 March accused the new prime minister of grabbing the "post that he was modestly longing for around the Leninist campfire" as a member of the communist "Leninist Spark" organization in 1989, compared the formation of the new cabinet to the communist takeover of Czechoslovakia in 1948, and charged that SDL leader Peter Weiss "hides badly his longing for the renewal of communist power." Outlook While the opposition parties may have managed to thwart Meciar's attempts to consolidate his power in newly-privatized firms, the new coalition's gains will be short-lived if the HZDS, which continues to top public opinion polls (CTK, 22 March), improves on its June 1992 performance. Freed from the burdens of governing, Meciar may have more success campaigning as an opposition figure rather than as a defender of the country's flagging economy, and his bloc of 65 deputies--56 HZDS deputies and nine SNS seats--in the 150-member parliament may prevent passage of any substantial reform legislation before the elections. Operating against Meciar, however, is the possibility of further defections from his party, the apparent decline in popularity of the SNS, and the limited possibility of the HZDS forming a postelection coalition with the parties that participated in his ouster. Although the HZDS will likely end up with a larger share of seats than it currently holds, having suffered the defection of 18 of its deputies in the last year, if Meciar is to regain and maintain the prime ministership, the HZDS will have to capture a solid majority of the seats in parliament- -something it did not achieve in June 1992 when it fell one deputy shy of a parliamentary majority. If the HZDS again falls short, the other parties may find themselves in an awkward marriage of convenience, united only over the danger posed by Meciar, while he attacks them from his opposition seat in parliament. (AUTHOR: MIHAILOVICH. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF ANALYST, ELAG, (703) 733-6120) ELAG/GILISON/DEW 23/2005Z MAR

The recent dismissal of 129 employees from the state-controlled radio network appears to have been engineered not by the government but by the extreme right, which was expelled from the governing Hungarian Democratic Forum (MDF) last June. Nevertheless, the government's apparent acquiescence to the dismissals makes it vulnerable to charges that it shares responsibility. While the dismissals may well have a chilling effect on press freedom, fears that they signal the return of centrally controlled media in Hungary appear to be exaggerated. The announcement by government-appointed acting radio president Laszlo Csucs on 4 March that he was dismissing 129 employees- -including many of the radio's most prominent reporters--provoked widespread outrage among journalists and the parliamentary opposition, and dismay even among many in the MDF's own ranks. In a stormy session of parliament, Ivan Peto, the chairman of the Alliance of Free Democrats (SZDSZ)--the largest opposition party in parliament--denounced the dismissals as politically motivated "cleansing" that "surpasses . . . even the dismissals following the 1956 uprising." The leader of the Hungarian Socialist Party (MSZP), Zoltan Gal, accused the government of wanting to transform the public service media into its own "mouthpiece," while a spokesman of the Federation of Young Democrats (Fidesz)- -the opposition party that has been most amenable to cooperation with the MDF--declared that the move "annulled the hope of a clean election campaign" and was clearly an attempt "to divert the public's attention" from the "inglorious details" of the government's record (MTI, 7 March). At a protest outside the radio building organized by the Independent Union of Radio Broadcasters, which was attended by "thousands," speakers assailed the move as an attack on press freedom and asserted that the dismissed "have the sympathy of many colleagues" remaining at the radio (MTI, 10 March). Government Ambivalence The government's reaction to the development appeared equivocal. On the one hand, Prime Minister Peter Boross said that charges of government complicity in the affair were "ungrounded and false" (MTI, 7 March), and Defense Minister and MDF Chairman Lajos Fur denied "most firmly" that the government was behind it (Magyar Hirlap, 14 March). On the other hand, government officials ignored demands that Csucs be replaced, and while they bemoaned the likelihood that the dismissals would hurt the government parties in the coming elections, they did not condemn the move without qualification. Tamas Katona, political state secretary in the prime minister's office and a key player in past media negotiations, said the dismissals were the "right step at the wrong time" (Nepszabadsag, 8 March). Similarly, while expressing dismay at the impact on his party, MDF parliamentary group leader Ferenc Kulin said that the dismissals may have been justified by "ethical" considerations and overstaffing (Kossuth radio, 4 March). He argued that the government has "no right" to investigate the dismissals because the radio network is an independent entity (Kossuth radio, 4 March), even though Csucs's appointment in 1992 as radio vice president had been widely viewed as a political move and was made in the face of opposition objections. Kulin also tried to shift blame to the opposition, saying the media situation would not have become so "hopeless" if the opposition had not, in his view, obstructed government efforts to pass a law regulating the media (MTI, 7 March). Despite the government's reluctance to condemn the dismissals unequivocally--and thus by implication criticize its appointee, Csucs--it appears that Csucs's move overstepped the tolerance of a significant number of government supporters: -- Even though the directors of Duna Television are widely considered to be government sympathizers--the opposition has charged that the board of trustees of the foundation running Duna "consists exclusively of the ruling party's politicians" (Magyar Hirlap, 7 April 1993)--its 15 March news program on speeches given at commemorations of Hungary's national holiday focused on those speakers who were clearly critical of the dismissals. The program highlighted clips from the speeches of President Arpad Goncz and Budapest Mayor Gabor Demszky--both SZDSZ politicians- -who issued strong warnings on the threats to freedom of the press. Moreover, the announcer drew attention to the fact that the main television channels' news program failed to report on Demszky's speech. Duna Television is the specialized satellite channel that in effect is Budapest's third source of television news, even though it was set up to reach minority Hungarians in surrounding countries. -- Sandor Csoori, a prominent intellectual who is known to be close to the government, refused to let his recorded interview be broadcast on the 168 Hours radio program after he learned that the program's editor --well-known radio personality Akos Mester- -had been dismissed. Because of Csoori's refusal and because several remaining journalists refused to work on the program out of sympathy with Mester, the 5 March program had to be cancelled (Nepszabadsag, 7 March). -- The pro-government dailies showed signs of sympathy for the purged radio journalists. On 5 March Uj Magyarorszag featured an interview in which Mester's replacement as 168 Hours editor praised Mester as "an accomplished and excellent" journalist. Moreover, a Pesti Hirlap journalist showed considerable hostility to Csucs in an interview published in the 5-6 March issue, expressing his opinion that some of the dismissed were "star reporters who are highly regarded professionals with extensive experience." Csurka's Role The widespread dismay in government circles over the dismissals suggests that despite the government's frequent complaints that an anti-government bias dominates the media, it was not the government but right wing extremist Istvan Csurka who engineered the move. Although the dismissals may have been abetted in some government quarters--as pointed out in the press, someone in the government had authorized severance pay for the ousted employees, without which they could not have been fired (Nepszabadsag, 5 March)--it is Csurka who has led the demands for political changes in the electronic media and who has been the strongest advocate of the current acting presidents of radio and television, who both seem to be his protegees. Despite, or perhaps because of, opposition demands, the government failed to remove these Csurka supporters from the electronic media even after Csurka was expelled from the MDF last June, leaving them in a position to act on Csurka's conviction that holdovers from the communist era should be forced out. Csurka has made this demand even though he has apparently been more than tolerant of other former Communist journalists who have refrained from criticizing him and the extreme right. Thus, Csurka's candidate for television president was Alajos Chrudinak, a prominent broadcast journalist of the Kadar era, while Mester's replacement at 168 Hours had served at the communist radio since 1971 (Uj Magyarorszag, 5 March). There are ample indications that Csucs is Csurka's man and follows a Csurka-approved agenda. Csurka's weekly, Magyar Forum, has lauded Csucs numerous times, including on 28 October when it praised him for taking the "brave" step of terminating an alternative news program, saying it had been a "Communist-liberal ...agit prop" operation that enabled the "bolsheviks" to save themselves. Csurka's party supports Csucs's candidacy for parliament (Nepszabadsag, 5 March), and Csurka appears to be the only prominent politician who unequivocally praised Csucs's recent move, telling parliament that "the good of the nation can be served by politically motivated dismissals . . . those dismissed told many lies and did damage to the country" (Kossuth radio, 7 March). Moreover, although ousted broadcaster Akos Mester has often been critical of the government, he indicated that it was not the government that was behind the dismissals, declaring that the radio was taken over "not by the right, but the far right" (Nepszabadsag, 7 March). Before the dismissals, Mester had made clear that by the far right he meant Csurka, indicating in the March issue of the monthly Kritika that Csurka was able to continue dominating the radio through Csucs even after his expulsion from the MDF. The government had a "very hard time realizing" that the situation endangered its own interests, said Mester, adding, "By the time they wake up, it will be too late." Radio Coverage Despite charges that the dismissals were an attempt to restrict opposition access to the public as the elections approach, Hungarian radio has continued to broadcast opposition opinions. Possibly in response to pressure behind the scenes from the government to counter the negative publicity surrounding the dismissals, the radio has appeared eager to demonstrate that it remains an unbiased medium. -- The radio gave full coverage to the parliamentary debate on the crisis over the firings, giving the opposition's views extensive coverage. In fact, the broadcast gave the last word to opposition leader Peto, who countered Boross's claim that the "international reaction to the affair is one-sidedly critical of the country" with the charge that "it is the affair itself that is denigrating the country" (Kossuth radio, 7 March). -- The radio's reporting on the Democratic Charter's demonstration for press freedom on 14 March--far from aligning itself with its director, Csucs--seemed to go beyond objective reporting to adopt a sympathetic tone toward the demonstrators, saying that "at least 15-20,000 people with torches demanded a free press and free radio," that "many" people wore blue ribbons to show solidarity with the "sacked journalists," and that, citing the "danger" to press freedom, the demonstrators gathered at monuments that symbolize both "grief" and "eternal renewal." -- The radio has also broadcast some opposition interviews on other subjects, including a long, hard-hitting interview on 9 March with SZDSZ politician Imre Mecs, who harshly criticized a recently passed law on communist-era informers, accusing the government of "hypocrisy" and "morally very objectionable behavior" and alluding--although without mentioning his name--to Csurka's confession of his own informer past. Implications Even if, as seems likely, the government did not approve the ousters, it is likely to be the major loser in the affair, since it is vulnerable to charges that it shares responsibility for the media crisis due to its reluctance to break completely with Csurka and his camp. Despite numerous indications that the split between Csurka and the government mainstream is becoming ever wider--even Csurka's longtime friend, Defense Minister Fur, has declared that he has no contact with Csurka and his party because he finds their political behavior "shocking" (Magyar Hirlap, 14 March)--the government will probably have to pay a price for not moving forcefully to remove all traces of its past association with Csurka. At the same time, despite the assault on the national radio, there appears to be little danger that Hungarian voters will be denied ample access to uncensored information as Hungary approaches the election. There is no sign that the Hungarian print media have been intimidated into moderating their overwhelmingly critical attitude toward the government. According to poll data, 61 percent of adult Hungarians read at least one newspaper a day, and the readership of the papers which sympathize with the opposition overwhelmingly outnumbers the readership of the progovernment papers, with the socialist daily Nepszabadsag alone having over a million readers and the pro- government paper Uj Magyarorszag trailing at the end of the readership list (Heti Vilaggazdasag, 11 July 1992). Moreover, the obvious unease of many government politicians with the radio dismissals indicates that they too recognize the importance of media independence and will try to limit further blatant attacks on the electronic media. (AUTHOR. BARCZAY. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF ANALYST/ELAG, (703) 733-6120.) ELAG/GILISON/DEW 23/2202Z MAR

SUMMARY Reflecting Bonn's preference for structural reforms and opposition to economic stimulus measures, the German participants' positive evaluation of the 14-15 March G-7 jobs conference in Detroit focused on the conference proposals for education and labor market reforms but rejected U.S. suggestions that Germany stimulate domestic growth by reducing taxes and lowering interest rates. German officials were also cool to U.S. proposals for setting up new institutions to deal with the issues of unemployment, technology policy, and education, preferring instead to work through the existing OECD framework or through bilateral ties. END SUMMARY Germany's finance, economic, and labor ministers, all of whom participated in the jobs conference, seemed to devote virtually all their attention to the conference recommendations to promote economic growth through international trade, technological innovation and private enterprise and to achieve structural reforms through education, greater flexibility of the labor force, lower costs, and deregulation. Anticipating U.S. efforts to make the Bundesbank's interest rate policy a central issue, Bonn officials sought even before the conference to focus attention on structural issues and to avoid discussion of stimulus measures (Die Welt 14 March). They also rejected U.S. proposals for setting up new groups to study technology policy and employment and for creating a new institution to exchange ideas about education, suggesting instead that existing institutions and bilateral relations were better suited for dealing with these issues (Frankfurter Allgemeine, 15 March). No New Stimulus Measures Both Finance Minister Theo Waigel and Economics Minister Guenter Rexrodt rejected the U.S. call for Germany to reduce its taxes and interest rates to stimulate domestic growth. Citing Germany's budget deficit, Waigel repeated Bonn's position that Germany's unemployment is a structural problem and that a cyclical recovery will not automatically solve the problem (Frankfurter Allgemeine, 15 March). According to Rexrodt, since new programs to "stimulate the economy" do not offer a way out of the German labor market crisis, efforts must focus on "structural changes" (DPA, 14 March). Structural Measures, Domestic Solutions German conference participants stressed the need to reform Germany's economic structures and, while welcoming cooperation on common concerns, rejected proposals to create additional G-7 institutions: --Indicating that he saw the jobs conference largely as a confirmation of the German government's plans for improving Germany's competitiveness, Rexrodt said he would take away from the conference ideas on "labor market flexibility, trade liberalization, deregulation," and lower wage costs, and said Germany must "learn from U.S. technological and innovation successes." He did not favor U.S. proposals for new study groups for technology policy and employment statistics, however, saying that the OECD framework already dealt with such issues, and he opposed creating a new institution for exchanges on educational issues, saying he preferred bilateral arrangements (Frankfurter Allgemeine, 15 March). --Similarly, Waigel stated that there is no "miracle cure " -- each country "must find its own solutions" and, for Germany, "structural reforms" will make its labor markets "better equipped for the challenges of the future" (Handelsblatt, 17 March). --Bluem, on the other hand, appeared to see more room for international cooperation, saying that the jobs conference had "clearly improved conditions for harmonizing labor market initiatives." Because of current practices of multinational corporations, he said, job developments can "no longer be an exclusively national task" (Sueddeutsche Zeitung 17 March). He cautioned against an "uncritical acceptance" of the U.S. model, however, saying that the drastic cost reductions have not led to the expected rises in profits (Frankfurter Allgemeine, 15 March). Press Reaction Press reaction echoed the largely positive official reaction, with several papers welcoming President Clinton's initiative, the G-7's focus on people's concerns rather than on macroeconomic issues, and the opportunity for international cooperation on employment issues. Most media supported the Government's stance against stimulative measures: --Frankfurter Allgemeine's Washington correspondent Carola Kaps on 16 March called it "remarkable" that a G-7 conference had focused not on "interest rates and exchange rates" but on the "well-being of the average citizen." She defended Germany's stance against stimulus measures, however, saying that the "nasty and trite" controversy over German interest rates shows that the "special German situation" is still being largely "ignored." Nevertheless, she said hopefully that the U.S. administration now "seems to understand" that Germany's current conditions "do not permit an additional stimulation" of demand. --The leading business daily Handelsblatt of 17 March, citing Clinton's observation that job losses in one country lead to higher unemployment in neighboring and partner countries, said that "no country" can fight unemployment with domestic means alone in a world economy that is increasingly interdependent. --Sueddeutsche Zeitung's chief editor Josef Jof fe also saw increased international cooperation resulting from the jobs conference, saying that such issues as "unemployment, health insurance, immigration" have become "international politics" and politicians now realize that domestic policy problems "cannot be solved exclusively" by a single country. He praised President Clinton's "initiative" for highlighting the "necessary shift in awareness" (16 March). --The left-of-center Frankfurter Rundschau presented one of the few negative reactions to the conference outcome, regretting the conference's failure to adopt new stimulus measures. "Any plans President Clinton may have had" for preparing a plan for coordination at the Naples G-7 Summit, it said, were "destroyed" with Rexrodt's "unmistakable rejection" of "any type of Keynesian economic program" (16 March). (AUTHOR: SHAVER. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF ANALYST, ELAG, (703) 733-6120.) ELAG/GILISON/SM 24/0109Z MAR

Table of Contents JAPAN: Economic Trends - FEATURE: Retention of Large Retail Store Law Criticized; FEATURE: Food Agency Under Severe Criticism Over Rice Panic; IBJ Capital Investment Survey Reveals 6.1 Percent Decline Financial Issues - Chinese Provinces Urge Japanese Banks To Set Up Branches; China To Authorize Japanese Banks To Use Yuan; MOF Sale of 90 Tons of Gold Likely To Affect International Market; BOT Concludes Investment Agreement With Colombia Foreign Trade and Investment - MALAYSIA: Daiken, Itochu To Set Up Company To Manufacture Fiberboard; Mitsubishi Materials Establishes Ceramic Parts Subsidiary; Ichikoh Industries Expanding Production Operations NORTH KOREA: Japanese Hijacker Heads Firm Promoting Trade With Japan Machine Tools/Robotics - FEATURE: MT Companies Strengthening International Ties; Fanuc Pulls Robot-Programming Software Off the Market; Firm Develops New Machine To Process Aircraft Engine Parts Petroleum/Energy - Firms To Participate in Indonesian Coal Mining Project Semiconductors/Computers/Electronics - FEATURE: NEC, Samsung To Cooperate in 256M DRAM Research; Canon, NAL To Research Parallel Processing Technologies; JEOL Sets Up Semiconductor Equipment Sales Office in South Korea Telecommunications/Satellites - FEATURE: MPT-NTT Maneuvering on Next-Generation Communications; Communications Companies Begin Testing 'Personal Handy Phones CHINA: Domestic Developments - Guangzhou's 1993 Economic Growth Maintains Double-Digit Increase; Outlook for Auto Industry in 1994; Shenzhen SEZ Plans To Establish Auto Industry; Guizhou Defense Enterprises Support Rural Enterprises; Guangzhou Per Capita GDP Highest in PRC; Guangxi Regional Airline Set for 28 March Launch Foreign Trade and Investment - FEATURE: Shanghai's Successes, Efforts in Attracting Foreign Investments; Anhui Increases Foreign Investment, Enterprises in 1993; Shenzhen Foreign Trade Authority Announces New Tilt in Nine Policies; PRC-Funded Firms Boost Booming Hong Kong Real Estate Market; Hong Kong Investment Funds Created for PRC Investment; Hong Kong Dominates Foreign Investment in Beijing; Wholesale Grain, Oil Markets Show Rapid Development; Golden Resources Sets Up Rice Processing Venture in Vietnam; Guangdong Governor Wants More Foreign Banks, Cites Funds Shortage; South African Bank Opens Representative Office in Beijing; Shandong Reports Use of Foreign Government Loans; Danish Company Plans Investment in Tianjin Development Zone; Tianjin Plans To Build Four Projects With Singapore; Taiwan Shipping Giant To Invest in Mainland Facilities; Taiwan Company Invests in Fujian, Shanghai; Guangxi's Beihai City To Set Up Industrial City With Singapore Help; Shenzhen Reaches Agreement With South Korean Firm on Oil Refinery; Heilongjiang Imports Telephone Switchboards From Australia; Heilongjiang Uses German Loan To Upgrade Switchboards; Tianjin Signs First Joint-Venture Agreement With Poland; Hutchison To Build 12- Billion-Yuan Power Plant in Shenzhen; Fujian's Fuzhou City Uses Foreign Funds For Agricultural Development Taiwan: Taiwan's 1993 Mainland Investment Trend Outlined; Companies Planning To Invest in Mainland's Hainan Province; Minister of Economic Affairs Warns Taipei To Avoid Super 301; Plans To Export Arms, Planes, Missiles; Exports to United States Reverse Course, Increase in Dec 93, Jan 94; Competitive Edge in U.S., Japan Deteriorates; National Council Views Impact of Entry Into GATT on Local Industries; Profit Rate of Manufacturing Sector Declines NORTH KOREA: FEATURE: DPRK's Interest in 'Chinese-Style Economic Reforms' Noted; Efforts Marking Beginning of 'Adjustment Period' Reported SOUTH KOREA: FEATURE: Trade Ministry Announces New China Policy; FEATURE: ROK Announces Decision on Mid-Size Aircraft; FEATURE: South Korea Building Two New Research Institutes; ROK Advertises for Expatriate, Foreign Scientists; Steel Firm Imports North Korean Scrap Iron; Car Makers Consider New Production Method To Raise Productivity; China's Currency, Tax Reforms To Be 'Direct Blow' to ROK Exports; South Korea To Set Up 'KORNET'--Korea Internet; Government To Regulate Transport of Industrial Waste; Hyundai Motors To Market 'Fully Indigenous' Automobile; Sunkyong Industries Develops Biodegradable Film; Yukong Enters Power Generation, Liquefied Gas Business; Real Estate Company Becomes First Private Owner of Public Firm; Goldstar Signs Multimedia Deal With U.S. Company; Daewoo Electronics To Export Computer Monitors to U.S. Firm; Koryo Zinc To Develop Lead, Zinc Mines in Canada; Daewoo Motors Enters Partnership With Japan's Honda; Sambo To Export Personal Computers to Japan; Goldstar To Build Television Plant in Vietnam; Daewoo To Export Forklifts to United States; Korea Nambang Development To Advance Into PRC, Indonesia; Daewoo To Build Joint Venture Auto Plant in PRC; Il-yang, Chinese Firm To Build Pharmaceutical Factory in Jiangsu; Inchon Steel Receives Order From Indonesia; Dongbu Steel To Transfer Silicon Technology to German Firm; Daewoo Car Audio Plant in Tianjin Begins Operations SOUTHEAST ASIA: INDONESIA - Paiton Electric Power Agreement Signed; Increased Competition Expected in LNG Market; Batam Island To Be 'Center' for Taiwanese Investments; P.T. Pindad To Shift Production, Marketing Focus; State-Owned Gas Company To Receive $424-Million Loan; Increase in Trade With Taiwan Expected LAOS: French Firm To Build Hydropower Station MALAYSIA: Mahathir Outlines Strategy for Space Industry; Telekom Malaysia To Provide Services in India PHILIPPINES: FEATURE: Davao Focusing on Economic Growth; Consortium To Undertake Water Project; Increase in Money Supply Noted; Decrease in Foreign Investment Reported SINGAPORE: OCBC Launches Fund for Investment in China; Company To Build Oil Terminal in Nigeria THAILAND: Norwegian Company To Invest in Gas Venture (Pacific Rim Economic Review FBPSP 94-06) VIETNAM: Joint Venture With Daewoo To Assemble Trucks, Buses, Vans; Malaysian Company To Build Industrial Compound in Dong Nai; Interior Ministry Firm Forms Venture With Hong Kong Firm; Venture With Russian Company To Produce Tractor Parts; Cardphone Company Inaugurates Center in Ho Chi Minh City; Industrial Output Increases to $1.9 Billion in 1993; Electricity Output Increases Reported; Export, Import Figures for 1993 Reported; Haiphong Tops Hanoi, Ho Chi Minh City in Industrial Growth; GDP Figures for 1993 Reported; Korean Oil Company Reports Offshore Discovery; Hanoi Airport Expressway Opens; Norwegian Company Discovers Natural Gas Offshore JAPAN: Economic Trends - FEATURE: Retention of Large Retail Store Law Criticized -- SUMMARY: The Ministry of International Trade and Industry (MITI) will revise the Large Retail Store Law to ease some restrictions while maintaining the basic framework of the law, according to press reports. Several articles note that the law has survived because the U.S. Government did not pressure Japan to abolish it. The positions of small retailers, who initially supported the law, and the large supermarket chains, which opposed it, now have been reversed. Writing in the 22 February NIHON KEIZAI SHIMBUN (NIKKEI), editorial staff writer Sumikazu Asakawa questions the Hosokawa Government's determination to promote deregulation and criticizes the recent draft revision of the Large Retail Store Law for "not even returning to the level of the original law" enacted in 1974. According to Asakawa, large retail stores with a floor space of up to 1,000 square meters--double the provisions of the current law- -will be able to open without restrictions under the revised law. But this change "is still far from deregulation," he notes, since stores with a floor space of up to 1,500 square meters were "free of restriction" under the original 1974 law. The law was "strengthened" in the following 10 years. Asakawa argues that the Hosokawa Government's retail store policies ought to respond to consumer needs by promoting the expansion of large discount stores, such as the American retailing chain "Toys R Us." He notes that discount stores have increased their annual sales by almost 10 percent and thus have contributed to increasing personal consumption. In contrast, overall sales by all other retail stores, including department stores and large supermarkets, have dropped. While discount stores with a floor space of about 1,000 square meters specializing in men's clothing and liquor are increasing, Asakawa writes, there is an increasing need for factory outlet stores and home improvement centers that require more than 3,000 square meters of floor space. He concludes that the Large Retail Store Law "continues to block the introduction" of these types of large stores, which consumers want. Writing in the 6 March NIKKEI, Sueaki Takaoka, chairman of Seiyu, a large supermarket chain, notes that in addition to the Large Retail Store Law, there are many local ordinances that have been "added on top of the law" by local governments to further strengthen restrictions. Takaoka notes that MITI began guiding local governments to repeal some local rules in 1992, when the revised store law was enacted. But he states that without a national law, which generally takes precedence over local ordinances, large stores are concerned about how local ordinances will be enforced. At MITI's direction, a joint commission of the Industrial Structure Council's Distribution Subcommittee and the Distribution Subcommittee of the Small and Medium Enterprise Policymaking Council has submitted a report recommending easing some restrictions while maintaining the framework" of the Large Retail Store Law, according to the 1 February NIKKEI. A bill revising the law, based on this recommendation, will be submitted to the Diet in March, and the revision is expected to take effect in April 1994. Law Has Survived Because No Foreign Pressure Exerted - In an article in the 6 March NIKKEI, Keio University Professor Atsushi Kusano observes that the Large Retail Store Law has survived "because of the lack of foreign pressure." Kusano states that should U.S. pressure be stepped up," as was the case in the previous revision of the law following the 1990 Structural Impediments Initiative (SII) talks, the joint commission would have come to a "considerably different" conclusion. He points out that the 1992 revision of the law was possible because of the SII talks, in which the Japanese Government accepted the U.S. demand to revise the law, and therefore the joint commission "automatically approved" the revision. Thus, Kusano argues, the law could possibly be abolished "if the U.S. Government demands it." Kusano's view is shared by NIKKEI editorial staff writer Asakawa in his 22 February NIKKEI article. He notes that without foreign pressure, Japanese discount stores will continue to follow MITI, which wants to avoid any "disturbance" or change in the industry. Seiyu Chairman Takaoka, who was an industry representative on the 50-member joint commission, in his 6 March NIKKEI article notes that if a vote had been taken, "the majority of joint commission members would have agreed to abolish the law," since the commission included journalists, consumer group representatives, and labor union officials, all of whom were in favor of abolition. However, Takaoka notes, since the joint commission must reach a unanimous consensus- -giving each member veto power--"only marginal revisions are possible." NIKKEI editorial staff writer Asakawa writes that he was "shocked" that after discussions by the 50 commission members over three months, "the majority opinion was not reflected in the recommendation. MITI Wants To Retain Law So It Can 'Control' Distribution Sector - According to the 7 February NIKKEI BUSINESS, MITI wanted to keep revisions within the existing framework of the law to protect "MITI's interests." The article claims the law is an instrument giving MITI influence over the distribution sector. MITI can "control" the opening of new stores--one of the most important concerns of retailers--" through its regional bureaus and local chambers of commerce" throughout Japan. According to the article, before the joint commission began discussing revision of the law in November 1993, eleven organizations of small- and medium-sized retail stores held a rally in front of the Diet Building urging that no changes be made. About 20 Diet members from both the ruling coalition and opposition parties attended the rally. The article quotes a senior member of a retail store organization as saying that MITI "organized the rally and asked Diet members to participate." The article also quotes a member of the Hiraiwa Commission on governmental reform, who asserts that MITI "pressured" the commission to delete a recommendation "to abolish the law" from an early draft of the Hiraiwa Commission's report that recommended overall deregulation. Reversed Positions of Small Retailers, Large Supermarkets - A "strange reversal" in the positions of small retailers and large supermarket chains has occurred concerning revision of the law, according to the NIKKEI BUSINESS article. Because of sluggish economic conditions, small retailers are hurting and seek to survive in association with a large store or shopping center by inviting a department store or large supermarket to be the core of a large store complex or shopping center. Therefore, the article maintains, "although small retailers want to abolish the law, they have to support it" because the law is their only "political bargaining chip." Consequently, the small retailers do not want to "completely discourage" large stores from opening new outlets. The article notes that the supermarket chains are also experiencing difficulties because of the recession and the increasing number of discount stores. Under such conditions, the chains are inclined to feel that their interests are best protected "if no new large stores are permitted." Thus, the large supermarket chains, which formerly were "the champions of deregulation," are now reluctant to abolish the store law and want protection under "MITI's umbrella." The article quotes Isao Nakauchi, chairman of Daiei Store, a large supermarket chain, and chairman of the Japan Chain Stores Association, as stating: "It would be better to retain the law, or otherwise conflicts with local small retailers will increase." NIKKEI BUSINESS observes that Nakauchi was one of the officials who helped then MITI Minister Yasuhiro Nakasone pass the original law in 1974. FEATURE: Food Agency Under Severe Criticism Over Rice Panic - SUMMARY: In response to "panic buying" stemming from Japan's shortage of domestically-grown rice,, the Food Agency has issued "guidance" that imported Thai rice must be blended or sold packaged with domestic rice, according to press reports. Japan's largest rice trading firm has criticized this policy as promoting the sale of black market rice. Consumers are critical of the agency for denying their right to choose which rice to buy. Also, press editorials have criticized the agency's policy of continued control of rice distribution and selling imported foreign rice at "considerably higher" prices to generate profits sufficient to compensate farmers who had poor rice crops last summer. According to the 8 March issues of major Japanese newspapers, on the evening of 7 March the Food Agency urgently issued "guidance," based on Japan's Food Control Law, to Japan's rice retailers that domestic rice must be blended with at least 20 percent of imported Thai rice before sale. The guidance is in response to "panic buying" that began in early March--with long lines of people forming every day at rice retail shops and supermarkets to buy whatever domestic rice that is available. Japan's poor harvest in 1993 after unusually cold summer weather has triggered fears of a serious shortage. The 8 March MAINICHI SHIMBUN attributes the rice shortage to Food Agency delays in importing Chinese rice, hoarding of domestic rice by farmers and some wholesalers waiting for prices to rise, and stockpiling by consumers worried about further shortages. The 10 March NIKKEI RYUTSU SHIMBUN reports the Food Agency plans to allow rice retailers to package a bag of domestic rice together with a bag of imported rice and sell it for one price. Despite the possible violation of a Fair Trade Commission rule prohibiting retailers from forcing consumers to buy unwanted products by "bundling" popular and unpopular products together, the Food Agency considers this necessary to sell the imported rice. It is concerned that consumers will buy only domestic rice or California and Chinese medium and short-grain rice, which are close to Japanese rice. Japanese consumers consider Thai long-grain rice, the taste of which is generally disliked, as "unsafe" and having a "unique smell," according to the 6 March ASAHI SHIMBUN. The Food Agency reportedly fears that the outcome will be a rice shortage in the midst of a glut of unsold Thai rice. By forcing consumers to buy blended rice, ASAHI maintains, the Food Agency wants to make sure that all imported Thai rice is sold. In an apparent public relations effort, the Imperial Household Agency announced that the imperial family will also eat blended rice (70 percent foreign and 30 percent domestic rice), the 9 March ASAHI reports. Food Agency's Policy Raises Price of Black Market Rice - Seizo Yamazaki, chairman of Yamatane Corp., Japan's largest rice trading firm, comments in the 9 March YOMIURI SHIMBUN that "forcing consumers to buy blended rice is a policy to promote the sale of black market rice" (also called "free market rice," the sale of which is illegal). Yamazaki asserts that prices of black market rice will surely rise, because the black market is the only place consumers can buy domestic rice not blended with Thai rice. "Given the fact that the Food Agency has left black market rice merchants unregulated in the past," Yamazaki continues, it now has "no effective way to regulate them." However, Yamazaki anticipates that the situation will improve beginning in April, when imported Chinese rice begins to arrive in Japan. Also, the weather turns hot in May and farmers and black market rice merchants will have problems maintaining the quality of stored rice. The situation will ease further in June when the new crop of Australian rice will come on the market. According to statistics from the Rice and Grain Data Bank, cited in the 9 March SANKEI SHIMBUN, Japan's 1993 domestic rice harvest was 7.8 million tons (its annual consumption is 10 million tons), of which 4 million tons was collected and sold by the Food Agency, while 3.8 million tons presumably is being held by farmers or has been sold directly to black market rice dealers. Of this 3.8 million tons, 1.3 million tons will be consumed by farmers themselves, while 2.5 million tons already has been or will be sold on the black market. The data bank estimates that at least 1 million tons is currently being held by farmers and black market rice traders in anticipation of further increases in prices. The data bank notes that the black market price of the best brand domestic rice has already jumped to 15,000 yen ($143) per 10 kilograms, twice the 1993 price and triple the current price of imported California short-grain rice. It warns that the tighter the Food Agency controls rice, the more rice will be channeled into the black market. Consumers Criticize Food Agency's Guidance on Blended Rice - Consumers are critical of Food Agency guidance to blend domestic and imported rice, because it leaves them "with no choice," according to the 9 March SANKEI SHIMBUN. According to a mid?February consumer ? survey conducted by Seiyu, a large supermarket chain, 55.2 percent of consumers preferred "1O0 percent imported rice" over a "blend of domestic and imported rice." Consumers want each type of imported rice sold separately so that they can cook each variety according to its characteristics. Editorials in all major Tokyo newspapers on 9 March criticize the Food Agency's guidance. For example, the NIKKEI editorial asserts that consumers have the right to choose which rice to buy, and is critical of the Food Agency's policy of selling imported rice at a "considerably higher price" to generate profits large enough to compensate farmers. NIKKEI asserts that the market ought to determine the price of each variety of imported rice, and if Thai rice is unpopular, its price should be lowered. MAINICHI's editorial asks the Food Agency to stop controlling rice distribution and leave it to market forces--after consumers use up all the domestic rice, they will eat imported rice, and if they do not like it, "they will eat bread and noodles instead." ASAHI's editorial warns that if the Food Agency continues to insist on its policy of blending domestic and imported rice, despite strong opposition, it will only bring about further increases in the price of black market rice. Consumers, Cooperatives Attempt To Secure Rice - As one indication of how far Japanese consumers will go to secure palatable rice, NHK Television in its 9:00 pm evening news program on 15 March shows Japanese tourists bringing South Korean rice, which is similar to Japanese rice, into the country aboard ferry boats running from Pusan to Shimonoseki, the closest Japanese port city to South Korea. The announcer states that some tourists are bringing in as much as 50 kilograms of rice per person; Japanese citizens are permitted to bring in a total of 100 kilograms of foreign rice per year. Consequently, the amount of rice that has been seized and quarantined in Shimonoseki--normallY about 100 kilograms per month on average--increased to 18,000 kilograms in the first ten days of March. Despite the seizures, the Customs Service states there is no way to keep track of how much rice is brought back by each tourist, the NHK announcer reports. The 10 March NIKKEI notes that large consumer cooperatives, which earlier announced they would not sell imported rice because of "uncertainty concerning the safety of imported rice," have changed their position and have begun selling imported rice in response to widespread requests from their members. While selling both imported rice and blended rice, the cooperatives are already taking measures to secure domestic rice for the next crop year. They have begun talks with agricultural cooperatives from around Japan, which are authorized to sell a certain volume of rice at their discretion, about "direct contracts" for rice. The consumer cooperatives also have had to diversify the regions from which they will buy rice next year. Previously, they bought rice only from the Tohoku region, the area that produces the most famous rice varieties but which was hit hardest by last summer's cold weather. IBJ Capital Investment Survey Reveals 6.1 Percent Decline - According to an Industrial Bank of Japan (IBJ) survey of private sector investment plans for FY94, private sector capital investment is expected to decrease by 6.1 percent from FY93. Consequently, Japan's capital investment will likely decline for the third consecutive year. While capital investment by manufacturing industries is expected to improve gradually, capital investment by nonmanufacturing industries, excluding the electric power companies, is expected to decline further. The IBJ also projects that surplus production capacity on the part of manufacturing industries is unlikely to fall to the level of demand during FY94. If the yen appreciates further, the IBJ concludes, company capital investment plans might be lowered even further. According to the survey results, capital investment by manufacturing industries will decrease 10.3 percent, an "improvement" from the estimated 17.7 percent drop of FY93. Among manufacturing sectors, capital investment by assembly and processing industries will decrease "only" 4 percent, a "large improvement" from the estimated 17.9 percent decrease of FY93. Reasons for this improvement include: 1) most electronics firms are planning to increase capital investment for liquid crystal displays (LCD) and semiconductors; 2) one automaker is planning model changes in FY94, and therefore needs to invest in new production lines; and 3) general machinery companies are planning to increase production capacity slightly in response to steady, large demand stemming from public works projects. Capital investment by nonmanufacturing industries, other than electric power companies, will decrease 7 percent, an accelerated drop from the estimated 5 percent decrease of FY93. The primary reasons for the decrease are the glut of office buildings and stagnant personal consumption, which has caused department stores and large supermarket chains to shelve plans to construct new stores. Electronics--Most electronics companies are planning to increase their capital investment in FY94, resulting in an overall 4.5 percent increase. Investment will be concentrated in the LCD and semiconductor sectors. Toshiba will spend 150 billion yen ($1.43 billion), a slight increase from FY93, to increase production capacity for 4 and 16 megabit (M) dynamic random access (DRAM) chips. NEC and Hitachi plan to increase their capital investment slightly, from their FY93 totals of 160 billion yen ($1.52 billion) and 170 billion yen ($1.62 billion) respectively. Automobiles--Toyota Motor is planning capital investment totaling to 240 billion yen ($2.29 billion), a 25 billion yen ($238 million) increase from FY93, largely to finance model changes for its Corolla and Crown models. Nissan Motor, on the other hand, plans to decrease capital investment in FY94, limiting it only to new car development. In response to the recession, other automakers, especially truck manufacturers, plan to decrease capital investment in FY94. Steel--All steel manufacturers are planning to hold down capital investment in FY94 because of the slump in sales and poor prospects for an early economic recovery. Steel manufacturers have surplus capacity, especially to meet the needs of automakers. Nippon Steel plans a "drastic" decrease from the 170 billion yen ($1.62 billion) level of FY93. NKK Corp. plans to cut total capital investment from FY93 through FY95 by 40 percent from total capital investment level of the FY90-FY92 period. Kobe Steel's plans are similar to those of NKK. (Tokyo ASAHI SHIMBUN 8 Mar 94 p 11) Financial Issues - Chinese Provinces Urge Japanese Banks To Set Up Branches -- Provincial and municipal governments in China's interior areas have requested that Japan's major commercial banks, such as Sanwa and Sumitomo, establish branches and representative offices in their jurisdictions, according to the 10 March NIKKEI KINYU SHIMBUN. In the past, Japanese banks have focused on China's coastal areas, where Japanese companies have made conspicuous inroads, but now they are responding to requests made by city and provincial governments in inland areas and are seriously looking into setting up offices there. The major commercial banks have been "ardently" approached by the governments of Liaoning Province, Shenyang City, Jiangsu Province, Nanjing Municipality, Hubei Province, Wuhan City, Shaanxi Province, Xian City, Sichuan Province, and Chongging City, and others. In their pursuit of economic growth, the local governments have been competing to attract foreign investment. Their overtures to Japanese banks are thought to be part of their attempt to garner cooperation in capital financing from foreign financial institutions, not just from foreign investors in manufacturing and production. Despite the fact that investment by Japanese companies in these regions is still rather limited, the banks are now seriously considering where to set up offices in China's interior areas. Meanwhile, according to the 2 March NIKKEI KINYU SHIMBUN, five Japanese banks--Sumitomo, Sanwa, Industrial Bank of Japan, Bank of Tokyo, and Mitsubishi--are vying for permission to establish branches in Beijing. The Chinese Government is moving toward allowing a few foreign banks to open branches in Beijing, but because only one or two will be Japanese banks, the competition is intense. Sumitomo Bank is Offering seminars to financial institutions in Beijing to enhance its presence there, while the presidents of the Bank of Tokyo and Mitsubishi Bank recently visited China and appealed to the mayor of Beijing for authorization to establish branches. China To Authorize Japanese Banks To Use Yuan - Japanese banks will be authorized to use the Chinese yuan, but initially only for deposit-taking functions, according to the 8 March NIKKEI KINYU SHIMBUN. The People's Bank of China has not specified how deposits will be obtained or precisely when the deposit-taking functions will begin, but major Japanese commercial banks understand from discussions with the People's Bank that they will be able to start taking yuan-based deposits sometime in the spring or summer of 1994. The Ministry of Finance has continued to press the Chinese Government to authorize Japanese banks to use the Chinese currency because the recent change in China's foreign exchange system is having an adverse effect on Japanese banks doing business there, according the 4 February NIKKEI KINYU. Under the revision, foreign banks can only make loans and conduct foreign exchange transactions in dollars or yen, while foreign companies operating there can only use yuan. When a Japanese company operating in China sells yuan and buys a foreign currency, it must first transfer the money to the People's Bank of China, where the Japanese bank has an account, thereby making it more troublesome for the company to use a Japanese rather than a Chinese bank. According to the 8 March NIKKEI KINYU, some people assert that authorization to use the yuan is a "matter of life or death" for Japanese banks in China, and the recent indication that the yuan can be used for deposit-taking functions is being interpreted by Japanese banks as the "first step" toward full banking operations. MOF Sale of 90 Tons of Gold Likely To Affect International Market - The Ministry of Finance (MOF) on 7 March announced that it will sell 90 tons of gold on the market during FY94, from which it expects to realize 120 billion yen ($1.14 billion). This amount will help compensate for the shortfall in Japan's tax revenues. The MOF will melt down 4 million 100,000-yen ($952) commemorative gold coins that have been returned to the Bank of Japan into 90 tons of gold. The total face value of the coins is 400 billion yen ($3.8 billion), but the book value of gold contained in the coins is only 119.7 billion yen ($1.14 billion). although the MOF is studying appropriate ways to sell gold so that market prices are not unduly affected, sale of such a large quantity of gold by Japan, a gold- consuming country, "is likely to affect the gold market." The MOF issued 11 million 100,000-yen gold coins in 1986 to commemorate the 60th anniversary of Emperor Showa's accession to the throne. Despite their low gold content, the coins were so popular that 50 million lottery tickets were issued to people who wanted to buy the coins. However, because of the prolonged recession and poor prospects for appreciation in the coin's value as a collectible, "people have begun spending the gold coins in stores." (Tokyo MAINICHI SHIMBUN 8 Mar 94 p 1) BOT Concludes Investment Agreement With Colombia - The Bank of Tokyo (BOT) has concluded an investment-promotion agreement with the Invest in Colombia Corporation (Coinvertir, or ICC) to encourage Japanese investment in Colombia. ICC is a joint government-private sector organization established by the president of Colombia. This is the third such agreement the BOT has concluded with a south or Central American country, but is the first such agreement by any Japanese bank with Colombia. The BOT's previous agreements were a 1990 agreement with the National Finance Bank of Mexico and a 1991 agreement with the Chilean Foreign Investment Committee. Under the agreement, the BOT will introduce Japanese companies planning to enter Colombia's markets to the ICC and will hold investment-promotion seminars for them, while the ICC and the BOT will also jointly establish a forum for periodic information exchange. Although Japanese banks shied away from investment in South and Central America in the first half of the 1980s because of the debt crisis there, the BOT now has decided to step up its activities in Colombia. It sees South and Central America as "replete with potential for growth," especially with the implementation of trade agreements like the North American Free Trade Agreement. (Tokyo NIHON KEIZAI SHIMBUN 14 Mar 94 p 5) Foreign Trade and Investment - MALAYSIA: Daiken, Itochu To Set Up Company To Manufacture Fiberboard -- Daiken Corp., a manufacturer of wood and mineral fiberboard, together with the general trading company Itochu Corp. and other firms, will establish a company in Malaysia's Sarawak State to manufacture medium-density fiberboard (MDF), a plywood substitute manufactured from scrap wood. The new company, Daiken Sarawak, will begin operations in the spring of 1996. 0f the total 2.5 billion yen ($23.8 million) required for the new company, Daiken will contribute 50 percent; Itochu, 20 percent; Sarawak Timber Industry Development, a forestry development corporation operated by the Sarawak state governments 15 percent; Proexcel, 10 percent; and Linbang Trading, 5 percent. MDF production is projected at 100,000 cubic meters per year, all of which will be exported to Japan. MDF has gained popularity because it can be used as a substitute for plywood, the supply of which has become unstable due to increased efforts to protect tropical rainforests. The interests of both Daiken and the Malaysian Government will be served through establishment of the new company--Daiken is seeking to ensure a stable supply of raw materials, while the government seeks the efficient use of its wood resources. (Tokyo NIHON KEIZAI SHIMBUN 19 Feb 94 p 8) Mitsubishi Materials Establishes Ceramic Parts Subsidiary - Mitsubishi Materials Corp. (MMC) has established a wholly-owned Malaysian subsidiary, MMC Electronics Malaysia, to produce ceramic electronic parts. Mitsubishi's total investment in the subsidiary will be 2.9 billion yen ($27.6 million). The new subsidiary will serve as Mitsubishi Materials' production base in Southeast Asia, supplying Japanese manufacturers of home electronics equipment that have shifted their production to the region. MMC Electronics Malaysia will build a 6,000-square meter plant on a site adjacent to Kamaya Electric Malaysia on the outskirts of Ipoh, where its production equipment will be housed until the plant is complete. The new company, which will employ 300 workers, will begin operations in April with the anticipated production of 1 million temperature sensors for air conditioners and 300 million laminated ceramic chip capacitors for videotape recorders and television sets per month. (Tokyo NIKKEI SANGYO SHIMBUN 15 Feb 94 p 15) Ichikoh Industries Expanding Production Operations - Ichikoh Industries, Japan's second largest manufacturer of automotive lighting equipment, is increasing production in Malaysia to meet increased demand from Japanese auto manufacturers who have started operations in Malaysia to counter the effects of yen appreciation. Ichikoh Malaysia, its local subsidiary, is 90 percent owned by Ichikoh Industries and 10 percent by the general trading company Nissho Iwai. Currently, Ichikoh Malaysia produces about 600 million yen ($5.7 million) worth of interior lights for export to Japan. However, over the next two to three years the firm plans to invest just under 1 billion yen ($9.5 million) to begin the production of exterior lights and to increase the output of interior lights. (Tokyo NIKKEI SANGYO SHIMBUN 4 Feb 94 p 8) NORTH KOREA: Japanese Hijacker Heads Firm promoting Trade With Japan - According to an article in the 12 February SHUKAN GENDAI by freelance journalist Koji Takazawa, who visited Pyongyang in December 1993, the North Korean trading firm "Project 21" is "steadily" promoting trade with Japan, even though Japan-North Korea normalization talks are at a standstill. According to Takazawa, "Project 21," which was formerly named "21 Planning" ("21 Kikaku"), was founded in Pyongyang in April 1990 by Takahiro Konishi, one of the Japanese Red Army group that hijacked a Japan Air Lines jetliner and forced it to fly to Pyongyang in April 1970. Konishi had been working as a Japanese instructor and translator in Pyongyang before he founded the company. According to Takazawa, Konishi is particularly interested in negotiating contracts with Japanese firms to serve as their Pyongyang representative to promote trade between the two countries. To date about fifteen small Japanese companies have signed contracts with Project 21. Konishi reportedly hopes to conclude contracts with larger Japanese firms in the future. According to Takazawa, Project 21 is a general trading company with several dozen employees and annual sales of 1 billion yen ($9.5 million). It is housed in a six-story office building, which it owns, in downtown Pyongyang. Takazawa reports that the firm, which initially exported only foodstuffs and ginseng tea to Japan, now trades in more than 30 products-- including construction materials, steel, cement, automobiles, and agricultural products--with Japan, China, and some Southeast Asian and European countries. Machine Tools/Robotics - FEATURE: MT Companies Strengthening International Ties -- SUMMARY: According to press reports, some Japanese machine tool (MT) companies have been expanding their international activities, including overseas production, increased exports, and service activities. At the same time, some foreign firms are expanding their activities in Japan's MT market. Activities in the United States - Mitsubishi Heavy Industries (MHI) plans to increase its annual sales of MT products in the United States by 20 percent to more than 200 machines, according to the 1 March NIKKEI SANGYO SHIMBUN. In 1993 MHI sold about 180 MT products tools in the U.S. market--120 were made at its U.S. subsidiary and the remainder were imported from Japan. MHI will fill some of the expected increase in orders with machines built at its Hiroshima MT Plant and sell them through its U.S. subsidiary, MHI Machine Tool, located in Hopkinsville, Kentucky. MHI Officials state "it has become possible to combine increased exports from Japan with local production in the United States" with the lifting of the voluntary restraint agreement covering Japanese MT exports at the end of 1993. NIKKEI SANGYO adds that to enable MHI Machine Tool to increase production of machining centers, computer numerically controlled (CNC) lathes, and CNC cylindrical grinders, MHI will ship a large, five-surface processing machine from Japan to its Subsidiary. Ingersoll Milling Machine, a major U.S. MT manufacturer based in Illinois, will drop a Swiss trading company as its sales agent in Japan and will begin dealing directly with its Japanese customers through its subsidiary, Ingersoll Japan, according to the 14 February NIKKEI SANGYO. By eliminating the middleman, Ingersoll Japan expects to reduce distribution costs and to be able to gather information directly from customers. Ingersoll Japan anticipates that sales for its first fiscal year will be 1 billion yen ($9.5 million). Ingersoll, whose specialty is large, five-surface processing machines, has sold aircraft parts processing machines to MHI in the past. NIKKEI SANGYO characterizes Ingersoll's move as "threatening the very core of Japanese companies, which are pursuing the time-consuming recessionary countermeasure of expanding the volume production of high value-added general purpose machines." Cooperative Ventures in Europe - Two German MT manufacturers, Waldrich Siegin and Waldrich Coburg, both of which belonging to the Ingersoll Group, have contracted with Okura and Company, a medium- size trading company, to become their MT sales agent in Japan, according to the 9 February NIKKAN KOGYO SHIMBUN. Previously both Siegin and Coburg used a Swiss company as its sales agent, but the two companies switched to Okura "because they plan to enter new product areas." Siegin makes MT equipment primarily for steel and aluminum producers and manufacturers of paper and heavy electrical machinery, while Coburg makes MT equipment and extrusion molding machines for companies that process large parts. Okura expects first fiscal year sales to reach 500 million yen ($4.76 million), according to NIKAAN KOGYO. Okuramech, a company affiliated with the Okura Group, has contracted with the Swiss MT firm Fritz Suchard to be its sales agent in Japan to market Suchard's large 0.3-micron precision granite-bed cylindrical grinders, according to the 14 February NIKKEI SANGYO. Okura anticipates demand for the large grinder in the metal processing, auto parts, and aerospace industries, NIKKEI SANGYO notes. Fanuc, Japan's largest manufacturer of CNC equipment, and Charmilles Technologies, a leading Swiss manufacturer of electrical discharge machines (EDM), will expand their cooperative relationship to include die-cutting EDMs as well as wire EDMs, according to the 14 February NIKAAN KOGYO SHIMBUN. Currently Charmilles uses Fanuc CNC equipment on all its wire EDMs. In the near future Fanuc will begin assembling Charmilles' latest wire EDM series, the "Robofile," at its Tsukuba plant. This plant now assembles only CNC equipment, but Fanuc President Seiuemon Inaba states that "it also will be possible for us to carry out knockdown production of entire machines" at the plant. Fanuc plans to make its Tsukuba plant "a production base for Charmilles in Asia." In addition, Charmilles Fanuc, a joint venture company formed by the two companies three years ago, but which has been "inactive" until now, will soon begin operating, NIKKAN KOGYO reports. A special unit will be activated to handle the administrative and process-control work required for operations to attach CNC equipment to EDMs. Previous cooperation between Fanuc and Charmilles included Fanuc's original equipment manufacturing production of Charmilles' "Robocut Alpha-OA" and "Alpha-IA" wire EDM machines. Charmilles has sold these machines in Great Britain, France, and Italy, while Fanuc supplied them for other markets. Some types of wire EDMs which Charmilles' Japanese subsidiary, Charmilles Japan, sold in Asia were "mated" with CNC equipment at Fanuc's headquarters systems plant, NIKKAN KOGYO notes. South Korean, East Asian Markets - Citizen Watch will begin exporting to South Korea small precision CNC lathes through G. Boley GmbH, the German MT company it bought in 1992, in response to changes in South Korea's import regulations, according to the 22 February NIKKEI SANGYO. In January 1994 South Korea eased restrictions on imports by reducing the number of products subject to its "Importers Diversification List." These changes covered numerically controlled horizontal lathes capable of speeds over 12,000 rpm, including Citizen's "Shincom L" series. However, because of the way import authorization procedures are handled, exports of high-speed lathes from Japan have became "impossible," thereby "wiping out in a single stroke" the South Korean market for Citizen's MT equipment. In response, Citizen will export lathes made by G. Boley to South Korea. Some parts for these lathes will be shipped from Japan to G. Boley and then exported from Germany marked "Shincom Made in Germany." G. Boley already manufactures Citizen's lathes on consignment for the European market, NIKKEI SANGYO observes. Mitsubishi Corp., one of Japan's largest general trading companies, will establish a South Korean corporation, Hanguk MC Shoji, to export South Korean "machinery," according to the 24 February NIHON KEIZAI SHIMBUN (NIKKEI). Mitsubishi could obtain permission from the Korean Government in March and begin operations as early as 1 May. The wholly owned subsidiary will be capitalized at $4.5 million. Mitsubishi anticipates sales of $30 million during the firm's first fiscal year. Mitsubishi is the second of major Japanese trading company to establish a firm in South Korea, NIKKEI notes. Toshiba Machine, one of Japan's largest MT companies, will establish an Asian network for after-sales service for MT equipment separate from its network of sales agents, according to the 28 February NIKKEI SANGYO. Toshiba Machine already has locally incorporated sales companies in Thailand, Taiwan, and Singapore, in addition to business offices in Hong Kong and Beijing. However, the company determined that since this network could not adequately serve growing customer needs for maintenance and service, it would establish a separate network of locally incorporated service offices that will be directly managed from Tokyo. Toshiba Machine has already opened service offices in Singapore and in Kuala Lumpur and Penang, Malaysia, and has plans for offices in Shanghai and Kaohsiung, Taiwan. Exports are becoming more important for Toshiba Machine, the NIKKEI SANGYO article notes. In the first half of FY93 (April through September 1993) Toshiba's ratio of exports to total sales reached 35 percent, up almost 10 percent from the same period in 1992. Exports of injection-molding equipment and machine tools rose 30 percent. China accounts for "just under 70 percent" of Toshiba's exports, NIKKEI SANGYO notes. Fanuc Pulls Robot-Programming Software Off the Market - Fanuc, the world's largest producer of numerically-controlled equipment for machine tools and a leading manufacturer of industrial robots, has decided to stop selling FAST, its internally developed off-line robot-programming software, and replace it with Robcad, the robot- simulation software marketed by the Israeli firm Technomatix Technologies. Fanuc will continue developing FAST for use in the development of intelligent robots and for intelligent manufacturing system (IMS) applications. Fanuc's U.S. subsidiary, Fanuc Robotech, has signed a contract with Technomatix for rights to market Robcad in North America and Japan. Robcad, characterized as "powerful" robot-simulation software, is used to verify a robot's movements and for off-line robot training. This software is also used by Nachi-Fujikoshi, Komatsu, and Mitsubishi Electric Co., which also manufacture robots. (Tokyo NIKKAN KOGYO SHIMBUN 14 Jan 94 p 11) Firm Develops New Machine To Process Aircraft Engine Parts - Fuji Machine Manufacturing, a leading manufacturer of machine tools and specialized machinery, together with Daido Steel Co. has developed a spinning processing machine to process titanium and ultra-high temperature alloy parts, such as engine casings and compressors used in the high-temperature, high-pressure section of aircraft engines. To date these types of complex cylindrically-shaped parts have been formed by milling, but this method is time consuming because of the hardness of the materials. The new machine processes and finishes parts by forming them on spinning rollers under a maximum pressure of 50 tons, while the parts are heated to a maximum temperature of 1,200 degrees. This method reduces processing time to about one-third that previously required and reduces the areas requiring milling to one-fifth that necessitated by the old method. (Nagoya CHUNICHI SHIMBUN 1 Mar 94 p 11) Petroleum/Energy - Firms To Participate in Indonesian Coal Mining Project -- Nichimen Corp., a general trading company, and Mitsui Matsushima Co., a Kyushu-based coal-marketing company, will participate in developing a 98,000-hectare strip coal mining project in central Sumatra together with the Indonesian firm PT Riau Baraharum. Coal reserves in the area are estimated at 25 million tons, and Riau Baraharum plans to complete studies to confirm this figure by the end of 1994. Commercial production will begin in 1996, and from 1997 production is planned at a level of 1 million tons per year. Costs for the project are estimated at $2.5 million for exploration and $25 million for development. Nichimen and Mitsui Matsushima will equally divide their $1.5 million share of the exploration costs and $15 million in development costs. In return for providing project financing, the companies will receive priority in purchasing the coal mined, which they will sell to Japanese electric power companies at a level of 800,000 tons per year. Their goal is to ensure a supply base for the Japan market, where demand for coal from the electric power industry is expected to increase from the current 33 million tons per year to 72 million tons by the year 2000. (Tokyo NIH0N KEIZAI SHIMBUN 5 Mar 94 p 1) Semiconductors/Computers/Electronics - FEATURE: NEC, Samsung To Cooperate in 256M DRAM Research -- SUMMARY: NEC, Japan's largest semiconductor company, and South Korea's Samsung Electronics Co. have agreed to share the results of their research on next- generation 256-megabit (M) dynamic random-access memory (DRAM) chips, according to press reports. Although cooperative relations between Japanese and South Korean semiconductor manufacturers have been increasing, this is the first relationship involving 256M DRAM chips. In addition, NEC and Samsung are discussing possible cooperation in the actual production of the chip. At a 1 March press conference, NEC officials announced they had reached agreement with Samsung Electronics to exchange information on 256M DRAM chips, according to the 2 March NIHON KEIZAI SHIMBUN (NIKKEI). The two companies are also proceeding with negotiations on joint development of the chip. Although Samsung Electronics is a leading manufacturer of DRAMS, the company may have decided to cooperate with NEC because the estimated 100 billion yen ($950 million) investment needed to develop the next-generation chip is big a burden for one company to bear alone. The 2 March NIKKEI SANGYO SHIMBUN notes that this is the first time Japanese and South Korean companies have agreed to cooperate concerning 256M DRAM chips. The 2 March MAINICHI SHIMBUN observes that by cooperating, the companies hope to be the first to make 256M DRAMs, and "thus have it be the world standard." The 2 March ASAHI SHIMBUN notes that NEC would like to begin mass production of 256M DRAMs from 1995, but the 1 March YOMIURI SHIMBUN estimates that actual mass production will not take place "until 1998 or 1999." Closer Relationships Between Japanese, South Korean Firms - According to the 2 March NIKKEI, the relationship between Japanese and South Korean semiconductor manufacturers "has shifted from one of Korean companies trying to catch up with Japanese companies to one of a system of cooperation." This is illustrated by the growing number of agreements between semiconductor manufacturers of both countries. Hitachi has provided 1M, 4M, and 16M DRAM technology to Goldstar Electron Co. in exchange for semiconductor products. Fujitsu and South Korea's Hyundai Electronics reached an agreement in October 1993 to produce 4M and 16M DRAMs under a reciprocal original equipment manufacturing basis. Samsung Electronics is also cooperating with Toshiba on flash memory chips and with Mitsubishi Electric Corp. and Oki Electric Industry concerning high-speed memory devices. The 2 March NIKKEI SANGYO asserts that such cooperation is not without some risk. Cooperation like that between NEC and Samsung could be a "double-edged sword," because Japanese and South Korean companies have focused on DRAM chip production, whereas American and Japanese companies have differing areas of specialization and "thus are not in such a competitive situation." There is a danger, the paper notes, that if Japanese companies cooperate with their South Korean counterparts, any benefit from this "could be turned into a weapon" that might be used against them later in their "competitive struggle." Canon, NAL To Research Parallel Processing Technologies - Canon Supercomputing S.I., a wholly owned subsidiary of Canon Sales Co., has begun a joint research program in fluid analysis parallel- processing technologies with the National Aerospace Laboratory (NAL). The NAL, an organ of Japan's Science and Technology Agency, is a "major user" of supercomputers, and parallel processing supercomputers are being more widely used. By using software developed by the NAL, the program is expected to find a more efficient way of using parallel processing systems and "improve technological capabilities." Technicians from Canon and NAL will use a "KSR1" parallel- processing supercomputer purchased by Canon from the U.S. firm Kendall Square Research (KSR). The researchers will evaluate the system's efficiency using a "miscellaneous fluid analysis program" developed by NAL, and also will conduct research into the most suitable parallel processing technologies for the software. The NAL already uses supercomputers made by Fujitsu and the U.S. firm Intel, but is looking forward to conducting research on the KSR parallel-processing machine. For its part, Cannon Supercomputing hopes this research will strengthen sales of both supercomputer hardware and software. (Tokyo NIKKEI SANGYO SHIMBUN 8 Mar 94 p 7) JEOL Sets Up Semiconductor Equipment Sales Office in South Korea - JEOL Ltd., a maker of semiconductor manufacturing equipment (SME) and Japan's largest producer of electron microscopes, has established a joint-venture sales and service subsidiary in Seoul. Since South Korea is becoming a "large market" for electron microscopes and semiconductor manufacturing equipment, JEOL decided that it was necessary to strengthen its local sales ability and develop an after-sales service system. JEOL, a member of the Mitsubishi Group, is the latest of a number of Japanese SME firms "advancing" into South Korea to take advantage of robust capital investments being made by Korean semiconductor makers. The new company, "JEOL Korea," is a joint venture capitalized at 300 million won ($380,000) of which 30 percent was provided by JEOL and the remaining 70 percent JEOL's Korean sales representative. They are aiming to expand sales of a wide variety of equipment including electron microscopes, photomask manufacturing equipment, and related medical and analytical equipment. A number of major SME manufacturers, including Canon and Tokyo Electron, have already established service subsidiaries in South Korea. Lasertec, another maker of photomask-related equipment, set up operations in February. Korean semiconductor makers are continuing to invest to expand production capacity. Consequently, Japanese SME makers are realizing that a strengthened presence in Korea has become "indispensable." (Tokyo NIKKEI SANGYO SHIMBUN 7 March 94 p 9) Telecommunications/Satellites - FEATURE: MPT-NTT Maneuvering on Next-Generation Communications -- SUMMARY: According to press reports, the Telecommunications Council, an advisory group to the Ministry of Posts and Telecommunications (MPT), which has been deliberating issues concerning Japan's next-generation communications network for nearly a year, has "suddenly" decided to delay release of its final report from March until May. The MPT explains that "things have changed" since Nippon Telegraph and Telephone (NTT) initiated its multimedia activities. However, the press notes that the new report date "coincides" with a June decision on whether NTT President Masashi Kojima will be appointed to a third term, or whether Shigeo Sawada, NTT's senior vice president and a former MPT administrative vice minister, will be made NTT's new president. According to the 4 March NIKKEI SANGYO SHIMBUN, the Telecommunications Council's final report has been a matter of great interest within the communications and broadcasting sectors from the early stages of its deliberations, because its recommendations will determine the future direction of Japan's next-generation communications infrastructure. Specifically, industry sectors are interested whether NTT or an MPT public corporation will be responsible for developing the next- generation communications infrastructure, according to NIKKEI SANGYO. Executives of cable television companies have also been "looking forward" to the council's final report in March because the council has been deliberating on deregulating this industry. NIKKEI SANGYO notes that people in the industry feel they are "the victims of evasive action" in having to accept the delay in the report, and feel they have been treated "unreasonably." According to NIKKEI SANGYO, the MPT's explanation is that "multimedia activities are moving ahead very quickly," and it would like to study the current situation more "before presenting any conclusions." The view in industry circles is that MPT's explanation may be "officially true," but that the ministry "is probably quarreling with NTT management." The MPT reportedly had Shigeo Sawada, a former MPT administrative vice minister, "planted" in NTT as senior vice president and number-one candidate to succeed Masashi Kojima as NTT president when his current term expires in June. By delaying the council's report until May, the MPT can use the report as a "bargaining chip" to acquire the NTT presidency for Sawada, NIKKEI SANGYO notes. NTT Supporting Kojima For Third Term - The Osaka edition of the 10 March MAINICHI SHIMBUN reports that NTT President Kojima expressed his desire for another term at a 9 March press conference. According to Kojima, "it would be inconvenient if I just suddenly abandoned the presidency." He adds, however, that "this is something which is not decided by my desires but by society, which includes Nagata-cho (the Diet), the bureaucrats, and the corporation." MAINICHI notes that in terms of a formal decision, all that remains is a consensus at NTT's shareholders meeting and approval from the MPT. The 10 March NIKKEI SANGYO SHIMBUN notes that NTT is supporting Kojima in his desire to continue as president because NTT needs to establish "superiority" over the MPT as a "precondition" to block possible MPT measures to further break up NTT as part of an its review of NTT operations slated for 1995. On the other hand, according to the 6 March SANKEI SHIMBUN, the MPT has been "pressing" to have Sawada, an MPT "old boy," replace Kojima as president in conjunction with the upcoming MPT review. Reportedly, this has resulted in growing support from within NTT for Kojima to continue as president for another term to "block" the MPT's "breakup efforts." It also appears that NTT has planned another strategy to keep Kojima as president by carefully timing the submission of its application to raise local telephone calling rates for March, the 10 March NIKKEI SANGYO notes. In this way, the MPT would have to make a decision on the rate hike before its April or May decision on the next NTT president. If the application is not approved, this could be the "springboard" for Kojima to stay on. NTT executives, according to NIKKEI SANGYO, feel that Kojima's next term is "100 percent guaranteed," because certain target objectives have already been established for solving pending issues at NTT. MPT Not Actively Pushing Sawada's Candidacy - Kojima asserts "there have been considerable developments" in terms of a decision, but that he did not want to "reveal the details," according to the NIKKEI SANGYO article. It states that there usually is a "flurry of maneuvering" within political and financial circles at the beginning of the year in which an incumbent NTT president's term expires, but that matters to date have been "especially dull" concerning NTT's case. The MPT minister, who usually plays an active role in this maneuvering, thus far has been "inactive." According to NIKKEI SANGYO, it appears that the MPT continues to be "so involved with issues," such as U.S.-Japan trade friction over cellular telephones, that it does not have the time to "wrestle" with NTT's executive management. Communications Companies Begin Testing 'Personal Handy Phones' - Tokyo Telecommunications Network (TTNet), Tokyo Electric Power Co., Mitsui and Co., and Mitsubishi Corp. began testing "personal handy phones" (PHP), the next-generation cellular telephone, for the first time in the Tokyo metropolitan area on 1 March. The companies are collecting data on various performance factors, including functions, sound quality, and the efficiency of frequency utilization, by having 300 current TTNet customers use PHPs until March 1995 in a test area around the Marunouchi and Shimbashi train stations. The test area is supported by TTNet's fiber optic network and about 90 base stations set up by Tokyo Electric. The data collected from the testing activities will be used to determine future PHP-related business activities. (Tokyo NIKKEI SANGYO SHIMBUN 1 Mar 94 p 7) Long-Distance Telephone Companies Begin Testing Activities - Japan Telecom and Kokusai Denshin Denwa (KDD) have also decided to team up to begin PHP testing activities from 30 March. Japan Telecom and KDD will conduct testing activities in an area near Japan Railway's Sapporo station in Hokkaido. The two companies will set up about 20 base stations in the area and lease PHP units to about 100 "monitors," who will test their performance over a period of six months. While Japan Telecom and KDD will be testing the same performance factors as other companies involved in the ongoing testing activities, "they will also test PHPs on international service networks." People in the industry are pressing to commercialize PHP services, and much "pulling and hauling" behind the scenes is expected between the service providers, who are involved in the testing activities, and equipment manufacturers in anticipation of future markets. The new carrier companies, which offer long- distance telephone services, find PHP commercialization efforts "attractive" because once the PHP service networks are built, the new carrier companies will be able to independently own and control intra-city communications lines instead of having to rely on Nippon Telegraph and Telephone's (NTT) network, as they currently do. However, many PHP issues have not been clarified, such as how many operator licenses the Ministry of Posts and Telecommunications (MPT) will approve and how the MPT will define standards for service options and service fees. The MPT is expected to use the results gained from the PHP testing activities in its deliberations on these issues. (Tokyo NIKKEI SANGYO SHIMBUN 11 Mar 94 p 6) DDI, U.S. West To Cooperate in U.S.-Based PHP Testing - Beginning in April, Dainidenden (DDI) will cooperate with U.S. West by providing technical support for testing the communications system DDI developed to support PHP services. The tests, to be conducted in Washington, D.C., are part of an effort led by U.S. West to test various PHP-compatible communications systems. This cooperative testing effort resulted from an earlier venture between DDI and a U.S. West affiliate which involved renting analog-based portable telephones to DDI customers in Japan for use in the United States. DDI's system may be considered in future cellular telephone commercialization efforts in the United States. In Japan, both DDI and NTT have developed communications systems, but DDI's system covers a broader service area than NTT's, and DDI's ground stations have a higher transmission capacity--500 milliwatts--compared to the 20-milliwatt capacity of NTT's ground stations. (Tokyo NIKKEI SANGYO SHIMBUN 3 Mar 94 p 6) CHINA: Domestic Developments - Guangzhou's 1993 Economic Growth Maintains Double-Digit Increase -- Guangzhou City continued its rapid economic development in 1993 with the "overwhelming majority" of its principal aggregate production quotas achieving double-digit growth, thus overfulfilling the city's annual plan. In 1993, Guangzhou City's total output value was 23 percent more than in 1992, reaching a total of 710 million yuan. Of this total amount, the secondary industry (light industry) share increased by 28 percent and the tertiary industry (service industry) share increased by 22 percent compared to 1992. Guangzhou City's per capita gross domestic product (GDP) value exceeded 10,000 yuan for the first time, reaching 11,490 yuan, a 21 percent increase compared to the year before. Guangzhou City's total amount of social commodity and retail was 3.073 million yuan, an increase of 41.14 percent compared to 1992. Its bank deposit surplus by financial organizations reached 99.462 billion yuan with a surplus loan value of 71.03 billion yuan. Guangzhou area's total freight volume via land, sea, and air reached 11,900 tons and passenger volume was 9,656 persons, an increase of 5.76 percent and 27.86 percent respectively. The readjustment of the city's economic structure apparently resulted in higher economic benefits. The composite index of industry and business economic profit by the village and above- village independent accounting entities was 133 percent, 22.8 percent more than 1992. The commodity selling rate increased 0.7 percent to 97.84 percent, with a total realized profit tax of 10.175 billion yuan, an increase of 50.35 percent. The number of businesses suffering losses was reduced by 52 percent. The economic and enterprise reforms and the opening up to the outside world have also resulted in new breakthroughs. Of the 640 enterprises in the city that have already opened up, 37 of these were set up as limited-liability companies with six of these issuing stocks. The actual foreign capital used jumped to $1.464 billion, an increase of 32.63 percent compared to 1992. The total commodity export value in foreign trade reached $3.263 billion, 32.34 percent more than in 1992. The standard of living of the people of Guangzhou City has also continued to rise. Per capita worker's wages annually were 6,272 yuan in 1993, per capita city resident's annual income increased to 4,984 yuan, and per capita farmer's annual income were 2,653 yuan, accounting for increases of 30.88 percent, 7.13 percent, and 23.24 percent respectively. (Guangzhou NANFANG RIBAO 13 Feb 94 p 1) Outlook for Auto Industry in 1994 - China produced 1,280,000 cars in 1993, fulfilling 116.4 percent of the annual plan. The gross value of industrial output was 130 billion yuan, sales income exceeded 150 billion yuan, and taxes and profits were 18 billion yuan and 12 billion yuan respectively. Auto demand for 1994 will be about 1.3-1.4 million. The 1994 auto demand estimates are based on the following assumptions: 1. In 1994 the national economy will maintain a growth of 9 percent, industry 15 percent, investment in fixed assets 13 percent, and if several national construction projects begin operating this year demand for autos will be slightly higher than 1993. 2. It will be difficult to alleviate the railroad transport capability problems before 1996, and automobile shipment will continue to be problematic in 1994. However, because of an increase in railroad branch lines and highway improvements, demand for highway transport vehicles, especially heavy and medium-size freight cars, will increase. 3. The development of a car rental industry, a flourishing tourist industry, and prospering individual passenger transport businesses will increase the demand for minivans, limousines, and tourist buses. 4. At present, tertiary industry accounts for 30 percent of the national economy and is a major auto consumer. Expanding rural enterprises maintain a stable demand for heavy and light trucks. 5. At the end of 1993, China possessed 8,200,000 vehicles, but about 1 million old vehicles need to be scrapped or replaced. China plans to replace 250,000 vehicles in 1994, mainly mid-size freight cars and sedans. 6. China has adopted severe measures to crack down on car smuggling, reorganize border and barter trade, and limit imports. In addition, implementation of a guidance price policy will stimulate domestic sedan sales. Based on regional, departmental, and enterprise production plans, domestic supply will be about 1.5 million, of which 850,000 will be freight cars, 320,000 buses, and 330,000 sedans. The No. 1 Auto Group will supply 180,000 vehicles, the Dongfeng Group 210,000, the Heavy Vehicle Group 20,000, China Automobile Company 80,000, the Beijing Company 130,000, the Tianjin Company 110,000, the Shanghai Company 110,000, the Jinbei Company 40,000, and converted defense enterprises 140,000. These enterprises account for about three- fourths of output. In 1994 supply will exceed demand. Factors restricting auto production are: 1. Foreign exchange shortages. Although domestic sedan production has rapidly developed, rising prices for foreign spare parts and steel has greatly increased the amount of foreign exchange used by the auto industry. 2. Changes in the renminbi foreign exchange rates have increased production costs. Production enterprises and consumers will share the increased costs. Increased prices will dampen consumer demand, and the share absorbed by enterprises will restrict the volume of imports. 3. Fund shortages are another factor restricting the auto market. Major consumers are government and commercial offices, and their funds to purchase vehicles come from public funds. In the last half of 1993 defaults on loans increased and funds diminished, which will restrict demand. (Beijing JIDIAN RIBAO 1 Mar 94 p 3) Shenzhen SEZ Plans To Establish Auto Industry - Shenzhen Special Economic Zone, Guangdong Province, has announced ambitious plans to develop an automobile industry from scratch by establishing a 1 million square meter "auto town." About 90 percent of the land will be used to build plants and the rest as residential areas to accommodate workers. Negotiations are currently under way with several South Korean and Japanese auto makers to set up the necessary plants. Baoan Automobile Services and Shenzhen Automobile Industry and Trading will take the lead in developing the area. The target is an annual production capacity of 5,000 specialized vehicles for industrial, firefighting, and other purposes; 10,000 medium-sized buses; and 50,000 cars. A Korean company is to set up a plant to produce brake systems and Japan's two largest specialized automakers intend setting up assembly lines. Chinese auto makers, including First Automobile Works and Second Automobile Works, have also been invited to set up assembly plants. Officials say $2.5 billion will be invested in infrastructure this year, up from last year's $2.1 billion. Some 25 major construction projects include: An international passenger terminal and second runway at Shenzhen Airport; two major power stations; an oil refinery; four highways; and a large-scale integrated circuit manufacturing base. (Hong Kong SOUTH CHINA MORNING POST (BUSINESS POST) 16 Mar 94 p 5) Guizhou Defense Enterprises Support Rural Enterprises - Rural enterprises in Guizhou Province have set their sights on the personnel, technology, equipment, products, and market superiority of defense enterprises. At present, 38 counties in seven prefectures and cities are using defense enterprises funds, equipment and technology, and have set up over 130 economic lateral associations. Rural enterprises have become the financial pillar of these counties. Rural enterprises in all areas have greatly raised their overall level by absorbing over 300 defense S and T achievements and new technology. Defense enterprises have transferred spare parts and auxiliary equipment for a number of products, including refrigerators, cars, and TV satellite stations, to rural enterprises. The Jiangnan Space Industrial Enterprise Group alone has transferred over 170 auto spare parts to support the specialization of rural enterprises. The Jiangnan Enterprise Group has invested over 100 million yuan to set up seven rural enterprises, and has invested over 60 million yuan to set up four branch plants of the Jiangnan Machinery and Electronics Plant in Zunyi City. (Chongqing XINAN JINGJI RIBAO 6 Feb 94 p 1) Guangzhou Per Capita GDP Highest in PRC - Guangzhou City's per capita GDP in 1993 was 11,490 renminbi, leading the country for the second successive year. Total GDP was 71 billion renminbi, an increase of 23 percent over the 1992 level. Average annual growth in the city in recent years has reached 21 percent, greatly surpassing the original goal of 11.8 percent set for the 15 years to the turn of the century. (Beijing ZHONGGUO XINWEN SHE 0811 GMT 5 Mar 94) Guangxi Regional Airline Set for 28 March Launch - Guangxi Province plans to establish a new regional airline company, Guangxi Airline Co. Ltd., a joint venture between Guangzhou-based China Southern Airline and the Nanning-based Guangxi Zhizhuang Holding Co., beginning operations 28 March. The new airline will have a fleet of 10 Boeing aircraft and will initially operate regular local air services to and from Nanning, Guilin, and Beihai. These operations will later be expanded to include 23 Chinese cities and regular flight services to Hong Kong and Thailand. In the first year of operation the airline will operate 100 flights per week with a passenger volume of 6,000. (Hong Kong AFP 0524 GMT 11 Mar 94) Foreign Trade and Investment - FEATURE: Shanghai's Successes, Efforts in Attracting Foreign Investments -- SUMMARY: Attracting foreign investment has been an important objective in Shanghai's economic agenda. The city has already succeeded in attracting a number of large international companies to establish businesses and is continuing to make strong efforts to attract new foreign investment. According to the Shanghai WEN HUI BAO of 17 January, Shanghai Mayor Huang Ju stated that in 1993 Shanghai had actually received one-third of the $7 billion contracted foreign investments either in cash or equipment - a realization rate higher than the national average. The SHANGHAI JINGJI BA0 of 18 January reported that in 1993 Shanghai approved 3,650 new foreign investment projects, with 205 of them involving capital of over $10 million each. So far, 54 countries/areas have invested in Shanghai and 25 of the world's 100 largest international conglomerates have set up businesses there. In addition, the authority to approve foreign investment projects under $10 million has been granted to district, county, and bureau authorities to improve efficiency. In 1993, some 2,352 investment projects in Shanghai (excluding Pudong), or 64 percent of the total, were approved at the lower levels. SHANGHAI JINGJIBAO also reported that foreign investment has expanded into the finance, real estate, commerce, food, and trade sectors. Shanghai now has 26 foreign financial companies, the largest number in China. Forty four of China's 500 joint ventures with the highest sales volumes are located in Shanghai. The Beijing JINGJI CANKAO BAO of 13 February reports that Shanghai plans to allow foreign financial companies to engage in renminbi business on a limited basis. Under the current conditions, foreign companies will first be allowed to conduct renminbi deposit and loan business with foreign-invested enterprises and those state enterprises that receive supplementary renminbi loans along with foreign loans. Statistics show that so far, Shanghai has approved over 6,000 foreign investment projects and has already attracted over $13 billion in foreign capital. JINGJI CANKAO BAO also reported that this year, Shanghai plans to open approximately 100 industrial projects of over 10 million each in petro-chemical, metallurgy, power station, communications, tire, computer, and bearing sectors to attract foreign investors. In addition to joint ventures, new methods of cooperation will be adopted. The city plans to cooperate with foreign firms in retail, wholesale, capital goods, and trade businesses and will promulgate preferential policies to attract international finance companies to establish offices there. Individual districts in Shanghai have also taken their own initiatives to attract foreign investments. The Shanghai WEN HUI BAO of 1 February reported that the government has greatly lowered development costs in Shanghai's Nanshi District so that foreign investors can enjoy a good return. In addition to holding weekly receptions for foreign investors, the approval period for foreign investment projects in Nanshi is being reduced from 62 to 40 days. The WEN HUI BAO of 29 January reported that Shanghai's Hongkou District has also made major breakthroughs in foreign investment. Real estate renovation through land leasing--tearing down old houses and constructing skyscrapers--has become a major project. In 1994, Hongkou plans to open a new section to attract foreign participation. The SHANGHAI JINGJI BAO of 25 January reported Shanghai's Pudong New District further accelerated the pace of foreign investment in 1993 and attracted 924 new foreign enterprises along with $3.125 billion in capital. Of these enterprises, 43.5 percent are engaged in production and 56.5 percent in service industries (now extending to over 30 different fields). Sixty nine percent out of the 140 export-oriented foreign enterprises approved in 1993 have already started to show a profit. Anhui Increases Foreign Investment, Enterprises in 1993 - In 1993, Anhui Province approved 1,039 new joint ventures, a 50 percent increase over 1992. The total investment was $1.98 billion, and registered capital was $1.36 billion. Foreign businessmen increased investment in energy and transportation projects, and the tertiary industry. In 1993, joint ventures earned over $80 million in foreign exchange from exports, a 90 percent increase over 1992. Joint venture exports accounted for 8 percent of all exports, compared to 5.6 percent in 1992. (Hefei ANHUI RIBAO 8 Jan 94 p 1) Shenzhen Foreign Trade Authority Announces New Tilt in Nine Policies - In order to make more progress in Shenzhen City's foreign trade work and to carry out the more export, more foreign exchange" policy promulgated by the State Council, Shenzhen City's Bureau of Trade and Development is promoting nine "tilt policies." First, the tax rebate procedure will be simplified and unified state tax rebate policy will be implemented. The tax rebate procedure will require only one invoice and one certificate instead of two invoices and two certificates as in 1992. The audit and review process will also be strengthened. Secondly, a loan policy favoring the expansion of exports will be introduced. All banks will guarantee loans on the priority basis needed by export businesses and must favorably support the loan repayment and the use of foreign exchange from the foreign-owned projects in energy, communication, transportation, and the service industry. The third policy calls for reducing the burden on export businesses and encouraging their competitiveness. Starting in 1994, the regulation on taking back 0.05 yuan for every U.S. dollar that these businesses export will be cancelled. The fourth policy is designed to encourage export businesses to better use and manage their regulating fund and to develop ocean shipping markets. The Shenzhen city government will borrow 30 million yuan from its financial revenue and, through the State Administration of Trade Development, give it to the export businesses to use for these purposes. The fifth policy mandates public bidding on the distribution of permits and quota commodities and the creation of fair competitive environment. The sixth policy seeks to reduce the export businesses' tax burden within the scope of financial policies and to lend support to them in developing export enterprises. The seventh policy encourages the active development of import processing and re-exports operations and business operations that process imported raw materials. Under the new system, export businesses will be allowed to sign contracts with each side deciding on its own prices. The eighth policy is designed to relax restrictions on export businesses' scope of operations. Under the new guidelines, except for the commodities covered by quota permits as stipulated by state regulation, all other commodities can be exported. Finally, the process of evaluating import/export rights will be improved. Those businesses that do not meet the standards of exports and earning foreign exchange will have their export operating rights rescinded and tax refund privileges confiscated. (Shenzhen SHENZHEN TEQU BAO 29 Jan 94 p 1) PRC-Funded Firms Boost Booming Hong Kong Real Estate Market - As Hong Kong office and residential real estate prices reach further heights, with the territory projected to overtake Tokyo as the most expensive business center in the world, two Chinese officials have voiced concerns over the activities of PRC-funded enterprises in the Hong Kong real estate market. On 17 March, EASTERN EXPRESS reports on page 26 that a new study by realtor Jones Lang Wootton points to further rent rises and rising capital values in all areas of the Hong Kong real estate market. The study states that with chronic shortages of Grade-A office space, especially in Central district, and an equally serious supply crunch in terms of high-end accommodation to house incoming executives, office and residential rents are set to surpass Tokyo. The study says commercial and office rents rose 40 percent in 1993 and rose another 10 percent in the first two months of 1994. Residential rents also surged, with rents rising by between 30 and 70 percent depending on the quality and location of the accommodation. The study credits mainland-backed investors with a 23.2- percent share of the HK$57.5 billion of identifiable real estate transactions in 1993. The role of PRC-funded firms in stoking the Hong Kong real estate market has attracted the scrutiny of Chen Yuan, vice president of the People's Bank of China and son of elder leader Chen Yun. A report by the Beijing-based press agency ZHONGGUO XINWEN SHE at 1442 GMT on 17 March cites Chen Yuan declaring his opposition to speculative activities in the market by PRC-funded organizations. Highlighting concerns that badly needed capital is being diverted from China to earn quick profits in Hong Kong, Chen Yuan stated that China faced a shortage of foreign exchange and construction capital, and he had a "disapproving attitude" towards PRC-funded entities speculating in the Hong Kong real estate market. However, Chen Yuan said that it was normal for PRC-funded enterprises in Hong Kong to buy office buildings and residences for their staff, adding that the Bank of China ran its banking business in Hong Kong independently, determining its scale of mortgage lending according to the market situation. Chen Yuan also noted that the People's Bank of China was not paying any special attention to the issue. Lu Ping, director of the State Council's Hong Kong and Macao Affairs Office, has also commented on the role of PRC-funded companies in the real estate market. ZHONGGUO TONGXUN SHE at 1400 GMT on 17 March cites Lu Ping, in remarks to a group of Hong Kong delegates to the National People's Congress, as saying that China- funded enterprises should refrain from actions detrimental to Hong Kong's prosperity and stability. Lu said that these firms should not engage in real estate trading activities and that, as they were using state funds, they had an unfair advantage over other market players. Hong Kong Investment Funds Created for PRC Investment - More investment funds are being established in Hong Kong to facilitate investment on the mainland. Taiwan's Jun Tai Group and the Shanghai International Trust and Investment Company are organizing a "Shanghai Development Fund" with $150 million to invest in enterprises in Shanghai; the U.S.-based Boston Pacific Technology and Investment Fund is cooperating with financial organizations on the mainland to set up funds to invest in projects in Shanghai; and the U.S.-based multinational GE Financial Services has joined other companies to promote a $50-million China Industrial Investment Fund. In addition, a China fund aimed at investing in high-tech projects is likely to be established this year, while 34 state enterprises and financial organizations on the mainland are discussing the idea of establishing a "Chinese Enterprises Development Fund" in Beijing with a Hong Kong company. (Hong Kong ZHONGGUO TONGXUN SHE 1020 GMT 15 Mar 94) Hong Kong Dominates Foreign Investment in Beijing - Beijing by 5 March of 1994 had approved 7,521 foreign funded enterprises of all types with contracted foreign investment of $18.5 billion and realized foreign investment of $10.24 billion. Hong Kong interests were represented in 3461 enterprises, with a total capital investment of $5.76 billion. Taiwan investors provided $878 million in 948 enterprises. Together, Hong Kong and Taiwan investors accounted for 58 percent of foreign investment in Beijing. (Beijing ZHONGGUO XINWEN SHE 0808 GMT 5 Mar 94) Wholesale Grain, Oil Markets Show Rapid Development - China's wholesale markets for grain and vegetable oil have shown rapid development and there are now two state-level markets, the Zhengzhou Wholesale Grain Market and the Shanghai Grain and Vegetable 0il Exchange. There are also over 10 provincial-level wholesale markets, dozens of regional wholesale markets, and over 80,000 primary grain markets. According to statistics, 13 provincial wholesale grain markets from January to November 1993 showed a business volume of 55.53 million tonnes, 260 percent up from the similar period in 1992. The Zhengzhou Wholesale Grain Market, since its inception, has had a business volume of 4.1 million tonnes and its prices have become the benchmark for the grain business throughout the country. (Beijing ZHONGGUO XINWEN SHE 0810 GMT 5 Mar 94) Golden Resources Sets Up Rice Processing Venture in Vietnam - Golden Resources Development has taken a 55 percent stake in a $10 million joint venture in Vietnam to process and trade rice. Hong Kong's biggest rice distributor has signed a 50-year joint venture agreement with the four major rice producing provinces in Vietnam: Long An, Dong Thap, Tien Giang, and An Giang, which together account for 40 percent of the country's production. Vietnam's trade representative in Hong Kong, Huynh Minh Hue, said the venture was the largest of its kind so far. Golden Resources' share of the investment will be used to build a processing plant and to provide working capital. The managing director of Golden Resources, David Lam, said the company hoped to raise the quality of Vietnamese rice, so as to command higher prices on the world market. (Hong Kong SOUTH CHINA MORNING POST (BUSINESS POST) 8 Mar 94 p 3) Guangdong Governor Wants More Foreign Banks, Cites Funds Shortage - Guangdong Governor Zhu Senlin says that his province is suffering from a shortage of funds and will try to absorb at least $10 billion in foreign investment. He also said that Guangdong should try to attract more foreign banks and China-funded banks in Hong Kong and Macao to set up branches in the province. At the moment, Guangzhou only has seven branches and 24 representative offices of foreign banks, falling far behind Shanghai. Zhu requested the head office of the People's Bank of China to consider easing the number of foreign banks allowed into Guangzhou. Zhu WanIi, governor of the Guangdong branch of the People's Bank of China, said that Guangdong should make better use of the fund management experience and skills of Hong Kong and Macao. He also commented on the shortage of circulating funds that has landed many enterprises in dire straits, saying: It is imperative to put an end to ill-planned capital construction and use available resources on efficient enterprises to speed up the circulation of funds in a positive direction. (Hong Kong TA KUNG PAO Chinese 14 Mar 94 p 3) South African Bank Opens Representative Office in Beijing - Nedbank, one of South Africa's big four banks, became the first from that country to set up a representative office in Beijing 16 March, despite the lack of diplomatic relations. John Maree, president of Nedbank's parent group Nedcor, said bilateral trade has more than tripled from $200 million in 1992 to $660 million in 1993. Beijing decided last October to lift trade and economic sanctions against South Africa after 30 years and trade this year is expected to reach $1 billion. "South Africa is the gateway for Chinese firms into the huge African market," Maree said. China mainly imports steel, coal, wool, gold, and raw materials from South Africa and exports textiles and electrical goods. 0ver 20 Chinese companies have opened representative offices in Johannesburg. (Hong Kong AFP 0609 GMT 16 Mar 94) Shandong Reports Use of Foreign Government Loans - By the end of 1993, Shandong had signed more than 160 contracts on the use of foreign government loans. The actual amount of the loans used total $1.5 billion. Most of the projects developed with the loans have created economic and social benefits. (Jinan Shandong Radio 2300 GMT 2 Mar 94) Danish Company Plans Investment in Tianjin Development Zone - A Danish company plans to invest in a project producing enzyme derivatives for industrial use and insulin in Tianjin Development Zone. The letter of intent was signed at the Tianjin Municipal Government 0ffice on 26 February with Mayor Zhang Lichang. This project will cover an area of 170,000 square meters with an investment of about $200 million. (Tianjin TIANJIN RIBA0 27 Feb 94 p 1) Tianjin Plans To Build Four Projects With Singapore - After two days of inspection and talks, Singaporean businessmen signed four letters of intent with Tianjin's relevant departments on 26 February on establishing four projects in Tianjin, including a plant to jointly produce plastic products with an investment of 32 million yuan; a company for handling and delivering containerized goods; a company for handling the storage of oil at Tianjin oil wharf; and a bonded goods circulation center with an investment of $100 million. (Tianjin TIANJIN RIBAO 27 Feb 94 p 1) Taiwan Shipping Giant To Invest in Mainland Facilities - The Taiwan shipping giant Chang Jung Group has decided that its two subsidiaries will invest $50 million and $30 million respectively in mainland projects. This is the first mainland investment ever undertaken by any listed Taiwan shipping company and will prepare for the opening of direct shipping links between the two sides of the strait. The planned investments will concentrate on piers, container distribution areas, and trailers at ports such as Shanghai, Qingdao, and Shenzhen's Shekou. (Hong Kong ZHONGGUO TONGXUN SHE 0953 GMT 13 Mar 94) Taiwan Company Invests in Fujian, Shanghai - Taiwan's leading warehousing enterprise, Far East Warehousing Company, recently started setting up operation bases in mainland China. Apart from the bonded warehouse project at Shanghai's Waigaoqiao which has been finalized, its next investment project will be aimed at Fujian's Zhangzhou Bay. The company's investment in port-related projects on the mainland mainly covers facilities in the hinterland of the ports. In cooperation with the mainland partners, it will first make small investments to establish footholds and prepare for direct links between the two sides. In Shanghai, for example, it will cooperate with its mainland partner in running a bonded warehouse at Waigaoqiao. The joint investment will be $3 million, of which Far East Warehousing will contribute 49 percent or $1.47 million. (Hong Kong ZHONGGUO TONGXUN SHE 1025 GMT 2 Mar 94) Guangxi's Beihai City To Set Up Industrial City With Singapore Help - A Singapore business leader and the mayor of Beihai recently signed a memorandum on the construction of a Singapore Industrial City, which will occupy 10,000 mu of land in Tieshan Port Industrial Zone in Guangxi's Beihai City. The land tenure offered by Beihai City Government is for a period of 50 years and is renewable with government approval. The city government will provide all infrastructural facilities, while the Singapore side will be responsible for overall planning, leveling, waste disposal, attracting investment, property management, and so on. This industrial city is intended as a base for the development of advanced industries, on a par with Singapore's industrial sophistication, and to create new jobs and import new technology and management techniques. (Hong Kong LIEN HO PAO11 Mar 94 p 22) Shenzhen Reaches Agreement With South Korean Firm on Oil Refinery - China Petrochemical Corp (Sinopec) has reached agreement in principle with Yukong Ltd, South Korea's leading refinery company, to build a $1.5-billion oil refining project in Shenzhen Special Economic Zone, Guangdong Province. This is the biggest venture involving South Korea since diplomatic ties were established in 1992. The refinery will have the capacity to process 100,000 to 150,000 barrels of oil per day. Yukong will hold 40 percent of the equity, the rest being owned equally by the state-owned Sinopec and the Shenzhen City Government. Yukong has a long-term agreement to import 10,000 barrels of oil per day from China. Sinopec is the largest industrial corporation in the PRC, with 690,000 employees, a registered share capital of $2.5 billion, and assets valued at $15 billion. It has investments in Japan, Hong Kong, and Thailand. (Hong Kong SOUTH CHINA SUNDAY MORNING POST (SUNDAY MONEY) 13 Mar 94 p 2) Heilongjiang Imports Telephone Switchboards From Australia - Qingan County in Heilongjiang Province formally put its program- controlled telephone switchboards with a total capacity of 6,000 lines into operation on 15 March, thus becoming one of Heilongjiang's counties with advanced telecommunications equipment imported from Australia. This equipment is jointly financed by the World Bank and Qingan County with a total investment of 17 million yuan. After putting this equipment into operation, Qingan County will change its telephone number from five digits to six. (Harbin Heilongjiang Radio 2200 GMT 14 Mar 94) Heilongjiang Uses German Loan To Upgrade Switchboards - Heilongjiang Post and Telecommunications Bureau has decided to use $100 million of a low-interest loan from Germany to introduce program-controlled telephone switchboards with 79,600 channels. On 10 March, the China Post and Telecommunications Equipment Company, the Heilongjiang Provincial Post and Telecommunications Bureau, and a German company jointly signed this contract. These telephone switchboards will be installed in 14 cities and counties in Heilongjiang, including Qiqihar, Mudanjiang, Jiamusi, Daqing, and Hulin. It is planned that all these telephone switchboards will be put into operation prior to June 1995. (Harbin Heilongjiang Radio 2200 GMT 10 Mar 94) Tianjin Signs First Joint-Venture Agreement With Poland - On 11 March, Tianjin Alcohol Plant and a company in Poland signed a letter of intent to jointly building a brewery in Tianjin. The brewery will produce vodka wine with alcohol material provided by the municipal plant and production technology by the Polish side. The total investment in this joint-venture project is $1.5 million. It is the first Sino-Polish enterprise in Tianjin. (Tianjin Radio 2300 GMT 11 Mar 94) Hutchison To Build 12-Billion-Yuan Power Plant in Shenzhen - Hutchison Whampoa will build and operate a thermal power plant outside Shenzhen, according to an agreement signed with the Shenzhen Electricity Bureau. Total output from the first phase of the proposed plant will be 2540 megawatts. According to Shenzhen Vice Mayor Li Guangzhen, the Eastern Power Plant will be developed in several phases and will involve a total investment of 12 billion yuan. Li Guangzhen's assistant, Li Jangguo, said an agreement had been signed with Hutchison earlier this year and site preparation work had already begun. (HONG KONG STANDARD (FINANCIAL REVIEW) 16 Mar 94 p 1) Fujian's Fuzhou City Uses Foreign Funds For Agricultural Development - Last year, Fuzhou City agricultural and sideline products industries attracted $1 billion in direct foreign investment in over 450 items. This investment helped the city earn $200 million in exports. The city exported agricultural and sideline products valued at over 1 billion renminbi to over 20 foreign countries and regions last year. The foreign investors are mainly from Japan, the United States, France, Singapore, Indonesia, Hong Kong, Macao, and Taiwan. (Beijing ZHONGGUO XINWEN SHE 0810 GMT 5 Mar 94) Taiwan: Taiwan's 1993 Mainland Investment Trend Outlined - By October 1993, China had approved more than 15,100 requests by Taiwanese enterprises to do business on the mainland for a total negotiated cost of $13.6 billion. Many Taiwanese industry and business people pointed out that cross-Strait economic cooperation has contributed to the development of the Taiwan economy. Taiwan's investment areas on the mainland have rapidly expanded from the southeast coastal area into all the coastal and some of the interior areas. There was a sharp increase of Taiwanese investment in and around the Changjiang River, Bohai region, and inland areas, and even in the remote provinces and autonomous regions such as Qinghai and Tibet. In the Changjiang River region, Shanghai alone had approved 482 direct Taiwan investment projects between January and September with a negotiated cost of $430 million dollars. This amount has exceeded both the total number of investment projects and the total cost for the past five years. Anhui Province has newly approved a group of Taiwan's investment projects whose total numbers and total investment amount have increased several fold. Jiangsu Province has the largest number of Taiwanese businesses. Taiwan's investment in the interior provinces such as Sichuan and Shanxi increased by a big margin. The northeast region has also become a hot spot for Taiwanese investment; Liaoning Province alone has attracted investment from more than 300 Taiwan businesses between January and September, far exceeding the total combined numbers of the previous nine years. Taiwan's cross-Strait investment in 1993 has the following special characteristics: One, there has been an increase in long-term investment and an expansion of investment areas. In addition to investing in labor- intensive processing industries, Taiwan businessmen have invested in the capital-intensive and new technology-intensive enterprises, and in basic infrastructure projects such as transportation, energy, and communications. They have also set up a whole series of new high- tech enterprises involving plasma slicers, laser products, biological projects, and computers in addition to expanding in the areas of finance and real estate. In recent years, Taiwan businessmen have actively focused their mainland investments on long-term strategic development, investing in plants and factories, seeking land use rights, and even building built factories and employee housing themselves. Two, investment scales have hit new heights and business structures have undergone drastic changes. Estimates announced by the Council of Economic Planning and Development show that Taiwanese not only invest in the long-term capital-intensive and high-tech businesses, but also in all types of cross-industry, large-scale investments manifesting a pluralistic developmental approach. According to the same estimates, 64 percent of Taiwan's manufacturing industry investing in the mainland have already invested $2.65 billion in the first eight months of 1993, accounting for a 13-fold increase over the same period in 1992. Taiwanese businesses investing in the similar industries have joined together and established their own industrial regions, processing zones, and other cluster-oriented areas on the mainland, such as a bicycle production region in Kunshan, Jiangsu Province, a "computer street" in Shanghai, and a Taiwan machinery-specialization zone in Xiaoshan, Zhejiang Province. This large-scale and pluralistic grouping trend in Taiwan's investment in China will continue. (Taipei CHING-CHI JIH-PAO 15 Jan 94 p 2) Companies Planning To Invest in Mainland's Hainan Province - According to a 21 February NIHON KEIZAI SHIMBUN article by Yosahiko Sakurai, one of the paper's Hong Kong correspondents, private-sector Taiwan companies are planning large investments in China's Hainan Province. A 200-man inspection group will visit Hainan in late March to assess investment areas, while a trade promotion group, the "Hainan-Taiwan Economic Cooperation Promotion Committee," has already been organized and is chaired by Hainan's vice governor. At present Taiwanese investment in Hainan is primarily small in scale, such as investment in restaurants. Sakurai notes that in January 1994, Lien Chan, president of Taiwan's Executive Yuan, visited Singapore and proposed to Prime Minister Goh Chok Tong that Taiwanese and Singapore companies jointly undertake investment projects in Hainan, a step that would help protect Taiwanese investments. The outcome of Lien's visit reportedly heightened enthusiasm toward investing in Hainan on the part of Taiwanese companies. The purpose of the trade promotion committee, which is based in Haikou, Hainan's capital, is to promote two-way economic cooperation and expedite the introduction of Taiwanese investment. The honorary chairman of the committee is Du Qinglin, Hainan's NPC delegate, and the chairman is Vice Governor Mao Zhijun. Hainan is seeking "large- scale Taiwan cooperation" in the petroleum, natural gas development, agriculture, fishing, and basic infrastructural sectors, Sakurai reports. The 200-person corporate inspection group, Taiwan's "largest company inspection group ever," will visit Hainan from 25 to 30 March. For its part, Hainan's government has "growing expectations" concerning Taiwanese investment in the province, one of the five Chinese special economic zone, where foreign investment "has lagged." Sakurai maintains that one uncertainty regarding investment in Hainan is "deep-seated opposition" to promoting trade with China among Taiwanese governmental officials. Because of this, people involved in this issue reportedly feel "the situation remains fluid" whether large-scale Taiwan investment in Hainan "will progress smoothly." Minister of Economic Affairs Warns Taipei To Avoid Super 301 - Commenting on 3 March on U.S. moves to revive super article 301 against Japan and other countries, Minister of Economic Affairs Chiang Ping-kun said that even though the article is aimed at Japan, and despite the fact that Taiwan's foreign trade surplus against the United States declined in 1993 to $6.76 billion from a peak of $16 billion, the not-too-open Taiwan market may still make it a possible U.S. target. As the United States has been exerting pressure on Taiwan to open up its domestic market, Taiwan should properly restructure its market before joining GATT at the end of 1994. (Taipei CHING-CHI JIH-PAO 4 Mar 94 p 2) Plans To Export Arms, Planes, Missiles - In a report to Premier Lien Chan on 7 March, Minister of Defense Sun Chen said the Defense Ministry plans to cooperate with the civilian sector in commercializing for export defense industry products such as missiles and planes. Sun Chen noted that the shifting of the defense industry to manufacturing civilian products has been promoted for many years, adding that concrete results have been made in the manufacturing of communications equipment, radar, chemical weapons protection gear, and electronics equipment for military purposes in cooperation with the civilian sector. (Taipei CHING-CHI JIH-PAO 8 Mar 94 p 2) Exports to United States Reverse Course, Increase in Dec 93, Jan 94 - After declining for six consecutive months in 1993, Taiwan's exports to the United States in December 1993 and January 1994 reached $2 billion and $1.9 billion respectively, up 8.8 percent and 8.7 percent respectively over the corresponding months in 1992 and 1993. The United States is the largest importer of Taiwanese exports, absorbing some 28 percent of the nation's total exports. (Taipei CHING-CHI JIH-PAO 3 Mar 94 p 2) Competitive Edge in U.S., Japan Deteriorates - A quarterly report released on 7 March by the Industry Development Bureau shows the Republic of China's export competitive edge in the United States and Japan is deteriorating rapidly in terms of constant market share. In the U.S. market, the competitive edge declined by 42 percent compared with five years ago, while in the Japanese market it declined between 42 and 52 percent compared with six years ago. (Taipei CHING-CHI JIH-PAO Mar 94 p 2) National Council Views Impact of Entry Into GATT on Local Industries - According to Taiwan's Council for Economic Planning and Development, after Taiwan joins GATT and lowers its tariffs, it will import greater amounts of raw materials for the agricultural and industrial sectors. While manufacturers' output will occupy a smaller proportion of the gross national product, the output of export-oriented manufacturers will increase. Agricultural output and the number of related workers will drop considerably. Both imports and exports will increase. A large number of foreign competitors will join Taiwan's service industry, a situation which will result in the improvement of services because of fierce competition. (Taipei CHING-CHI JIH-PAO 26 Feb 94 p 13) Profit Rate of Manufacturing Sector Declines - The average selling price of Taiwan's major export products continued to decline in 1993, and the profit rate of the manufacturing sector averaged only 5.6 percent, the lowest in the past 8 years, according to the Council for Economic Planning and Development under the Executive Yuan. The council noted Taiwan's exports grew only 4.3 percent in 1993 and that the profit rate of its textile, timber, woolen, pulp, paper, and basic metal products averaged less than 4 percent. Only the profit rate of nonmetal mineral products exceeded 7 percent. (Taipei CHING-CHI JIH-PAO 8 Mar 94 p 2) NORTH KOREA: FEATURE: DPRK's Interest in 'Chinese-Style Economic Reforms' Noted - SUMMARY: Since the 1980's, North Korea has ruled out the possibility of adopting "Chinese-style economic reforms" and even declared that "establishing special economic zones does not suit our interests" when it introduced its joint venture law in 1984. However, in 1991, the government changed directions by making Najin and Sonbong free trade zones and is now planning to do the same in other areas of the country, according to South Korean press reports. A recent article in a Seoul journal features the views of two experts on North Korea on the DPRK's interest in China's reforms and the prospect for change in North Korea. The 14 February CHUNGANG ILBO quotes an unnamed Chinese expert on North Korea who says that the DPRK is planning to make Sinuiju and Nampo special economic zones. With Najin and Sonbong on its eastern shore, and Sinuiju and Nampo on its western shore, the DPRK expects to reap economic benefits from these areas "much sooner" than from the UN-sponsored Tumen River free trade zone project, CHUNGANG states. The 1 March MUNHWA ILBO echoes CHUNGANG's views and reveals that Chongjin and Wonsan are also slated to become special economic zones. In the 3 February SISA JOURNAL, Kim Pong-tok, a professor at Northeast Finance University in China, gave the following reasons as to why North Korea would be interested in China's approach to reform: a) China has made economic reform a priority, allowing social changes when timing and conditions are right, in order to "minimize shock;" b) China has been able to maintain a "socialist structure" under "communist leadership;" and c) if reforms are well planned from the outset, they can take place gradually, as they are in China. Kim notes several indications that the DPRK may be adopting "Chinese-style economic reforms:" a) North Korea has relaxed the rules on private ownership; b) since 1985, the DPRK has slowly changed its centrally controlled and planned economic system, allowing various industries a certain degree of freedom; c) the government has reduced the scope of central management; and d) North Korea has opened special economic zones, under new investment regulations. Kim points out that North Korea's joint venture law offers foreigners more favorable terms than China's law, and concludes by saying that "North Korea could rise as a new star of the Far East, if reform is properly handled." SISA also reports the views of Ho Mun-yong, a prominent researcher at the National Unification Research Institute, regarding North Korea's outlook on China's reforms. Ho believes that Kim Il- song's visit to China in 1982, Kim Chong-il's tour of the Shenzhen special economic zone in 1983, and the enactment of the joint venture law in 1984 are indications that the DPRK is moving toward Chinese-style reforms. According to Ho, North Korea's interest in PRC economic reforms was "intense," but the government was "afraid" of following the Chinese Government's lead because of the risk of "ideological corruption by outside forces." In Ho's opinion, the DPRK has "very little choice" but to make economic changes in order to maintain a political system that will allow Kim Chong-il to succeed his father. Kim has to do something extraordinary" to establish his own credentials and "what better way to do that than to show leadership by boosting the economy and improving the standard of living through economic reforms?" Ho notes that North Korea has marked "1990-1993 as a survival period, 1994-96 as an adjustment period, and the post-1997 years as a well- to-do period." He also predicts that North Korea will continue to change its economic policies. Efforts Marking Beginning of 'Adjustment Period' Reported - Various industries are reportedly making "extraordinary" efforts to give the "adjustment period" a "successful" start. The 26 March Factory in Pyongyang has increased its productivity by utilizing industrial waste materials "effectively" and has found a way to produce insulators using common domestic raw materials. Other industries in Pyongyang have already produced over 6,000 tons of steel and 106,000 of general material items in 90 different categories. Also, over 90,000 small farming equipment items of 20 different types were distributed to Pyongyang area farmers to mark the opening year of the "adjustment period." (Pyongyang NODONG SINMUN 20 Jan 94 p 1) SOUTH KOREA: FEATURE: Trade Ministry Announces New China Policy - SUMMARY: South Korea's Trade Ministry has issued a paper outlining the country's new plans for economic relations with China, according to ROK press reports. Highlights include shifting from light to heavy industry, redirecting investment southward, and cooperating in five high-tech fields including nuclear energy. Seoul is backing its drive into China-with a full range of direct and indirect subsidies designed to give ROK firms an advantage over competitors. On 17 February, South Korea's Ministry of Trade, Industry, and Energy (MOTIE) released a report entitled "Comprehensive Measures for Making Inroads into China," outlining the ROK's latest plans for economic relations with the PRC. As reported in the 18 February MAEIL KYONGJE SINMUN (MKS), the policy seeks to "build a comprehensive support structure for economic cooperation including trade, investment, and industrial cooperation." Unlike previous ROK economic ventures into China which were "one-sided and impromptu," the current plan takes into account the experiences of Japan, Taiwan, Hong Kong, and other competitors in their dealings with China to help South Korea meet its challenges more effectively, the newspaper says. Among the plan's concrete aspects, MKS reports the ROK Government will "greatly enlarge" its "Overseas Economic Cooperation Fund" and the Export-Import Bank's "Deferred Payment Export Fund" to "expand the scale on which our companies will be able to provide important plants and facilities which China needs to move forward with its plans for economic development." The paper reports that the former fund is supporting China investors this year with some $50 million, and that the figure will grow to $5 billion by 1996. At present, there are nine China-related deferred payment applications with a total value of $1.2 billion, according to the report. MOTIE intends to "accelerate" this by making China "the main target for deferred payment export financing." South Korea "through support measure like this will prepare an opportunity for itself to secure a favorable position vis-a'-vis competing countries," the ministry states. MOTIE considers it "urgent" that South Korea build its own distribution network in China and is working on a plan to accomplish this, according to MKS. The ministry aims to put a stop to "South Korean companies' indiscriminate investment in China, which has been lopsided by region," and will select "business sectors in which China investment will be encouraged," by dropping, for example, the requirement for prior approval. "Other types of financial support" will also be given, such as raising the ceiling on "Overseas Investment Fund" loans from 70 percent for large firms and 80 percent for small and medium businesses, to 90 percent for both. Commenting on MOTIE's plan, the 18 February TONGA ILBO reports the government will enact measures to reduce the concentration of South Korean investment in Manchuria and redirect investment toward Shanghai and further south. The newspaper also says that ROK trade offices, now limited to Beijing and Shanghai, will be expanded to Dalian and Chongqing. Five particular areas of industrial cooperation will be pursued according to MOTIE's agenda: aircraft, automobiles, time-division exchange (TDX) switching equipment, nuclear energy, and high-definition television (HDTV). TONGA ILBO reports cooperation in aviation will be in the form of a joint program to build a mid-size 100-passenger airplane. (No mention is made of how this ties in with MOTIE's plans to produce a mid-size aircraft with a European partner. See related article in this issue of the PACIFIC RIM ECONOMIC REVIEW.) In the automotive sector, TONGA ILBO reports MOTIE wants to export finished cars to China, in addition to producing them locally. Plans for cooperation in the nuclear field include "operation and control" of a nuclear power station in Guangdong, exporting generating equipment, and building nuclear power plants. MOTIE reportedly is also encouraging exchanges of technology and personnel. The 19 February MKS reports on how South Korean conglomerates are gearing up for large investments in China in anticipation of government support for increased involvement. ROK investments, which have been primarily in assembly and light industry, will shift to cars and other forms of heavy industry. Major projects planned or under way are reported to include the following. Major ROK Investment Projects in China (figures in million dollars) Company Project Location Scale Investment Samsung Heavy equipment Liaoning 1,000 pieces 13.0 VCR factory 600,000 units Hyundai Auto assembly Dalian 300,000 cars Semiconductors Shanghai 50.0 Car audio sets Tianjin 300,000 units 2.0 Lucky- VCR's Shanghai Goldstar Color CRT's Changsha 100.0 Audio equipment 1,000,000 sets TDX factory Shandong 1,000,000 units Daewoo Cement Shandong 2,400,000 tons 300.0 a/c compressors 150,000 units 10.0 Bus assembly Shanghai 900.0 Bus assembly Guangxi 2,500 buses 35.0 Pipes Guangdong 100,000 tons 29.0 Sunkyong Oil refinery Shenzhen 150,000 barrels 1,100.0 Video tapes 18,000,000 tapes 8.5 Ssangyong Cement Shanghai 600,000 tons Daerim Octanol 100,000 tons 150.0 Posco Cold-rolled steel Liaoning 300,000 tons Other projects reported are tire cord, cotton spinning, polyester, cranes, construction equipment, transmissions, trash trucks, and beer. FEATURE: ROK Announces Decision on Mid-Size Aircraft - SUMMARY: The South Korean Trade Ministry's announcement that a single domestic firm will "lead" the development of the country's first indigenous commercial aircraft has drawn charges of "favoritism" among companies less likely to be selected, according to Seoul press reports. The 50-100 passenger design will be pursued with technical support from a European aircraft manufacturer. China's involvement on some level is being considered to facilitate overseas sales. According to a plan made public on 7 February by the ROK's Ministry of Trade, Industry, and Energy (MOTIE) reported by MAEIL KYONGJE SINMUN (MKS) the following day, South Korea's government will sponsor development of a mid-size 50-100 passenger aircraft through a domestic consortium under one leading company, with technical help from a foreign manufacturer, probably European. Work is scheduled to begin later this year, after a decision is made on what companies will participate, and will be finished by 1998. MOTIE's announcement reportedly ends months of speculation over the type of aircraft to be developed and how the project will be apportioned among domestic companies (see PACIFIC RIM ECONOMIC REVIEW Vol 2 No 25, 15 Dec 93 pp 29-30 and Vol 3 No 1, 12 Jan 94 pp 26-27 for earlier reporting). MOTIE chose the 50-100 passenger design based on estimated domestic demand for 170 units of an aircraft this size by the year 2000, with an export potential of another 100 planes, according to the 8 February CHOSON ILBO. The ROK Government will pay half the 279 billion won ($349 million) development costs as part of its goal to make South Korea 10th in aircraft worldwide by the next decade. The newspaper reports MOTIE will "direct and supervise" the project while private companies carry out the developmental work. MKS reports the government will select by this May the "leading company" within a consortium of domestic manufacturers, whose stake in the project will be less than 50 percent. The share of other ROK firms will depend on their actual roles. All companies in the consortium will work together on design, equipment, parts manufacture, and mass production, but only the leading company will perform final assembly and afterservice, according to CHOSON ILBO. Except Samsung which reportedly is the "strongest contender," all other candidates, including Daewoo, Korea Air, Hyundai, and Halla, oppose the concept of a leading company as "favoritism." Several of the firms cited above have already signed cooperative agreements with Asian countries and are "extremely dissatisfied" with the government's decision to limit foreign cooperation to a single firm. Candidates said by MKS to be "under consideration" are all European: England's BAE, Spain's CASA, and Sweden's Saab, MKS reports. MOTIE's quest for a foreign partner stems from its "concerns' that local technology is inadequate, and that the ROK would have trouble selling the plane overseas on its own. CHOSON ILBO notes similarly that MOTIE's present plan is to invite only one foreign firm to participate in the plane's development, but that it may bring in a third country, "including possibly China," to facilitate marketing the aircraft. FEATURE: South Korea Building Two New Research Institutes - SUMMARY: Two large research institutes will open this year in South Korea, each in its own way aimed at accumulating and disseminating information from and about foreign countries. Kwangju is getting its first graduate engineering research institute, staffed with many foreign instructors and geared toward acquiring foreign technology. Samsung meanwhile has built the country's first "Industrial Business Research Institute" which will train employees in overseas business practices while doubling as a commercial intelligence collection facility. South Korea will open two major research institutes over the next few months, one a government-sponsored S and T university in the southern city of Kwangju, the other a private business research facility in Yongin near Seoul. Although different in location, affiliation, and ostensible function, the two institutes share a common goal of acquiring information on foreign commerce and technology, and disseminating this knowledge among the ROK's professional and managerial elite. According to the 2 March CHUGAN MAEGYONG, construction of the Kwangju Science and Technical Institute will be completed this year and first classes will be held in March 1995. Intended as a "first- rate" engineering college, the institute will admit 360 students into master and 224 students into PhD programs in five fields: information and communications engineering, new materials, electro- mechanical engineering, life sciences, and environmental engineering. Before 1993, the school was operated as a branch of the Taedok-based Korea Advanced Institute of Science and Technology (KAIST). The decision to upgrade its status and facilities was made to attract better students and to integrate the south into the country's S and T network. CHUGAN MAEGYONG reports the cost of the physical plant at 132 billion ($165 million). The 1 January MAEIL KYONGJE SINMUN gives its 1994 operating budget at 23.97 billion won ($29.96 million). CHUGAN MAEGYONG describes the new institute as one of several projects undertaken by the ROK's Ministry of Science and Technology to foster the development of high-level technical personnel able to help South Korea "leap" into the ranks of advanced countries by the 21st century. The university will heavily emphasize research, with a planned faculty-to-student ratio of 1 to 5. The magazine reports a "large number" of foreign professors will be hired. It also says 10 to 20 percent of the 120-member faculty will be "pure" foreigners, presumably to distinguish this group from ethnic Koreans overseas who will also be recruited. The university will require faculty and students "to attend all types of international academic meetings and receive education from foreign professors." Foreign languages will be taught to give students access to "theoretical work in their specialties." CHUGAN MAEGYONG's 28 February issue reports that Samsung, South Korea's leading industrial conglomerate whose efforts to collect information on foreign commercial technology and businesses have been the subject of several ROK media reports (see PACIFIC RIM ECONOMIC REVIEW Vol 2 No 17, 25 Aug 93 pp 22-23 and Vol 2 No 20, 6 Oct 93, p 25), will open an Industrial Business Research Institute this June in Kyonggi Province. The facility is designed to produce "global businessmen" on the premise that Samsung's future depends on its employees' knowledge of foreign customs, business practices, and languages. The institute, reportedly the first of its kind in South Korea, will cost 22 billion won ($27.5 million). Some 220 trainees will be in residence at any one time. According to CHUGAN MAEGYONG, Samsung's institute has three functions: (1) preparing international specialists for "globalization" (essentially, a group-wide effort to sell more goods overseas through better market research and products tailored to individual countries); (2) The training facilities will double as a "professional information center" for storing and handling data on foreign countries; and (3) "Concentrated research" on different areas of the world will be carried out by more than 100 full-time area specialists, including former diplomats, overseas Koreans, Korea Trade Promotion Corporation (KOTRA) officials, and Samsung employees with experience abroad. The results of this research will be "used fully" in the company's business activities. "Globalization" training will include courses on international finance, taxation, investment, labor-management relations, marketing, languages, and customs. Satellite receivers will pick up lectures in foreign languages on these and other subjects. Samsung reportedly has consulted with Japan's SR International, the United States' Global Success, and other foreign firms on curricula. ROK Advertises for Expatriate, Foreign Scientists - The following advertisement appeared in the 14 February Seoul HANGUK KYONGJE SINMUN on page 7: Invitation To Apply for Employment in a Brain Pool of High-Level Overseas Scientists - The General Federation of Korean Science and Technology Organizations, in accordance with the Government's (Ministry of Science and Technology's) plan to employ high-level S and T personnel (a brain pool system), invites superior overseas scientists and technicians to South Korea for work in research and development, in order to achieve the supreme national task of helping South Korea enter the ranks of scientifically and technologically advanced countries by the 2000's. We hope for your wide participation. 1. Goals - To strengthen national competitiveness in keeping with the trend toward a global, worldwide, information society, we seek to employ superior overseas ethnic Korean and foreign scientists and technicians locally in domestic research and development, to contribute toward South Korea's entry into the ranks of scientifically and technologically advanced countries by the 2000's. 2. Fields - All fields of science and technology which are the objects of national strategic development, including: - basic fields (basic research, measurement, standards, astronomy) - machinery and materials fields (machinery, ships, aviation, space, materials) - electrical and electronic fields (electricity, power, electronics, computers, communications, optical technology) - chemical engineering and biological fields (chemistry, chemical engineering, biology, agriculture and fishing, sanitation) - resources and oceanographic fields (resources, oceanography, environment, construction) - energy fields (atomic power) 3. Positions To Be Filled - 100 or fewer 4. Personnel Sought a. Ethnic Korean and foreign scientists and technicians with five years or more experience working overseas from the time they received a PhD. b. Ethnic Korean and foreign scientists and technicians who possess excellent, world-class R and D accomplishments or know-how, regardless of their degree or experience, as determined by the Selection Committee. 5. Period of Employment a. Between six months and two years (less than six months is also possible, as determined by the Selection Committee). b. There is a possibility of extending the employment period beyond two years (as determined by the Evaluation Committee). 6. Support and Expenses a. Expenses incurred entering and leaving the country (airfare and personal expenses, etc.) b. Costs in country (automobile and other support depending on one's experience, salary on a level higher than the compensation received in one's own country, to be decided by the Selection Committee) 7. Institutions of Employment a. Government-funded research labs (institutes) b. National and private research labs c. Universities (except ERC (Engineering Research Center) and SRC (Science Research Center)) 8. Method of Employment Conduct joint research as part of an existing or new R and D team, with the possibility of concurrently giving lectures in one's specialty, and making presentations in various types of academic meetings and seminars. 9. Evaluation The scientists and technicians who are hired will have their research results evaluated from the perspective of the type of employment at six-month intervals by the Evaluation Committee. (If found "unsuitable," support will be discontinued and that part of the support paid will be recovered from the institution where the person is employed.) 10. Application Period 14 February to 10 March (for the first half of the year). * Remaining personnel look for a later notice in the second half of the year. 11. Documents To Submit a. Application for employment with the Brain Pool (in a form determined by the individual) 1 copy b. Statement of plans (to be drawn up by the institution applying) 1 copy c. Written introduction from the institution applying 1 copy 12. Information Office General Federation of Korean Science and Technology Organizations (635-4 Yoksam-dong Kangnam-gu Seoul 135-703) 13. Miscellaneous a. Materials received will not be returned. b. Please address detailed inquiries to the General Federation of Korean Science and Technology Organizations (Tel: 553-2181-5) Director General Federation of Korean Science and Technology Organizations (Note: the 25 January MAEIL KYONGJE SINMUN identifies South Korea's Ministry of Science and Technology as the sponsor of this organized effort to acquire foreign technology. See PACIFIC RIM ECONOMIC REVIEW Vol 3 No 5 9 Mar 94 pp 33-34) Steel Firm Imports North Korean Scrap Iron - ROK steel producers are actively moving ahead with importing scrap steel from North Korea. In January, Inchon Iron and Steel Co., Ltd. (Inchon Steel) brought in on a trial basis 1,200 tons of scrap iron from Najin. The company tested the suitability of the iron, which was obtained from dismantled rail cars, and found that the quality was not as good as U.S. scrap iron. Nonetheless, steel firms which use scrap steel as raw materials in their electric furnaces are actively moving ahead with importing scrap iron from North Korea. Inchon Steel is already prepared to place a supplemental order for 8,000 tons via a Japanese trading company. North Korea has many scrapped rail cars and cracked rails. If the nuclear issue is resolved and North Korea normalizes its foreign relations, ROK firms could possibly import 40-50,000 tons of scrap iron from North Korea annually. In the long run, steel firms could even import scrapped Russian rail cars via Najin or Sonbong, where they could be disassembled. Realizing that North Korean scrap iron refining facilities are insufficient, ROK steel firms are considering plans to have a joint scrap iron refining facility in the Najin-Sonbong region. In addition, they are considering plans to import pig iron directly from the Songnim region. Currently, steel firms import 4-5,000 tons of North Korean pig iron each year via China. (Seoul HANGUK KYONGJE SINMUN 16 Feb 94 p 9) Car Makers Consider New Production Method To Raise Productivity - ROK auto makers Hyundai, Kia, and Daewoo believe that it is not possible to greatly increase productivity using current production methods and are looking at a method that most overseas car makers use. With the "module" production method, a cooperating company or separate assembly line assembles individual parts in advance, and then a main assembly line assembles the semi-finished goods. This method allows producers to check in advance for defects, and it requires fewer workers on the assembly lines. Thus, companies can greatly increase their product quality, automation rates, and productivity by using this method. Hyundai Motors has done a few experiments with the module method, and this year will prove to bring the process into its company. Kia Motors is already using the method in some of its production, but there is still a big difference between its efforts and those of advanced car makers. (Seoul HANGUK KYONGJE SINMUN 13 Feb 94 p 4) China's Currency, Tax Reforms To Be 'Direct Blow' to ROK Exports - China's moves to unify its two currency system (renminbi and foreign exchange certificates), adjust tariffs, raise the VAT, and impose a consumption tax will greatly weaken ROK export competitiveness in third country markets where ROK and Chinese goods compete. The moves are also expected to be a "direct blow" to ROK exports into China. China has devalued the yuan by 33.3 percent, fixed the VAT (which had varied between 8 and 15 percent depending on the type of good) at 17 percent, and set up a new consumption tax to restrain imports. The estimated effect of these changes will be to boost the price competitiveness of Chinese goods by at least 20 percent in overseas markets. While China's reform measures bring its trade system in line with international standards, they also seem to reveal China's intention to curb imports. The exchange rate adjustment and tax measures will act like a "double trap" to ROK exports to China. For example, one ton of cold-rolled ROK steel, which cost a Chinese importer $400 last year, would now cost close to twice that amount. The VAT and tariffs on that ton, which last year equalled 592 yuan ($102.07 at $1/5.8 yuan), would now total 1009 yuan ($115.98 at $1/8.7 yuan) thanks to adjustments in the tax, tariff, and exchange rates. The impact on ROK firms is not all negative, however. ROK firms that manufacture in China and export to third countries will see their competitiveness rise. Also, because foreign currency restrictions are being eased, there is a growing possibility that Chinese firms may expand their imports. (Seoul HANGUK ILBO 11 Jan 94 p 9) South Korea To Set Up 'KORNET'--Korea Internet - This year South Korea will put into service Korea Internet (KORNET), which can receive databases from "famous" overseas universities or research institutes. In Korea Telecom's judgment, using an international scientific research network that can easily utilize high-tech S and T information in order to strengthen industrial competitiveness is an urgent matter. It has decided to offer domestic commercial service for INTERNET, and wll set up the service so that customers can link up with the system using various methods, such as a LAN (local area network) or a modem. Links with LAN units will use 56 Kbps (kilobits per second) or 9.6 Kbps lines, while links with modems will use 2.4 or 9.6 Kpbs. This year, Korea Telecom will set up T1-level (1.544 Mbps) backbone networks in six ROK cities (the article names only five--Seoul, Pusan, Taejon, Taegu, and Kwangju). Korea Telecom will upgrade the backbone network to T3-level (43 Mbps) lines by 1997. (Seoul HANGUK KYONGJE SINMUN 11 Jan 94 p 20) Government To Regulate Transport of Industrial Waste - Beginning in June, ROK companies must receive advance permission from the Ministry of Trade, Industry, and Energy (MOTIE) before importing or exporting certain industrial wastes. This procedure will apply to 47 different items. In addition, in March the government plans to formally join the Basel Convention regulating transboundary movements of hazardous wastes. It also intends to establish its own regulations governing the shipment of waste between nations in mid- March. According to the regulation prepared by MOTIE, the government will call for the forcible re-export of illegally imported waste. The government also may, if necessary, prohibit the import of certain wastes to protect the environment or public health. Furthermore, those who import waste without permission or who disobey the rules on exporting waste will face five-year prison sentences and fines of up to 30 million won ($37,500). To more strictly regulate transport of these materials within South Korea, the government will set up recycling complexes to nurture recycling enterprises in places like Noksan and South Cholla Province's Yojon. South Korea imports 50 different types of waste materials--worth $1.5 billion--each year for use as industrial raw materials (see table). While MOTIE realizes that importing some types of industrial waste is unavoidable, it plans to regulate more strictly the transport of certain toxic materials within South Korea. In addition, companies will be required to obtain permission from the Ministry of the Environment in cases involving extremely toxic or hazardous materials. ROK Imports of Industrial Waste, 1990-1993 (Unit: 1 ton) Imported from: Product United States England Canada Nickel 346 - Lead 162.7 - 181.1 Copper 4,669.5 Zinc 17.8 - Plastic 38.2 - 35.5 Aluminum 4,503 Toxic chemicals - 23,331.5 Metallic iron 3,064,185.9 749.5 Non-ferrous metals - 2,634 (Seoul HANGUK ILBO 4 Feb 94 p 2) Hyundai Motors To Market 'Fully Indigenous' Automobile - Hyundai Motors will begin selling a fully indigenous, 1,500-cc passenger car next month. The "Accent" was developed solely with domestic technology and is equipped with locally built components including engine, transmission, various metal casts, and electronic parts. It is the first car built by South Korea without royalty payments to foreign component suppliers. (Seoul YONHAP 0230 GMT 11 Mar 94) Sunkyong Industries Develops Biodegradable Film - Sunkyong Industries has developed a type of polyester-based film for paper coating that can be fully dissolved by micro-organisms. The film is used for coating paper bags and stationery. (Seoul YONHAP 0223 GMT 4 Mar 94) Yukong Enters Power Generation, Liquefied Gas Business - Yukong Ltd. plans to enter the power generation and liquefied natural gas (LNG) businesses. The oil refining company's move is in line with the government's policy of promoting the participation of private firms in electric power generation and LNG projects. The action is also part of Yukong's long-term plan to become a general energy company by diversifying into other areas because of oil refining's growth limits. (Seoul THE KOREA TIMES 9 Mar 94 p 8) Real Estate Company Becomes First Private Owner of Public Firm - Keo Pyong Co., a real estate developer, has taken over the Korea Tungsten Mining Co. to become the first private buyer of a public corporation under the government's policy to privatize state-run companies. Korea Tungsten, founded in 1916 as an exporter of tungsten ore, has recently focused on manufacturing processed products as China has emerged as the biggest supplier of the metal. The company's capital was 26.2 billion won ($32.75 million) as of the end of last year, with 60.2 billion won ($75.25 million) in sales and 8.5 billion won ($10.63 million) in net profits. Its assets are valued at over 300 billion won ($375 million). (Seoul THE KOREA HERALD 2 March 94 p 8) Goldstar Signs Multimedia Deal With U.S. Company - Goldstar recently announced that it has signed a contract to cooperate with the U.S. company Oracle Corporation to develop and market multimedia equipment. The contract will pave the way for Goldstar to participate in the U.S. information superhighway project and to enter the multimedia market there. The contract calls for Goldstar to provide technology for producing compact disk interactive (CDI) equipment, which is designed to allow customers to select video movies on their televisions through telephone lines on a video-on- demand (VOD) basis. The communicable CDI system, called "set top box," is a basic instrument for new media service firms such as Oracle. (Seoul THE KOREA TIMES 18 Feb 94 p 8) Daewoo Electronics To Export Computer Monitors to U.S. Firm - Daewoo Electronics has been designated the main supplier of monitors to the AST Research Company, a U.S. computer company. Daewoo will supply over 500,000 units including 14-inch monitors for personal computer use and 17-inch monitors for CAD/CAM (computer-aided design/computer-aided manufacture) use. Sales will reach $100 million per year. The contract is renewable annually as conditions warrant. (Seoul MAEIL KY0NGJE SINMUN 26 Feb 94 p 8) Koryo Zinc To Develop Lead, Zinc Mines in Canada - Koryo Zinc will invest $8.952 million to establish a corporation in Canada to develop lead and zinc mines there. Koryo Zinc and a Canadian zinc refining company will take over two lead and zinc mines in Canada at a cost of Canadian $29.84 million. Expenses will be shared 50:50. Koryo Zinc is also promoting development of lead and zinc mines in China. (Seoul MAEIL KYONGJE SINMUN 25 Feb 94 p 11) Daewoo Motors Enters Partnership With Japan's Honda - Daewoo Motors is forming an overall partnership--in technical assistance and sales--with Japan's Honda. After developing its "Arcadia" model based on the Acura "Legend," Daewoo signed a contract to import Honda's "Accord" in April or May this year. Honda's former Korean import agent Daelim had stopped importing Accords since the end of last year. Daewoo will also develop a compact car based on Honda's "Civic," and is negotiating to produce Civics in its PRC plant in Changchun. Daewoo is expanding cooperation with Honda to save on development costs. (Seoul MAEIL KYONGJE SINMUN 8 Mar 94 p 10) Sambo To Export Personal Computers to Japan - Sambo Computer Company recently concluded a contract with Japan's NEC to export NEC-9800 personal computers worth $200 million to Japan in the form of OEM (original equipment manufacturing). Shipments will begin in 1995. (Seoul MAEIL KYONGJE SINMUN 8 Mar 94 p 22) Goldstar To Build Television Plant in Vietnam - Goldstar will set up a color TV plant in Vietnam as a joint venture with two Vietnamese enterprises--Thang Loi and Sae Yang. A contract will be signed at the end of April, with construction starting in September on a $6-million plant located outside Ho Chi Minh City. The venture, which goes into operation in March 1995, will produce 200,000 color sets per year with 14-, 16-, 20-, and 25-inch screens. Some 70 percent of the TV's will be sold in Vietnam and the remainder exported to neighboring countries. Goldstar's parts making affiliates are also making plans to enter the Vietnamese market. (Seoul THE KOREA TIMES 7 Mar 94 p 8) Daewoo To Export ForkliftS to United States - Daewoo Heavy Industries will establish a sales corporation in the United States, DEC, to export its own model of forklift trucks. DEC will be based in Cleveland, and a center for spare parts will be built in Brunswick, Georgia. The company plans to set up distributors in all 50 states. Daewoo will export 9,000 forkliftS this year to the world market, and 15,000 units in 1995. For the past 10 years, Daewoo has exported forklift trucks under the Caterpillar brand name through original equipment manufacturing (Seoul MAEIL KYONGJE SINMUN 8 Mar 94 p 11) Korea Nambang Development To Advance Into PRC, Indonesia - Korea Nambang Development (KODECO) will invest $500 million to begin new large-scale businesseS in the PRC and Indonesia. KODECO established a joint-venture plywood company with an Indonesian firm (Pakati Wood). With paid-in capital of $10 million, the 60:40 joint-venture acquired development rights for 30,000 acres of forest in Irian Jaya, Indonesia. The company will produce 240,000 cubic meters of plywood a year. KODECO also established a joint venture with the Forestry Bureau of Shanhe Village, Heilongjiang Province, China. The operation, to be located in yingkou, near Dalian, Liaoning Province, will produce yearly 35 million cubic meters of plywood from pulp beginning in 1996. (Seoul MAEIL KYONGJE SINMUN 4 Mar 94 p 19) Daewoo To Build Joint Venture Auto Plant in PRC - The Daewoo Group will build a joint venture automobile plant in China in cooperation with China's Shandong Provincial Government and a Chinese motor company. Daewoo and the Chinese side will each invest 50 percent of the total fund of $1.5 billion. Chairman Kim U-chung and other Daewoo managers will visit China soon to finish negotiations- and the project will be announced officially after approval is obtained from both governments. (Seoul MAEIL KYONGJE SINMUN 27 Feb 94 p 1) Il-yang, Chinese Firm To Build Pharmaceutical Factory in Jiangsu - Il-yang Pharmaceutical Co. will establish a joint venture with a Gaoyou City pharmaceutical factory in China's Jiangsu Province. The company, tentatively named Yangzhou-Ilyang Pharmaceutical Co., will be capitalized at $4 million, with the Korean company contributing 32 percent. Il-yang will build a plant as soon as it receives authorization from the Chinese Government and start manufacturing tonic drinks and digestives in the latter part of next year. (Seoul YONHAP 0223 GMT 4 Mar 94) Inchon Steel ReceiveS Order From Indonesia - Inchon Steel recently received an order for 500 tons of molding iron (worth $1.3 million) from the Indonesian engineering company FPE (Flat Product Equipment Co). The molding iron will be used to expand FPE's facilities for large-scale housing and housing parts. Shipments will begin on 10 August. (Seoul MAEIL KYONGJE SINMUN 4 Mar 94 p 18) Dongbu Steel To Transfer Silicon technology to German Firm - Dongbu steel will transfer silicon production technology to Wacker- Chemitronic of Germany for $3.84 million plus royalties. The technique is for the production of multicrystalline silicon, an ingredient for semiconductors. The German firm currently supplies 30 percent of the world's demand. Dongbu is entitled to a royalty of 1-2.5 percent for the technology it developed jointly with the Korea Research Institute of Chemical Technology, a government-funded research institute, over a period of 10 years. The company said it opted for German production instead of domestic manufacturing because of the high costs involved in transporting the ingredient material, thricholosil. (Seoul THE KOREA HERALD 10 Mar 94 p 8) Daewoo Car Audio Plant in Tianjin Begins Operations - Daewoo Electronics expects to put its car audio plant in Tianjin, China into full operation on 11 March. The plant will make 600,000 car audio systems a year, all for export. Daewoo has a 100-percent stake in the plant with an investment of $3 million. Annual capacity will be increased to about 2 million units by the year 2000. (Seoul YOHAP 0230 GMT 11 Mar SOUTHEAST ASIA: INDONESIA - Paiton Electric Power Agreement signed -- Indonesia recently signed an agreement with P.T. Paiton Energy Co., an international consortium, to produce electricity at the $2.3-billion, coal-fired Paiton power station in East Java. According to Indonesian officials, the two 615-mw units covered under the agreement are expected to be operational by 1998. The consortium consists of Mitsui and Co. of Japan and Mission Energy of the Netherlands, each holding a 32.5-percent stake in the project; the U.S. General Electric Power Funding Corporation which has a 2O-percent share; and Indonesia's P.T. Batu Hitam Perkasa, controlled by Hashim Djojohadikusumo which holds the remaining 15 percent. Paiton Energy has agreed to sell the electricity it will produce to Indonesia's state-owned electric company PLN over a 3O-year period, based on a three-tiered rate structure--8.56 cents per kilowatt hour (kwh) for the first six years, 8.41 cents per kwh for the following six years, and 5.54 cents per kwh for the last 18 years. (Jakarta KOMPAS 14 Feb 94 p 8) Increased Competition Expected in LNG Market - Pertamina Director for General Affairs Baharudin recently stated that even though Indonesia is the world's largest LNG exporter, it cannot ignore the emergence of several new competitors. Baharudin said that five countries are vying for the Asia-Pacific region's LNG market, which is currently concentrated in Japan, south Korea, and Taiwan, with China and Thailand surfacing as potential markets. Qatar, Alaska, and Australia are in the process of jncreasing their annual LNG production by 10 to 15 million tons, and Malaysia and Oman by 5 million tons, Baharudin noted. (Jakarta BISNIS INDONESIA 19 Feb 94 p 5) Batam Island To Be 'Center' for Taiwanese Investments - Minister of Research and Technology B.J. Habibie recently stated that Taiwan has formed a-task force to encourage entrepreneurs to invest in Batam, as Taiwan plans to make Batam Island the "center" of its Southeast Asian investments. In return, Habibie has requested that Chang, director of Taiwan's Evergreen Group, serve as his personal advisor in a $600,000 project to establish a container port in Batam, capable of handling 600 million containers annually. Evergreen has already completed a feasibility study on the project, at no cost to the Indonesian Government. While Indonesia has of fered Evergreen the contract to construct the port, the company has not responded thus far. (Jakarta BISNIS INDONESIA 15 Feb 94 p 6) P.T. Pindad To shift Production, Marketing Focus - T. Sjamsu, senior executive vice president of P.T. Pindad, recently announced that the company is shifting its production and marketing efforts away from the military sector. In order to boost revenues and defray the cost of producing military equipment for the Indonesian Armed Forces (ABRI), the company plans to devote 80 percent of its production capability to the manufacture of non-military equipment. In the past, P.T. Pindad was able to sell 40 percent of what it produced to overseas commercial markets, Sjamsu said. P.T. Pindad produces ammunition, pistols, revolvers, and non- military equipment such as generators- machine tools, vacuum circuit breakers, and air brake systems. (Jakarta BISNIS INDONESIA 14 Feb 94 p 9) State-Owned Gas Company To Receive $424-Million Loan - The state- owned gas company Perum Gas Negara will receive a $424-million loan for the construction of an 823-km pipeline from the Asamera gas field in south sumatra to the Duri oil field and Batam Island, Riau. The loan will come from a syndicate comprising the Asian development Bank, the Export-Import Bank of Japan, and the European Investment Bank. (Jakarta THE JAKARTA POST 4 Mar 94 p 1) Increase in Trade With Taiwan Expected - An official of the Taipei Economic and Trade Office in Jakarta recently announced that bilateral trade this year is expected to increase by $3.5 billion over 1993. The estimate is based on historical growth trends, Taiwan's increased purchase of liquefied natural gas, coal, crude oil, and non-oil products- and Taiwan's increased investments in Indonesia. (Jakarta THE JAAARTA POST 4 Mar 94 p 9) LAOS: French Firm To Build Hydropower Station - The state-run Electricite du Laos and sogreah of France recently signed an agreement for the construction of the Nam Leuk hydropower station. The project, to be funded by an Asian development Bank loan, is expected to generate 40 mw of power. (Vientiane KPL 0830 GMT 15 Mar 94) MALAYSIA: Mahathir Outlines strategy for space Industry - Prime Minister Mahathir has outlined a three-step approach to develop an indigenous space industry that can foster space-related commercial ventures in the country. The strategy calls for local companies and institutions to participate in selected foreign space programs that are compatible with Malaysia's scientific and industrial capability to establish a networking system with space agencies in Europe, Asia, and the United States, that will facilitate Malaysia's participation in various programs and projects; and to promote closer relations among the countries in the region in order to develop scientific and commercial activities that would be mutual1y beneficial. Mahathir remarked that Malaysia should break into the space industry, not only because of the impact it would make on international politics and the economy and defense worldwide, but also because new initiatives in the space industry can benefit other industrieS, such as aeronautics, aerospace engineering- and communications. (Kuala Lumpur BERITA HARIAN 18 Feb 94 p 8) Telekom Malaysia To Provide services in India - Telekom Malaysia recently announced that it has received an offer from the Indian Telecommunications Department to operate paging and cellular services in several major cities in India. It has formed a joint venture company with Usha Martin IndustrieS (UMI) Ltd. of India, which is expected to be operational sometime this year. The new company, Usha Martin Telekom Ltd., will be worth $40 million, with both sides holding equal shares. (Kuala Lumpur BERITA HARlAN 17 Feb 94 p 7) PHILIPPINES: FEATURE: Davao Focusing on Economic Growth - SUMMARY: Davao, the principal city on the island of Mindanao, is focusing on achieving economic growth, according to related articles in a Manila daily. The city has turned its attention away from Manila, to a "triangle area" that includes East Indonesia, East Malaysia, and other parts of Mindanao. Cooperative efforts between Davao and other cities are under way, cross-investments have started, and infrastructural improvements in Mindanao are being planned, the paper notes. An article in the 11 February BALITA reports that just as the philippines feels "left out of booming southeast Asia," its southern island of Mindanao feels "left out of the rest of the country." However, the article adds, the island's main city, Davao, is trying to achieve economic growth by working with surrounding areas in Mindanao, East Indonesia, and East Malaysia. The East Asian Growth Area (EAGA), patterned after the two other economic areas in the region (the Southern Triangle encompassing Singapore, Johor (Malaysia), and Batam Island (Indonesia), and the Northern Triangle, comprising Aceh (Indonesia), Penang (Malaysia), and southern Thailand), is designed to promote trade and development in the "triangle area" of Mindanao, East Indonesia, and East Malaysia, according to the 12 February BALITA. Guided by the EAGA concept, Davao is focusing on its own economic progress, the paper says, citing increasing construction of new buildings and the recent opening of three shopping malls as indications of growth in the city. The 11 February BALITA reports that, according to Merle Cruz, regional director of the Department of Trade and Industry, the private sector has led the way in establishing links between Davao and Manado, capital of North Sulawesi, Indonesia. For example, Indonesia's Bouraq Airlines currently makes two weekly flights to Davao and Philippine Airlines is seeking landing rights in Labuan, which is being developed as Malaysia's financial center. Cruz adds that cross-investments have also begun. A Philippine fishing company, QBRO, has invested in a cold-storage facility and ship repair operation at Bitung, Indonesia, while the Indonesian company P.T. Intimas has bought into a soya oil processing plant in Mindanao. Davao officials note other cooperative opportunities as well, says the 14 February BALITA. These officials suggest, for instance, that Mindanao might ship its rice and corn to Sabah and Sarawak and, perhaps, benefit from the two Malaysian states' oil and gas reserves. In addition, since Manado lacks colleges and private hospitals, its residents could use Davao's facilities which are more easily accessible and more affordable than the facilities in Jakarta. Infrastructural improvements are also being planned, the paper adds, noting that the construction of overpasses and a four- lane road connecting Davao to the northern part of Mindanao, and the upgrading of Davao airport to international standards are all priority projects. Syvelyn Tan, head of the Philippine Government-private sector group promoting investments in Davao, is quoted in the 12 February BALITA as saying that business confidence "has come slowly" to Davao because it used to be a battleground between Muslim and communist guerillas and government forces. Furthermore, Davao had the reputation of being a "crime and murder center." But now, Tan says, even the communist New People's Army has withdrawn, making room for peace and investment. Most importantly, the 14 February BALITA concludes, the regional grouping is getting "full support" from the three governments involved. Malaysian Prime Minister Mahathir has endorsed the EAGA, while the Philippines and Indonesia have signed agreements for postal and shipping services between Davao and Manado, and have established a joint commission to handle border and customs issues. Consortium To Undertake Water Project - Malaysian entrepreneur Eugene Campos will head a consortium that will undertake a $480- million, build-own-operate water project in Metro Manila. The project, expected to be completed in five to six years, will help accelerate infrastructure development and delivery of basic services, in line with the "Philippine 2000 Vision." The project entails financing, designing, constructing, managing, operating, and maintaining a water treatment plant with a capacity of 1,000 million liters a day. (Kuala Lumpur UTUSAN MALAYSIA 18 Feb 94 p 5) Increase in Money Supply Noted - Money supply (M3), representing the total amount of currency in circulation plus savings deposits, time deposits, and deposit substitutes, stood at $17.14 billion in 1993, an increase of more than 22 percent over the previous year. On the other hand, broad money (M2), which is the total amount of currency in circulation, savings, and time deposits, rose by 24.49 percent to $17 billion. (Manila MANILA BULLETIN 26 Feb 94 p B-1) Decrease in Foreign Investment Reported - Foreign investment dropped to $327.942 million in 1993 from $328.012 million the previous year. Less infusion from the major trading partners, Japan and the United States, accounted for the decline, but investment from Great Britain has risen. (Manila MANILA BULLETIN 7 Mar 94 p B- 1) SINGAPORE: OCBC Launches Fund for Investment in China - The Overseas Chinese Banking Corporation (OCBC) has launched the Savers China Growth Fund, offering investors a vehicle to invest in China. Initially, investors will have to buy $10,000 worth of shares, while subsequent purchases will be transacted in $5,000 lots. OCBC is targeting retail investors and "wealthy individuals," and hopes to raise between $20 and $30 million. (Singapore BUSINESS TIMES 10 Mar 94 p 17) Company To Build Oil Terminal in Nigeria - IPCO International has been awarded a $251-million contract to build an oil terminal in Nigeria. The project will be carried out by IPCO subsidiaries and is expected to be completed in 20 months. (Singapore BUSINESS TIMES 16 Mar 94 p 17) THAILAND: Norwegian Company To Invest in Gas Venture - Norway's national oil firm Statoil is investing $96 million in the Bongkot gas field development in the Gulf of Thailand. This sum will be spent between 1994 and 1998 and represents the firm's 10-percent share in the project. Other investors include PTT Exploration and Production (40 percent), the French oil firm Total (30 percent), and British Gas (20 percent). (Bangkok XING XIAN RIBAO 14 Mar 94 p 3) VIETNAM: Joint Venture With Daewoo To Assemble Trucks, Buses, Vans - The Machinery Union Enterprise 7983, under the Ministry of Defense's General Department of Economics and Technology, and South Korea's Daewoo group have formed a 30-year joint venture to assemble trucks, buses, and vans in Vietnam. The venture was licensed in December 1993, with an investment capital of $32.2 million. Prescribed capital is $10 million, of which the Vietnamese company is contributing 30 percent. (Hanoi THOI BAO KINH TE VIET NAM 23-29 Dec 94 p 3) The new company, which is called Vidamco, has received approval from the State Committee for Cooperation and Investment. It is expected to produce 500 cars this year and 10,000 cars in the year 2000. (Hanoi VNA 0605 GMT 10 Mar 94) Malaysian Company To Build Industrial Compound in Dong Nai - The Malaysian company Hwa Leong Ltd. has been licensed to build a $242.7-million industrial compound in Dong Nai, about 50 km from Ho Chi Minh City. The compound will consist of eight textile mills. (Hanoi TUAN BAO QUOC TE 20 Jan 94 p 7) Interior Ministry Firm Forms Venture With Hong Kong Firm - The Interior Ministry's Thang Long Company, Vietranimex Co. from Hanoi, and Merry Dragon Development Ltd. from Hong Kong have formed a 25- year joint venture to produce license plates for motor vehicles, traffic signs, motorcycle helmets, and hard hats. The new venture, called Vietnam Transportation Safepromotion Co. Ltd., was licensed in December 1993. Investment capital in the venture totals $4 million, while prescribed capital is $3 million, of which the Hong Kong firm is contributing 60 percent. (Hanoi NHAN DAN 19 Jan 94 p 2) Venture With Russian Company To Produce Tractor Parts - The Engineering Command's Lung Lo Construction Company and Russia's Uraltrac company have formed a joint venture to provide services and supply parts for construction equipment and tractors. Investment capital in the venture totals $1.8 million, while prescribed capital is $1.3 million, of which the two partners will have equal shares. The joint venture, called the Vietnam Uraltrac Construction Machine Joint Venture or Vu Trac Co., Ltd., was licensed in late October 1993. (Hanoi QUAN DOI NHAN DAN 9 Jan 94 p 4) Cardphone Company Inaugurates Center in Ho Chi Minh City - Uniphonekad is a joint venture between the Ho Chi Minh City Post Office and Malaysia's Sapura Holdings Ltd. Investment capital in the joint venture totals $5.12 million, of which the Malaysian firm is contributing 68 percent. The new company recently inaugurated a cardphone center in Ho Chi Minh City. As of August 1993, Uniphonekad has issued 79,000 cards in Ho Chi Minh City, with an average of 6,000 cards per month. The company plans to open 200 new phone booths in the city in 1994 and increase the number of cards issued to 8,000 per month. (Ho Chi Minh City THOI BAO KINH TE SAIGON 6-12 Jan 94 p 6) Industrial Output Increases to $1.9 Billion in 1993 - According to the General Department of Statistics and the Ho Chi Minh City Bureau of Statistics, Vietnam's industrial output was worth approximately $1.9 billion in 1993, a 12-percent increase over 1992. The average increase in the past three years (1991-1993) was 13.2 percent. The output by sector breaks down as follows: about $968 million from central state-owned industries (a 14-percent increase over 1992); about $539 million from non-state industries (a 9- percent increase over 1992); and about $374 million from local state-owned industries (a 10-percent increase over 1992). (Ho Chi Minh THOI BAO KINH TE SAIGON 6-12 Jan 94 p 40) Electricity output Increases Reported - Electricity output nationwide continues to show yearly increases: 8.9 billion kwh in 1990, 9.3 billion kwh in 1991, 9.8 billion kwh in 1992, and 10.8 billion kwh in 1993. When the 500 kv north-south powerline is completed in April, it will provide the south between 200 mw and 300 mw. Currently, almost all districts in the Red River Delta receive electricity from the national power network. (Hanoi THOI BAO KINH TE VIET NAM 5 Jan 94 p 1) Export, Import Figures for 1993 Reported - According to the General Department of Statistics, total exports were worth $2.08 billion in 1991, $2.57 billion in 1992, and between $2.8 and $3 billion in 1993. Crude oil export reached 3.93 million metric tons in 1991, 5.4 million metric tons in 1992, and 6.31 metric tons in 1993. Rice export rose from 1.03 million metric tons in 1991 to 1.95 million metric tons in 1992, but dropped to 1.7 million metric tons in 1993. Total imports for 1993 amounted to over $3.3 billion, a 31- percent increase over 1992. This does not include unofficial trade which, according to the Customs Department, reached approximately $390 million in the first eight months of 1993. An increase in almost all essential imports was noted in 1993. Total imports were worth $2.33 billion in 1991 and $2.57 billion in 1992. (Hanoi OUAN DOI NHAN DAN 19 Jan 94 p 7) Among the export products that registered an increase of over 20 percent in 1993 are garments, textiles, ground nuts, tea, and aquatic products. Export products that showed a decrease of over 20 percent in 1993 include handicrafts, rice, and tin. Several import products registered an increase in 1993, such as steel and iron (116.1 percent), electronic components (73.6 percent), and oil and gas (26.7 percent) (Hanoi THOI BAO KINH TE 6-12 Jan 94 p 12) Haiphong Tops Hanoi, Ho Chi Minh City in Industrial Growth - According to the General Department of Statistics, industrial growth in Haiphong in 1993 increased by 30.1 percent over 1992. Hanoi ranks second with an increase of 25.8 percent, followed by Ho Chi Minh City with 11.5 percent. (Ho Chi Minh City THOI BAO KINH TE SAIGON 6-12 Jan 94 p 40) GDP Figures for 1993 Reported - According to the General Department of Statistics, the gross domestic product (GDP) in 1993 was about $11.6 billion, an increase of 22.78 percent over 1992. The breakdown by sector is as follows: agriculture and forestry(30.9 percent); industries (22.7 percent); trade (12.07 percent); other services (12.6 percent); state administration, national security, and defense (12.1 percent); capital construction (4.57 percent); communications, transportation, and postal services (4.1 percent); and other material production (.96 percent). (Ho Chi Minh City THOI BAO KINH TE SAIGON 6-12 Jan 94 p 5) Korean Oil Company Reports 0f fshore Discovery - The ROK Petrol Development Company recently announced that it has discovered a well about 280 km southeast of Vung Tau Province, with a daily production capacity of 3,400 barrels of oil and 22 million cubic meters of gas. (Hanoi Voice of Vietnam 1430 GMT 7 Mar 94) Hanoi Airport Expressway Opens - The recently opened $20-million, six-lane expressway linking Hanoi and Noi Bai International Airport is reportedly capable of handling up to 8,000 vehicles a day, traveling at 120 km per hour. It goes through an industrial zone at the western end of the capital and is a part of the east-south beltway that is going to be built. (Hanoi VNA 0614 GMT 10 Mar 94) Norwegian Company Discovers Natural Gas Offshore - Norway's national oil company Statoil has discovered natural gas off the southern coast of Vietnam. Decisions are expected to be made in the next few months on Statoil's $400-million gas project that includes a compression station, a liquefying plant, and a pipeline from Vung Tau to Ho Chi Minh City. (Hanoi Voice of Vietnam 1000 GMT 14 Mar 94) EAG/23MAR94/ECONF/TECHTF/EAST ASIA GROUP/CL 24/1945Z MAR

Eleven joint ventures have been registered at the Mongolian State Registry since 11 May 1993. Five of the foreign Participating parties are Russian, four are Far Eastern, and two are European. The following 11 joint ventures have been registered at the State Registry in accordance with the Foreign Investment Law and the Law on Economic Units since 11 May 1993. [For reporting on 37 earlier registered joint ventures, see FB PN 92-386, FB PN 92-426, and FB PN 92-479.] 1. "Mongolpress" BBHK [expansion not given] -- Registration No.: 764183; Mongolian Participating party: MONTSAME agency; Foreign Participating party: "Fredi Hofmani" Corporation of Denmark; Investment: $62,300; Business activity: Production of high-quality printed materials; Duration: 5 years; Director: M. Kristensen (Ulaanbaatar-l3, Suhbaatar, Mongolian; Trade Union Building) 2. "Herlen" BBHK -- Registration No.: 764329; Mongolian Participating party: "Mongol em" impeks UUK [expansion not given]; Foreign Participating party: Korean Far Eastern Medicine Production Administration; Investment: 13,624,000 tugriks; Business activity: Cultivation of medicinal plants and production of tea and medicines; Duration: 10 years; Director: D. Monhbaatar (Ondorhaan, Hentiy Aymag) 3. "Undral" BBHK -- Registration No.: 759481; Mongolian Participating party: Military Trade Administration, UUG [expansion not given]; Foreign Participating Party: "Huan Ho" Company in Hohhot; Investment: 10 million tugriks; Business activity: Pastry Production and sale; Duration: 3 years; Director: Yang Li-shun (Ulaanbaatar-Bayandzurh, Military Unit No 089 Premises) 4. "Falikon Internayshil" -- Registration No.: 759635; Mongolian Participating Party: "Attila" BHH [expansion not given]; Foreign Participating Party: "S.M. Handelskonsolt" Company; Investment: $125,000,000 and 5 million tugriks; Business activity: Restaurant and foreign trade consultation; Duration: 10 years; Director: L. Unenburen (Ulaanbaatar-Bayandzurh, Russian Culture Center) 5. "Monkikal" BBHK -- Registration No.: 759867; Mongolian Participating party: "Monteh" BBHK; Foreign Participating party: Russian Kalmyk "Ay-Pi-N" and the OMODzO [expansion not given] Information and Service Center of China; Investment: 3 million tugriks; Business activity: Exchange of scientific and technical information, installation and repair of home electrical appliances, and tourism; Duration: 3 years; Director: B. Dabaadorj (Ulaanbaatar-songino hayrhan, Geology Building) 6. "Monteks Internayshil" BBHK -- Registration No.: 759899 Mongolian Participating Party: "Dzos shir" BBHK; Foreign Participating party: Hong Kong Redis Company; Investment: 48,051,900 tugriks; Business activity: Production of various kinds of children's clothing; Duration: 5 years; Director: D. Dunger Yaychil (Ulaanbaatar-Han-Uul, Construction Troops Unit No 073 Premises) 7. "Buteel" BBHK -- Registration No.: 760021; Mongolian Participating Party: "Tushee" BBHK; Foreign Participating Party: Ulan-Ude "Soyol" Publications and Writers Association, "Shola" Enterprise, and the "Vostochnaya vorota" Company, all of Russia; Investment: 2 million tugriks; Business activity: Experimental production of newly created medicines; Duration: 5 years; Director: P. Tomorbaatar (Ulaanbaatar - Suhbaatar, State Statistical Office) 8. "Ji-M" BBHK -- Registration No.: 760161; Mongolian Participating Party: Citizen D. Mondzul; Foreign Participating party: Hobei Province Water Supply Base of China; Investment: $40,000; Business Activity: Furniture Production; Duration: 5 years; Director: D. Monhdzul (Ulaanbaatar-Bayandzurh, Building No 17) 9. "Yol-Had" BBHK -- Registration No.: 760307; Mongolian Participating Party: "MONNAA [expansion not given]" Concern; Foreign Participating Party: Russian Buryat "Agrokonsortsium"; Investment: 6.75 million tugriks; Business activity: Tourism, meat and milk processing, and Production of Pastry and beverages; Duration: 5 years; Director: N. Baatarchuluun (Bornuur Somon, Tob Aymag, "Yol had" amralt) 10. "Monross Ard" BBHK -- Registration No.: 763187; Mongolian Participating Party: 5 citizens, including S. Chimeddorj and D. Chuluunbaatar; Foreign Participating Party: "Novosti Holding" of Novorossiysk, Russian and 5 citizens, including Semikin; Investment: 7,719,600 tugriks; Business activity: Household electric equipment and vehicle repair and servicing, ShTS [exPansion not given], importing, exporting, and re-exporting; Duration: 3 years; Director: S.V. Filinovich (Ulaanbaatar-Bayandzurh, "Mobidemiks Company 11. "Burvodstroy" BBHK -- Registration No.: 760587; Mongolian Participating party: [not given]; Foreign Participating party: Rosglavzarubezhvodstory Cooperative, Russia; Investment: 24 million tugriks; Business activity: Water removal from the Baganuur Mine, deep drilling for centralized water supply, and delivery of material and equipment; Director: A.S. Kutsay (Ulaanbaatar-Songino hayrhan "Nuurs" Company Building) (Ulaanbaatar ARDYN ERH in Mongolian 28 Jan 94 p 4) (AUTHOR: MIAB/CISD. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, MILITARY/INTERNATIONAL AFFAIRS BRANCH, CISD, (703) 733-6375.) ENEAG/24 MAR/ECONF/CIS DIVISION/DEW 24/2150Z MAR

Europe Economic Review: WESTERN EUROPE Vol. III, No. 13, 24 March 1994 Notice To Readers: FOREIGN MEDIA SURVEY is a series published by FBIS Europe/Latin America Group featuring brief summaries of foreign media reports on topical issues, compiled from the most recent sources available to FBIS. Europe Economic Review (EER) is a subseries of FOREIGN MEDIA SURVEY published by the West and East European Divisions of Europe/Latin America Group with contributions from FBIS overseas bureaus. The EER is intended to supplement coverage of European economic issues by the FBIS Daily Report for West and East Europe, and other FBIS publications. Foreign news, feature, and editorial reports selected for summary in this publication normally do not appear in other FBIS publications. The EER is published in two editions, one for Western Europe (also including media coverage of Canada and Turkey), and the other for Eastern Europe. Drawing primarily from domestic media sources of these countries but also using other foreign media where appropriate, the EER focuses on national and regional economic issues, such as economic competitiveness, regional economic integration, economic reforms and other changes in economic policies, and foreign trade and investment. FOREIGN MEDIA SURVEY is a U.S. Government publication. Its contents in no way represent the policies, views, or attitudes of the U.S Government. All comment or analysis contained herein is attributable to the cited media source, unless otherwise indicated. TABLE OF CONTENTS FEATURES: Sweden--Exporters Set Their Sights on China EU Rapid Conclusions of Leuna Dispute Sought; EBRD Doubles Investment in East Europe FINLAND Commentary Views Reich's Jobs Solutions FRANCE Editorial Discusses G-7 Job Summit; Commentary Advocates Social Welfare Commitment; Job Summit Ignores World Unemployment;Commentary on G-7 Job Summit; U.S. Seen Speaking 'Double Talk' on Audiovisual; Sapin Discusses Monetary Policy; Editorial on OECD Views on French Interest Rates; Editorial on Government Subsidies;Dassault Asks Assembly To Stop Rafale Delays; Roots of Unemployment Viewed; U.S. 'Pressure' Divides EU on Naval Construction GERMANY Commentators View Jobs Summit; Environmental Technology Seen As Creating Jobs; Governments Push Small Business Funding; New Semiconductor Plant Opens in East; Bitterfeld Chemical Facilities Expanded GREECE Civil Service 'Inflation' Noted; Greek-Romanian Economic Relations; Energy Pollution Taxes Assessed ITALY Labor Minister Discusses Black Market Labor; Recent Labor Accords Seen As Stopgap Measures; ENI's Plans To Expand East NORWAY Record Export Year Reported; Pension Fund Called 'Profitable Business'; Swedish Bank Predicts Growth for Norway, Denmark; 1993 Profitable for Most Businesses; New Oil Drilling Planned; Competitiveness of Norwegian Shelf Assessed7 SWEDEN Swedish Contribution to EU Budget Calculated ECONOMIC BRIEFS France, Greece, Norway FEATURE Sweden: Exporters Set Their Sights on China With many Swedish companies hoping to take advantage of the Chinese economic boom, exports to China have more than doubled in the last two years. In fact, according to a 29 January SVENSKA DAGBLADET survey of Swedish economic activity in China, the Far East is well on its way to becoming a more important market for Swedish firms than North America. Swedish exports to China increased from 1.6 to 3.5 billion kronor between 1991 and 1993, and more Swedish firms are establishing joint ventures in China as well. The commercial section at the Swedish embassy in Beijing described 1993 as a "real record year." Despite the export boom, Sweden's trade picture with China is not all rosy. According to the 29 January SVENSKA DAGBLADET, Sweden continues to maintain a trade deficit with China because imports from that country--especially textiles--have increased dramatically. In recent years, China has replaced Portugal as the leading supplier of textiles to Sweden. The business weekly VECKANS AFFARER also reported on 21 February that Sweden's share of Chinese imports has decreased from 1.35 percent in 1987 to under 1 percent in 1993. This is attributed to Eurocentric attitudes on the part of many Swedish firms. Ericsson: The Shining Star The Ericsson electronics company accounts for the lion's share-- 60 percent--of Sweden's exports to China, which is well on its way to becoming Ericsson's largest market, according to an article in DAGENS NYHETER on 29 January. Ericsson has been most successful in exporting mobile phones to China, where it holds a 70-percent market share. The article cites Hans Ekstrom, the company's head of operations in China, as saying that "the sale of mobile telephones in China has been a real cash cow for us." Ericsson's sales of these phones--a popular status symbol in China--doubled in 1992 and 1993 and are expected to further increase when China installs a standardized digital system. Ericsson already has an advantage in the vast Chinese market because of its ability to build large-scale systems. According to the article, the firm sees its most important competitors in establishing a mobile phone system in China as Motorola and the Finnish firm Nokia. The article also notes that a large part of the export credits for Ericsson's sales is expected to come from foreign institutions because of the low risk tolerance of Swedish banks. Ericsson, which last year moved its southern China office from Hong Kong to Guangzhou to be closer to its customers, has been particularly active in Guangdong--a province of 66 million inhabitants whose capital is Guangzhou. According to the 31 January SVENSKA DAGBLADET, Ericsson has 40 percent of the overall public telecommunications market in Guangdong, second only to Japan's NEC, and 80 percent of the market for mobile telephones. In addition, the company has received 80 percent of all new telecommunications orders in the province in the last three years. Last year it got a 2.5-billion-kronor order from Guangdong Post & Telecom to expand the regular telephone system to 2 million new subscribers; the order will be 15 percent financed by state- backed Swedish export credits. Ericsson is also one of five companies invited to bid on building a digital GSM mobile phone system in the province; according to an article in DAGENS NYHETER on 29 January, Ericsson has an advantage in the competition because it built Guangdong's GSM test system. SVENSKA DAGBLADET also reported on 1 March that Ericsson got a 1.7-billion- kronor order from the province, which the deputy head of Ericsson Radio Systems in China called "one of our largest orders ever," to build an analogue system for mobile phones, called the Total Access Communication System. It will also deliver mobile phone exchanges, radio base stations, a system for maintenance and monitoring, and subscriber databases, all of which will be produced in Sweden. Other Players Other Swedish firms are hoping to take advantage of the development of the Chinese infrastructure, especially the railroad industry. Asea Brown Boveri (ABB), a Swedish-Swiss electrical engineering giant, is perhaps the second most active Swedish company in China. An article in the 29 January SVENSKA DAGBLADET explains how ABB, whose sales in China totalled 1.5 billion kronor in 1992, has capitalized on China's energy and transportation needs to carve out a niche for itself in the Chinese market. While the company had only 50 employees in Hong Kong and China five years ago, that total has now risen to 1,500. China is its single largest market for power generators, power transmitters, and trains. ABB hopes for large sales of its X2000 high speed train as well. According to a SVENSKA DAGBLADET report from 27 October, the railroad is also among Atlas Copco's biggest Chinese customers. The mining engineering firm, which has built dams and tunnels in China, is hoping for a contract to construct tunnels for the high- speed train route between Beijing and Hong Kong. Last year SKF, a ball bearings manufacturer, also got what the report calls a "breakthrough" order from the railroad. SKF had previously concentrated on supplying ball bearings and components for textile machines in China. The Swedish trade counselor in Beijing told SVENSKA DAGBLADET on 27 October that Swedish exporters can be as successful in the railroad industry in China as Ericsson has been in the telecommunications sector, providing they can secure financing. However, the Swedish development aid organization, which has established strict regulations on deals in China, has not been forthcoming. Looking at the success of Swedish industry in China, an article in SVENSKA DAGBLADET on 29 January notes that the country is also an important market for Hagglunds, which produces heavy machinery. China makes up 30-40 percent of Hagglunds' market worldwide for hydraulic motors. The company also sells cranes, many of which are made in a joint venture in Nanjing, to China's growing shipbuilding business. Its vehicles are also being used in oil exploration on the coast and the Yellow River delta. Automaker Volvo has been making inroads into the Chinese market through local representation and joint ventures, another article in SVENSKA DAGBLADET on 29 January claims. Although sales slacked off last year due to tight Chinese economic policies, the company is expecting sales to increase this year. It has 10 retail and service locations in China and earlier this year opened an office in Beijing. Last Fall Volvo concluded a joint venture agreement with Xian Aircraft Company for the production and marketing of buses. The factory will start by producing 1,000 buses a year and then increase to 3,000; it will employ 1,100 workers. An article in DAGENS NYHETER on 29 January notes that the company is hoping to open another production facility. (WS) EU RAPID CONCLUSION OF LEUNA DISPUTE SOUGHT--At a meeting in Bonn to discuss economic convergence between the two countries, French and German parliamentarians pointed out the symbolic character of the proposed Leuna oil refinery, which France's Elf oil company agreed to build in eastern Germany. The refinery project, they claim, could solidify industrial links between France and Germany. To do so, however, the parliamentarians state that there needs to be a quick resolution of the dispute which has arisen between Elf and Germany's Trust Agency over Elf's desire to reduce its investment commitment to the project. Noting that this investment was "vital for overcoming the difficulties of eastern Germany's chemical industry," the parliamentarians added that besides the purely political considerations, necessary market considerations must not be neglected. However, any arrangement should proceed "with the general principle of law which says that contracts concluded should be respected in their spirit." Because of the impasse in the negotiations between the Trust Agency and Elf, the economy minister of Saxe-Anhalt, where Leuna is located, intends to talk directly to Elf. Additionally, officials at Germany's Thyssen, Elf's partner and coinvestor in the refinery, declared they were convinced the issue would be resolved soon and that the question of Elf's ownership share could be resolved internally between Thyssen and Elf. (DiI) (Paris LES ECHOS in French 10 Mar 94 p 10) EBRD DOUBLES INVESTMENT IN EAST EUROPE--The European Bank for Reconstruction and Development (EBRD) approved 91 projects in East Europe in 1993, which represented a financial investment of 2.28 billion ECU's or two times more than the preceding year, according to an EBRD report published on 9 March. In 1992, the bank approved 51 projects representing 1.09 billion ECU's. The report indicates that in 1993, EBRD loans made possible East European projects worth 11.3 billion ECU's compared to 7 billion ECU's in 1992 and 1.5 billion ECU's during the first nine months of the banks existence in 1991. According to the report, EBRD wants to maintain the same level of investment this year as in 1993. However, as in 1992, EBRD only disbursed a small fraction of the approved sums: Out of the 2.28 billion ECU's approved, only 435 million ECU's were actually made available to projects, according to an article in LES ECHOS. This "enormous" difference between approved and disbursed funds, although caused by projects structured for completion over several years, may rekindle the debate on EBRD's ability to lend. The article questions whether this might thwart EBRD's attempt to highlight the good conditions of its accounts after the past year when the bank was criticized for former director Jacques Attali's management. In any case, EBRD can point to progress in containing bank operating expenses, which at 137.3 million ECU's are 8 percent less than forecast, according to the report. (DiI) (Paris LES ECHOS in French 10 Mar 94 p 7) FINLAND COMMENTARY VIEWS REICH'S JOBS SOLUTIONS--In the lead editorial for Helsinki HUFVUDSTADSBLADET on 16 March, editor-in-chief Bo Stenstrom commented on U.S. Labor Secretary Robert Reich's message at the G-7 Jobs Summit that infrastructure investment is a major factor in creating employment. While admitting that Finland, with its over 20-percent unemployment rate, has not been as successful as the United States in putting people to work, Stenstrom criticizes those who have taken Reich's ideas as a "job creation recipe in itself." Stenstrom argues that investing in infrastructure will not automatically lead to better jobs and better wages. He cites assertions that while the United States has indeed a better record as far as raw unemployment figures, that many of these jobs are low- paid service sector positions. Stenstrom suggests that both Reich's and the G-7's White Papers are too eager to diminish the role of the public sector, which Stenstrom sees as vital for "providing training" to improve workers' skills to make them more competitive with those in developing countries. Stenstrom also points to another problem particular to Finland's virtually flat population growth, a problem he believes infrastructure investing alone cannot solve: overproduction as industry and workers become more efficient. He reasons that growth in industrial production leads toinvestment in technology, which will improve productivity but cut jobs. The lack of population growth, with its attendant reduction in consumption, makes Finland unable to absorb more production or create more employment, Stenstrom maintains. He questions whether Finland or Europe are going to provide the ever higher-paying and higher-skilled jobs demanded by its more educated work force. As an example of how European governments are running out of solutions, he mentions such practices as Denmark's sabbatical leave program, which--used as a substitute for paying unemployment compensation--is "a big minus" for the economy. "We are resorting to such methods in a situation which we cannot in the long run afford." (RB) (Helsinki HUFVUDSTADSBLADET in Finnish 16 Mar 94 p 2) FRANCE EDITORIAL DISCUSSES G-7 JOB SUMMIT--Deputy editor-in-chief for macroeconomics Francoise Crouigneau writes in the Paris financial daily LES ECHOS that the G-7 job summit in Detroit is strongly symbolic despite the fact that the United States has transformed "this think-tank seminar" into a "media happening" and that each of the G-7 countries is "showing off" its own solutions for unemployment. The meeting, Crouigneau contends, is an acknowledgment of "worry and of powerlessness" when faced with safeguarding the competitiveness of the companies of industrial countries and their ability to employ workers. The world's work force seems to have a choice between being poorly paid and unskilled overseas or being skilled but unemployed in Europe. Crouigneau argues that if the future world job market depends on the highly skilled, then Europe, despite its unemployment problems, is further along than the United States, which has essentially created low-skilled jobs. However, creating jobs in the future is all the more troublesome since the solution is no longer the budgetary and monetary management of governments. The emergence of newly industrialized countries creates an unknown factor in the rules of the game for foreign trade. These rules, Crouigneau points out, are all the more important now since economic guerilla warfare" has replaced past relationships built on politics and the Cold War. Today, the most advanced nations are condemned to adapt and innovate to survive. To do so, they must recognize that two conditions are needed. They must agree to at least a minimum of coordination so that growth in the G-7 countries can resume, and they must reform their economies to address unemployment caused by high labor costs. Crouigneau acknowledges that no one has the secret for accomplishing the latter. (DiI) (Paris LES ECHOS in French 14 Mar 94 p 4) COMMENTARY ADVOCATES SOCIAL WELFARE COMMITMENT--According to Pascal Riche writing in the 15 March Paris daily LIBERATION, U.S. Labor Secretary Robert Reich's comments that countries do not have to choose between good jobs or a decent life is an attempt to achieve a convergence between Europe's need to create unskilled jobs and the U.S. need for skilled employment. However, while this approach seems logical, it may not be the right one, Riche argues. The United States is just beginning to try creating skilled jobs and no conclusion can be drawn from the U.S. experience at this time. As for Europe, it tried "various schemes" during the "laissez-faire" 1980's to do the same and failed to produce results, which has led to the French Government now proposing to modify minimum wage requirements for young people. For Europeans to seek a third way between the two models would probably result in a system that would only "preserve the disadvantages of the two systems," Riche contends. Instead, he advocates that European governments "deepen" their commitment to social welfare. These governments, Roche notes, failed in the fight against unemployment because they did not deal with unemployment in a timely manner. While he adds that some blame budgetary difficulties for this neglect, he also points out that successive governments allowed social costs to escalate and did not recognize the importance of job training. At the same time, working Europeans fought to preserve salary raises in disregard of labor market conditions. However, Riche concludes that if there had been more commitment to maintaining social welfare during the 1980's, the government might have formulated policies to stimulate economic growth to alleviate unemployment rather than trying its various ineffective job creation schemes. Instead, it allowed unemployment to "swallow up" working people "as if a l0- percent unemployment rate were considered 'normal'." (RM) (Paris LIBERATION in French 15 Mar 94 p 3) JOB SUMMIT IGNORES WORLD UNEMPLOYMENT--Gerard Dupuy, commenting on the G-7 Job Summit in the 15 March Paris daily LIBERATION, cites a recent report noting that unemployment rates in the rest of the world are "hugely" higher than the rate in rich countries. According to Dupuy, these "hundreds of millions of unemployed will be ignored in Detroit." Given the breadth of the challenge, it is easy to see why summit participants have warned that "no decisions should be expected." While unemployment problems in less-developed countries will make a "timid" appearance at the summit, Dupuy is skeptical about any impact it might have since he sees in it "less compassion about the miseries of the present" and more concern about the threat that such a problem entails. (RM) (Paris LIBERATION in French 15 Mar 94 p 3) COMMENTARY ON G-7 JOB SUMMIT--Delphine Girard, commenting in the Paris business daily LA TRIBUNE DESFOSSES on the G-7 Job Summit, stated that President Bill Clinton's message on unemployment caught Europe "on the wrong foot." Europeans have for months been trying to explain to distraught workers, especially in France, that they must choose between wages and employment. Clinton could have used the summit to provide a "final blow" to "old [European] complaints" about social welfare and unemployment, Girard claimed. Instead, Clinton stressed that it is not by underpaying wages and multiplying small jobs that industrialized countries will improve unemployment. To create employment, he said, they must instead raise living standards by increasing salaries, favoring higher education to foster technological progress, developing productivity in industries of the future, and reinforcing social protection. (DiI) (Paris LA TRIBUNE DESFOSSES in French 17 Mar 94 p 3) U.S. SEEN SPEAKING 'DOUBLE TALK' ON AUDIOVISUAL-- According to Emmanuel Schwartzenberg writing the economic supplement to LE FIGARO, Le Fig-Eco, the United States is speaking "double talk" when it comes to audiovisual policy since U.S. Trade Representative Mickey Kantor says one thing while President of the Motion Picture Association of America (MPAA) Jack Valenti says another. While Kantor has again threatened to use U.S. trade laws to force Europe to open its audiovisual market, Valenti has been very conciliatory toward Europeans declaring, "The government position and that of U.S producers and distributors is not identical. Cinema is outside the political field and it is I who guards the keys to the house. Kantor has never consulted me on the question of trade sanctions." Schwartzenberg contends that Valenti, since the GATT agreement, considers that the "too intransigent position" of the U.S. Government reinforces European cohesion and may prod the EU to establish a "super" trade regulation prejudicial to U.S. interests. Persuaded that "new technologies, which allow each television viewer to create his own program, will render legislation obsolete," Valenti considers that "France, as can the other European countries, can legislate all it wants." (DiI) (Paris LE FIGARO Le Fig-Eco supplement in French 10 Mar 94 p XII) SAPIN DISCUSSES MONETARY POLICY--In an interview with a panel of journalists from LA TRIBUNE DESFOSSES, Bank of France Monetary Policy Council (MPC) member and former Socialist Economy and Finance Minister Michel Sapin claimed that the Bank of France has "without question" become independent. Nonetheless, Sapin stated he would continue the policy followed by the current French Government and its predecessors of monetary coordination with the Bundesbank. He also refuted the idea that this policy increases unemployment, warned the government about increasing deficits, and said there was no "lasting" relationship between U.S. interest rates and those of Europe. Although he contended that the Bank of France was "certainly" independent, Sapin noted that questions were often asked about the counterpart of independence, that is, collegiality." "There is no independence without collegiality," Sapin argued, "because it is rarely the case that the correct monetary decision is clearcut." Decisions are made within the context of a network of constraints and contradictions. To appreciate these contradictory elements and this complexity, it is better to put several people together having different agendas, experiences, and languages so that monetary decisions can be made. Besides, he added, when monetary decisions were a government responsibility, they too were made after a collegial debate. Sapin, pointing out that the MPC was obliged to be accountable to the public and to be responsible in what it said since financial markets "watch its every word," stated that it was more necessary than ever to coordinate French monetary policy with the Bundesbank. The problem with France's relationship with the Bundesbank is not a question of independence. It is a question of either thinking of monetary policy in a French or a European sense. In Sapin's view, the need to establish a European single currency must not be influenced by economic or market conditions. The objective is to quickly establish a single currency to be able then to have more decisive margins of maneuver in relation to the United States and Asia. To arrive at that stage, "we must go through some turbulence," he said. Regarding unemployment, Sapin said that it cannot be reduced without economic growth but that growth is not enough. In France, structural unemployment existed before the recession and it will remain after the recovery if something is not done about it. Sapin argues that current monetary policy does not aggravate unemployment, since its emphasis on stability has given the economy a sound base. Nonetheless, Sapin stated that unemployment was one of his main preoccupations. Budget deficits are another. Sapin said it did not bother him if deficits were used in recessions to help fuel the economy. However, when recovery starts the government must change its spending policy or consumers and companies either will not have access to money or the money will cost too much. "We are at this point today," he said, and the government must now make reducing the deficit a priority to meet the very strict budgetary requirements for French-German convergence. Sapin was also asked how he explained what happened in financial markets when the United States raised its interest rates. He replied that the U.S. interest rate hike affected Europe for "no rational reason," indicating that European financial agents did not understand that increased rates in the United States are not contradictory with pursuing lower rates in Europe. There is no lasting connection between the United States and Europe because the economic situations are very different, Sapin declared. (Dil) (Paris LA TRIBUNE DESFOSSES in French 11 Mar 94 p 25) EDITORIAL ON OECD VIEWS ON FRENCH INTEREST RATES--In an editorial in LA TRIBUNE DESFOSSES, editor-in-chief Philippe Labarde claims that the recent report by the OECD, which advocated unilateral French interest rate reductions as the only way to sustain demand in France if German rates did not decline, was "priceless" as a means to resuscitate the debate on French monetary policy. Despite the hard line taken by the Bank of France and Prime Minister Edouard Balladur in support of continuing its close monetary coordination with Germany, Labarde notes that the critics of such a policy are increasing. Numerous economists and heads of companies are adding their voices to that of the OECD. Labarde argues that the OECD, as a bastion of free market orthodoxy, gives credence to these "partisans of a French offensive monetary policy." Before the OECD report, these critics were considered at best as "sorcerers apprentices or dreamers," at worst as secret devaluationists, notorious anti-Europeanists, or shameful protectionists." The OECD statement, however, may not lead to monetary authorities changing their policy, Labarde cautions. The government has already missed two occasions which would have allowed it freedom from the Bundesbank: the first was when it was elected and the second during last August's monetary crisis. Labarde concludes that while it is never too late to change monetary direction and that economic recovery would be helped by a significant lowering of discount rates, he acknowledges that current political and monetary conditions make it difficult to do so. (DiI) (Paris LA TRIBUNE DESFOSSES in French 10 Mar 94 p 32) EDITORIAL ON GOVERNMENT SUBSIDIES--Deputy editor-in-chief Francois Roche, writing in the Paris business daily LA TRIBUNE DESFOSSES, observes that government subsidies for public companies are expensive for France but that the "real" problem of France's public companies, especially the computer company Bull and Air France, is that they have been mismanaged for a long time. Roche notes that some would find it "scandalous" that Bull is receiving 7- 8 billion francs (Fr) and Air France Fr20 billion from the French Government. He characterizes such government assistance as "at the limit of decency" in the opinion of many, coming at a time when private companies are taking risks to find their own financial resources in the market place. He claims the distortion it causes in competition is "too flagrant" not to "set right." However, Roche states that the cause for Bull's and Air France's financial problems lies with long-term government mismanagement. These two companies have never been managed as they have should have been, that is to say, as part of a competitive free market. Their directors have never been able to cut themselves off, even when they wanted to, from larger political issues. Moreover, the government, when it harbored "great ambitions" in data processing or air transport, never furnished these two companies with the financial means to fulfill these "grandiose" projects. Roche concludes that Bull and Air France, which have been sheltered from the realities of the world in an attempt to make them the "guarantors of national independence," are now at the "end of their rope." Roche adds that while it is understandable that the new directors of these companies do not want to deal with the consequences of past mismanagement, waiting for them to come to grips with their problems wastes money, energy, and demoralizes employees. (DiI) (Paris LA TRIBUNE DESFOSSES in French 11 Mar 94 p 40) DASSAULT ASKS ASSEMBLY TO STOP RAFALE DELAYS--In a plea to the members of the National Assembly defense commission on 1 March, Dassault Aviation Chairman Serge Dassault asked that the Rafale fighter aircraft program no longer be delayed. "The survival of the group is linked to three factors," he said, "The Rafale program, innovative future projects, and civilian and military aircraft exports." The Rafale program was last delayed for six months at the end of 1993 and resulted in the loss of 1,000 jobs, half of them in the Dassault group. Serge Dassault pointed out that under present conditions, the Ministry of Defense foresees that "very few" Rafale aircraft will be delivered before the end of the decade. (RM) (Paris LE MONDE in French 4 Mar 94 p 10) ROOTS OF UNEMPLOYMENT VIEWED--In the Paris daily LE QUOTIDIEN DE PARIS, Economist Michel Drancourt notes that there is a "French cultural exception" with regard to the causes of unemployment. As early as the 1970's, the Europeans, and notably the French, chose to increase the salaries and social benefits of workers, despite periodic economic crises, and to finance growing unemployment by steadily increasing workers wages and thus employer social contributions. Drancourt remarks that such a "revenues policy" must be revised in favor of an "employment policy." He suggests the French could learn from the U.S. system, which he notes is "more efficient," with job creation increasing because productivity increases faster than do wages. Drancourt does not recommend "systematically reducing" salaries but proposes that they should be linked to productivity. The high cost of salaries, he argues, has limited companies chances to increase productivity. In playing the role of provider, the state caused a systematic reduction in employment in both large and small companies. The growth in unemployment, however, did not result in lower salaries. Drancourt lays the blame on social benefit costs, which are rising faster than direct salaries because they pay for redistribution of capital which does not promote job creation. "Rigidity should be dismantled," Drancourt contends, and real salaries should be adjusted according to productivity. This entails an adjustment in social benefit costs and their financing--a difficult but necessary solution, Drancourt concludes. (RM) (Paris LE QUOTIDIEN DE PARIS in French 3 Mar 94 p 4) U.S. 'PRESSURE' DIVIDES EU ON NAVAL CONSTRUCTION--A debate is beginning in Brussels on the position it should adopt in the last round of OECD negotiations on naval construction subsidies. EU shipbuilders fear that the EU Commission will only adopt a "minimalist" position in the face of U.S. retaliatory threats, according to an article in the Paris business daily LES ECHOS. The naval shipbuilders union (CSCN) claimed that EU negotiators want an agreement at any cost even if it is an inequitable one and shipbuilders fear they will lose the little protection they now have. However, the terms of the agreement which EU negotiators were prepared to accept could be modified under French Government pressure, the article contends, because France is "sharply opposed" to the EU "minimalist" position. The EU position, which was also criticized by Spain, Belgium, and Italy, would abolish as of 1 January 1995 aide to naval construction and aid to shipowners linked to naval construction. Japanese subsidies to its shipbuilding industry, however, would be examined to find out if it distort the market, but the results from such an examination would not be ready for several years. No safeguards have been provided in case of "monetary dumping." The United States could continue, at least for a while, numerous protectionist measures, especially those contained in the Jones Act, which stipulates ships must be built in the United States and keeps foreign builders from participating in a $1.5-billion market, according to a CSCN study. In addition to the United States protecting its shipbuilders in the civilian market at a time when military orders have decreased, the United States is also providing $2 billion a year for shipyards to convert to civilian work. The article concludes that the United States has entered the final round of OECD negotiations by brandishing the threat of retaliation if an agreement is not reached because they are "certain of their right, or at least their power, [to do so]." (DiI) (Paris LES ECHOS in French 10 Mar 94 p 12) GERMANY COMMENTATORS VIEW JOBS SUMMIT--Although German press commentators generally agreed that the recent G-7 Jobs Summit produced few concrete results, some thought the gathering was important as a sign of new international priorities and as an opportunity for countries to learn from each other's experiences. Writing in the 16 March SUEDDEUTSCHE ZEITUNG, Peter De Thier complained that the meeting was "rich in symbols and poor in content" and that it served "no concrete purpose," except as a "glittering self-portrait of the resurgent U.S. economy." Other commentators agreed that the meeting yielded few tangible results but noted that it was not expected or intended to. Gerd Brueggemann, for example, pointed dut in DIE WELT of 16 March that "quick successes were not to be expected," and Josef Joffe declared in the same day's SUEDDEUTSCHE ZEITUNG that meager results were "predictable, because summits rarely produce anything that was not put on paper beforehand." Some commentators, however, thought the conference was important despite this dearth of concrete achievements. Carola Kaps, for example, argued in the 16 March FRANKFURTER ALLGEMEINE that "it would probably be wrong" to call the summit a "failure," since its only objective was to allow the G-7 countries to "learn from one another through an intensive exchange of opinions" and "to take home new ideas or motivations." Judged by this standard, she argued, the meeting enjoyed at least one "success," since the United States seemed to have come away with more understanding and acceptance of Germany's reluctance to stimulate its economy. Kaps, along with Joffe, also saw the conference as evidence that the West had changed its international economic priorities. The meeting, both writers noted, marked the first time Western leaders had met to discuss unemployment, which was previously viewed as too prosaic for their attention. For her part, Kaps believed this change would "send a signal" to average citizens that their leaders "are aware of people's fears" and of the socially "dangerous" effects of a high rate of joblessness. Joffe, meanwhile, saw the meeting's attention to the jobs issue as important "because it enhances the shift in awareness" toward the unemployment issue, and because it showed that the G-7 recognized the "globalization" of economic problems and solutions. (RoH) (Munich SUEDDEUTSCHE ZEITUNG in German 16 Mar 94 pp 4, 28; Berlin DIE WELT in German 16 Mar 94 p 6; Frankfurt/Main FRANKFURTER ALLGEMEINE in German 16 Mar 94 p 15) ENVIRONMENTAL TECHNOLOGY SEEN AS CREATING JOBS--In the field of environmental technology, Germany is the "undisputed" world champion exporter, ahead of the United States and Japan, according to Federal Minister of the Environment Klaus Toepfer, who is a member of the Christian Democratic Union (CDU). Speaking at the Leipzig Spring Fair, Toepfer presented the following data: --In 1991 (the latest year for which statistics are available) Germany captured a 20-percent share of the world environmental technology export market, with exports of goods and services amounting to 37 billion German marks (DM) or 6 percent of the nation's total industrial exports. --Currently, 680,000 German workers are employed in the environmental technology industry, a number which could grow to 1 million by the year 2000. Toepfer interprets the data as evidence that "German environmental standards are not the reason for our economic problems" but rather a stimulus for growth, given an environmental technology market that is "nearly limitless." Citing an OECD study which estimates the volume of potential environmental sales in East Europe alone at $15 billion, Toepfer expressed his hope that German industry "will make use of its lead in exporting and will not gamble away its environmental know-how." To this end, he intends to champion the establishment in Leipzig of an environmental technology center with a "special" orientation toward Central and East Europe. (JS) (Berlin DIE WELT in German 10 Mar 94 p 14) GOVERNMENTS PUSH SMALL BUSINESS FUNDING--The laender governments in eastern Germany are trying to encourage the growth of small- and medium-sized businesses through a variety of aid programs. Thuringia, for example, is providing funds to new businesses to help preserve and create jobs and to assist with sales, trade fairs, consulting work, travel, credit guarantees, and direct investments. The German Bank of Settlements has extended aid to 35,000 businessmen in Thuringia, using its roughly DM6 billion in seed funds to generate DM9 billion in private investment. This program has preserved or created about 250,000 jobs since 1990, notably in the trade and craft sector. Meanwhile, in heavily industrialized Saxony-Anhalt, the land government is attempting to stimulate banks to fund small firms' needs through credit guarantees and manufacturing subsidies for particular products. The land of Brandenburg claims to have funded 48,000 small entrepreneurs with DM15.1 billion since 1991 and to have more than offset the loss in manufacturing jobs by the increase in trade and craft positions. Finally, the government of Mecklenburg-Vorpommern has instituted two new funding mechanisms for small businesses, the "capital support program," which provides supplemental capital funding, and the "consolidation program," a one-time advance to establish liquidity or to refinance loans. (CW) (Duesseldorf HANDELSBLATT in German 10 Mar 94 p 8) NEW SEMICONDUCTOR PLANT OPENS IN EAST--System Microelectronic Innovation (SMI), the privatized successor to East Germany's VEB Halbleiterwerk of Frankfurt/Oder, is the first European company to manufacture silicon-based, superfast bipolar semiconductors. A new DM17-million plant developed by Synergy Semiconductor Corporation, a U.S. firm which owns 49 percent of SMI, has just been opened. SMI expects sales of DM33 million in 1994 and estimates selling 50 percent more in 1995, largely because of sales of the new semiconductor, which is based on a Toshiba license. SMI believes the new device will soon account for nearly 50 percent of the its output. Once profitability is reached and investors are found for the Trust Agency's remaining stake, Synergy plans to increase its share in SMI to 51 percent and foresees a total investment of DM40 million to develop the German company. (CW) (Frankfurt/Main FRANKFURTER ALLGEMEINE in German 7 Mar 94 p 18) BITTERFELD CHEMICAL FACILITIES EXPANDED--The Chemiepark Bitterfeld industrial park reports that 178 firms have located in its complex--once the center of the East German chemical industry-- and that over DM2 billion have been spent on new manufacturing facilities and businesses there. Barely one-half of the complex's GDR-era companies have been privatized and some 40 percent of its production facilities are shut down and being dismantled. Akzo Nobel, a Dutch firm, has just purchased part of a phosphorus production company in Bitterfeld from the Trust Agency and plans to invest DM50 million by 1996 to establish production lines for fire- retardant chemicals. The Eschborn-based Ausimont Deutschland company, a subsidiary of Italy's Montedison group, is building a DM140 million hydrogen peroxide plant at Bitterfeld and expects to produce 40,000 tons of the chemical per year, yielding revenues in the "high double-digit millions." Chemiepark Bitterfeld's manufacturing branch reports that the complex's inorganic chemicals and dyestuffs facilities are still not privatized but that negotiations for sale of the pesticide production facilities are progressing. (CW) (Frankfurt/Main FRANKFURTER ALLGEMEINE in German 3 Mar 94 p 19) GREECE CIVIL SERVICE 'INFLATION' NOTED--According to Fotini Kalliri writing in the 3 March Athens daily I KATHIMERINI, "the thoughtless hiring policy" of both the New Democracy (ND) and the Panhellenic Socialist Movement (PASOK) governments in recent years has resulted in a "ponderous, costly, and submissive" civil service, which presently numbers about 700,000 workers. For a population of 10 million, that is one civil servant for every 14 inhabitants. Total figures have steadily risen: 53,914 in 1972, 100,955 in 1980, and 589,386 in 1988. Salary and pension costs have risen from 1,858.3 billion drachmas in 1992 to 2,040 billion drachmas in 1993 and are projected to reach 2,272.6 billion in 1994. (RM) (Athens I KATHIMERINI in Greek 3 Mar 94 p 6) GREEK-ROMANIAN ECONOMIC RELATIONS--A Greek-Romanian Chamber of Commerce was recently established in Athens by a number of Greek companies, with a Salonica and a Budapest branch expected soon, aimed at intensifying commercial and industrial relations between the two countries. Between January and October 1993, Greek exports to Romania dropped to $73.9 million from the 1992 mark of $97.8 million. A simultaneous drop was reported in Romanian exports to Greece, which declined from $46.7 million in a 10-month period in 1992 to $43 million in the same period in 1993. (RM) (Athens TO VIMA TIS KIRIAKIS in Greek 6 Mar 94 p D31) ENERGY POLLUTION TAXES ASSESSED--According to a study by Ministry of National Economy experts, the EU Commission wants to levy a general energy and carbon dioxide environmental tax during the Greek EU presidency. The study claims' the burden of such a tax on Greece is "significant," and will: * Increase the inflation rate by 1 percent a year. * Decrease private investment by 2.5 percent a year. * Decrease GDP by 0.5 percent. * Decrease employment by 0.5 percent. * Increase cost of electricity. (RM) (Athens I KATHIMERINI in Greek 1 Mar 94 p 21) ITALY LABOR MINISTER DISCUSSES BLACK MARKET LABOR--At an informal EU meeting on labor held in Athens on 10 March, Labor Minister Gino Giugni discussed a white paper prepared by the Italian Government on unemployment. The paper, which identified most of the 2.5 million unemployed as women, youths with little education, and southerners, also said that the 2.5 million unemployed is paralleled by the "totally Italian anomaly" of black market labor involving 2.4 million people. According to Giugni this figure was derived by studying the following factors: Italy's extremely high propensity for saving, the unusual ratio of the self-employed to employed workers, the low participation of women in the "official" job market, and "an otherwise unexplainable general ability for the public to continue purchasing government bonds." The white paper concludes that the extent of the underground economy will make it very difficult for Italy's next government to bring the "value" of Italian labor up to that of the rest of Europe by increasing the number of the "officially employed," thereby guaranteeing increased tax revenues and social welfare benefits. The white paper also details the government's program to create 1 million new jobs by the year 2000 by raising GDP at least 3 percent yearly, raising the mandatory school age to 16 and later to 18, increasing flexible forms of employment, legalizing many of those forms to bring many of the "underground" jobs into the system, and encouraging part-time work to make it a truly competitive form of labor. (AB) (Milan IL SOLE-24 ORE in Italian 11 Mar 94 pp 1, 13) RECENT LABOR ACCORDS SEEN AS STOPGAP MEASURES--The recently concluded labor agreements between the labor unions and Fiat, Olivetti, and Italtel, which were concluded thanks to Labor Minister Gino Giugni's intervention, are considered to be mere stopgap measures that will cost the government billions of lire and will not solve the long-term problem of unemployment. Originally, the three companies had asked to be allowed to lay off 11,150 workers. Fearing social unrest, the government came up with a plan that would allow most of those workers to be retained under "solidarity contracts." These contracts stipulate that the employees would work reduced hours and the government would make up 75 percent of the lost pay. However, while these measures are designed to preserve the workers' jobs and salaries, they are temporary measures that will have to be renegotiated soon unless the economy rapidly improves. Former union leader and current director of personnel at Italtel Luciano Scalia said that unemployment is structural in nature and unless the work force is reduced, the problem will return as early as December 1995. At present, it is impossible to assess precisely the cost to the government because to do so requires detailed information is needed about the age, salary, and seniority of each employee--something which is not readily available. General estimates, however, place the total cost to the government at 2.1 trillion lire. (AB) (Milan IL MONDO in Italian 28 Feb-7 Mar pp 34- 35) ENI'S PLANS TO EXPAND EAST--The National Hydrocarbons Corporation's (ENI) planned reorganization to prepare for the eventual privatization of its two main groups--energy and chemicals- -includes expanding its activities in the former Soviet republics of Central Asia, Russia, and China, according to ENI's General Manager Franco Bernabe in an interview published in Milan's CORRIERE DELLA SERA. Bernabe explained that the changes taking place within ENI are intended to correct the overly ambitious expansion plans of its former management--involved in corruption and kickback scandals- -which led ENI into "tremendous" debt. The current plans are to sell off at least 80 of ENI's subsidiaries, keeping ENI's energy and chemical companies. In the meantime, ENI is planning to go from an international conglomerate operating primarily in the Middle East and western Africa, to a multinational entity focusing primarily on the energy field that will expand as far east as Siberia and China. Bernabe said ENI will not decrease its presence in the Middle East and western Africa, as 80 percent of Italy's oil reserves are located there. Bernabe said that Russia, Kazakhstan, and the Caspian Sea hold tremendous mineral reserves, and ENI is involved in large-scale projects in those areas either alone or in joint ventures. In China, ENI will not only pursue mineral exploration there but hopes to participate in refining crude oil and its distribution. (AB) (Milan CORRIERE DELLA SERA in Italian 7 Mar p 19) NORWAY RECORD EXPORT YEAR REPORTED--While Norwegian imports increased in 1993 by 5.6 percent, exports had a record year, according to a report published by the Norwegian Export Council in late January 1994. Total exports increased in value by 4.6 percent to 316.8 billion Norwegian kroner. The greatest increase was in oil and natural gas (6.8 percent), while traditional exports from the mainland increased by 3.8 percent in value. Fish exports increased by 8 percent in 1993, making that industry Norway's third largest. The rise in exports is due to greater Norwegian competitiveness and strong growth in foreign markets, the report stated. Germany replaced the Nordic countries as Norway's most important export market in 1993 with the UK as the second most important. Exports to the UK increased by 20 percent in 1993. The export of construction materials to the UK quintupled from 1992 to 1993. Additionally, exports to Japan, China, and the Far East grew strongly in 1993. (TF) (Oslo AFTENPOSTEN in Norwegian 26 Jan 94 p 22) PENSION FUND CALLED 'PROFITABLE BUSINESS'--The agency charged with investing National Pension Fund revenues had a "boom year" in 1993, according to an article in the Oslo daily AFTENPOSTEN. The Fund's operating costs, which are only a minute fraction of its income, are covered by only one day's income, according to General Manager Tore Lindholt. The rest is profit, he added. In 1993, the Fund had profits of almost 14.9 billion kroner, or more than 1 billion kroner for each member of the Fund's 13-person staff, prompting AFTENPOSTEN to call the Fund "Norway's most profitable business." The Fund increasingly acts as lender to the Norwegian state and has become one of the leading actors on the Oslo Stock Exchange, having placed 8.5 percent of its capital in stocks there. The Fund is also seeking permission from the government to invest 10 percent of its capital abroad. (TF) (Oslo AFTENPOSTEN in Norwegian 8 Feb 94 p 27) SWEDISH BANK PREDICTS GROWTH FOR NORWAY, DENMARK--Norway and Denmark are identified by economists at Sweden's Handelsbanken as being among the European countries that will experience the greatest growth in 1994. The economies of Sweden and Finland are also expected to grow, following the worst recession in those countries since the depression of the 1930's. As a whole, the Nordic region is expected to lead in growth in Europe. The strong growth predicted for Denmark and Norway is attributed to increased domestic demand and, in Denmark's case, to several years of austere fiscal policies and a surplus in foreign trade. Norway's GDP is expected to rise by 3 percent in 1994 and 3.5 percent in 1995 according to the Handelsbanken report. (TF) (Oslo AFTENPOSTEN in Norwegian 17 Feb 94 p 26) 1993 PROFITABLE FOR MOST BUSINESSES--The annual reports of Norway's major industrial, shipping, and banking firms indicate moderate to fast growth in profits for 1993. According to an article in the Oslo daily AFTENPOSTEN, the total growth in profits after taxes for these firms was 70 percent. The growth trend of these companies--Den norske Bank (DnB), Statoil, metals exporter Elkem, food manufacturer Rieber, pharmacological products exporter Hafslund Nycomed, shipping giant Bergesen--are viewed by chief analyst Sigmund Ellingsen of DnB Funds as typical of the entire commercial sector. He feels the growth will only continue. To a considerable extent this growth is attributed to the cut in costs which has made Norwegian industry more competitive internationally. However, while this increased competitiveness boosted exports in 1993, it also increased unemployment. (TF) (Oslo AFTENPOSTEN in Norwegian 11 Feb 94 p 27) NEW OIL DRILLING PLANNED--The Ministry of Industry and Energy has opened up several new fields on the Norwegian Shelf for explore for oil. The ministry will allow a maximum of six drillings off the Nordland coast and four drillings in the Skagerrak. Responding to criticism from environmental organizations and fishermen, Industry and Energy Minister Jens Stoltenberg noted that if oil is found, any development of the wells would not start until the year 2010 and that in any case, the country's best fishing areas are not in the area proposed for exploration. He added that Norway has "30 years' experience in guarding the coexistence of the oil and fisheries industries." (TF) (Oslo AFTENPOSTEN in Norwegian 25 Feb 94 p 21) COMPETITIVENESS OF NORWEGIAN SHELF ASSESSED--A report commissioned by the Ministry of Industry and Energy on the future competitiveness of the Norwegian Shelf states that costs in the oil industry will have to be cut in half in the future. It also concludes that the oil industry's taxes and fees must be made more predictable for the industry to compete. The report says that controlling costs is the industry's most important task, suggesting that projects currently planned should cut costs by 25-30 percent. The report states that the North Sea and the Norwegian Shelf are no longer the most attractive areas for oil companies to explore. This is in large measure because new, more competitive oil fields have emerged in Asia, Africa, and the former Soviet Union, according to the report, which was written by representatives of the Norwegian Government, the oil companies, and the delivery industry. (TF) (Oslo AFTENPOSTEN in Norwegian 17 Feb 94 p 27) SWEDEN SWEDISH CONTRIBUTION TO EU BUDGET CALCULATED--The Finance Ministry has calculated that Sweden's net contribution to the EU budget will be 8.9 billion kronor in 1995--potentially the first year of membership--then rise to 11.7 the next year and total about 18 billion by 1999, when the transition period for budget payments is complete. The total sum for 1995 is expected to be 18.3 billion but from this is deducted 5 billion in agricultural and regional support and an additional 4.4 billion in rebates. For 1996, these figures will be 19.1 billion total, 3.5 in subsidies, and 3.9 billion in rebates. Sweden will receive an additional 7.6 billion kronor per year in agricultural support that will not be counted in the state budget. It can also receive a maximum of 1.8 billion in environmental support, if it spends the same amount domestically. Under the framework of joint programs, Sweden can also expect to receive one-half to one billion kronor in subsidies for research and development, culture, and youth, according to the Finance Ministry report. (WS) (Stockholm DAGENS NYHETER in Swedish 4 Mar 94 p C2) ECONOMIC BRIEFS France --EMIRATES NEWS reports France's Giat Industries has annulled contract with French Offset partners group. company wants to revise compensation program linked to Leclerc tank sales to United Arab Emirates. (LE FIGARO 17 Mar 94 p 1) Greece --Government to "finally" tax gambling, most heavily on establishments masquerading as coffee houses...one-sixth of taxes to be paid at time of licensing, rest in five bimonthly payments. revenues may reach 10 billion drachmas yearly. (TO VIMA TIS KIRIAKIS 6 Mar 94 p D12) Norway State-Owned Statoil considering start-up operations in eight new gas, oil fields on Norwegian Shelf...operations to begin in 1994-95. (AFTENPOSTEN 5 Feb 94 p 24) Anilla B. (703-733-6283), Roger B. (703-733-6508), Thale F. (703-733-6294), Robert H. (703-733-6504), Dian I. (703-733-6286), Rosa M. (703-733-6287), Joel S. (703-733-6503), Wendy S. (703-733- 6506), and Charles W. (703-733-6473) contributed to this Foreign Media Survey. ELAG/24MAR/ECONF/WED/CL 24/2227Z MAR

SUMMARY Reflecting Bonn's preference for structural reforms and opposition to economic stimulus measures, the German participants' positive evaluation of the 14-15 March G-7 jobs conference in Detroit focused on the conference proposals for education and labor market reforms but rejected U.S. suggestions that Germany stimulate domestic growth by reducing taxes and lowering interest rates. German officials were also cool to U.S. proposals for setting up new institutions to deal with the issues of unemployment, technology policy, and education, preferring instead to work through the existing OECD framework or through bilateral ties. END SUMMARY Germany's finance, economic, and labor ministers, all of whom participated in the jobs conference, seemed to devote virtually all their attention to the conference recommendations to promote economic growth through international trade, technological innovation and private enterprise and to achieve structural reforms through education, greater flexibility of the labor force, lower costs, and deregulation. Anticipating U.S. efforts to make the Bundesbank's interest rate policy a central issue, Bonn officials sought even before the conference to focus attention on structural issues and to avoid discussion of stimulus measures (Die Welt 14 March). They also rejected U.S. proposals for setting up new groups to study technology policy and employment and for creating a new institution to exchange ideas about education, suggesting instead that existing institutions and bilateral relations were better suited for dealing with these issues (Frankfurter Allgemeine, 15 March). No New Stimulus Measures Both Finance Minister Theo Waigel and Economics Minister Guenter Rexrodt rejected the U.S. call for Germany to reduce its taxes and interest rates to stimulate domestic growth. Citing Germany's budget deficit, Waigel repeated Bonn's position that Germany's unemployment is a structural problem and that a cyclical recovery will not automatically solve the problem (Frankfurter Allgemeine, 15 March). According to Rexrodt, since new programs to "stimulate the economy" do not offer a way out of the German labor market crisis, efforts must focus on "structural changes" (DPA, 14 March). Structural Measures, Domestic Solutions German conference participants stressed the need to reform Germany's economic structures and, while welcoming cooperation on common concerns, rejected proposals to create additional G-7 institutions: --Indicating that he saw the jobs conference largely as a confirmation of the German government's plans for improving Germany's competitiveness, Rexrodt said he would take away from the conference ideas on "labor market flexibility, trade liberalization, deregulation," and lower wage costs, and said Germany must "learn from U.S. technological and innovation successes." He did not favor U.S. proposals for new study groups for technology policy and employment statistics, however, saying that the OECD framework already dealt with such issues, and he opposed creating a new institution for exchanges on educational issues, saying he preferred bilateral arrangements (Frankfurter Allgemeine, 15 March). --Similarly, Waigel stated that there is no "miracle cure"--each country "must find its own solutions" and, for Germany, "structural reforms" will make its labor markets "better equipped for the challenges of the future" (Handelsblatt, 17 March). --Bluem, on the other hand, appeared to see more room for international cooperation, saying that the jobs conference had "clearly improved conditions for harmonizing labor market initiatives." Because of current practices of multinational corporations, he said, job developments can "no longer be an exclusively national task" (Sueddeutsche Zeitung 17 March). He cautioned against an "uncritical acceptance" of the U.S. model, however, saying that the drastic cost reductions have not led to the expected rises in profits (Frankfurter Allgemeine, 15 March). Press Reaction Press reaction echoed the largely positive official reaction, with several papers welcoming President Clinton's initiative, the G-7's focus on people's concerns rather than on macroeconomic issues, and the opportunity for international cooperation on employment issues. Most media supported the Government's stance against stimulative measures: --Frankfurter Allgemeine's Washington correspondent Carola Kaps on 16 March called it "remarkable" that a G-7 conference had focused not on "interest rates and exchange rates" but on the "well-being of the average citizen." She defended Germany's stance against stimulus measures, however, saying that the "nasty and trite" controversy over German interest rates shows that the "special German situation" is still being largely "ignored." Nevertheless, she said hopefully that the U.S. administration now "seems to understand" that Germany's current conditions "do not permit an additional stimulation" of demand. --The leading business daily Handelsblatt of 17 March, citing Clinton's observation that job losses in one country lead to higher unemployment in neighboring and partner countries, said that "no country" can fight unemployment with domestic means alone in a world economy that is increasingly interdependent. --Sueddeutsche Zeitung's chief editor Josef Joffe also saw increased international cooperation resulting from the jobs conference, saying that such issues as "unemployment, health insurance, immigration" have become "international politics" and politicians now realize that domestic policy problems "cannot be solved exclusively" by a single country. He praised President Clinton's "initiative" for highlighting the "necessary shift in awareness" (16 March). --The left-of-center Frankfurter Rundschau presented one of the few negative reactions to the conference outcome, regretting the conference's failure to adopt new stimulus measures. "Any plans President Clinton may have had" for preparing a plan for coordination at the Naples G-7 Summit, it said, were "destroyed" with Rexrodt's "unmistakable rejection" of "any type of Keynesian economic program" (16 March). (AUTHOR: SHAVER. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF ANALYST, ELAG, (703) 733-6120.) ELAG/GILISON

Chiba Prefecture has been successfully carrying out construction of the "Kazusa Academia Park," the second project of an ambitious plan to establish three new industrial-based cities in Chiba Prefecture. Chiba Prefecture incorporated a semi-public corporation in 1991 to establish this world-class science park. This cooperative effort included four Chiba cities, the Japan Development Bank, and private companies. Zoning and infrastructure development for the first phase of the Kazusa Academia Park is to be completed by the end of 1995. It has been estimated that the first phase will cost approximately 41 billion yen ($370 million) of which over 22 billion yen ($200 million) is designated for the construction (NIHON KOGYO SHIMBUN 26 Jan 94). (The hard copy version of this FMN contains a photo of the final proposed site plan for the Kazusa Academia Center which will be the central facility of the Kazusa Academia Park.) Three Industrial-based Cities in Chiba Chiba Prefecture is making steady progress in the construction of its new science park, Kazusa Academia Park. Establishment of the Kazusa Academia Park was part of Chiba Prefecture's conceptual plan submitted in 1983 to establish three new industrial-based cities in Chiba. These cities include Makuhari New Metropolis, in Chiba City; Narita International Airport Community, in Narita City; and Kazusa Academia Park, in Kisarazu City. Chiba Prefecture aims to establish the Kazusa Academia Park as a world-class research and development city, integrating primary R&D facilities for prospective industries (NIHON KOGYO SHIMBUN 26 Jan 94). Construction of the Kazusa Academia Park was initiated in March 1991, following the completion of the first stage of the Makuhari New Metropolis. The total area of the project site is approximately 1000 hectares. Chiba Prefecture predicts it will take approximately 10 years to complete each of the three phases of the project completing the construction in 30 years (NIHON KOGYO SHIMBUN 26 Jan 94). The first development phase will result in approximately 278 hectares of the site. The table shown in Figure 1 represents the projected size of each construction site (NIHON KOGYO SHIMBUN 26 Jan 94). Kazusa Academia Park, World-class R&D Center Compared to Tsukuba Science City, in Ibaraki Prefecture, in which the majority of the research organizations are national research institutes, the center of the Kazusa Academia Park will be comprised of private companies. These companies are expected to be the driving force of Japanese science and technology in the 21st Century. Chiba Prefecture's objective is to establish an international R&D center for high-tech industries including electronics, advanced materials, and biotechnology, centered with private research institutes. The prefecture also aims the development growth of Kisarazu City and Kimitsu City as "mother cities," along with development of the new cities. When a new road that crosses over the Tokyo Bay is completed in 1996 it will be approximately 30 minutes to the Kazusa Academia Park from either the Haneda Airport or Kawasaki City and about 50 minutes from downtown of Tokyo by car (See Map shown in Figure 2.) (NIHON KOGYO SHIMBUN 26 Jan 94). Kazusa DNA Research Institute The highlight of the Kazusa Academia Park will be the "Kazusa DNA Research Institute," which is scheduled to be open in the fall of 1994. The research institute will be Japan's first research center specializing in structural analysis of DNA. The construction of the institute is near completion, with approximately 15 billion yen ($136 million) allocated. The institute is expected to be one of the world's largest research centers when completed. The institute will be operated by the Kazusa DNA Research Institute Foundation, which was established in March of 1991. Gaishi Hiraiwa, senior advisor to The Tokyo Electric Power Co. and chairman of the Japan Federation of Economic Organizations (Keidanren), has been appointed as the chairman of the board of the institute (NIKKAN KOGYO SHIMBUN 19 Jan 94, DENKI SHIMBUN 13 Dec 93). The institute will initially be operated with 70 staff members, including Mitsuru Takanami, professor emeritus of Kyoto University, who will be the director of the institute, Susumu Tonegawa, Nobel Prize-winning molecular biologist and MIT professor, and Itaru Watanabe, professor emeritus of Keio University -- both appointed as special advisors (NIHON KOGYO SHIMBUN 26 Jan 94). The institute will encourage joint research projects between Japanese researchers and researchers from overseas as a research institute with an "open-door policy." The institute plans to establish lecture rooms for visitors and observers (NIHON KOGYO SHIMBUN 26 Jan 94 and 19 Jan 94). (The hard copy version of this FMN contains the final proposed site plan for the Kazusa DNA Research Institute.) The Research Institute, equipped with supercomputers and 18 of the latest DNA sequencers, will focus on 1) analytical research on DNA structure, 2) research on analytical technologies for DNA structure, 3) research on mechanisms of DNA, 4) production and provision of DNA data, and 5) education of personnel for DNA research. Along with these research activities, a primary mission of the institute will be to provide research data to the private sector in order to promote biotechnology industry (NIHON KOGYO SHIMBUN 26 Jan 94). So far, the institute has made agreements with seven Japanese companies to construct high-tech R&D centers and R&D-focused plants in the Park. These companies include Fujitsu, Canon, Nissan Chemical Industries, Denki Kagaku Kogyo, Nippon Zeon Co., Maruzen Petrochemical Co., and Tokyo Tanabe Co. (NIHON KOGYO SHIMBUN 26 Jan 94) Tokyo Tanabe Co. will obtain approximately 34,000 square meters on the site. Total area of its research center will be approximately 20,000 square meters. The company plans to allocate about 200 researchers and invest approximately 12 billion yen ($109 million) into the project excluding the cost for the land (NIKKEI SANGYO SHIMBUN 29 Sep 93). FIGURE 1 THE FIRST PHASE CONSTRUCTION PLAN FACILITY NAME AREA REMARKS Kazusa Academia Center Facility Approx. 17ha Public experimental & Approx. 40ha Kazusa DNA Research research facilities Institute & others approx. 19ha Enviornmental Center approx. 3ha Public experimental & research facilities approx. 18ha Private research Approx. 94ha 15 divisions institutes R&D-focused plants Approx. 56ha 5 divisions Lots for other Approx. 13ha Lots planned for facilities public facilities Parks & Landscapes Approx. 37ha 5 parks & 3 landscapes Roads & Rivers Approx. 21ha Prefectural roads TOTAL Approx. 278ha

Possibly seeking to avoid simultaneous disputes on auto trade with both Washington and Brussels, Japan and the European Union, as announced on 19 March, concluded an agreement raising the quota for Japanese auto exports to the EU. Under the new arrangement, the Japanese quota will rise by 0.4 percent in 1994 (KYODO, 19 March) and the Japanese will be allowed to ship up to an estimated 984,000 vehicles to the EU -- an increase of 4,000 units over the 980,000 permitted in 1993 (Nikkei Weekly, 21 March). This agreement came after earlier negotiations in February had broken down because of disagreement over projected European auto market demand in 1994. According to a Kyodo report at the time, the EU had argued that demand would remain flat, while the Japanese maintained that it would increase slightly (25 February). Suggesting that Japan has been eager to conclude the auto trade talks with the EU, a 14 March KYODO report quoted Ministry of International Trade and Industry (MITI) Vice Minister Hideaki Kumano in remarks at a press conference that day as urging both sides to "agree as early as possible on setting a ceiling for European-bound Japanese car exports for 1994." Kumano also reportedly stressed that the new ceiling should be agreed upon before the start of the next Japanese fiscal year, beginning April 1. (AUTHOR: COHEN. QUESTIONS AND OR COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM, (703)-733-6534.) EAG/HEBBEL JEG 25/0144Z MAR

Hosokawa Visit to China Yields Mixed Results SUMMARY Prime Minister Morihiro Hosokawa's recent visit to China appears to have yielded few concrete results, either on the economic or political and security fronts. Beijing evidently did little to address issues of key concern to Tokyo, resisting Tokyo's call for a more active Chinese role in resolving the North Korean nuclear issue and for clarification of China's military spending. Beijing, however, appears to have reaped a propaganda bonus for use in its dispute with Washington, as Hosokawa, in keeping with past Japanese policy, sof t-pedaled the issue of China's human rights record. In addition, Beijing used the visit to signal Washington that it has other alternatives if China's most-favored nation trading status is revoked. END SUMMARY Hosokawa used the his 19-21 March visit to China, his first trip to the country since taking office last summer, to highlight the burgeoning economic ties between Tokyo and Beijing. In a 20 March news conference in Beijing, Hosokawa described the growth of trade and investment between the two countries as a "very desirable development" and stated that he and his Chinese counterparts had agreed to "continue to exert efforts to further develop our economic relations." He also noted that, as previously announced, Japan would extend a fourth yen-based loan to China (NHK Television, 20 March). Beyond the rhetoric, however, no significant new developments in bilateral relations appear to have come out of the visit. The most substantial accomplishment during the trip on the economic front, judging from media reporting, was the signing on 20 March of an agreement designed to promote cooperation between the two countries in the prevention and control of environmental pollution (Xinhua, 20 March). According to the 21 March Nihon Keizai Shimbun, Hosokawa and Chinese Vice Premier Zhu Rongji also discussed Japanese investment in China's auto industry--an area where the Ministry of International Trade and Industry has been pushing Japanese investment for some time in an effort to compete with U.S. and European ventures in China. Disagreement on Approach to DPRK On several issues of high concern to Tokyo, however, Hosokawa appears to have made little headway. One such issue was a reported Japanese request for China to use its influence with the DPRK to pressure Pyongyang to submit to full inspections by the International Atomic Energy Agency (IAEA). An article in the 21 March Nihon Keizai Shimbun, sourced to unnamed Japanese government officials, claimed that securing China's cooperation on this issue was the main purpose of Hosokawa's trip. The paper and a 20 March Kyodo report portrayed Hosokawa as taking a tough stance on this issue, telling Li Peng and Jiang Zemin that the DPRK was using "delaying tactics," and as warning that "the international community's patience is running out and attempts to resolve this nuclear issue through dialogue may end in failure." Kyodo also said that Hosokawa expressed to Premier Li Peng "grave concern" about Pyongyang's recent stance on inspections, warning that the possibility that the UN Security Council would take up the issue was "rising," and asking the Chinese to convey the international community's increasing impatience to North Korea. Chinese leaders who met with Hosokawa, however, appear to have done little more than reiterate China's long-standing position on the issue--that the problem should be resolved through negotiations. A 20 March Xinhua report on Hosokawa's meeting with Li Peng that day quoted Li as saying that the issue "should be solved through dialogues and negotiations." According to a 20 March Kyodo report, unnamed Japanese officials familiar with what was discussed at the meeting reported that Li also stated that it was necessary to offer North Korea "what it needs" in return for agreeing to inspections. The report did not indicate what, if anything, Li said North Korea needed, although this would presumably include economic aid. Concern Over Chinese Military Spending Tokyo also appears to have made little headway in clarifying another issue that reportedly worries the Japanese Government- -Beijing's recent increase in military spending. During his 20 March Beijing news conference, Hosokawa stated that he had urged Chinese leaders to "make efforts to increase the openness of China's military programs"--a step he said would "assure a sense of security and increase the international community's trust in China." Hosokawa added that he told his Chinese counterparts that Japan would have to take the level of China's military spending into account when considering future official development assistance (ODA) loans to China (NHK Television, 20 March). Li Peng, however, appears to have responded to Hosokawa's comments with Beijing's standard defense of China's military budget, telling Hosokawa at their talks on the 20th that China's military budget was among the "lowest" in the world and assuring him that the recently-announced increase in military spending is aimed primarily at "offsetting inflation." He went on to dismiss Japanese concerns, saying that "any worry abroad" over the recently announced increase in military spending is "groundless" (Xinhua, 20 March). Footdragging on Security Council Membership Tokyo also appears to have gained no Chinese commitment to support Japan's efforts to attain a permanent seat on the United Nations Security Council. According to a 21 March Asahi Shimbun report, Li told Hosokawa during their meeting on 20 March that, while China supported the concept of reforming the Security Council "at an appropriate time," the issue would have to be given "careful consideration" because "it will affect the interests of various countries." Soft-pedaling Human Rights While Tokyo failed to secure Chinese support on issues of concern to Japan, Beijing appears to have gained some ammunition to use against Washington in its dispute with the United States over China's human rights policy. Despite reports that he had promised Secretary of State Christopher that he would raise human rights during his talks with the Chinese leadership, Hosokawa, in fact, appears to have taken an extremely low-key approach on the issue, alluding to human rights in only vague and ambiguous terms. According to a 19 March Kyodo report, Hosokawa, in a speech at Li's welcoming banquet for him on 19 March, stated that "each nation should make efforts on human rights problems" in line with the declaration adopted at the June 1993 international conference on human rights in Vienna. Judging from both Chinese and Japanese media reporting, however, in private comments to Li during the banquet, Hosokawa appears to have undercut any impact these comments may have had. According to a 20 March Xinhua report, at a press conference that day PRC Foreign Ministry spokesman Wu Jiamin told reporters that during dinner Li briefed Hosokawa on Secretary of State Christopher's recent visit to China, and Hosokawa commented that "it is somewhat unwise to impose Western concepts of democracy on other countries." Wu reportedly added that Hosokawa told Li that he "fully understands [China's] viewpoint and position on human rights." According to a 21 March Kyodo report, in comments to reporters on his flight home from China, Prime Minister Hosokawa confirmed that he made these remarks. To soften the effect of his comments on Washington, the prime minister reportedly denied that he intended them as a criticism of U.S. policy toward China. Hosokawa also played down the human rights issue during his news conference in Beijing on 20 March. In his opening statement, broadcast on NHK Television on 20 March, Hosokawa referred to human rights only in passing, saying that he had had "a candid exchange of views" on the topic, among several others, with the Chinese leadership. When questioned about what he had said to the Chinese on the human rights issue, he stated ambiguously that during the welcoming banquet he had told Li that "each nation should make its own efforts to deal with the issue of human rights, which has universal value." Hosokawa refused to comment on differences between the United States and China on the issue or on China's recent detention of dissidents. Japan's Low Key Track Record on Human Rights While Hosokawa may have sof t pedalled human rights in part because he did not want to disrupt his trip or detract from his message on North Korea by raising a controversial issue, his position is consistent with Japan's past stance on human rights in China and other countries in East Asia. Both the Japanese Ministry of Foreign Affairs and past governments headed by the Liberal Democratic Party have tended to focus on economic relations with China rather than human rights. To support their position, they have maintained that promoting China's economic development and keeping the country engaged in the international community will promote development of human rights in China more effectively than isolating Beijing over the issue. For example, in an article in the October 1993 issue of the Foreign Ministry's journal, Gaiko Forum, Japanese Ambassador to the PRC Michihiko Kunihiro stated that although the Japanese Government would ask Beijing to take "corrective measures" if a specific incident involving human rights occurred in China, Tokyo believed that "with the development of a market economy in the PRC, the consciousness of its citizens about human rights will be elevated automatically and it will become impossible for the PRC to disregard international opinions as the country becomes more involved in the international community." The ambassador added that such a process would be, in his view, "more effective than to hastily try to change [China's] opinion by force." Beijing's Pointed Message to Washington At the same time China appears to have used Hosokawa's trip to China to signal Washington that Beijing has other economic options should the United States decide to revoke China's MFN status. In his meeting with Hosokawa on 20 March, for example, Li underscored the "tremendous potential for further growth of bilateral economic cooperation, pointedly noting that the economies of the two countries are "mutually complementary" and that China's priorities for development are in "energy, transportation, and telecommunications, in which Japan is strong." During Secretary Christopher's visit just days earlier, Li, in identical terms, had held out the possibility of giving U.S. companies preference in developing these areas. A signed Xinhua commentary on 21 March similarly described the great possibilities for expanding Sino-Japanese economic relations. Hailing the rapid development of relations, the commentary noted the "wide scope" for further development of cooperation in transportation, energy and communications. "It can be foreseen," the commentary stated, "that as Japan's technology and capital continue to increasingly integrate with China's market and resources on a wider scale, it will definitely become a reality in the near future for the annual volume of trade between the two countries to reach $390 billion." Such a figure would be much larger than the current volume of Sino-U.S. trade. Vice Premier Zhu Rongji had delivered a similar message about the potential for the expansion of Sino-Japanese relations during his 23 February-4 March visit to Japan. In an interview in Fukuoka summarized by Xinhua on 2 March, Zhu pointed out that trade between China and Japan reached a record high of $39 billion in 1993, making Japan "China's largest trading partner" and China "Japan's second largest trading partner." Zhu added that, although this figure was record-breaking, "when we consider the potential of Sino-Japanese bilateral cooperation, it is a very small figure." A 4 March article about Zhu's trip in the Chinese Communist Party's organ, Renmin Ribao, stated that Zhu also frequently pointed out during his trip that Sino-Japanese trade had the potential to increase by ten times over its current level. Outlook Prime Minister Hosokawa's weakening domestic political position made it imperative that he appear to handle his visit to China successfully. Because of this, even had he been inclined to raise the human rights issue, he would probably have been unwilling to take a forceful position that would have offended his Chinese hosts and marred his trip. China will likely certainly use Hosokawa's reported private comments to Li Peng in pressing its case against Washington's criticism of Beijing's human rights record. On other fronts, Japan's growing concern about the DPRK's nuclear program and the security environment in North Asia will almost certainly mean that Tokyo will continue to press China in other forums to intervene with the DPRK and to clarify the nature of Chinese military spending. (AUTHOR: BOUNDS. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM, (703)-733-6534.) EAG/HEBBEL/CB 25/1647z Mar

SUMMARY: Recent Japanese press articles have detailed the mushrooming of policy study groups formed among Japanese Diet members, most of which cross party lines and factions within individual parties. Their reported aim is to both promote political reform and to act as catalysts for the "second phase" of political restructuring. Cross-Party Policy Study Groups Have Proliferated More than ten cross-party policy study groups have been formed since the inauguration of the Hosokawa administration in August 1993, according to the 8 January 1994 SANKEI SHIMBUN. These are in addition to several that were formed in 1992 and early 1993. The study groups have been formed, according to a Sakigake (Harbinger Party) leader, because "Diet members are insecure in the current chaotic political situation and want to join forces with others" so as to be ready for the "second stage" of Japan's political reaignment--the possible formation of new political parties. SANKEI notes that the study groups can be "roughly divided" into three categories: 1) those composed of "conservative centrists" that include LDP Diet members; 2) conservative centrist groupings that exclude LDP members; and 3) centrist members of the SDPJ and the Democratic Socialist Party (DSP). The paper observes that some groups are not only inviting participation by members of the public, but are also actively seeking to "conceptualize" the formation of new political parties. [See Annex I for membership listings and other information concerning the major cross-party study groups. Annex II contains information on the LDP study groups and Annex III reports on the Socialist Party study groups.] The 1 January 1994 TOKYO SHIMBUN also reports that the study groups are actively contemplating the formation of new political movements. It asserts that "each group" is striving to form a "new- new party," coalescing around three groupings: 1) a party comprising Sakigake, the Japan New Party (JNP), and "about 30" reform-minded LDP members; 2) a party led by Shinseito and Komeito, which would follow the line reportedly subscribed to by Shinseito coleader Ichiro Ozawa and Komeito Secretary-General Yuichi Ichikawa, viz., that political realignment should center on two major parties; and 3) a "Yokomichi Party," led by Hokkaido Governor Takahiro Yokomichi, that will be the political vehicle of "liberal" SDPJ members, and which will be supported by members of the "Democrats," a recently established SDPJ policy study group which includes rightist and centrist groups within the party. Makeup of Study Groups One ostensibly influential cross-party group, established initially by Prime Minister Morihito Hosokawa and others in 1992 to promote political reform, is the "System Reform Study Group," comprising LDP, SDPJ, Shinseito, Komeito, Japan New Party (JNP), DSP and Sakigake members. It is reportedly led by Hosokawa, Chief Cabinet Secretary Masayoshi Takemura, Izumo Mayor Tetsundo Iwakuni, and other Sakigake members, particularly Shusei Tanaka and Yukio Hatoyama. Tanaka and Hatoyama left the LDP in June 1993, joined Sakigake, and subsequently became "driving forces" behind the birth of the Hosokawa administration, according to the 3 October 1993 NIHON KEIZAI SHIMBUN. This group also reportedly supports the setting up of an independent organization resembling an omsbudsman's staff in the Diet to monitor political reform. On 25 January 1994, group chairman Naoto Kan put together an outline of a bill, specifying that this new organization, "Gyosei Kanshi Chosakai," or "Administrative Supervisory Committee," will include five committee members approved by the speakers of both upper and lower houses, according to 26 January 1994 YOMIURI SHIMBUN. In addition to the five committee members, the bill also reportedly calls for a staff of 70. Another influential grouping, the "Long-Term Basic Problems Study Group," was formed in December 1993 by SDPJ and JNP Diet members. Its leader is Hirotaka Akamatsu, former secretary general of the SDPJ. The group was formed to coordinate policies among members of different political parties with an eye toward a possible tie-up in the second phase of political restructuring, according to the 23 December 1993 YOMIURI SHIMBUN. This group reportedly discusses problems related to the decentralization of power, deregulation, problems of an aging society, U.N. policy and Japan's international contributions, as well as the nuts and bolts functioning of a new political party and its leadership. Another cross-party group that reportedly includes LDP members is the "Forum on Comparative Study of Political Systems." This group is comprised of 21 "younger pro-reform Dietmen" from the LDP, SDPJ, Komeito, and DSP, according to the 20 February 1993 ASAHI SHIMBUN. The group reportedly discusses issues such as the functioning of different political systems, the Japan-U.S. security treaty, and Japan's "vision" of the future, SANKEI notes. In order to deal with the multiplicity of views in Japan, this group reportedly supports a "multiparty system" rather than a "two-party system," according to ASAHI. One large and expanding cross-party study group, the "General Economic Policy Study Group" promoted by Toshio Yamaguchi, an independent member of the House of Representatives, has reportedly "created quite a stir." When this group was inaugurated in October 1993, it was rumored that Yamaguchi's intention was to unite Michio Watanabe, leader of the LDP's Watanabe faction, and Ichiro Ozawa to form a "new party." But because of opposition within the Watanabe faction to Watanabe's personal involvement in the new group, Watanabe refrained from joining the group as chairman. However, according to the 3 February NIHON KEIZAI SHIMBUN, it now appears that Watanabe will participate in the group's activities and will give lectures on issues such as economic stimulus measures, the FY95 budget, and Japan-U.S. economic problems. NIKKEI concludes that such a move by Watanabee could once again stir up speculation concerning a "Watanabe-Ozawa tieup." Yet another study group, the "New-WIC Dietmen's Forum," was established in January, according to the 20 January CHUNICHI SHIMBUN. Headed by the LDP's Masayasu Kitagawa, it includes 30 younger Diet members from the LDP, SDPJ, JNP, DSP and Sakigake. The group reportedly aims to make recommendations on improving social welfare and Japan's information and communications networks, according to the paper. The paper also observed that this forum has excluded Shinseito, Komeito, and the Communist Party from its ranks. LDP-Oriented Groups There are reportedly a number of LDP-oriented study groups in existence, including "Forum To Promote Pump-Priming Measures and Political Reform," "Forum To Renew the LDP," "Parliamentary Alliance To Promote Political Reform," and "Democratic Politics Study Group." According to a 24 February Kyodo report, 20 legislators mainly from the LDP attended a meeting on the same day to prepare for launching yet another policy study group called "Liberals" in early March. Organizers of this group reportedly hope to secure the participation of more Diet members, local assembly members, academics and business executives. The group will reportedly be chaired by Diet member Koji Kakizawa, and will include Seiichi Ota and Shokei Arai. Hokkaido Governor Yokomichi's Prospective Role The idea of a "Yokomichi Party" corresponds to Rengo (Japanese Trade Union Confederation) Chairman Akira Yamagishi's concept of a "New Liberal Party," TOKYO SHIMBUN notes. The prospective leader of this party, Hokkaido governor Takahiro Yokomichi, is regarded by members of the SDPJ rightist-centrist "Democrats" study group to be the "last trump card" left in the hand of the SDPJ, the paper adds. Yokomichi, now in his third term as governor of Hokkaido, left the House of Representatives in 1983 to run for the Governorship, stating that he would return to national politics "in 12 or 13 years." In March 1993, "as expected," he made public his intention not to seek a fourth term as governor, thus indicating his interest in returning to the national political scene. Annex I. CROSS-PARTY STUDY GROUPS Forum New-WIC (New-Wic Giin Forum -- "Wic" is an acronym for "welfare, information, and communications") Established: 19 January 1994 Goals: To discuss issues involving social welfare, improving information and communications network. Members: 30 young Diet members from the LDP, SDPJ, JNP, DSP andSakigake. Headed by LDP Dietman Masayasu Kitagawa. (source: 20 January 1994 MAINICHI SHIMBUN) Long-Term Basic Problems Study Group (Choki Kihon Mondai Kenkyukai) Established: 22 December 1993 Immediate Goals: To seek consensus on issues such as Japan's U.N. policy and deregulation. Members: SDPJ Members: Hirotaka Akamatsu (representative), Akihiro Ohata, Masanori Goto, Mamoru Kobayashi, Harumichi Hosoya (above are standing executive secretaries), Junsuke Iwata, Tomiko Okazaki, Azuma Koshiishi Taisuke Sato, Shoichi Tanaka, Ryuichi Doi, Ritsuo Hosokawa Ryu Matsumoto (above are secretaries) JNP Members: Akio Nakajima (representative), Fumihiko Igarashi, Sakihito Ozawa, Seishu Makino, Toshimitsu Motegi (above are standing executive secretaries), Banri Kaieda, Yuriko Koike, Tokihiro Nakamura, Hiroyuki Nagahama, Yoshihiko Noda, Kenichiro Hatsumura, Osamu Fujimura, Hirotaro Yamasaki (above are secretaries) (source: 23 December 1993 ASAHI SHIMBUN) Forum Future Established: 25 November 1993 Goals: To involve younger Lower House Diet members in future political realignment. Members: About 20 young Diet members from the Shinseito, Komeito, DSP, JNP and Sakigake, including Ichiro Aisawa (LDP) (representative), Minoru Yanagida (DSP), Koichiro Genba (independent), Tokihiro Nakamura (JNP), and Osamu Yoshida (DSP) (sources: 26 November 1993 MAINICHI SHTMBUN; 23 October 1993 SANKEI SHIMBUN) Upper House Study Group (Sanin o Kangaeru Kai) Established: 25 November 93 Goals: To revitalize the Upper House so as to avoid becoming a "carbon copy" of the Lower House. Members: 63 members, excluding Japan Communist Party (JCP) Dietmen. Headed by Motoo Shina (independent). Other members include 10 LDP members (such as Masakuni Murakami), 5 SDPJ members (such as Manzo Hamamoto), Hiroshi Tsuruoka (Komeito), Kei Inoue (DSP-Kokumin Rengo), Sadao Hirano (Shinseito) and Osamu Ikeda (JNP-Kaikakuren) (sources: 25 November 1993 NIHON KEIZAI SHIMBUN; 1 November 1993 SANKEI SHIMBUN) Group To Promote Political Realignment in 1995 (95-nen Seikai Saihen o Susumeru Kai) Established: 9 November 1993 Goals: To promote passage of political reform bills. Members: 170 Diet Upper and Lower House members, including Kunio Hatoyama (representative, independent), Hajime Funada (Shinseito), Hirotaka Akamatsu (SDPJ), and Toshio Yamaguchi (independent) (sources: 9 November 1993 NIHON KEIZAI SHIMBUN; 16 November 1993 TOKYO SHIMBUN) General Economic Policy Study Group (Sogo Keizai Seisaku Kenkyukai) Established: 21 October 1993 Goals: To exchange opinions on economic issues such as GATT and the Uruguay Round, tax cuts, currency denomination, and pump-priming measures. Weekly meetings managed by 27 representatives of the participating parties. Members: Group started with 159 upper and lower house members, excluding JCP members, but has grown to nearly 200 members. (sources: 22 October 1993 CHUNICHI SHIMBUN; 31 October 1993 ASAHI SHIMBUN) Cornerstone Group (Ishizue Kai) Date Established: 30 September 1993 Goals: To exchange opinions on issues such as Japan-U.S. security treaty, tax system, and to lay the ground for future political realignment. This group sets itself apart from Shinseito co-leader Ichiro Ozawa's line of promoting Japan to become a "mini super-power" through active international contributions. Members: 18 first-term and second-term Lower House members: SDPJ Members: Ikuo Horigome, Minoru Kawashima, Ryuichi Doi Shinseito Members: Katsuya Okada, Shigefumi Matsuzawa, Yoshihito Iwasa, Takaaki Koga Komeito Members: Yoneo Hirata, Akihiro Ueda, Yoshinori Oguchi, Shigeki Sato Sakigake-JNP Members: Susumu Yanase, Ko Tanaka, Sakihito Ozawa, Yoshihiko Noda DSP Members: Kenji Kitahashi, Shingo Nishimura, Ryuzo Sasaki (sources: 1 October 1993 SANKEI SHIMBUN; 1 October 1993 NIHON KEIZAI SHIMBUN) Heisei Club Established: 5 October 1993 Goals: To discuss the need to review 1,100 licenses and approvals to promote deregulation. Members: 84 Lower House members, many endorsed by the "Heisei Restoration Society" (Heisei Ishin no Kai) during the last general election: 30 LDP members; 16 SDPJ members; 11 JNP members; 7 Sakigake members; 6 Shinseito members; 5 DSP members; 3 Shaminren members and 6 independents. Club is represented by Koji Kakizawa (LDP), Seiichi Ota (LDP) and Minoru Kawashima (SDPJ) (sources: 3 November and 6 October 1993 MAINICHI SHIMBUN) Forum on Comparative Study of Political Systems (Hikaku Seijiseido Kenkyukai) Established: February 1993 Goals: To promote a multiparty system and discuss "Japan's vision toward 2010." Members: About 20 members including young LDP, SDPJ, Shinseito, Komeito, JNP, DSP, and Sakigake members. Headed by Sakigake's Susumu Yanase. (sources: 2 October 1993 ASAHI SHIMBUN; 8 January 1994 SANI?EI ? SHIMBUN) System Reform Study Group (Seido Kaikaku Kenkyukai) Established: December 1992 Goals: To promote administrative reform. Members: About 40 members, including Morihiro Hosokawa, Masayoshi Takemura, Tetsundo Iwakuni, Shusei Tanaka, and Yukio Hatoyama. Chaired by Naoto Kan. (sources: 3 October 1993 NIHON KEIZAI SHIMBUN; 11 October 1993 TOKYO SHIMBUN) Annex II. LDP STUDY GROUPS Forum To Promote Pump-Priming Measures and Political Reform (Keikitaisaku Saiyusen, Seiji Kaikaku Jitsugen no Kai) Established: 22 December 1993 Goals: To concentrate discussion on pump-priming measures and on anticorruption measures. Members: Representatives are Taro Nakayama, Nobuyuki Hanashi, Shunjiro Karasawa. There are 11 other managers. (source: 23 December 1993 ASAHI SHIMBUN) Forum To Renew LDP (Shinsei Jiminto o Tsukuru Kai) Established: September 1993 Goals: To promote political reform by dissolving factions, and if necessary, to support the coalition government's reform bills. Members: About 40 members, headed by Seiichi Ota and Shokei Arai. However, the group dissolved on 10 February 1994, saying that it had achieved its goal of party reform by "abolishing the practices of 'dango' among factional members." (sources: 13 November 1993 SHUKAN JIJI; 11 February 1994 MAINICHI SHIMBUN) Parliamentary Alliance To Promote Political Reform (Seiji Kaikaku Suishin Giin Renmei) Established: June 1993 Goals: To promote political reform. Members: 186 members, headed by Toshiki Kaifu. (source: 25 October 1993 MAINICHI SHIMBUN) Democratic Politics Study Group (Minshu Seiji Kenkyukai) Established: 17 September 1993 Goals: To debate the introduction of the new electoral system. Members: About 70 members, headed by Yoshinobu Shimamura. (sources: 2 October 1993 ASAHI SHIMBUN; 25 October 1993 MAINICHI SHIMBUN) Annex III. Socialist Party Study Groups Democrats Established: 21 December 1993 Goals: To actively support the coalition government and initiate the realignment of political parties while trying to forge a broad-based coalition of interparty political forces. Through exchanges with JNP and Sakigake members, the group hopes to support Yokomichi as a new party head. Moreover, the Democrats also plan to seek cooperation with reform- minded LDP members. Members: About 40 from the eight groups comprising rightist and centrist members of the SDPJ. Diet Lower House Members: Makoto Tanabe, Churyo Morii, Sadao Wada, Yu Amioka, Daikichi Ishibashi Kenji Taguchi, Hirotaka Akamatsu, Junsuke Iwata, ShogoOki, Akihiro Ohata, Azuma Koshiishi, Masanori Goto, Mamoru Kobayashi Taisuke Sato, Shoichi Tanaka, Ryuichi Doi, YoshioHachiro, Kenji Yoshioka, Katsuhiko Yokomitsu, and Shogo Abe (USDP) Diet Upper House Members: Shinji Aoki, Wataru Kubo, Keiko Chiba, Masakazu Yamamoto, Yukiko Kawahashi, Tetsuo Kitamura, Takashi Tanihata, Makoto Taneda Akiko Domoto, Toshikazu Hori, Kenichi Yamada, Mitsuharu Tawashina, and Takashi Awamori(Democratic Reform Coalitin) Former Lower House Members: Motohisa Ikeda, Makoto Ogawa, Masato Okita, Hachiro Kishi, Kiyoshi Koiwai, Tsuneto Kobayashi, Rikyu Shibusawa, Yoshito Sengoku Nobutaka Tsutsui, Kazuko Yoshida (sources: 20 December 1993 YOMIURI SHIMBUN; 22 December 1993 ASAHI SHIMBUN; 26 December 1993 NIHON KEIZAI SHIMBUN) Network To Recreate a Constitutional SDPJ (Goken no Shakaito o Saiseisuru Zenkoku Net towaaku) Established: 20 November 1993 Goals: To defend the Constitution and oppose the introduction of anelectoral system combining single-seat constituencies with proportional representation. Members: 10 lower house members and 10 upper house members, headed by Kiichi Murayama and Sukio Iwatare. (source: 21 November 1993 YOMIURI SHIMBUN) New Policy Forum (Shinseisaku Konwakai) Established: September 1993 Goals: To promote reform and to initiate a political realignment. Group was most active in pushing Diet passage of the political reform bills. Group also plans to reexamine the party's basic political platform, including security and defense policies. Members: 20 lower house members and 10 upper house members, including Aogu Matsumae (chairman) and young members such as Masao Sakon, Ikuo Horigome, and Hideko Ito. (sources: 11 October 1993 ASAHI SHIMBUN; 10 November 1993 ASAHI SHIMBUN; 4 January 1994 MAINICHI SHIMBUN) Society To Promote True Political Reform (Shinno Seiji Kaikaku o Susumeru Kai) Established: sometime in 1993 Goals: To stop corporate political contributions, lower party subsidies, prevent a conservative two-party system from forming, and maintain the SDPJ's identity through a multi- party system. Members: 27, including members of the "anti-Tanabe" and "anti- single seat constituency" factions. Principal members are from the following SPDJ groups: Suiyokai: Tsuruo Yamaguchi, Shun Oide, Tadatoshi Akiba. Social Democratic Forum: former and present forum members, such as Koken Nosaka, Sekisuke Nakanishi, Seiko Kitazawa, Mankichi Kato. Creative Society: (Tsukuru Kai--Yamahana faction) Reijiro Sawafuj i. Former Ishibashi-Hori Faction: Hideyuki Maezima, Masaru Hayakawa. Sangatsukai: (March Society--an ultraleft faction) Yasuo Yamashita. (sources: 2 October 1993 SHUI?AN JIJI; 1 September 1993 ASAHI ? SHIMBUN) League of Reformist Diet Members (Shakaito Kaikaku Giin Rengo) Established: April 1993 Goals: To create a SDPJ that can unite with other opposition parties to oust the LDP from power. Members: Include Aogu Matsumae, Toshiharu Okada, Yu Amioka, Sadao Komatsu, Akira Kima, Takashi Motonobu, Tsuruo Yamaguchi, Han Yasuda, Masato Okita, Kenji Yoshioka, Shuo Matsubara, Mamoru Kobayashi, Minoru Kawashima, Ikuo Horigome, Motohisa Ikeda, Rikyu Shibusawa, Kenji Taguchi, Yukio Takemura, Risei Ueda. (source: 30 March 1993 SHM?I SHIMPO) ? New Policy Study Group (Shinseisaku Kenkyu Shudan) Established: 24 March 1993 Goals: To study policies concerning the 21st century politics on a broad scale. Members: 21 members, including Masao Hori, Shigeru Ito, Sanji Muto,Hideyuki Maejima, Masaru Hayakawa. (source: 30 March 1993 SHAKAI SHIMPO) Young Reformist Diet Members' Union (Wakate Kaikaku Giin Rengo) Established: March 1993 Goals: To unite four groups of junior Diet members and, to reexamine the SDPJ's basic policies. Members: Members of "Leadership 21," ""Sirius," "Action New Democracy," and "New Wave." (source: 30 March 1993 SHAKAI SHIMPO) New Generation Political Forum (Shinsedai Seiji Forum) Established: 10 March 1993 Goals: To promote reform of the SDPJ. Members: 19 members, including Hisashi Suzuki, Takashi Awamori (Upper House) Junsuke Iwata, Hiroshi Tsunematsu. (source: 30 March 1993 SHAKAI SHIMPO) (AUTHOR: KOWALSKI. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, JAPAN BRANCH AT (703) 733-6534. EAG/24MAR94/POLCHF/ASIA DIVISION/CB 25/1703z Mar

Summary: Arye Stav, editor of the conservative journal NATIV, has written an article published in the journal's January-February issue strongly opposing any peace settlement that would involve setting up a Palestinian state, which Stav sees as eventually ensuing from the Israeli-PLO Declaration of Principles (DOP) signed in September; returning the Golan Heights to Syria; and returning Palestinian refugees to the West Bank and Israel. He argued that giving up Israeli control of the West Bank and the Golan would severely weaken Israel's geostrategic position in the face of enemies who are growing stronger, and the return of millions of refugees would greatly over tax water supplies in the region, and within Israel itself. This foreign media note summarizes the views Stav expresses in his article. Geo-Strategy According to Stav, if Israel loses the three strategic strongholds in Western Eretz Israel (the Jordan Valley, the Golan Heights, and the mountains of Judaea and Samaria) the country will be in greater danger than at the time of the Six Day War. Iraq and Syria are now stronger than they were in 1967, Iran is more powerful, and Saudi Arabia is being armed at an unprecedented pace, all of which makes the eastern front more dangerous. Since 1967, said Stav, Israel has built up its defensive infrastructure in the east, including the Jordan Valley proper and the fortified ridges of eastern Samaria, which are its "defensive key." In addition, control of the Jordan Valley is a basic principle of the Alon Plan (post-1967 peace plan calling for the return of the densely populated areas in the West Bank and Gaza, along with most of the Sinai, to Arab sovereignty) for eastern front defense. According to the NATIV editor, Samaria--an Israeli troop concentration point and early warning zone--is the only defensive line that protects the "soft underbelly" of the Israeli coastal plain in which most of the Jewish population and energy sources are concentrated. In addition, said Stav, the trans-Samaria highway is the principal strategic highway in Israel and is intended to facilitate mobilized troop movement from Gush Dan eastward. If the West Bank territory were lost, Israel's mobilization cushion of 72 hours would be reduced to a few hours. Furthermore, Stav wrote, if the coastal plain were hit with non-conventional weapons, Israel's north-south movement axes would be cut. Since no western axis exists, 2 million people would be forced to flee to the mountains of Samaria, an hour's distance away (assuming Samaria was still under Israeli control). According to the NATIV editor, Israeli control of the Golan Heights now deprives Syria of a springboard into northern Israel and is an effective barrier to any Syrian adventurism because Israeli weapons deployed on the Golan can deter Damascus. In addition, said Stav, Israeli control prevents Syria from deploying on the Golan missiles capable Of accurately striking population centers on the Gulf of Haifa with a Scud B or along the coastal plain, where most Israeli reserve forces are mobilized, with a Scud C. Israel is also able to prevent terrorist attacks in the Galil Finger and Jordan Valley which, said Stav, would preclude having "bunkers above and children's homes below." According to Stav, there are over 5 million who call themselves "Palestinians." Although a Palestinian entity will not, in and of itself, threaten Israel, the great numbers of Palestinians on the Jordan will "naturally" remove the Jordanian Hashemites. Palestine would then be an enticing prey for either Iraq or Syria. Syria is a greater threat to Israel, Stav said, because it is pursuing strategy of incorporating Jordan and Israel into "Greater Syria"--a strategy Damascus has followed by its support of the rejectionist "Group of 10" and its involvement, through Iran, with Hizballah and Islamic Jihad. Palestine under Syrian influence or control would not be a small demilitarized entity as currently envisioned, but the "heavy fist of the Arab Ummah (nation)" stretching from Baghdad to the outskirts of Gush Dan. Refugees The combined number of Palestinian refugees from 1967 and 1948 is currently estimated at 2.6 million, says Stav, and their repatriation would place a heavy demographic and economic burden on Israel. Under the terms of UN Resolution 194 on Arab refugess, Israel is faced with the return of millions of refugees to their dwellings inside the 1949 armistice lines. Stav asserts that Israel has apparently agreed to family reunification of around 100,000. The alternative to Palestinian repatriation is monetary compensation, says Stav, which the Israeli Arab community has rejected because it nullifies the right of return. The only compensation the Arab community is willing to discuss, he continues, is awarding post-1967 Jewish settler residences and infrastructure in the West Bank and Gaza as partial compensation for 1948 Arab property losses. If Jewish residences in east Jerusalem are added, this would result in some 80,000 housing units being offered as compensation. According to Stav, these 80,000 Jewish families who might be evacuated from their homes in the West Bank, Gaza, and Jerusalem would themselves require some $16 billion in compensation. Since Israel agreed to recognize the right of return for the 1967 refugees, Stav expects plans for dealing with the 1948 refugees to be brought up sometime in 1994. Water According to Stav, a peace settlement that brings the return of refugees would also lead to a major shortage of water in Israel. He said that Israel's per capita water consumption of 250 cubic meters/annually is half of UNESCO's international minimum recommendation of 500 cubic meters. Consumption is expected to continue to decrease despite a natural population increase, the influx of immigrants, and returning refugees. Nonetheless, Israel intends to transfer two-thirds of this water to Arab sovereignty. The three primary water sources are: Kineret Basin: Supplies 610 million cubic meters/year. Two- thirds of its water comes from wadis in the Golan and Jordan river headwaters which will transfer to the Syrians who, according to international law, will be able to draw on a considerable portion of it. The Kineret has a delicate saline balance. If its water level drops below 213 meters, irreversible damage is likely and Israel's sole upper water basin will abe destroyed. Stav notes that the Syrians suffer from a water shortage and will need to use the Golan waters for intensive irrigation. Mountain Aquifers: Supply 500 million cubic meters/year. They are spread over the central mountain range in Judaea and Samaria, where most of the water supply will come under the control of Palestinian state. Since the Palestinians intend to absorb 1.5 million refugees over the next decade, the population of the West Bank will reach 2.5 million by the year 2000. If the population on the coastal plain is to receive almost 50 percent of its water, 2.5 million Palestinians will thus have only 100 cubic meters/person- -one-fifth of the international minimum. Coastal Aquifer: Supplies 400 million cubic meters. This aquifer is under Israeli control, but is contaminated by industrial waste, over salinated from overpumping, and is insufficiently replenished because of the building boom on the coastal plain. The aquifer's concentration of such contaminants as nitrates has reached 90 milligrams/liter, double the international standard. Recycled and saline water can also supplement the coastal aquifer. If Israel gives away the Kineret Basin and the mountain aquifers, concludes Stav, it will be left with brackish water, sewage, and toxic waste to drink. (QUESTION AND/OR COMMENTS, PLEASE CALL CHIEF, AFRICA/LEVANT BRANCH AT (703) 733-6408) ENEAG/25 Mar/POLCHF/ECONF/NEASA Division/CB 25/2138z Mar

Foreign Economic Review: EASTERN EUROPE Vol. III, No. 12, 23 March 1994. Notice To Readers: FOREIGN MEDIA SURVEY is a subtitled series published by FBIS Europe/Lat in America Group. The Survey series features brief summaries of foreign media reports on topical i?sues ? compiled from the most recent sources available to FBIS. Any and all comment or analysis contained herein is attributable to the cited media source. Europe Economic Review is a subseries of FOREIGN MEDIA SURVEY published by the East and West Europe Divisions of Europe/Latin America Group with contributions from FBIS overseas bureaus. Europe Economic Review is intended to supplement coverage of European economic issues by the FBIS Daily Reports for West and East Europe and other FBIS publications. Foreign news, feature, and editorial reports selected for summary in this publication normally do not appear as full-text translations in other FBIS publications. The contents of Europe Economic Review consist of abstracts of foreign media coverage of European economic developments under two main geographic headings: -- Western Europe: Drawing on West European, Canadian, and Turkish media, this section reports on national and regional economic issues, focusing on economic competitiveness, key industries, regional economic integration, internal economic policies and performance, and foreign trade and investnient. -- Eastern Europe: Citing East European and, where appropriate, other foreign media sources, this section highlights East European efforts to rebuild national economies and achieve integration into the European Community and the global economy, focusing on policy debates and practical action geared toward the implementation of internal economic reforms and industrial restructuring and on developments in foreign trade, cooperation, and investment from national and regional perspectives. Under these two main headings, summaries of foreign media reports on all categories of economic issues generally are grouped under subheadings by subject, country, or region. FOREIGN MEDIA SURVEY is a U.S. Government publication. Its contents in no way represent the policies, views, or attitudes of the U.S. Government. ALBANIA FORTY PRIVATE CONSTRUCTION FIRMS ACTIVE IN SHKODER: Following the private trade sector, the construction sector has undergone a active development in Shkoder. Currently, there are 40 private construction firms active in this region. They are involved with the construction of buildings in the city and are trying to complete the construction of apartments financed by the National Buildings Institute. These companies are also involved in roads and works of art as well. One of the companies has been working for several months on the renovation of the former Labor Party Central Committee building, to be turned into part of the Luigj Gurakuqi University. (Tirana ATA in English 1129 GMT 25 Feb 94 AU) CABINET VIEWS FOREIGN DEBT NEGOTIATIONS, BUDGET EXPENSES: The Council of Ministers has been discussing a draft decision on a response to the Paris Club regarding extending repayment of the country's public debts. Albanian Bank Governor Dylber Vrioni, who also holds the post of chairman of the Committee for Negotiation of External Debt, spoke in detail about the Committee's work to find ways to pay off the public debts that Albania owes Germany, France, Austria, Italy, and the Netherlands. In accordance with the terms put forward by the Paris Club, which were approved by the Council of Ministers, the repayment of Albania's public debts, which make up a fifth of the country's external debt, should be completed within seven years from mid-1996. Concerning the other part of the external debt, which Albania owes to foreign private banks, the cabinet stressed the preliminary phase, but there are good hopes for a quick solution in the future. The Council of Ministers approved a preliminary draft of the budget to the middle of March 1994, which will pave the way for budgetary institutions to operate until parliament approves a draft law in 1994. Finally, they reached a cooperation agreement between the Albanian National Conipany and the Croatian company, Ina, on the exploration, processing, and production of hydroxides. (Tirana ATA in English 0925 GMT 26 Feb 94 AU) 1993 ALBANIAN IMPORTS INCREASE: The total value of Albanian imports during 1993 was 42.1 billion leks or 29 billion more than in 1992. Private imports accounted for the major part with 28 billion of the total. The main countries from which Albania imported goods were Italy, Greece, Germany, and France. In 1993, goods worth 18.888 billion leks were imported from Italy, mainly foodstuffs such as meat, flour, vegetable oil, and sugar, while goods worth 10.545 billion came from Greece, mainly tractors, machinery, and electrical appliances. Some 12,500 tons of oranges were imported from Greece, though the southern Albanian coast has many citrus plantations of its own. (Tirana ATA in English 1112 GMT 26 Feb 94 AU) BRITISH PETROLEUM TO OPEN AIRPORT FUEL STATION: British Petroleum, one of the world's largest companies, will open the first petrol station to supply aircraft in Rinas Airport. This joint venture has been due to an agreement between two companies, British Petroleum and Petrol Impex of Albania. The petrol station will be constructed soon and is expected to open by mid-March. (Tirana ATA in English 1141 GMT 1 Mar 94 AU) CABINET APPROVES AMENDMENTS TO LAWS, BILATERAL AGREEMENTS: The government has approved an agreement between the Republics of Albania and Malaysia on the promotion and protection of investment and an agreement between the Governments of Albania and Croatia on educational, cultural and scientific cooperation as well as on mutual removal of visas between the two countries. (Tirana ATA in English 1128 GMT 1 Mar 94 AU) BILATERAL AGREEMENTS SIGNED WITH CROATIAN DELEGATION: Several bilateral agreements were signed at the Palace of Congresses and Foreign Ministry today between the Albanian and Croatian delegations. The agreement on cooperation in the field of tourism between the Government of the Republic of Albania and the Government of Croatia was signed by Ministers Spaho and Bulic. The agreement on petroleum research in land between the National Agency of Hydrocarbons and Croatian National Company Ina Naf t Plin was signed by Fatbardh Ademi and Franjo Gregoric. Presidents Berisha and Tudjman were present at the signing ceremony. (Tirana TVSH Television Network in Albanian 1900 GMT 1 Mar 94 AU) CABINET ADOPTS BILLS; AGREEMENTS WITH FRANCE, GERMANY: The Prime Minister's Press and Information Office reports that on Monday the Council of Ministers approved several draft laws and decisions. At today's meeting, the Council of Ministers discussed and approved the draft law on medications. The bill defines the means of production and registration of medicaments, their marketing, as well as their import and export. Later, the Albanian Government approved in principle a draft treaty of understanding and friendship between the Republic of Albania and the Republic of France. The treaty provisions comprise commitment from both sides on political, economical, and cultural cooperation, as well as the exchange of experience between the Albanian and French Parliaments, local authorities, and the fields of legislation, industry, mining, agriculture, technology, tourism, culture, science, and social matters. The government also approved an agreement between the Republic of Albania and the Federal Republic of Germany for financial cooperation regarding projects on private agriculture and the extension of communal infrastructure. The approval of the project decision on the free of charge circulation of the material values covers the problems related to the values circulation within the system of the Ministry of Defense, the Ministry of Public Order, and the financial and forestry policies. The Council of Ministers approved a draft decision presented by the Finance Ministry on the Law for Documenting and Keeping Tax Records. The Albanian Government approved a decision to grant land to 427 peasant families living within the territory of the Ksamil Agricultural Enterprise in Sarande district. (Tirana ATA in English 1116 GMT 15 Feb 94 AU) WINNING TENDER FOR TIRANA WATER SUPPLY PROJECT: The commission set up by Tirana municipality announced the project of the Albanian private firm ''Huk-Project'' as the winner of the tender for the improvement of Tirana's water supply. Astrit Hana, Public Services director in Tirana Municipality, told an ATA reporter that the project foresees the increase of the water quantity with 400 liters per second after the sinking of wells in Laknas-Vore area, which will be worth some 312 million leks. The project of the "Huk- Project" firm aims to partially improve the water supply for Tirana, so as to pass the phase of emergency due to the increase of population and the number of the private shops opened during the last years. The final solution will be achieved only in 1996, when the water pipe-line in Bovilla will start to function. (Tirana ATA in English 1316 GMT 17 Feb 94 AU) JOINT VENTURES FOR CLEANING TIRANA STREETS: The grave situation created in Tirana due to dirty streets and the mass of unremoved filth is expected to change completely next month. Astrit Hana, director of Public Services in Tirana municipality, said to ATA that the contracts with foreign firms, which won the tender organized by the municipality for the best Tirana cleaning project, will be signed within the first 15 days this month. Tehnokomerc, a Slovene- Austrian firm, and Nuova Ekolega, an Italian firm, will create joint ventures with the existing domestic units to for city cleaning. Tirana's rural territory will be divided into two areas and one of the joint ventures will work in each of them. (Tirana ATA in English 1108 GMT 18 Feb 94 AU) MALESI E MADHE PRIVATE FARMERS BUYING TRACTORS: The Regional Department of Agriculture and Food reports that during the last two years, the private farmers in Malesi e Madhe have bought 245 tractors. The increasing number of the tractors has led to a decrease in land tariffs and other agricultural services. Malesi e Madhe is a mountainous area north of Albania and one of the country's poorest provinces. (Tirana ATA in English 1304 GMT 18 Feb 94 AU) PRIVATE FURNITURE FACTORY IN DURRES: Two years ago, some Durres specialists of various professions, such as engineers, doctors, and economists set up the private firm "Ada," which mostly deals with the import of domestic electric facilities. Now, the firm has extended its activity even in the field of production. A small furniture factory, supplied with foreign technology and raw material and with a staff of 11 workers and specialists, has started to manufacture furniture, cupboards, and domestic facilities, which bear the seal of Ada. Bujar Bajramaj, the firm's president, told an ATA reporter that $45,000 have been invested for the construction of this factory and the salaries vary from 7,000 leks monthly for workers to 13,000 leks monthly for specialists. The advantages of the productions of this firm to those imported are the prices, which are 30-40 percent lower, as well as the employment of Albanian specialists. The firm is prepared to set up a money exchange agency and aims to start some productive and elaborate activities in food industry. (Tirana ATA in English 1123 GMT 20 Feb 94 AU) FOREIGN INVESTMENT IN ELBASAN: Xhelil Kaci, chief of the Foreign Economic Relations Department in Elbasan Municipality, told an ATA reporter that 15 foreign investors have so far started their activity in Elbasan, city in central Albania. Kaci mentioned four wood factories, a tobacco plant, a soap and oil enterprise, and two clothing production enterprises. Kaci said that there are also some other enterprises, which work with ordered material, such as the Carpet and Clothing Enterprise, which has so far employed 700 workers, as well as oil supply centers that will be built by foreign capital. Total investments reach $7 million, out of which $3.5 million for the reconstruction of the Wood Processing Plant by an Italian company, $1.8 million for the Tobacco Plant by a Greek company, and $700,000 for building an oil supply center, undertaken by a Slovene company. Some 70 percent of foreign companies have invested in productive fields. (Tirana ATA in English 1120 GMT 20 Feb 94 AU) DHL TO EXPAND ACTIVITY IN ALBANIA: At a news conference held last week in Tirana, DHL representatives in Albania confirmed that 65 percent of DHL post services are carried out by Albanians and 35 percent by foreigners, who are performing activity or live in Albania. They stressed that during last year, DHL has carried out services of 9,000 letters and packages of various sizes. This year, the DHL's activity in Albania will be twice greater and will be extended in other regions, too, such as in Fier, Shkoder, Elbasan, and Korce. DHL started its activity in Albania a year ago, and the Albanians are making good use of it, though its service tariffs are high compared to the country's living level. (Tirana ATA in English 0913 GMT 21 Feb 94 AU) PRIVATE CLOTHING PRODUCTION ENTERPRISE IN FIER: In cooperation with the powerful Italian firm Eldo S.P.A, the Fier businessman Krijenko Memo established a private clothing production enterprise named Luck. (Tirana ATA in English 1133 GMT 21 Feb 94 AU) ASSEMBLY APPROVES DRAFT LAWS ON DUTIES, IMPORTS: Upon the president of the republic's proposal, yesterday the People's Assembly approved some draft laws and decrees amending Laws on Custom Taxes, Tariffs. It also approved an annual tax on vehicle registration, which will be different depending on the kind of vehicle. The tax will vary from 500 to 7,000 leks. An amendment to Article 17 of the Law on Customs Tariffs will discontinue the phenomenon of artificially decreasing customs values, which is observed in the custom-houses. The Assembly also adopted two other decrees proposed by the president of the republic; one on exempting from customs taxes those commodities imported in conformity with the projects of granting credits under facilitated conditions, and the other on decreasing the customs tariffs on imported cheniical fertilizers, froni 30 to 5 percent. (Tirana ATA in English 1109 GMT 10 Feb 94 AU) ELBASAN COMBINE RESUMES PRODUCTION OF STEEL: On 9 February, GAZETA SHQIPTARE writes that the former Steelworks Plant in Elbasan city, central Albania, has been already divided into three subplants -- the hydro-metallurgical, energy, and siderotic divisions. The newspaper comments that this solution has enabled the greatest factory of Albanian industry to start producing steel. The siderotic subplant director says that "special sectors are operating normally although the technology is generally out of date and cannot resist time. Actually, Albanian steel is being produced in electric furnaces, using scrap iron as raw material. Specialists believe that since the scrap iron is considerable and electric energy is cheap in Albania, foreign investment will be high in this field. So far, an Italian company has granted $1.3 million. Steel turned out by the Steelworks Plant has met the demands of domestic consumers, i.e. different construction companies. The siderotic subplant started to produce in October 1992 and has employed 2,500 workers so far. (Tirana ATA in English 1115 GMT 10 Feb 94 AU) ASSEMBLY APPROVES LOWER DUTY ON FERTILIZERS: At today's plenary setting, the Assembly approved the president's decree on an amendment to custom tariffs. Based on this decree, the custom tariffs on azo fertilizers will be decreased from 30 to 5 percent. This will promote private farmers to raise agricultural production. The high protectionist tax on azo fertilizers is already of no value because the fertilizer plants in Albania are out of work. The new tariff will influence the rise of national incomes and agricultural production. (Tirana ATA in English 0911 GMT 11 Feb 94 AU) UNEMPLOYMENT DATA UNRELIABLE: Mr. Hasan Carcani, director at Labor Department in the Ministry of Labor and Social Assistance, told an ATA reporter that extravagant figures are given regarding unemployment in Albania. It is impossible to give real figures on the number of the unemployed in Albania because many people who are in private business are not registered as such, some others have cars and use them as taxis without licenses, and furthermore, there are Albanians who "emigrate" illegally every day. Mr. Carcani says that even people who are employed in the administration and state enterprises are included in the lists of persons registered in labor offices. To be able to face the abuses, the Ministry of Labor and Social Assistance will soon send an order to labor offices clearly defining the criteria that unemployed citizens should meet in order to be registered as such. (Tirana ATA in English 1112 GMT 11 Feb 94 AU) GLUT OF IMPORTED MACAR0NI HURTS DOMESTIC PRODUCERS: Some 60 tons of stockpiled macaroni have remained in the storage-houses of Macaroni Factory in Berat. Consequently, production is blocked and 50 factory workers are likely to lose their jobs. Specialists say that the market is oversupplied with iniported macaroni from Italy, Bulgaria, and Greece, and that is why stockpiles of Albanian macaroni are created. (Tirana ATA in English 1124 GMT 11 Feb 94 AU) COUNCIL APPROVES SHKODER DEVELOPMENT PLAN: The Territory Management Council recently approved a plan to regulate Shkoder city. The plan foresees urban development over the 20 next years. Specialists say this plan is in full conformity with the new economical and social conditions and will bring about many changes in the citizens' lifestyles, as well as completing and improving accommodation according to the residents' wishes. Juli Shllaku, specialist at the Territory Management Directorate, said the plan will raise the population density from 136 to 250 residents per hectare. The plan is also based on the development perspective of the city within its limited territory. As for the private buildings, the plan foresees to give away the free existing areas in the city, in which the population density will be 200 residents per hectare. (Tirana ATA in English 1116 GMT 12 Feb 94 AU) RINAS AIRPORT MODERNIZATION CONTRACT SIGNED WITH SIEMENS: On 11 February, the Albanian Albtransport Enterprise in Tirana and the National Agency of Air Traffic in Rinas signed a contract with the German firm Siemens A.G. Erlangen for the first phase of the modernization and reconstruction of Rinas airport. Ferdinand Petrela, Albtransport director, said that after the contract, we will immediately start negotiations on signing a financial agreement with the banks that will provide the necessary credit to finance the contract. (Tirana ATA in English 1114 GMT 13 Feb 94 AU) TWELVE THOUSAND FAMILIES REQUEST RELOCATION: Some 12,000 families, mainly from the northern part of the country, have asked for a change of residence because they have remained without land due to natural disasters, floods from the waters of lakes and hydro- power stations, etc. On 18 October last year, the Albanian Government approved a decision to set up a commission that will study the problem and try to find possible ways to answer the requests of the families who want to change residence. Aleksander Mara, director of Vegetable Production Directorate in the Ministry of Agriculture and Food, told an ATA reporter that it is too difficult to find a proper solution to such a problem. In the first phase, the commission is thinking about the establishment of some families in those areas where, after the distribution of the land according to the present law, free arable land has remained, especially from the land of the former agricultural enterprises. According to this official, the Albanian state has to give millions of leks to these families, but such funds are far too limited at present. The free movement of the people, a well-known phenomenon in Albania only in the last three years, is still limited due to the hard economic situation. (Tirana ATA in English 1114 GMT 14 Feb 94 AU) DURRES HOUSING CONSTRUCTION: Tomorr Golemi, head of the Durres municipality, told an ATA reporter that a total of 500 apartments are under construction and will be completed within 1994. The apartments are being constructed to help the 1,200 families that are now living in buildings returned to their former owners. Mr. Golemi said that 400 apartments will be constructed from state funds, adding that the construction of 65 house units will be covered by the amount of money from the privatization of the present apartments. Some of the new apartments will be given to the families of former persecutees. The Durres municipality has asked the Ministry of Agriculture and Food for two buildings that can be adopted as dwelling places. (Tirana ATA in English 1119 GMT 14 Feb 94 AU) BURREL FERRO-CHROMIUM PLANT INCREASES PRODUCTION: The Ferro- Chromium Plant in Burrel, eastern north of Albania, increased its January production by 80 tons, Tonin Gjoni, the plant director, told an ATA reporter. In January, the total production amounted to 1,980 tons or 17 percent more than the same period of 1993 [all figures as received]. This will supplement the Albchromium production program. Mr. Gjoni said that we have signed contracts with five companies to sell our products. During the next three months we will reconstruct technological furnace No. 1, following an agreement with the U.S. Company Hackslay Bater to invest $1 million, while the Croatian Company Dalmatia Dugirat will implement the project. Last year, the Ferro-Chromium Plant in Burrel covered 80 percent of production in the Mat District. The figure exceeds the production program of the Albchromium state company by 9 percent. (Tirana ATA in English 1122 GMT 14 Feb 94 AU) ELBASAN WOOD PLANT IN JOINT VENTURE WITH ITALIAN FIRM: The region of Apulia in Italy took the initiative to extend economic relations with Albania through investments and other forms of business and trade. The firm Nettis Impianti, with Giuseppe Nettis as president, has established cooperation with the former wood plant in Elbasan, thus establishing a joint venture called Italdruri. (Tirana ATA in English 1124 GMT 14 Feb 94 AU) SOROS FOUNDATION DONATES COMPUTERS TO TIRANA UNIVERSITY: In the framework of the continuation of its program for high schools, the Soros Foundation donated 45 computers with printers to Tirana University. (Tirana ATA in English 1305 GMT 14 Feb 94 AU) ASSEMBLY APPROVES BILL ON CUSTOMS TARIFFS: On 14 February, the People's Assembly discussed and approved the draft law on customs tariffs, according to which taxes will be imposed on imports of grain and flour. These goods will have a 5 percent custom tax and a 5 percent surtax. No taxes will be paid on the grain and flour that will continue to be imported in the framework of aid or governmental agreements. The parliament has adopted some amendments even to the tax imposed on used cars, depending on the mileage. The parliament also discussed the draft law on some amendments to the Law on Traffic Taxes. (Tirana ATA in English 1121 GMT 15 Feb 94 AU) AGENCY REPORTS 27,500 'UNITS' PRIVATIZED SO FAR: The National Privatization Agency reports that some 27,500 units have been privatized so far. The agency statistics confirm an $17 million input into the state budget through privatization. In the first six months of 1993 alone, 710 large units and enterprises were privatized, thus representing 80 percent of the monetary value cashed during the 1993 period. Efforts to privatize 7,000 objects are presently under way. Food, clothing, and construction enterprises are increasing their demands for privatization. (Tirana ATA in English 1123 GMT 15 Feb 94 AU) DUTCH AID FOR FIER AGRICULTURAL DEVELOPMENT CENTER: An agricultural development center will be created in Fier with the support of a Dutch firm. In this context, an agreement of understanding with partners in the Dutch Ministry of Agriculture, Food and Fishing was signed. Rakip Kryeziu High Agricultural School, which will be completely reconstructed, will be the pillar of this center for agricultural development. The investments will be mainly allocated to modernize the school conditions, raise the level of lessons, and improve the cattle stocks and plant stocks of the school. In the context of this cooperation, three demonstration centers in the form of private firms may also be built in the near feature. (Tirana ATA in English 1119 GMT 16 Feb 94 AU) SATELLITE RECEIVER STATION TO BE SET UP IN DURRES: A satellite receiver station will be soon set up in Durres, a city 30 kilometers from Tirana. After organizing a poll of specialists and citizens of different ages, the city municipality presented the applications of various firms that will compete in the tender for the satellite station. This will make it possible for people to watch satellite programs broadcast by some renowned television stations such as CNN, MTV, and some serious Italian television channels. (Tirana ATA in English 1309 GMT 16 Feb 94 AU) BULGARIA HEALTH MINISTRY TO CONTROL MEDICINES: The Ministry of Health intends to regulate the import and distribution of pharmaceuticals. At a news briefing on 23 February the ministry announced that its experts have prepared a draft decree specifying the terms for issuing licenses to manufacturers and wholesalers of medicines. According to the ministry's experts, the market in medicines has been too liberal since 1991, and requires state control. According to the ministry, there are more than 400 wholesale importers and distributors at the moment, far too many for a small country like Bulgaria. The number is expected to drop following the introduction of a 10,000-leva licensing fee and as soon as the regulations for trade and storage of pharmaceuticals have been determined. The decree provides no special mechanism to protect Bulgarian manufacturers. The higher taxes and customs duties charged on imported medicines are supposed to provide sufficient protection for local manufacturers. Bulgarian manufacturers of medicines will be obliged to make them in accordance with the regulations applicable in the EU and worldwide. (Sofia BTA in English 1701 GMT 23 Feb 94 AU) AGRICULTURAL PRODUCTION FALLS SHARPLY: In 1993 agricultural production accounted for 9.6 percent of GDP, compared with 11 percent in 1992, according to the National Statistical Institute (NSI) on 24 February. State-owned, private, and cooperative farms saw a slump in the output of all crops except wheat, which went up by 240,000 tons. In 1993 the average annual earnings of the 677,000 persons employed in farming was 26,440 leva. There was no fall in the number of farm workers compared with 1992. There was a sharp drop in livestock numbers: Cattle went down by 70,000, pigs by 608,000, sheep by 1,050,000, and poultry by 660,000. This brought about a slump in the output of milk, eggs, wool and other stock- breeding products. About 40.5 percent of all former landowners had their land back by 25 January 1994. The figure includes those given land for temporary use. However, the land is much fragmented: Statistical data on land use show that plots measuring 0.1 to 1 hectares (ha) account for 91 percent of the land; plots of 1.1 to 5 ha, 8.5 percent; 5.1 to 10 ha, 0.47 percent; plots over 10 ha, only 0.03 percent. (Sofia BTA in English 1505 GMT 24 Feb 94 AU) TRADE TALKS HELD WITH BELGIUM: Bilateral relations and prospects for cooperation between Bulgaria and Belgium were discussed on 25 February at a regular meeting of the Bulgarian-Belgian Mixed Committee on Economic, Industrial, Trade, and Technical Cooperation. The committee's cochairmen are Edmond de Wilde, minister plenipotentiary and director for Eastern Europe at Belgium's Foreign Trade Ministry, and Vladimir Kisyov, chief of the International Integration and Coordination Department with Bulgaria's Industry Ministry. The Bulgarian side sought Belgian help in the fulfillment of procedural requirements for the ratification of Bulgaria's association agreement with the EC and in the talks on Bulgaria's association with GATT and other international organizations. The Bulgarian side also requested support for its claim for compensation for damage suffered in enforcing sanctions against Serbia and Montenegro. Bulgarian exports to Belgium account for about 10 percent of total exports to the EC, and imports from it for 4 percent of the total imports. After a sharp drop in 1990, two-way trade began to stabilize. According to Racho Petrov, the Belgian side has shown an interest in Bulgaria's power engineering, electronics, equipment, chemicals and food processing industry. The Belgian delegation tabled specific proposals for joint construction of small hydroelectric power stations, joint production and setting up of joint ventures. According to Reneta Indzheva, executive director of the Privatization Agency, who also attended the meeting, Belgian capital will soon enter Bulgaria. The first privatized company in Bulgaria, the Tsaramil animal feed plant in Razgrad, was sold to a Belgian buyer. Belgian businessmen are interested in other large companies in this country, Indzheva said. Belgian businessmen accompanying the delegation met officials of the Union for Private Economic Enterprise, the Bulgarian Chamber of Commerce and Industry, and the Bulgarian Industrial Association to discuss ways to promote Belgian investment in this country. (Sofia BTA in English 1201 GMT 25 Feb 94 AU) ORTHODOX BANK TO RAISE CAPITAL: The International Orthodox Bank, incorporated on the initiative of a group of Bulgarian citizens, is launching a capital-raising effort. The Russian Patriarchate is ready to invest 150 million leva, the Greek Exarchate and the Serbian Patriarchate 50 million leva each, the Armenian Apostolic Orthodox Church in Bulgaria 10 million leva, Bulgarian commercial partnerships of various economic groups some 150 million leva, and the metropolitans of the Bulgarian Orthodox Church for Europe and the U.S. some 50 million leva, according to Vasil Gyatsov, secretary member of the Supreme Ecclesiastical Board of the Holy Synod. He said that the Bulgarian Orthodox Church still does not fornially participate in the bank. (Sofia BTA in English 1927 GMT 25 Feb 94 AU) IMF OFFICIAL EXPECTS AID GRANT IN 1994: Bulgaria will receive an aggregate U.S.$500 million from the IMF in 1994 and 1995 after signing a stand-by arrangement, according to IMF resident representative Gregory Dahl. To qualify for the SBA, Bulgaria must have its 1994 national budget passed by Parliament within the parameters agreed with the Fund. Dahl believes that the 30 percent inflation, zero decline of the GDP and a budget deficit of 6.2 percent of GDP, listed in the government's Letter of Intent to the IMF, are realistic if the government is able to keep within the budget and not resort to extra borrowing. The big problem is to cope with the problems of the state-owned enterprises, for whose debts new loans are contracted, Dahl believes. In his view, the results will depend on the government's efforts. (Sofia BTA in English 1739 GMT 28 Feb 94 AU) CEMENT MAKER PREPARES FOR PRIVATIZATION: The state-owned Beloizvorski Cement Works in Vratsa is preparing for privatization. It is one of the 13 large enterprises whose sale is to be arranged by the Privatization Agency. The works' fixed tangible assets are appraised at 837 million leva. Its 100 million leva of debts have been settled by the state and will be no burden for the buyer. In addition, the cement mills in Devnya and Zlatna Panega are also up for sale. They are priced at 734 million and 440 million leva respectively, but buyers are interested mainly in the Vratsa facility. Compared with other cement producers, the enterprise has more efficient manufacturing lines and thus requires half the usual amount of fuel. The company's capacity, however, is now underutilized owing to a smaller cement market. (Sofia BTA in English 1654 GMT 27 Feb 94 AU) SHARP INCREASE IN FOREIGN CURRENCY DEPOSITS: On 28 January STANDART NEWS reported that foreign exchange deposits in the Bulgarian banking system had increased by the equivalent of 2 billion leva within the space of a week. According to the latest figures released by the Bulgarian National Bank's Economic Analysis Department, state-owned enterprises keep the equivalent of 34.1 billion leva in foreign currency deposit accounts, while private businessmen hold the equivalent of 8.5 billion leva. (Sofia BTA in English 1257 GMT 28 Feb 94 AU) RETAIL PRICES RISE IN FEBRUARY: Retail prices of goods monitored by the Council of Ministers went up by an average of 2.16 percent between 15 and 28 February, according to figures supplied by the National Statistical Institute. The price of beef rose most (5.13 percent), followed by white brined cow's cheese (4.62 percent), and cow's yogurt (4.16 percent). (Sofia BTA in English 1956 GMT 28 Feb 94 AU) STRICTER CONDITIONS FOR HOUSING LOANS: Amendments to the housing loans system that will come into force in the summer will introduce higher requirements for borrowers. Specialists expect the new requirements to bring down the number of Bulgarians entitled to housing loans. Under the regulations of the State Savings Bank (DSK), which has the major share in the housing loans system, the loan extended should be under 70 percent of the dwelling's market price. The interest rate charged on housing loans is 56 percent for citizens with housing accounts and 61 per cent for those without such accounts. The total numbers of housing accounts fell in recent years. In late 1993 the housing accounts contained deposits of 1.921 billion leva, compared with 2.484 billion in late 1992. According to DSK figures, 450,000 Bulgarians hold housing accounts at the moment, whereas in 1985 there were 560,000. A 100,000 leva loan, for example, is repayable in 4,000 leva (about U.S.$100) monthly installments, which is too much for Bulgarians, according to DSK Deputy Chairman Georgi Tomov. The minimum monthly pay is now 1,565 leva (about U.S.$40). According to Tomov, real estate is sold at speculative prices. Vis-a-vis the percentage of owner-occupied dwellings, Bulgaria ranks first among the former socialist countries. However, the statistical data refer to the number of dwellings and not the per capita floor area norm and one will often find families of different generations sharing one flat. In 1958 the numerous construction companies were nationalized and transformed into large state-owned companies specialized in the construction of tall apartment blocks, the major type of town dwelling. The flats constructed were owned by the municipalities and could be bought by the people living in them. By 1989 the DSK was the only institution authorized to extend loans for house purchase and many Bulgarians had the chance to buy their own house on favorable terms without substantially affecting the family budget. Having their own house is an obsession shared by nearly all Bulgarians. According to the National Statistics Institute, 13,480 state- owned dwellings were constructed in 1992, compared with 30,050 in 1985. The increasing number of private construction companies during the past couple of years could not stop the downward trend in private house-building, which fell from 34,820 in 1985 to 4,100 in 1992. (Sofia BTA in English 1036 GMT 1 Mar 94 AU) UNDERFUNDING IMPEDES SPRING SOWING: The spring sowing is expected to put 1.3 million hectares under crops, Polina Stefanova, head of the Crop Farming Department at the Agriculture Ministry, announced today. Some 600,000 hectares are expected to be planted with cereals, 450,000 hectares with industrial crops, 120,000 hectares with animal feed crops, 70,000 hectares with vegetables, and 30,000 hectares with legumes. The main problem is lack of funds for sowing. Although the 1994 national budget allocates 1 billion leva for financing autumn and spring farm work in the 1993-94 season, in practice this money is unlikely to reach farmers. "The Ministry of Agriculture is not in a position to provide these funds, even though it has done everything within its powers," Agriculture Minister Georgi Tanev said. Of the areas intended for sowing, 800,000 hectares, or 60 percent, have been deep-plowed. Between 60 and 75 percent of the soil cultivators are ready for the planting season. This year some 70 private companies will join the effort. All necessary quantities of pest-control chemicals are ready, as well as sufficient quantities of fertilizer. (Sofia BTA in English 1358 GMT 1 Mar 94 AU) DOLLAR RATE EXCEEDS 40 LEVA, AT ALL TIME HIGH: "Dollar Jumps Over 40 Leva. Lev in Collapse," runs the headline of a front-page report in PARI on 2 March, commenting on the strengthening of the dollar in Bulgaria's foreign exchange market. "The dollar's record- high of 40.20 leva crushed the Bulgarian national currency in the interbank market yesterday. It was a new all-time low for the lev", PARI notes. The daily cites Finance Minister Stoyan Aleksandrov as saying that "there is nothing to worry about if one dollar exchanges for 50 leva and the base interest rate goes down to 30 percent (now it is over 50 percent) because there are other compensatory factors." "Dollar Hits 40.50 Leva, BNB (Bulgarian National Bank) Does Not Intervene," TRUD observes in a front-page headline. The DEMOKRATSIYA daily notes that yesterday the banks purchased U.S.$11.2 million at an average exchange rate of 38.316 leva and sold $7.7 million at an average of 38.496 leva to the dollar. (Sofia BTA in English 1115 GMT 2 Mar 94 AU) GOVERNMENT TO SUBSIDIZE TOBACCO INDUSTRY: The purchasing of the 65 percent of last year's tobacco harvest, which is still in warehouses, will be financed with a subsidy from the 1994 national budget, according to Agriculture Ministry Plant-Growing Department Chief Polina Stefanova. The 1994 budget passed by parliament a couple of days ago allocates a total of 500 million leva in subsidies to be spent on purchasing for the 1993 tobacco harvest. According to Stefanova, the subsidy will be enough to buy out the 1993 harvest. Bulgartabak Executive Director Rafail Ivanov said for his part that the subsidy will be spent to compensate the margin between the purchase and the market price of tobacco. He also said that the distribution of the funds has yet to be considered. (Sofia BTA in English 1345 GMT 2 Mar 94 AU) RETAIL PRICES RISE SLIGHTLY: Retail prices of government monitored and controlled goods went up 0.68 percent over the past two weeks, the National Statistical Institute reported on 16 February. The greatest rise was registered in the price of milk -- 2.41 percent, and cheese -- 3.43 per cent. The prices of mutton, pork, and bread went down. (Sofia BTA in English 2150 GMT 16 Feb 94 AU) NATIONAL BANK OFFICIAL VIEWS BANKING REFORM: In an interview published in KONTINENT on 16 February, Mileti Mladenov, deputy governor of the Bulgarian National Bank (BNB), says that the plan to reform banking by building a two-tier banking system with a central bank independent of the government has not been achieved. There are cases of the government and parliament putting pressure on the BNB as a result of the uneven progress of reforms and limited external financing. The BNB's autonomy eliminates the possibility of financing the government automatically and unrestrictedly, but now most of the central bank's loans go to the government and much less to the country's economy, Mladenov points out. The Bank Consolidation Company was set up to promote the regrouping of banks and their privatization. As the legal framework is imperfect and because the banks to be privatized belong to the state, the BNB Board decided that decisions on selling the banks should be made by the government. The delay in privatization makes the condition of the state banks even worse, and improvement can only be expected from the application of the Bad Debts Act and recapitalizing the banks through sales of shares and state property or making new issues of shares in the state banks. Mladenov considers that part of the banking sector should remain under the control of the state. (Sofia BTA in English 1234 GMT 16 Feb 94 AU) KHASKOVO TOBACCO PLANT RESUMES PRODUCTION: The Trakiya Tobacco Plant in Khaskovo has resumed production and will be operating at peak capacity within 15 days. Until recently its warehouse was packed full of cigarettes. Now Trakiya is about to make a comeback after closing a profitable deal with Russia. Bulgarski Turgovski Dom, a Plovdiv-based private company with a branch in Moscow, will export to Russia about 1,500 tons of cigarettes in 1994. Trakiya began exporting cigarettes to the Soviet Union in 1967, and its highest annual exports to date were 20,000 tons. The latest deal will provide security for the hard-pressed plant and its 1,700 employees and will also enable the plant to pay money due to 17,000 tobacco growers for the purchase of last year's crop. (Sofia BTA in English 1634 GMT 16 Feb 94 AU) PLAMA REFINERY'S DIFFICULTIES REPORTED: Production has stopped at the Plama Oil Refinery in Pleven. Plama president Nikola Pukalski explained that there was nowhere to store the lubricating oils the plant produced. In November and December it produced 16,700 tons of lubricating oils which were supposed to be exported to Ukraine under a bilateral agreement. Part of the money due has not been paid. Production will probably be resumed in mid-March. (Sofia BTA in English 1738 GMT 20 Feb 94 AU) COST OF LOANS FALLS IN FEBRUARY: The cost of loans to the economic sector went down in the first two weeks of February, 24 CHASA reports on 21 February, citing figures from the Bulgarian National Bank. The interest charged on long-term loans was reduced significantly from an annual 93.35 percent in late January to 82.90 percent on February 11, representing a monthly interest rate of 5.16 percent. The interest rate on short-term loans dropped from 88.65 to 88.43 per cent, or 5.42 percent per month. (Sofia BTA in English 1105 GMT 21 Feb 94 AU) AUSTRIAN BANK SEEKS TO OPERATE IN BULGARIA: Raiffeisen Zentralbank of Austria has asked the Bulgarian National Bank (BNB) for permission to establish a bank in Bulgaria, STANDART NEWS reported on 21 February. The BNB chiefs declined to specify whether Raiffeisen Bank proposed to found a new bank or to buy the Bank for Agricultural Credit, in which it currently holds a 34 percent stake. According to experts, Raiffeisen Bank is more likely to go for the second option. The Bank for Agricultural Credit is one of the most stable financial institutions in this country and is among the few to post a handsome profit for 1993. (Sofia BTA in English 1105 GMT 21 Feb 94 AU) PRODUCTION, CONSUMPTION OF DAIRY PRODUCTS FALLS: Deputy Agriculture Minister Yuri Borisov reported a considerable drop in the production of milk and dairy products to a meeting of top Agriculture Ministry officials. The major causes are a drastic cut in the number of livestock and poor technological conditions at breeding farms. Other causes are low purchase prices and irregular payments to suppliers. In 1993 milk output dropped by 337.7 million liters from 1992. Production of staple dairy products also went down: white brined cheese by 10,932 tons; yellow cheese, 2,048 tons; and butter, 4,218 tons. However, dairy products are plentiful on the domestic market, due to per capita consumption falling from 194 liters in 1990 to 130 liters in 1993, and a rise in imports. The largest exporters of cheese to Bulgaria were Estonia, Lithuania, Denmark, and France. Bulgarian cheese, until now one of the staple exports, hit a ten- year low of 10,200 tons in 1993, down from 26,877 tons in 1985. About 30 percent of it went to Greece; 45 percent to the United States, Macedonia, and Lebanon; and the rest to France, Germany, and Australia. Practically none was exported to the former Soviet Union, which used to buy over 10,000 tons of cow's cheese per year. The Agriculture Ministry expects milk output to reach last year's level of 1,506.6 million liters and expects purchasing to increase 12 percent. The production of white brined cheese and yellow cheese is expected to rise by 6,700 tons and 2,000 tons respectively. According to the deputy agriculture minister, the government's efforts to guarantee purchase prices and low interest loans and to encourage stock breeding in mountain regions give grounds for optimism. (Sofia BTA in English 1027 GMT 23 Feb 94 AU) HOUSEHOLD BUDGETS ANALYZED: Bulgarians spend 37 percent of their earnings on food, according to a household budget survey carried out by the National Statistical Institute and published in STANDART NEWS on 23 February. Bread and pastry account for 13 percent of food consumption, followed by eggs, 12.8 percent; milk, 6.5 percent; and fresh vegetables, 5.8 percent. Meat consumption dropped from 4.2 percent in 1992 to 3.7 percent in 1993. Cigarettes and alcohol account for 0.1 percent and 1.6 percent of household expenses respectively. (Sofia BTA in English 1317 GMT 23 Feb 94 AU) FIRST CELLULAR TELEPHONE NETWORK: The first cellular radio telephone network in Bulgaria was officially launched in Sofia on 23 February. The system is called Mobifon. It covers Sofia and its environs, and has over 1,000 subscribers. The system will shortly be extended to Varna, Burgas, Plovdiv, and the highway from Sofia and Plovdiv. Later it will cover all the larger towns. Mobifon is the trademark of the Bulgarian-British Radiotelecommunications Company Ltd., in which Bulgaria holds a 51 percent stake. (Sofia Khorizont Radio Network in Bulgarian 1400 GMT 23 Feb 94 AU) CABINET APPROVES WAGE INDEXATION MECHANISM: At its regular session on 3 February, the Council of Ministers adopted three decrees that determine the mechanism for its income indexing policy this year. The three regulatory documents were approved in their final form after several months of discussions and consultations with the trade unions and employers within the National Council for Trilateral Cooperation. The first decree sets a new national minimum wage of 1,565 leva per month for the first quarter of 1994 and raises the social pension received by about 2.5 million pensioners from 450 to 780 leva per month. The minimum income for persons receiving social assistance is set at 980 leva per month. During the first quarter of 1994 other benefits and payments, such as unemployment benefitS and children's allowances, will be indexed by a coefficient of 1.107 on the basis of the forecast inflation rate for the quarter, namely 10.7 percent. The second decree regulates wages and salaries in material production and the trading sector. It provides that wages should now be indexed on the basis of the forecast inflation rate, as compared to last year, when wages were increased on a trailing basis by 85 percent of the actual inflation rate. The third cabinet decree regulates the principles for fixing wages and salaries in state enterprises, government departments, and other organizations funded from the national budget. Actual salaries will vary in different organizations and departments: For example, the average gross monthly salary of employees of the Committee for Power Supply will be 5,942 leva; for health care employees, the average salary will be 3,685 leva; and for employees in the field of education, 3,200 leva. (Sofia PARI in Bulgarian 4 Feb 94 pp 1, 2 AU) MACEDONIAN DELEGATION SEEKS BULGARIAN TOURISTS: Last year 50,000 Bulgarians went on vacation to Ohrid in Macedonia, Ohrid Mayor Blagoje Siljanoski told a news conference on 9 February. Siljanovski and about a hundred Macedonian tourist executives, mostly from Ohrid, have arrived to attend the Holiday '94 International Tourist Fair, which will open on 10 February in Sofia. This year Macedonia hopes to attract as many tourists as in 1990, when over 1 million visited that country, spending 3.5 million overnights there, Dose Kotevski, deputy chairman of the Chamber of Economy of Macedonia said. He added that they will rely heavily on Bulgarian vacationers in reaching this goal. The Macedonian delegation, which includes directors of the largest Macedonian hotels and travel agencies as well as the head of the Macedonian Press Office Zivko Georgievski, met with Bulgarian intellectuals. The guests will meet central and local government officials in Plovdiv and Stara Zagora. Tourist exchanges between Bulgaria and Macedonia are hindered by the limited traffic capacity of the three border checkpoints, the bad roads, and the lack of a direct rail link between Skopje and Sofia. A working team from the two countries' ministries in charge of the border checkpoints discussed at their first meeting on 8 February a project to extend the Bulgarian checkpoint at Gyueshevo, it was announced at the press conference. For two years now the transport ministers of the two countries have been discussing the construction of a 40-km stretch of railway across the border to provide a direct rail link between Bulgaria and Macedonia, but the route has yet to be finalized. hrid is the largest tourist center of the Republic of Macedonia. It lay within the boundaries of the Bulgarian state during various periods prior to the Ottoman conquest. (Sofia BTA in English 1509 GMT 9 Feb 94 AU) MINISTRY OF TRADE'S PRIVATIZATION EFFORTS: In 1993 the Ministry of Trade conducted 32 privatization transactions, producing receipts totalling 188 million leva, Valentin Karabashev, deputy prime minister and minister of trade, told a news conference held on 9 February to mark the first anniversary of the start of privatization. The privatized enterprises are mainly garages, warehouses, and shops, plus a single foreign trade company. Karabashev pointed out that the Privatization Agency and other institutions have joined in the process, but only the Ministry of Trade has carried out its privatization program in full. "To my great regret, the other authorized institutions are falling behind," he observed. Last year the Ministry of Trade privatized seven enterprises more than planned and initiated a further 104 procedures, Karabashev stated. He rejected press allegations that the enterprises were sold at knock-down prices. "The selling prices exceed the privatization appraisals of the companies by an average of 28 percent, and their fixed assets (totalling 41 million leva) by about four times," he said. This year the Ministry of Trade plans to privatize 120 companies engaged in trade and services, after which 50 percent of that sphere will become private property, and in another year or so the remaining 50 percent will be privatized as well, Karabashev said. (Sofia BTA in English 1657 GMT 9 Feb 94 AU) STATE-CONTROLLED BANKS' LOSSES TOP $270 MILLION: State- controlled Bulgarian banks made losses exceeding 10 billion leva (some $270 million) this financial year, TRUD reported on 10 February, citing estimates from the profit and loss accounts of more than half of all banking institutions. "The figures suggest that the banks' state of finances has not been worse since they were established," experts are quoted by the daily as saying. Only 10 percent of Bulgaria's banks are expected to be in the black. TRUD observes that even some of the profit-makers, which were consolidated into new merger groups at the end of last year, will move into the red because of the huge losses of the other constituent banks in their groups. The disastrous annual financial performance is due mainly to the accrual of nonperforming loans, which entails even larger losses because of the steep interest rates, TRUD noted. As a result of this, banks will probably be unable to pay dividends to their shareholders. (Sofia BTA in English 1219 GMT 10 Feb 94 AU) THERMOELECTRIC PLANT CUTS PRODUCTION: The Ruse-East Thermoelectric Power Plant is at present operating at 30 percent of its design capacity as a result of a fall in demand in the region. It is producing 90 instead of the usual 260 megawatts and trying to run down its coal stocks. The plant has diverted a shipment of 6,000 tons of Ukrainian coal to the power plant in Vidin. Since the start of the year, the plant has not supplied any industrial steam to the factories in the town's eastern industrial zone because they are barely functioning and owe a total of 120 million leva to the power station. Due to the low level of electricity production, the plant itself is finding it difficult to repay the 150 million leva of credits it has been granted. (Sofia PARI in Bulgarian 10 Feb 94 p 3 AU) RUSSIAN ENVOY BLAMES GOVERNMENTS FOR TRADE DECLINE: Addressing the press on 10 February following a meeting with the president of the Bulgarian Economic Association Bozhidar Danov, Russian Ambassador Aleksandr Avdeyev ascribed the lion's share of blame for the decline of trade between Bulgaria and Russia to the governments, which did not provide the legal basis for trade. The high excise and customs duties make Bulgarian goods hard to sell in Russia, he said. According to Avdeyev, the establishment of joint ventures and payments through commercial banks can help promote trade. Russian business circles show interest in privatization of tourist facilities on the Black Sea and some industrial companies, the ambassador said. (Sofia BTA in English 2249 GMT 10 Feb 94 AU) FIGURES ON FOREIGN LOANS PUBLISHED: Bulgaria has received a total of $2,200 million in loans from world financial institutions since the fall of the communist regime on November 10, 1989, DUMA, STANDART NEWS, and 24 CHASA reported on 11 February, citing a report by the Finance Ministry to the Parliamentary Budget and Finance Committee. Bulgaria received $644 million from the IMF, of which $474 million was under the first stand-by agreement and $170 million under the second. The World Bank extended Bulgaria $445 million in credits, credits for $161 million have been agreed on with the European Bank for Reconstruction and Development, and the European Investment Bank has extended Bulgaria credits totalling $316 million. (Sofia BTA in English 1148 GMT 11 Feb 94 AU) CIGARETTE EXPORTS TO RUSSIA: The Tobacco Combined Works in Khaskovo signed a contract to export 15,000 tons of cigarettes worth $56 million to Russia, 24 CHASA reported on 11 February, citing the director of the works, Nikolay Zakhariev. The contract will be implemented by Bulgartabak. (Sofia BTA in English 1148 GMT 11 Feb 94 AU) FISH CANNING FACTORY EXPORTS OUTPUT: The Slavyanka Fish Cannery in Burgas -- the only one in Bulgaria -- produces 10 tons of canned fish per day. After a prolonged forced outage it has just resumed production. Most of the plant's products are exported to Greece. The fish is canned according to Greek recipes and has not so far appeared on the Bulgarian market. (Sofia BTA in English 1808 GMT 13 Feb 94 AU) BULGARIAN-SERBIAN BUSINESS MEETING: A Bulgarian-Serbian business meeting was held in Vidin on 10 February. The meeting was hosted by the Vidin Chamber of Industry and Commerce and was attended by 15 Serbian and 20 Bulgarian companies. (Sofia BTA in English 1808 GMT 13 Feb 94 AU) GROUP FORMED TO PROTECT VARNA CONSTRUCTION MARKET: Sixteen construction companies in Varna have set up a construction chamber. Its purpose is to consolidate the construction market and preserve it for local companies. Though almost 300 construction companies have been registered, the number of such companies actually working in the construction market is actually 10 times smaller, according to the chamber's chairman Krasimir Daskalov. (Sofia BTA in English 1808 GMT 13 Feb 94 AU) BRAZILIAN SUGAR: The Martsianopulos Factory in Devnya has started processing 18,000 tons of raw sugar from Brazil for the domestic market. According to the plant's director Boris Terziev, the recent rise in the sugar price was caused by the adverse trading situation on world exchanges, the rise of the U.S. dollar against the lev, inflation, and the fact that this country's raw material basis has been almost destroyed. (Sofia BTA in English 1808 GMT 13 Feb 94 AU) GABON GRANTS TIMBER CONCESSION: The Government of Gabon has granted Bulgaria a concession for lumbering and trade in timber, according to a statement from Ginyo Ganev, legal adviser and member of a Bulgarian delegation back from Gabon. The concession was granted to Balkanbank, which will select financial and business partners. Balkanbank will explore 223,000 hectares of tropical forest and negotiate the term of the concession, set between 25 and 30 years in preliminary talks. President Omar Bongo received members of the Bulgarian delegation. Gabon's foreign minister expressed a desire for broader cooperation with Bulgaria, Ganev said. (Sofia BTA in English 2044 GMT 14 Feb 94 AU) INCREASE IN POSTAL RATES SOUGHT: On 15 February the National Council for Tripartite Cooperation decided to submit to the government the softer of the two projects proposed by the Post and Telecommunications Committee (PTC) for increasing internal and international postal, telegraph, telephone, radio, TV and telematic services charges. According to the project, most postal charges will rise by 75 to 300 percent, while some rises will be even steeper. The charges collected at present are insufficient to cover the postal system's actual expenses, whose losses exceed the state subsidies of 165 million leva (about $4.5 million), the PTC claims. The project envisages some concessions for individuals and higher charges for companies and organizations. The decision for submitting the project to the Council of Ministers was not adopted by consensus. The main objection raised by the social partners who disagreed with the project is that the self-financing potential of the system's infrastructure of post offices and the Bulgarian Post Bank is not used adequately. The preferences given to the Defense Ministry and the Ministry of the Interior also caused discontent. The government's representative on the council, Mr. Bankov, denied that the new postal charges had been calculated without considering the actual incomes of the population. The increased charges takes into account the inflation rate projected for this year (45 percent) on which the amount of some social benefits is based, Bankov pointed out. According to him, the increase will probably be introduced as of March 1. (Sofia BTA in English 1757 GMT 15 Feb 94 AU) GREEK BUSINESSMEN SEEK NEW CONTACTS: An international conference on Bulgaria's prospects in United Europe was held in the Boyana Residence in Sofia on 15 February by the Union of Greek Businessmen in Bulgaria and attended by state officials, bankers, and Bulgarian and Greek businessmen. Greek businessmen have made considerable efforts to build up their businesses in Bulgaria but we have not yet utilized all opportunities, said Panayotis Piroyanos, the unions' chairman. According to Deputy Minister of Trade Velev, 1993 set a record in Bulgarian-Greek trade relations. Bilateral trade reached $400 million. About 400 Bulgarian-Greek joint ventures are operating in Bulgaria. Four Greek banks have opened offices here and the joint Bulgarian-Greek bank has been granted a full-service license. Mileti Mladenov, deputy governor of the Bulgarian National Bank (BNB) told the conference about the reform in Bulgaria's banking system. (Sofia BTA in English 0906 GMT 16 Feb 94 AU) CZECH REPUBLIC JAPANESE, GERMANS GAIN STAKE IN TESLA HRADEC KRALOVE: In March, the first general meeting of the Tesla Hradec Kralove company will take place. The company was established with the Japanese company Y.S. (manufacturer of ceramics), JAIDO, a Japanese fund to support exports, and the Czech-American Entrepreneurial Fund. Tesla owns 97 percent of this new company. At the first general meeting, it will be decided that the basic capital will be increased to 163 million Czech Korunas (Kc): Y.S. will gain 20 percent, and the two financial institutions will gain under 20 percent each. Tesla Hradec Kralove will sign an agreement with the German firm Possehl Elektronik on establishing a joint venture company with basic capital of Kc16 million. (Prague HOSPODARSKE NOVINY in Czech 22 Feb 94 p 6 AU) KLAUS IN MUNICH TO MEET REPRESENTATIVES OF GERMAN FIRMS: Czech Prime Minister Vaclav Klaus arrived in Munich on 23 February for a two-day private visit at the invitation of the Allianz Insurance Company, the biggest of its kind in Europe, and the BMW automobile company. Klaus is to attend a meeting of representatives of leading German companies, banks and societies, including Bayer, BASF, Siemens, Hoechst, Bertelsmann, Grundig, Thyssen and Krupp. The meeting will also be attended by Hans Peter Stihl, Chairman of the Association of German Chambers of Industry and Commerce (DIHT), Otto Wolff von Amerongen, chairman of the German Economy Eastern Committee, and former German President Walter Scheel. Klaus is to visit the BMW base and meet with its managing board. He is accompanied by Czech Economic Minister Karel Dyba, who is to meet with his Bavarian counterpart Otto Wiesheu. They are expected to discuss possible extension of Czech-Bavarian Economic cooperation. (Prague CTK in English 2101 GMT 23 Feb 94 AU) PRODUCTION FELL, RETAIL SALES INCREASED IN 1993: The Czech Republic's industrial production fell last year by 5.3 percent (in constant prices) and construction production by 7.5 percent, while retail sales increased by 1 percent, according to preliminary data from the Czech Statistical Office (CSU). Production was worth Kc93O.73 billion (about $31 billion) in current prices last year and Kc444.62 billion (over $14 billion) in constant prices. Exports (without Slovakia) increased one-fifth last year to Kc297.67 billion and imports 2.7 percent to Kc3O1.34 billion. Exports from Slovakia were Kc74.63 billion and imports from there Kc65.02 billion. The Czech Republic had a trade surplus with Slovakia (Kc9.61 billion) but a trade deficit with other countries (Kc3.67 billion). The average monthly wage in organizations with 25 or more workers increased between December 1992 and December 1993 by 18.6 percent to Kc6,665 in industry, by 24.6 percent to Kc7,579 in construction, by 14.9 percent to Kc5,447 in retail, and by 17.4 percent to Kc6,396 crowns in transportation. The number of unemployed increased between January 1993 and the same month of 1994 from 158,113 to 198,837 persons, which represents an increase in the unemployment rate from 3.0 to 3.8 percent. (Prague CTK in English 1944 GMT 23 Feb 94 AU) COUNTERFEIT GERMAN MARKS SEIZED IN MORAVIA: A total of 414,000 German marks worth of forged German banknotes seized in an apartment here on Tuesday, 22 February, is probably the largest stash of forgeries found in central Europe in the last 10 years, Petr Dvorak of the Central Criminal Police said today. The find of forged notes is the largest in Czech history. In August 1993 a stash of 998 forged 100-German-mark bills was fotind in the Moravian town of Nove Mesto. The apartment had been rented to a 50-year-old Italian man, who was arrested on Monday, 21 February, in Cesky Tesin on the Polish border. The suspect, M.C., was sentenced in absentia in Rome last year to 19 years in prison and a 180-million-lira ($107,000) fine for cocaine smuggling. There had been an international warrant out for his arrest. Dvorak said M.C. had admitted intending to use the 4,410 forged 100-mark bills to buy precious stones in Russia. (Prague CTK in English 1657 GMT 23 Feb 94 AU) POLISH NATIONALS IN MORAVIA SET UP BUSINESS CONFEDERATION: The main focus of the activities of the confederation of Polish entrepreneurs in the Czech Republic is to contribute to the development of new commercial and production activities, particularly in north Moravia and Silesia. The confederation began operating this month in Cesky Tesin, near the Polish border, and 35 small and medium-sized businesses have become its members so far. Most of the owners are Polish nationals living in the Czech Republic, while four of the firms are located in Polish border cities. Confederation President Bronislav Batorek expects membership to increase to 300, and possibly include partners from other areas in the Czech Republic. Confederation members will cooperate with businesses in Poland, Austria, Slovenia, and also with firms located in the Commonwealth of the Independent States (CIS). Confederation activity will include providing up-to-date information on production possibilities and arranging joint production projects. (Prague CTK in English 1210 GMT 23 Feb 94 AU) CZECHS, SLOVAKS RESUME ARMS SALES: The Czech and Slovak Republics are silently setting their arms industries on their feet, the British paper DAILY TELEGRAPH writes on 28 February. The two countries say that it was economic reasons that led them to resume arms production that is not so extensive but more competitive, the daily states. In 1990, after halting arms production and exports, the unemployment rate in the towns of Martin and Dubnica, both central Slovakia, which had relied exclusively on the arms industry, reached 25 per cent. The Czech Republic has established a research, development, and production group uniting twelve arms producers and aimed at promoting arms exports. The Slovak Government has created the Armex consortium to coordinate production and sales of arms systems, the paper reports. It quotes Slovak representatives as saying they intended to increase arms production to 30 to 40 percent of its volume in the cold war period. (Prague CTK in English 1139 GMT 28 Feb 94 AU) FOREIGN CAPITAL MADE UP 30 PERCENT OF MONEY SUPPLY IN 1993: The influx of foreign capital made up one third of the money supply in 1993, according to an estimate made by the Ceska Narodni Banka (Czech National Bank). (Prague HOSPODARSKE NOVINY in Czech 24 Feb 94 p 1 AU) EXPORTS INCREASED MORE THAN IMPORTS IN 1993: Exports from the Czech Republic rose by 20 percent against 1992, while imports rose only by 2.7 percent. The most pronounced increase in exports was into countries with advanced market economy, particularly into Germany, Britain, and Austria. This is what ensues from the report of the Ministry of Industry and Trade. Exports reached $12.8 billion, and imports $12.5 billion. (Prague HOSPODARSKE NOVINY in Czech 24 Feb 94 p 3 AU) ADAMOVSKE STROJIRNY MAKE KC91 MILLION PROFIT: The audit made by Ernst & Young Consulting confirms that Adamovske Strojirny (Adamovske Engineering Plants) in Adamov made a profit of Kc91 million. This is why the management will propose at the general meeting that dividends be paid out. The production of goods exceeded Kc1.3 billion, of which one fifth were pumps and pump appliances, and more than thee fifths were printing machines. (Prague HOSPODARSKE NOVINY in Czech 24 Feb 94 p 6 AU) SURVEY FINDS MOST REFORM SUPPORT IN CZECH REPUBLIC, ALBANIA: In a survey of 16 Central and Eastern European countries conducted by the Commission of the European Union and published today, the Czech Republic emerges as the country with most popular support for the tempo of its reforms. In terms of overall satisfaction with a market economy, however, 71 percent of Albanian citizens expressed their approval, the highest result in the survey. With the growth of the economy in that country the financial situation of Albanian households has also been improving. Czechs were somewhat more restrained in their praise of capitalist economies, with 51 percent signifying approval and 36 percent disapproval. In Slovakia the majority in the survey were displeased with market economy (44 percent disapproval, 40 percent approval). The market economy was rejected by an absolute majority of polled citizens from the Commonwealth of the Independent States, but overall the survey found that its support was eroding in other countries as well. Survey results link the current economic difficulties in the countries with the drop off in support. A total of 50 percent of Czech Republic's citizens approved of the pace of reform, the most of all countries surveyed. Twenty-one percent considered the reform process to be too slow and 18 percent too quick. In all other countries the dominant opinion was that reform was proceeding too slowly. Citizens of the Czech Republic also approved of the pace of privatization -- 39 percent considered the pace to be optimal. It was too slow for 36 percent and too fast for 14 percent of Czech citizens. In Poland and Macedonia, however, a majority of citizens considered the progress of privatization to be too quick, while in other countries a majority saw privatization as proceeding too slowly. The greatest dissatisfaction with the tempo of privatization was observed in Slovakia where 54 percent said it was too slow, and in Ukraine where 59 percent were dissatisfied with the pace of privatization. (Prague CTK in English 2141 GMT 1 Mar 94 AU) SEVENTY-ONE MILLION FOREIGNERS VISITORS IN 1993: In 1993, 71.1 million foreign visitors visited the Czech Republic, which is 3.3 percent more than in 1992. 11.5 million were tourists, mostly from Germany, Holland, Italy, Austria, and Poland. According to the Ceska Narodni Banka (Czech National Bank) estimate, the yield from tourism will amount to $1.4 billion, which is roughly 24 percent more than in 1992. Foreign currency income from tourism makes up approximately 11 percent of Czech exports and 4 percent of gross domestic product. (Prague HOSPODARSKE NOVINY in Czech 11 Feb 94 p 3 AU) CESKE ENERGETICKE ZAVODY READYING NEW BOND ISSUE: Ceske Energeticke Zavody (Czech Electrical Plants) (CEZ) wants to cover its capital costs by issuing bonds worth 10 to 11 billion Czech korunas (Kc). In January, CEZ issued bonds worth Kc4 billion. CEZ IS preparING an emission that should be placed at the London exchange. (Prague HOSPODARSKE NOVINY, BURZOVNI NOVINY Supplement 14 Feb 94 p 1 AU) U.S. FIRM TO TREAT RADIOACTIVE WASTE WATER: The U.S. firm Ionics Inc. has signed a contract with a Czech state-owned firm to deliver $40.2 million worth of technology for purifying radioactive waste water. The contract was signed with the state enterprise Diamo, the successor to Czechoslovak Uranium Mines. A spokesman for the Massachusetts-based Ionics said the treatment system would operate for two years to clean the water in a large underground reservoir where a quantity of sulphuric acid has formed, and which contains other poisonous substances and endangers the drinking water supply. The spokesman said the process has been so perfected that the treated water is clean enough to be returned to rivers, and the crystallized impurities are of high enough quality to be used in industry. The firm previously used the technology to clean uranium mine water poisoning the Vistula River in Poland. The Diamo contract is the largest in Ionics' history. (Prague CTK in English 0810 GMT 15 Feb 94 AU) JEZEK ON SECOND COUPON PRIVATIZATION WAVE: In the second wave of coupon privatization more information on enterprises will be provided than in the first wave, Tomas Jezek, National Property Fund (FNM) chairman, said on Czech Television on 16 February. One of the reasons is the fact that the structure of enterprises entering the second wave is more complex, Jezek said. The second wave comprises the enterprises designated for the second-wave of privatization, plus enterprises that were not privatized in the first wave, he explained, adding that this does not mean they are of lower quality. On the contrary, he said that enterprises or their parts not sold during the first wave are sometimes of high quality, and, despite high demand, have not been sold because of pure technicalities. Jezek confirmed that the first round of the second wave should start at the beginning of April. (Prague CTK in English 1418 GMT 16 Feb 94 AU) STATE WILL FINANCE WATERWAYS: The government considers public transportation via waterways to be a classic case of a useful state service, Czech Prime Minister Vaclav Klaus said today after a cabinet meeting. The government even intends to finance such transport from the state budget. For this objective, Kc125 million (about $4.1 million) have been provided from this year's state budget, he added. (Prague CTK in English 2255 GMT 16 Feb 94 AU) CZECH INSURANCE BANK TO LAUNCH PENSION FUND: The Czech Insurance Bank, a joint stock company, is to launch a pension fund that will function as an independent joint stock venture, bank spokesman Zbysek Stepanek told CTK today. The bank's decision is a reaction to the passing by parliament of a law on pension premiums with state participation. With its current 13 different old age pension schemes, the bank has ample experience to draw on, Stepanek said. The law requires that 85 percent of the fund's net gains be used directly for the benefit of individual contributors, something that has been the bank's policy "ever since," Stepanek said, adding that profit from the fund's investment policy allows the bank to make increased payments each year to offset the effect of inflation besides delivering the premiums. The bank has had a policy of paying out an even higher proportion of the gains to the contributors than required under the law, Stepanek said. The law on pension premiums allows individual contributors to the schemes to obtain payments on top of standard old age pensions. (Prague CTK in English 1504 GMT 17 Feb 94 AU) ASSOCIATION OF ENTREPENEURS' POLITICAL AGENDA: Entrepreneurs want more representation in town halls and in the senate. The Association of Entrepreneurs of the Czech Republic (SP) is preparing its strategy for the community and senate elections this autumn, Chairman Rudolf Baranek told a press conference today. The SP wants to cooperate with the parties of the governing coalition, the Party of Entrepreneurs, Farmers, and Tradespeople, the Liberal National Social Party (LSNS) and the newly formed initiative for uniting right-wing parties. The problem was that entrepreneurs did not have time, SP representatives said. A partial solution was to find pensioners with entrepreneurial ability to run as candidates. Baranek said that he was convinced that, as of next year, the tax rates on the income of individuals and companies would be under 40 percent. SP Adviser Jaroslav Vostatek said the government was considering making better connections between tax and insurance. The prepared changes to the tax and insurance system are to be negotiated by the Tripartite Council for Economic and Social Agreement and put before parliament this year. Among the SP's proposals, which it wants to consult with other employer's associations, is the introduction of a joint maximum assessment basis for insurance in all branches of social insurance for employers and entrepreneurs. The SP also wants to increase the value of tax-deductible donations to 3 percent from the tax base, and to introduce a "super fast" write-off for material property that would be approximately 1.3 times faster than the present accelerated write-off, and to extend the road tax outside the business sector. They want income tax rates to be lowered for legal persons to a maximum of 37 percent, and would like to see an ideal rate of 25-30 percent in five years' time. The income tax scale for the income tax of physical persons should be made to rise less steeply, with the maximum rate being lowered to 38 percent, the association says. The SP will also call for the payment of insurance by the employee and the employer to be merged. The lower rate of value added tax should be raised to about 7 percent, with the basic rate being lowered. In five to seven years both rates should be brought together at about 15 to 18 percent, they say, so that its total weight in the state revenues is not lowered. Deputy Finance Minister Jan Klak said recently that lower tax rates for company incomes to 39 or 38 percent and for individuals to 42 or 41 percent would start at the beginning of 1996. At present, they are 42 and 44 per cent respectively. (Prague CTK in English 1926 GMT 17 Feb 94 AU) POLISH OFFICIAL VIEWS REGIONAL COOPERATION: Overcoming the recession must be the main objective in the densely-populated areas next to the Czech-Polish border, Katowice Regional Administrator Wojciech Czech told journalists on 17 February. Czech is on a working visit to the Czech Republic. Poland currently has 20 non- governmental organizations committed to regional cooperation with Czech and Slovak business and cultural bodies, Czech said. A meeting of bilateral regional representatives to be held on March 2- 3 may spur more cooperation, he said, adding that there are plans for a commodities exchange to be run jointly by Poland, the Czech Republic, and Slovakia, and for an agency -- to be also run jointly by the three countries -- to coordinate economic, cultural and tourist industry policies. Cooperation may extend to banking, insurance, and consultation, Czech said, adding that it might even lead to making the Odra River navigable as far as Ostrava, north Moravia; a prerequisite for constructing the Odra-Danube and Odra-Vistula canals. These waterways would help solve many difficulties in the transport, environment and energy sectors, Czech said. (Prague CTK in English 1929 GMT 17 Feb 94 AU) GERMAN FIRM SUPPLIES EXTRA GAS DURING COLD SPELL: The German natural gas distributor Ruhrgas supplied 5 million cubic meters of gas per day to the Czech Republic on February 15 and 16 and 2 million cubic meters on 17 February, Antonin Lomecky of the Czech Natural Gas Enterprise (CPP) told CTK today. The supplementary supplies of natural gas were ordered because the recent cold spell has increased demand to a level that could not be satisfied by Russian natural gas supplies. The Russian company Gazprom supplies the Czech Republic with almost 7 billion cubic meters of natural gas per year. The daily power input of over 19 million cubic meters is stored in four underground storage tanks in Moravia with a total capacity of 1.8 billion cubic meters. There is also a storage tank rented from the Slovak firm Naf ta of Gbely, where 500 million cubic meters per year are stored, Lomecky said. The daily rate of consumption of natural gas in the Czech Republic ranges from 6.5 million cubic meters during the summer season to 42.5 million in winter. When temperatures are very low, the volume of gas from Russia is insufficient. That is why a contract was signed with Ruhrgas for 200 million cubic meters of natural gas to be delivered during the first quarter of this year, Lomecky said. In addition to the contract with Ruhrgas, we have other agreements about supplementary gas supplies with gas companies in neighboring countries -- VMG of Leipzig, Wintershall, and the Slovak Natural Gas Industry enterprise, Lomecky explained. (Prague CTK in English 1257 GMT 18 Feb 94 AU) ESTEE LAUDER TO PROVIDE SERVICES IN PRAGUE: The prestigious U.S. firm Estee Lauder will its provide services to Prague residents. On the basis of a contract with Prague City Hall, the company Is renting commercial space in Zelezna Street for 10 years. (Prague HOSPODARSKE NOVINY in Czech 18 Feb 94 p 2 AU) JAWA TO EXPORT MOTORCYCLES TO ARGENTINA: Jawa Tynec nad Sazavou has concluded a contract for the delivery of 4,500 motorcycles to Argentina. This includes the delivery of 1,500 Chopper-type motorcycles. (Prague HOSPODARSKE NOVINY in Czech 18 Feb 94 p 6 AU) JIHLAVA FIRM TO PRODUCE OPTICAL CONNECTORS: The Optokon Jihlava company, in cooperation with the Japanese companies JDS Fitel and Seiko Instruments, will manufacture optical connectors. This state- of-the-art technology is earmarked mainly for the digitalization of the Czech and Slovak telephone networks. (Prague HOSPODARSKE NOVINY 18 Feb 94 p 6 AU) 'MARKED' INCREASE IN PRICES IN JANUARY: The marked increase in prices in January was mostly a result of an 8-percent increase in prices of services. Prices of non-food products increased by 1 percent and prices in public catering by 0.8 percent, despite the fact that food prices were almost stagnant, increasing by 0.1 percent. The average yearly inflation was 19.8 percent, and consumer prices rose by 10.9 percent in January compared with the same period last year. (Prague HOSPODARSKE NOVINY in Czech 18 Feb 94 p 9 AU) COMPENSATION FOR VICTIMS OF 1950'S DISCRIMINATION: Today, Minister of Labor and Social Affairs Jindrich Vodicka told journalists of the government decree approved on February 9 providing compensation for pensioners whose pensions were reduced by discriminatory laws of the 1950's. According to these laws the pensions of political prisoners, entrepreneurs, tradespeople, and their family members were reduced of taken away. Although the pensions of these people were eventually brought into line, they never received compensation for the years during which they collected lower pensions. Therefore the government chose the form of a lump sum payment, Vodicka said. (Prague CTK in English 1756 GMT 18 Feb 94 AU) GAMBRINUS LEADING CZECH BEER PRODUCER IN 1993: The Gambrinus brewery, part of the brewing company Plzenske Pivovary (Pilsner Breweries) Plzen, became the country's biggest producer and seller of beer last year, said the company's commercial director Mario Junek. Gambrinus produced 1,359,145 hectoliters of beer and sold 1,182,788 hectoliters. The total production of Plzenske Pivovary last year was 3,063,850 hectoliters of beer. Gambrinus's share of this was 44 percent. Next came Plzensky Prazdroj with 1,149,453 hectoliters, a 37.5 percent share. The cheaper beer Primus, introduced onto the market last June, sold 405,000 hectoliters, said Junek. (Prague CTK in English 1822 GMT 18 Feb 94 AU) CZECH, FRENCH TRANSPORT MINISTERS DISCUSS CSA: Czech Transport Minister Jan Strasky and his French Counterpart Bernard Bosson met on 17 February to discuss transport issues of interest to both countries. Reviewing the situation in the Czech Airlines (CSA) and the question of the Czech state buying back some of its stock previously sold to Air France, the ministers agreed that a rapid solution must be found among the airline's three main shareholders, a Transport Ministry spokesman told CTK on 18 February. The ministers pledged they would urge the negotiating parties' to adopt a constructive and accommodating attitude, the spokesman said. (Prague CTK in English 2023 GMT 18 Feb 94 AU) PARLIAMENT PASSES BILL ON LOCAL TAXES, EXCLUDES ALCOHOL: The Czech Parliament today approved an amendment to the law on local taxes that will adjust taxation levels on restaurant seating capacity, educational resorts, and fees for renting billboard space. According to the amendment, the taxes on restaurants and educational resorts will be levied only on enterprises in tourist and spa areas. In passing the amendment, parliament bypassed a government proposal for local taxes on the sale of alcoholic beverages. According to the parliamentary deputies, this kind of tax does not have a raison d'etre in the tax system because alcoholic beverages are already sufficiently taxed by the consumption tax collected by the central government. (Prague CTK in English 2239 GMT 18 Feb 94 AU) GALENA OPAVA TO BE BOUGHT BY U.S. COMPANY: IVAX, a U.S. producer of medicinal drugs, will acquire the majority share of Galena Opava, which is one of the most important Czech pharmaceutical companies. (Prague MLADA FRONTA DNES in Czech 18 Feb 94 AU) TRADE WITH BRITAIN GROWS 45 PERCENT: Trade between Britain and the Czech Republic grew 45 percent, reaching over 500 million pounds sterling, Britain's central statistical office told CTK on Monday, 21 February. British firms sold the Czechs 287 million pounds worth of goods -- office equipment and supplies and electrical equipment accounting for the largest share, while Czech producers sold goods worth 245 million pounds in Britain. Leading Czech goods included Skoda-produced cars -- 10,000 were sold in the United Kingdom last year -- followed by non-ferrous metal products and electrical machinery ana equipment. About 2.5 million pounds worth of Czech beer was sold in Britain as well. European Union import quotas have meant little problems for Czech exporters, British businessmen told CTK in London. (Prague CTK in English 1638 GMT 21 Feb 94 AU) SKODA PLZEN TO SELL TROLLEYS TO U.S. CITY: Skoda Plzen has bought 47 percent of the equity of Electric Transit International, and through this U.S. company it will sell 61 Skoda 14-Tr trolley- buses to the city of Dayton, Ohio. This information was provided by the Skoda spokesman in Plzen on 20 February. (Prague MLADA FRONTA DNES in Czech 21 Feb 94 p 3 AU) SLOVAKIA TO RECOGNIZE ONLY SOME CZECH CUSTOMS CERTIFICATES: Slovakia has agreed on mutual recognition of national certificates required for import only for goods where the identical standards are in effect on both sides of the Czech-Slovak border. Slovakia thus rejected the Czech proposal of mutual recognition of decisions and certificates for all commodities regardless of differences in state norms. The decision was reached at a meeting of representatives of both the Czech Republic and Slovakia today, led by Michal Tosovsky and Lubomir Sutek, chairmen of the National Offices for Technical Normalization, Metrology, and State Testing. Regarding food products, as of April 1, the Slovak Agricultural and Food Inspectorate will issue a single certificate valid for Slovakia. The decisions taken by the Czech authorities will form the basis of the issuing of the certificate. Until 31 March, the Slovak customs authorities will require the same documents they required before 11 February, when the Slovak customs authorities announced that food products without a Slovak quality certificate would not be allowed to enter the country. (Prague CTK in English 2129 GMT 22 Feb 94 AU) CZECHS TO INSIST ON DOMESTIC CONTENT FOR SKODA CARS: During the upcoming talks on supplements to the contract between carmaker Skoda of Mlada Boleslav and Volkswagen, Czech negotiators will insist that Skoda be not turned into a mere assembly plant, Tomas Jezek, chairman of the National Property Fund said today. He added that the main parts of Skoda-produced vehicles, such as the motor and transmission, should be produced in the Czech Republic. This was decided by Czech representatives at a meeting at the Ministry of Trade and Industry on Monday, 21 February, Jezek said. The Czechs agreed on their approach and are now "well prepared for the negotiations," Trade and Industry Minister Vladimir Dlouhy added. An analysis of the issue, presented at Monday's meeting, clearly specified the developmental goals that are to be part of the supplements to the contract, Dlouhy said. Volkswagen should support the sale of 30 percent of Skoda's shares, and help resolve environmental problems and matters regarding guarantees, Dlouhy reported. The State-owned Prisko company, that owns 69 percent of Skoda's shares, will not be discussed during the forthcoming negotiations, Jezek stated. The FNM's stand on Prisko could differ from the Ministry's only in the question of how to terminate it, he added. Prisko, that was established to settle restitution and environmental problems and to take care of Skoda's loans and liabilities, was meant to be terminated at a certain point, Jezek said. (Prague CTK in English 2053 GMT 22 Feb 94 AU) NO TALKS 'SO FAR' ON T-72 PARTS TO IRAN: Industry and Trade Minister Vladimir Dlouhy told CTK on 22 February that, so far, no one has discussed the possibility of exporting spare parts for Czech-made T-72 tanks to Iran. The current issue of the political weekly RESPEKT reports that, in January, Jan Vlcek, director of the RDP Group arms maker consortium, wrote to Dlouhy to ask for his help in obtaining a license to export arms to Iran. According to RESPEKT, Dlouhy sent Vlcek's letter to the Defense, Interior, and Foreign Ministries and is still awaiting replies before making final comments. The letter also mentioned financial advantages for the Czech Republic in such a deal. The project would last for five years and bring in about $500 million, an amount that would help stagnant arms makers supply components for the T-72. This could also fundamentally influence the employment situation, especially in the Moravian region, Vlcek said in his letter. It would also activate the arms industry in general and open the way to cooperation between Czech manufacturers and those in NATO countries. (Prague CTK in English 1724 24 Feb 94 AU) KLAUS, TOSOVSKY DISAGREE ON KORUNA CONVERTIBILITY: The debate on when the Czech koruna should become convertible has divided even those economists and politicians who formerly held similar views, MLADA FRONTA DNES Editor Petr Wawrosz writes in the weekly magazine REFLEX in an article called "Duel: The Convertibility of the Koruna." There is a duel between Czech Premier Vaclav Klaus, who does not consider full convertibility to be necessary yet, and National Bank Governor Josef Tosovsky, who believes that it could be introduced as early as next year.One thing is certain, Wawrosz says. Convertibility, like privatization and ttade liberalization is one of the basic goals of Czech reform. Logically it ties in with the steps that have already been taken, and it is therefore no surprise that it is now beginning to receive more attention. The introduction of convertibility has to precede the Czech Republic's entrance into the European Union, being a necessary condition of acceptance, without which the Czechs have no claim on a United Europe, he says. On the other hand, Czech people and firms will be wanting to make more use of foreign financial institutions. Capital will flow freely and, understandably, most of it will head for the most attractive conditions and opportunities. Naturally, the koruna's exchange rate will depend much more on the rate of other currencies, above all the German mark and the U.S. dollar, and on stability in the Czech Republic and in the surrounding countries. Speaking of stability inflation should be mentioned, which is higher in the Czech Republic than in the West. It would be ideal, Wawrosz says, if inflation did not exceed 6 percent per after convertibility in introduced, which is a situation which can be achieved within two years, the magazine believes. Greater movement of capital necessarily brings greater foreign competition. If the Czechs are not to keep up with much greater foreign competition, convertibility will do more harm than good, he believes. (Prague CTK in English 1426 GMT 22 Feb 94 AU) JANUARY INFLATION 1.83 PERCENT: Prices in the Czech Republic rose 1.83 percent in January. The increase in prices for rented housing, petrol, and transportation accounted for 1.03 percent, Czech Prime Minister Vaclav Klaus said on 10 February. (Prague CTK in English 2025 GMT 10 Feb 94 AU) NON-GOVERNMENT ORGANIZATIONS TO RECEIVE PHARE SUPPORT: More than $10 million will be set aside from the European Union's (EU) PHARE program to support non-government organizations in Central and Eastern Europe and in the states of the former Soviet Union, representatives of a delegation from the EU commission said 10 February. The project is aimed at granting support to those organizations that participate in the development of science and education through a variety of projects. The program is divided into macro-and microprojects. Macroprojects can obtain support from $12,000 to $165,000. The condition is that more than one post- communist country and at least two non-government organizations from EU countries participate in them. Microprojects are carried out only in one country and non-government organizations can receive from $3,500 to 12,000. PHARE's support has thus far concentrated especially on health care, environmental protection, human rights and similar purposes. Central European non-government organizations have thus far obtained 11 million Czech korunas ($366,000) from PHARE. (Prague CTK in English 2026 GMT 10 Feb 94 AU) PARTICIPATION IN INDIAN GAS PIPELINE PROJECT SOUGHT: The Czech Republic wants to participate in the construction of an extensive gas pipeline network that would stretch from Iran and Oman to India and neighboring states, Czech Deputy Minister of Industry and Trade Radomir Sabela said on 10 February. Sabela, who is accompanying Czech President Vaclav Havel on his current visit to India and Thailand, said the Czech Republic intends to enter a public tender to be announced by the Indian government. The pipeline is expected to start operating in 1998. If we succeed in taking part in the construction of the gas pipeline, it would be a big opportunity for Czech industry, Sabela said. The project's value is estimated at several billion U.S. dollars, and a loan may be granted by the World Bank or the Asian Development Bank (ADB), Sabela added. Finance Minister Ivan Kocarnik, who is also accompanying Havel, said in reference to the financing of Czech investments in India that India had significantly multiplied its foreign currency reserves, which now total about $14 billion. Moreover, a number of projects will probably be financed by the World Bank or the ADB. India could obtain also cheap long-term loans, according to Kocarnik. Investments by our side, for instance through a consortium of banks, should not be ruled out either, Kocarnik said. He added that the Czech Republic is interested in becoming an ADB member. Sabela told journalists that the construction of an oil derivatives pipeline in north-western India, in which Czech firms will participate, is expected to start by February 17 at the latest. The contract for building the pipeline, valued at $356 million, was signed by the Czech Firm Skodaexport last year. Havel called it the Czech Republic's largest investment abroad. Sabela also spoke of Czech-Indian cooperation in the aviation industry. In the civilian area we have delivered two L-410 planes (from Let Kunovice) and another two are on the way, he said. L-410 can take 17 passengers. The planes have been bought by an Indian private firm that is interested also in L-610 model planes that can take about 40 people. The Czech delegation is to discuss specific forms of military cooperation with the Indian Minister of Defense. (CTK in English 2037 GMT 10 Feb 94 AU) INTENT OF SLOVAK FOOD REGULATIONS QUESTIONED: Slovakia's decision to require certificates of quality for food products is a pretext for reducing food imports, National Property Fund Chairman Tomas Jezek said 11 February. It is an excuse to achieve the effect that would be attained directly by imposing duty on the goods, Jezek said. It is a move that is not allowed under the customs agreement between the Czech and Slovak Republics, he added. Jezek said he believed the Customs Union Council would have to meet because of the decision. It is a way of restricting imports without breaking the customs agreement, he explained. Jezek mentioned the protection of domestic producers and Slovakia's clearing account deficit with the Czech Republic as reasons for the step. Devaluation of the Slovak koruna would be a direct solution, but the Slovak Government fears it for political reasons, Jezek said. A partial list of the goods requiring a quality certificate by either the Health Ministry or the Agriculture and Food Inspection Authority for imports includes beer, dairy products, tea, rice, most dry legumes, sunflower and olive oil, dried and salted fish, some spices, buckwheat and millet. (Prague CTK in English 2143 GMT 11 Feb 94 AU) SLOVAK CERTIFICATE REQUIREMENT JAMS BORDER CROSSINGS: A total of 12 trucks with food leaving the Czech Republic for Slovakia were not allowed to enter the country by the Slovak Customs Office as they did not have certificates from the Slovak Agriculture and Food Inspection Authority or the Slovak Health Ministry. The Slovak Government adopted a decision with effect since February 11 whereby food products without a certificate for their quality would not be allowed to enter the country. Earlier this month Slovak Finance Minister Julius Toth said that a solution to the current trade deficit in relation to the Czech Republic should be looked for elsewhere, the introduction of an import surcharge is as yet out of the question. The introduction -- in two stages -- of special border controls for imported goods is being considered. First food control should be implemented. During the second stage control will be expanded to cover all sorts of goods. The time period of the second stage has not yet been specified. Some Czech-Slovak border crossings were virtually blocked to cars and railway carriages today. Some drivers did not know about the change. The move will largely affect Moravian exporters who supply the Slovak cross-border area with food every day, a local customs official said, adding that some of them learnt about the move only from the radio. (Prague CTK in English 1836 GMT 11 Feb 94 AU) SLOVAK CUSTOMS MEASURE BIG MISTAKE, DLOUHY SAYS: Thursday's decision of the Slovak Customs Authorities not to allow food products without a quality certificate to enter the country is the first major mistake in the functioning of the Czech-Slovak Customs Union, Trade and Industry Minister Vladimir Dlouhy said 11 February. Dlouhy said he would ask for the Customs Union Council to be called. Slovakia was attempting to protect the balance of payments by misusing technical obstacles to trade in a situation where such steps were indefensible, he said. The Czech Republic was informed of the measure only 24 hours before it came into effect, he said. Slovakia had merely carried out its formal obligations, but usually in similar cases the supplier is given more time to adapt to the new conditions, Dlouhy said. The Customs Union Agreement allows either country to take such a measure if it is essential for the protection of life or health of people, animals or plants, he pointed out, but in his view this was not the case. The measure is directed against all countries, not just the Czech Republic, he added. (Prague CTK in English 1232 GMT 11 Feb 94 AU) KLAUS ASKS MECIAR TO DROP NEW REGULATION: Czech Prime Minister Vaclav Klaus telephoned Slovak Prime Minister Vladimir Meciar to ask Slovakia to abandon its requirement that all imported food products carry a quality certificate, Klaus said on 11 February today after the cabinet had debated the measure. He said Meciar promised him the Slovak Government would seriously consider Klaus's request. (Prague CTK in English 1719 GMT 14 Feb 94 AU) CZECH-UKRAINIAN JOINT VENTURE: The IVEGOTOV company is a new Czech-Ukrainian joint venture established between Jihospol Strakonice and entrepreneur Alexander Dolisny. The company will be engaged in trading activity and will run the Slavia chain of restaurants. (Prague HOSPODARSKE NOVINY in Czech 10 Feb 94 p 6 AU) MANN, HUMMEL ACQUIRES 60 PERCENT OF PAPER MILL: Europe's largest producer of car filters, Mann and Hummel GmbH of Germany, has acquired 60 percent of Jihlavske Papirny (South Moravian Paper Mills) in Pribyslavice. (Prague HOSPODARSKE NOVINY in Czech 10 Feb 94 p 6 AU) UNEMPLOYMENT RATE 3.78 PERCENT IN JANUARY: On January 31, Czech job centers registered 198,837 job seekers, amounting to a 3.78- percent unemployment rate, the highest since February 1992, Ota Veverka, spokesman of the Ministry of Labor and Social Affairs, said 11 February. The lowest unemployment was as traditionally in Prague, at 0.36 percent, while the number of jobs offered -- 14,184 -- was the highest. (Prague CTK in English 1721 GMT 11 Feb 94 AU) HUNGARY EXPORTS TO EU DOWN 22.3 PERCENT IN 1993: Despite the favorable effects of the association agreement with the European Union (EU), Hungary's exports to the EU fell by 22.3 percent last year as compared to the overall 16.8 percent decline in Hungarian exports, figures published by the Ministry of International Economic Relations show. Hungary's exports to EU countries totalled $4,145.7 million in 1993 and the proportion of total exports going to the EU fell from 49.8 percent in 1992 to 46.5 percent last year. Although imports from the EU grew by 6.5 percent, this was less than the overall 13.2 percent increase in imports. As a result, the share of EU products in total Hungarian imports fell from 42.8 percent in 1992 to 40.2 percent last year. Portugal was the only EU member country to take more Hungarian exports, with a 12 percent ($0.7 million) increase last year. With the exception of Britain, imports from all EU countries increased last year. The largest fall in exports was registered with Spain (down 48.5 percent to $65.3 million) although imports from Spain rose 54.4 percent to $105.6 million. Imports from Ireland showed the largest increase (64.9 percent to $26.4 million) and Hungarian exports showed the lowest fall (1.1 percent to $4.1 million). Exports to Germany, Hungary's main trading partner, fell 20 percent to $2,376 million while imports rose by 4 percent to $2,713.1 million last year. Exports to Italy, Hungary's second largest EU trade partner, fell 30.1 percent to $713.5 million while imports rose 7.5 percent to $750.3 million. (Budapest MTI in English 1238 GMT 1 Mar 94 AU) BUSINESS TAKES OUT MORE FOREX LOANS IN 1993: Hungarian businesses took more loans from abroad last year than from Hungarian commercial banks, allocated most of their free assets in foreign exchange, and did not increase forint deposits significantly, the latest monthly report of the Hungarian National Bank shows. The net stock of credits of the business sector fell slightly last year, from 251.6 billion forints (HUF) to HUF 240.1 billion, although part of the companies' stock of loans were drawn away from banks in debt and credit consolidation. In 1993 the stock of gross bank loans of businesses decreased by HUF 15 billion as a result of credit consolidation and by an additional HUF 30-42 billion in debt consolidation. As a result, the real stock of gross bank loans of businesses increased last year by HUF 105-117 billion. Leaving out the effects of credit and debt consolidation, the stock of loans increased by HUF 59.5 billion to HUF 763.5 billion. Consolidation did not affect the stock of company foreign exchange deposits, which grew by the equivalent of HUF 4.5 billion last year to HUF 64.7 billion. The increase in forint terms includes a total 15 percent devaluation of the forint over the year. Within the HUF 59.5 billion increase, the stock of investment loans dropped by HUF 16.8 billion, to HUF 115.2 billion. Taking consolidation into account, the drop is around HUF 6.4-7.9 billion. The stock of working capital loans increased by HUF 56.4 billion last year, as opposed to a HUF 19 billion drop in the previous year (without consolidation). The real increase, including credit and debt consolidation, was around HUF 92-102 billion. The stock of net direct foreign loans of the business sector rose by $800 million in 1993 while the total stock reached HUF 1.8 billion. Seventy percent of the total loans were of more than one year's maturity, 22 percent were granted by foreign parent companies to subsidiaries in Hungary, 49 percent were for less than $10 million, and 30 percent were for more than $50 million. Deposits of businesses grew by HUF 71 billion in 1993, HUF 66 billion of which occurred in the last 10 days of the year. HUF 63 billion of the total increase was in the stock of foreign exchange deposits, although the forint devaluation must also be taken into account. Within the growth of foreign exchange deposits HUF 42 billion was the result of the privatization of MATAV. The forint deposits of businesses grew by only HUF 8 billion last year. Of this, the stock of fixed forint deposits dropped by HUF 7 billion while the deposits on current accounts grew by HUF 15 billion. (Budapest MTI in English 1716 GMT 2 Mar 94 AU) ECONOMY IN 1993: The volume of industrial production, excluding seasonal variations, fell by 3.7 percent in December, while retail sales increased by 2.6 percent, the Central Statistical Office reports. Industrial producer prices rose by 0.8 percent, domestic producer prices by 0.4 percent and retail prices by 1.3 percent in December. Industrial production showed a 4 percent increase over the whole of 1993, while agricultural production fell by 6 percent, with livestock breeding 9 percent and plant cultivation 4 percent down on 1992. Energy consumption was 1 percent higher in 1993 than in the preceding year. Within this, industrial energy consumption dropped by 1 percent, and that of households and public services rose by 2.7 percent. There was a decrease in consumption of coal, nuclear energy, and imported electricity, but more oil and gas were used. Fifty-two percent of energy resources were imported, as compared to 49 percent in 1992. Following a 1.6 percent drop in 1992, total investment in 1993 remained stable at 626 billion forints, according to preliminary data. Annual consumer inflation last year was 22.5 percent, against 23 percent in 1992 and 35 percent in 1991. Both industrial producer prices and domestic wholesale prices rose by 11 percent in 1993, with agricultural producer and purchase prices going up by 25 percent, following a 9 percent rise in 1992. Wages increased by 18 percent last year, but fell in real terms by 3 to 4 percent. Average gross salaries were 22 percent higher and net salaries 18 percent higher than a year before. The retail trade volume was about the same as in the previous year. Private savings increased more than in 1992. (Budapest MTI in English 0720 GMT 24 Feb 94 AU) BUDGET SURPLUS 8.5 BILLION FORINTS AT END OF JANUARY: Hungary's state budget showed a surplus of 8.5 billion forints (HUF) at the end of January, the Finance Ministry announced. Revenue amounted to HUF 127 billion, while expenditure stood at HUF 118.5 billion. Net budget revenue from businesses amounted to HUF 25 billion, of the HUF 200.2 billion targeted for the whole year. Corporate tax payments amounted to HUF 5.8 billion in the first month. Customs duties and import-related revenue to the state budget amounted to more than HUF 11.6 billion at the end of January, 11.9 percent of the full year target. Budget subsidies to businesses amounted to HUF 5.57 billion in January. Budget revenue from consumption related taxes amounted to HUF 43.754 billion in the first month of the year. The budget spent HUF 2.5 billion on consumer price subsidies. The state budget received HUF 21.75 billion in taxes and other payments from individuals in the first month. Income tax payments of HUF 20 billion went to the central budget in January. (Budapest MTI in English 1235 GMT 2 Mar 94 AU) TALKS OVER EXTENSION OF JAPANESE CREDIT LINE: Commercial banks have made commitments to disburse the entire 23 billion forints in credit granted equally by Eximbank of Japan and the Hungarian National Bank (MNB), although the full amount has not yet been drawn from the central bank. The MNB is currently negotiating with Eximbank for opening up a further credit line with similar conditions and hopes to sign an agreement in the first half of this year. The commercial banks said that there was demand for an amount at least equivalent to the previous credit line. The MNB signed an agreement with Eximbank in December 1992 on a 13 billion Japanese yen credit line, which had been granted by the Japanese government to promote small and medium-sized Hungarian businesses. The central bank in turn contributed an equal amount. (Budapest MTI in English 0745 GMT 24 Feb 94 AU) JAPANESE BANK LENDS DM 85 MILLION TO TELECOM: Hungarian Telecom (MATAV) is getting an 85 million German marks (DM) (5 billion forints) loan from Japan's Eximbank. As announced in Tokyo, depending on changes in currency exchange rates, the sum might rise to 6.2 billion Japanese yen, which is about 6 billion forints. This is the first large loan this banking institute, with the Japanese Government, has given to a Central European private firm. The Hungarian Ministry of Finance guaranteed repayment underwriting the loan. This is the first European Bank for Reconstruction and Development (EBRD) and Japanese Eximbank jointly funded project. A general agreement was reached by the two banking institutes two years ago, followed by negotiations starting last April. (Budapest MTI in English 1729 GMT 24 Feb 94 AU) FREE TRADE AGREEMENT WITH FINLAND COMES INTO FORCE: The Finland- Hungary free trade agreement and the related agricultural protocol came into effect on 1 March. Hungary signed agreements on the free trade of industrial products and bilateral protocols on agricultural trade with all members of the European Free Trade Association (EFTA) -- including Finland -- in Geneva on March 29, 1993. Due to the protraction of the ratification process in the Finnish Parliament, the Hungarian-Finnish agreements came into effect only on 1 March. Hungarian-Finnish trade of industrial goods has been liberalized since 1974. The new free trade agreement has extended the scope of duty-free commodities to some important export items of Hungarian agriculture, including meat and meat products, honey, fresh, frozen and preserved vegetables, fruit and fruit juice. (Budapest MTI in English 1707 GMT 2 Mar 94 AU) UNITED STATES ORDERS -102 IKARUS BUSES: Hungary's Ikarus Co. has received an order from Miami for 102 articulated buses. The first 30 buses will be made by the company's Budapest plant, with the rest to be produced and sold to America by the Budapest-based Hungarian- U.S. joint venture NABI (Nord American Bus Industria). Ikarus has been selling buses to the United States for 15 years (since 1988) via Ikarus-USA, which was formerly a subsidiary of UCBC, a transport and small-lorry manufacturer. The venture turned out buses suited to American demands -- type 400 -- with U.S. main components and a Hungarian chassis and body. Over 400 buses made this way are currently running in Houston, San Diego, and Pittsburg. Besides the United States, NABI will sell buses to Canada and Mexico. (Budapest MTI in English 1338 GMT 24 Feb 94 AU) GASOLINE PRICES UP, DIESEL PRICES DOWN: As of 1 March, petrol will cost 1 forint more and diesel oil four forints less per liter at pump-stations run by Hungary's oil and gas trust (MOL). The petrol price rise follows oil price increases on international markets and the 2.6 percent devaluation of the forint on 16 February. The price of diesel will be lowered because MOL has extra stocks on hand. MOL accounts for some 30 percent of domestic car- fuel supply. Other fuel companies have not yet indicated they will to join MOL's rate adjustment. However, they usually follow the same price policy. (Budapest MTI in English 1205 GMT 24 Feb 94 AU) COMPENSATION TO FOREIGN CITIZENS: Of the 120 billion forints (HUF) nominal value of compensation coupons so far issued, foreign citizens have received 16.4 billion forints, the Compensation Office reported. The Office estimates that the total value of compensation coupons to be granted to foreign citizens will eventually be HUF 21 billion, which represents 15 percent of the total value of compensation coupons to be issued. The original period for applications for compensation has been extended until 15 March. The office estimates that the extension will involve the issue of a further HUF 3 billion worth of compensation coupons. Under the First Law on Compensation, passed in 1991, those who lost property after 8 June, 1949 receive partial compensation. The Second Law deals with compensation for loss of property between 1 May, 1939 and 8 June, 1949. The Third Law covers compensation for those persecuted for political reasons and this is the law under which the bulk of compensation to foreign citizens falls. The largest value of compensation coupons (HUF 6.3 billion) has gone to Romanian citizens. German citizens have received coupons worth HUF 3 billion, and US citizens HUF 1.4 billion. (Budapest MTI in English 1437 GMT 1 Mar 94 AU) UNEMPLOYMENT RATE 12.8 PERCENT IN JANUARY: There were about 9,000 more registered unemployed at the end of January than a month earlier, to bring the total number of people on the dole to 641,000, the National Labor Centre said. The proportion between the unemployed and the economically active population -- that is the unemployment rate -- was 12.8 percent nationally. There are major differences in the unemployment rate per region: In the northern Borsod-Abauj-Zemplen county it is 21.1 percent, in Szabolcs-Szatmar- Bereg county 20.6, and in Nograd county 19.1 percent. At the same time, it is 6.3 percent in Budapest, 8.8 percent in the western Gyor-Sopron-Moson county, and 9.3 percent in Pest county. (Budapest MTI in English 0726 GMT 1 Mar 94 AU) EXPORTS DOWN 16.8 PERCENT IN 1993: Exports amounted to $8.907 billion last year, down 16.8 percent on 1992, Minister of International Economic Relations Bela Kadar said. Imports totalled $12.530 billion, but this sum includes $713 million worth of MiG fighter planes given by Russia to Hungary in partial repayment of trade debts accumulated in rubles before the dissolution of the Council for Mutual Economic Assistance (CEMA). When the fighter planes are deducted, imports total $11.817 billion, 6.8 percent up on the previous year. Government moves made last September to boost exports and improve the trade balance resulted in a tangible rise in exports in the fourth quarter of last year. While the monthly average of exports in the first nine months was $716 million, it rose to $820 million for the last three months of the year and to $866 million in December. Customs statistics showed a trade deficit of $3.623 billion for last year, including the import of the MiG fighters. The trade deficit amounted to $2.910 billion, not including the import of MiG fighters, and to $2.280 billion when other import items that do not appear in the current account were deducted. Exports of agricultural goods and food products fell by 26.6 percent, while exports of consumer goods fell by 20 percent. The export of products manufactured on commission fell $758 million, exports of grain were down $384 million, and food exports were $246 million less than in 1992. The latter three items made up 77 percent of the decrease in exports last year. Ninety percent of the decrease in exports was in sales to industrialized countries. Western Europe continued to suffer from the recession, with 64 to 65 percent of Hungary's exports going to countries like Germany, Austria, Italy, France, and the Benelux countries. The currencies of all of these countries depreciated against the dollar last year. Exports decreased by about 10 percent in volume terms when adjustments were made in connection with the appreciation of the dollar. Exports to former socialist countries made up 26 percent of total exports last year, while imports from these countries made up 29 percent of the total. Exports to the United States rose by 9 percent, exports to Poland were up 12 percent, exports to Slovenia were up 30 percent, and exports to the Czech Republic and Slovakia were each up 2 percent. Figures for trade with Poland, the Czech Republic, and Slovakia in the second half of 1993 had already begun to show the effect of the free trade agreement signed early last year that abolished customs duties and import quotas for 50 percent of industrial goods. Imports of consumer goods from the former socialist countries rose by 59 percent within an overall increase of 7 percent. This compares to a 2 percent rise in imports of consumer goods from industrialized countries. Agricultural exports fell by $700 million compared to the previous year, while imports rose by $100 million. Half the increase was accounted for by products that were not in direct competition with Hungarian produce, such as tropical and citrus fruit. Exports of machinery fell by 3 percent, while imports rose by 15.1 percent, excluding the MiG-fighter planes but including $150 million worth of Boeing aircraft bought by the Hungarian airline, MALEV. The decline in the import of investment goods ceased. (Budapest MTI in English 1159 GMT 17 Feb 94 AU) INCREASED TRADE WITH VISEGRAD COUNTRIES: Hungarian sales to Poland increased by 12 percent last year, with 2 percent export growth with the Czech Republic and Slovakia. Hungary's sales to the other Visegrad states -- Czech Republic, Poland, Slovakia -- rose from 4 percent to 4.7 percent as a ratio of its total exports in 1993. In the same year, imports from these countries fell from 5.9 percent to 4.7 percent of the total. Thanks to Central European Free Trade Area (CEFTA) customs preferences, Hungary's 1993 exports to Poland grew by $17 million to $160 million, and included more buses, bus parts, instruments, and medicines than a year before. (Budapest MTI in English 0954 GMT 18 Feb 94 AU) FORINT RATE CHANGES IN LAST 12 MONTHS: Over the last 12 months, the forint lost 26.8 percent on the Swiss franc and stayed stable against the Spanish peseta, a Hungarian National Bank summary published after the 2.6 percent devaluation of the Hungarian currency on February 16 shows. Accordingly, the forint lost 24 percent on the British pound and 20 percent on the U.S. dollar in one year. Its loss on the German mark, decisive for Hungarian foreign trade, was "merely" 15 percent, the same as against the Austrian schilling. The forint lost 10.6 percent of its value against the Italian lira, and 6.4 percent against the Greek drachma. There were six forint devaluations, by a total of 17 percent, between February 16, 1993 and February 16, 1994. (Budapest MTI in English 1359 GMT 16 Feb 94 AU) GOVERNMENT PLANS TO SET UP EXIMBANK: The government proposes separating export-related banking and insurer's functions. The cabinet decided to submit a bill on setting up the Hungarian Export- Import Bank Co. and the Hungarian Export Credit Insurance Co. to Parliament for urgent discussion. Under the bill, Eximbank will be in charge of export financing and guaranteeing, with the Export Credit Insurance Company insuring export loans. So far, both functions have been fulfilled by the Export Guarantee Insurance Co., whose 2 billion forints equity is to be divided between the two wholly state-owned joint-stock companies. (Budapest MTI in English 0736 GMT 18 Feb 94 AU) FOREIGN INVESTORS PREFER HUNGARY, CZECH REPUBLIC: Hungary and the Czech Republic have been the most popular East European venues for foreign investors since political changes in 1990, according to Vienna's Economic Research Institute. The survey shows that over the past four years, considerably more foreign capital has entered these two countries than, for example, Greece, a European Union member. They owe their attraction to political and economic stability, as well as rapid privatization of state assets. Foreign investments in Hungary were worth $5 billion over the past three years. Last year's privatization of 30 percent of the Hungarian Telecommunications Co. (MATAV), led by Deutsche Telekom, earned the central budget 800 million forints. Official figures indicate the Czech Republic has received $2.3 billion in foreign investment since the collapse of communist rule. (Budapest MTI in English 1137 GMT 23 Feb 94 AU) JANUARY PERSONAL SAVINGS DATA: Personal Savings (in billion Forints) 1993 1994 Jan 1 Jan 31 Jan 1 Jan 31(x) Households 269.6 263.6 319.7 307.1 Bank Deposits 582.4 598.2 694.0 702.2 Within Which: Forint Deposit 429.8 437.4 489.4 488.6 Accumulated Interest --- 4.0 --- 5.0 Foreign Currency 152.6 156.8 204.6 210.6 Bank Securities 190.9 194.2 202.7 208.1 Total 1,042.9 1,056.0 1,216.4 1,217.4 Non-Bank Securities(xx) 87.0 87.2 116.1 126.3 Insurance Premiums 41.3 43.3 51.0 51.0 Total 1,171.2 1,186.5 1,383.5 1,394.7 Personal Loans 252.3 255.1 284.0 289.0 Net Savings 918.9 931.4 1,099.5 1,105.6 (x) -- preliminary figures (xx) -- estimated Source: Hungarian National Bank (Budapest MTI in English 1218 GMT 18 Feb 94 AU) GYOR AUDI PLANT TO MAKE 1,000 ENGINES PER DAY: Audi engines assembled by Audi's wholly owned Hungarian subsidiary, Audi-Hungaria Motors Kf t, are currently being tested in Germany, with the company to begin producing 1,000 engines a day in the second half of this year. Audi-Hungaria is based in Gyor (western Hungary). The Gyor plant takes partly finished cylinder heads and overhead camshaf ts from Germany, which are then worked on further. Other parts arrive ready made. Audi is to invest a total of DM9OO million in the Gyor plant, with the factory expected to be turning out 2,000 to 2,500 engines a day by 1998. Audi will have invested DM3OO million in the first stage of development, which is to be completed this summer. In the third stage [as received] of the project, to be carried out between 1996 and 1998, other engine parts will also be finished in the Gyor factory. Audi has failed to find a Hungarian aluminum plant that is able to produce aluminum parts of the required quality, and Audi A.G. is now seeking a company from among its suppliers which is prepared to build a new plant near the Gyor factory. (Budapest MTI in English 0743 GMT 23 Feb 94 AU) JANUARY GAS CONSUMPTION: Gas consumption this January amounted to 1.35 million cubic meters, about 70,000 cubic meters down on January 1993 and last December, when 1.42 million cubic meters were used per month, the Hungarian Oil and Gas Trust (MOL) reports. Half of the gas quantity used in January -- about 700,000 cubic meters -- were supplied by gas distributors. Some 200,000 cubic meters fuelled the power stations of the Hungarian Villamos (electricity) Works, and over 40,000 cubic meters were used by the Budapest Gas Works and the chemical industry together. Of the 1.35 million cubic meters, 400,000 came from stores, another 400,000 was imported, and 550,000 produced domestically. A year ago, domestic gas production was 650,000 cubic meters, imports were some 420,000 and the consumption of stored gas was about the same as this year. (Budapest MTI in English 0725 GMT 22 Feb 94 AU) MALEV TO LEASE BOEING 737-300: The board of MALEV Hungarian airlines decided to lease a Boeing 737-300 for three years from the Los Angeles-based leasing company ILFC. The leasing contract is expected to be signed at the beginning of March and the initial three-year lease period may be extended by a further two years. MALEV plans to accelerate the modernization of its aircraft through the phasing out of Tupolevs and the leasing of more modern planes. MALEV's financial situation, however, does not permit it to buy new planes. The MALEV extraordinary general meeting originally planned for 6 March will now be held on 26 March. One of the items on the agenda will be the approval of a sale and lease back arrangement for MALEV's two Boeing 767-2O0er planes. (Budapest MTI in English 0713 GMT 23 Feb 94 AU) FURTHER GROWTH IN NUMBER OF BUSINESSES: There was an increase in the number of companies registered in January, with the number of incorporated businesses up from 85,638 to 87,060 from December to January, the latest figures from the Central Statistical Office (KSH) show. Of the 1,595 companies that were registered in January, 1,443 were new companies, while 152 were established from existing companies. Ninety-two percent of the newly established companies were limited liabilty companies and 84 percent were companies employing less than 10 people. Thirty-nine percent of the companies were based in Budapest. In January, 173 incorporated companies ceased to operate: Five of them were wound up, 66 ceased operating, and 102 were converted into other companies. Bankruptcy proceedings were initiated against eight incorporated companies in January, bringing the total number of bankruptcy proceedings initiated since the beginning of 1992 to 3,082. Of the companies that went bankrupt, 32 percent had been involved in industry, 26 percent in trade and repair services, 14 percent in construction, and 13 percent in agriculture and forestry. The KSH figures show that bankruptcy proceedings have been conducted against 2,444 companies. In half of the cases a bankruptcy agreement was made. Forty-eight percent of the companies were wound up and, in 2 percent of cases, the proceedings were in other ways. A total of 4,878 incorporated companies had been wound up by the end of January, 57 percent of which were limited liability companies and 32 percent cooperatives. Thirty percent of the companies wound up operated in industry, 25 percent in trade and repair services, 21 percent in the construction industry, and 12 percent were real estate agents or engaged in other service areas. The KSH figures showed that the following businesses were operating in Hungary. The figures are based on Hungarian tax office (APEH) data. BOT Business Dec 31, 1993 Jan 31, 1994 Incorporated Companies 85,638 87,060 Unincorporated Businesses 98,036 99,512 Budget and Social Security Run Institutions 14,853 14,882 Other Non-Profit Organizations 38,493 38,523 Self-Employed 688,843 692,678 EOT (Budapest MTI in English 1354 GMT 23 Feb 94 AU) DOMESTIC SECURITIES ISSUES COVERED 1993 BUDGET DEFICIT: The 1993 central budget closed with a deficit of 199.7 billion forints. Revenues totalled 939.6 billion forints and expenditures, 1,139.3 billion. The deficit remained under the 213.3 billion forints mark envisaged in the supplementary budget. The central budget deficit was fully financed from the issuing of domestic securities. The state spent less on expenditures related to debt, with savings in this field totalling 9 billion forints, mainly due to lower interest expenditures. The unfavorable effect of the rise in interest rates at the end of 1993 could hardly be felt. Revenue from personal income tax totalled 210.7 billion forints, instead of the expected 189.5 billion forints, as taxable incomes rose at a faster pace than planned. Corporate tax revenues were also somewhat higher than predicted. (Budapest MTI in English 1849 GMT 14 Feb 94 AU) INCREASE IN CONSUMER PRICE INDEX SLOWS: Consumer prices this January were up 3.2 percent on last December, the Central Statistical Office reported. The monthly price increase last January was 6.8 percent. The 12-month price index -- from January to January -- fell from 25.9 percent last year, to 17 percent. BOT 1 Month 12 Months Increase in Percentage 1992 1993 1994 1992 1993 1994 January 3.2 6.8 3.2 28.2 25.9 17.0 February 2.7 1.7 25.8 24.7 March 1.9 0.8 24.7 23.4 April 1.3 0.8 23.3 22.8 May 1.5 0.4 22.6 21.3 June 0.6 0.3 20.6 20.9 July 0.3 0.6 20.1 21.3 August 0.8 1.8 20.7 22.3 September 2.4 2.9 21.7 23.0 October 2.5 1.7 23.4 22.0 November 1.6 0.7 22.7 21.0 December 1.1 1.3 21.6 21.0 EOT (Budapest MTI in English 1158 GMT 15 Feb 94 AU) COMPANIES DRAW $1.264 BILLION IN FOREIGN LOANS IN 1993: Hungarian companies took out direct foreign exchange loans from abroad to a value of $1.264 billion in 1993, Econews learned from the Hungarian National Bank (MNB). Total loans stood at $2.516 billion on December 31, 1993, while company repayments totalled $691 million between 1990, when such lending began, and the end of last year, of which $441 million was repaid in 1993. The net stock of direct foreign loans owed by Hungarian companies stood at $1.825 billion at the end of last year, compared to $1.002 billion at the end of 1992. Hungarian companies held valid permits from the MNB for direct foreign loans totalling $4.008 billion at the end of December as against $2.536 billion on December 31, 1992. Of the total $2.279 billion loans taken out, 22 percent were in the form of credits to joint ventures from their foreign owners, 7 percent carried Hungarian state guarantees, while the value of loans over $50 million accounted for 24 percent of the total. Of total permits valid at the end of December, 37 percent were for loans with maturity of up to one year. The MNB started granting permits for such shorter-term direct foreign loans to companies in early 1993. In the maximum one-year category, companies took out loans to a total value of 1.061 billion and repaid $528 million last year, bringing the net stock of such loans to $533 million at the end of December. The above MNB figures do not include foreign loans granted either by the World Bank or under inter-governmental loan agreements to Hungarian companies. The above figures cover the principal amounts of loans and also reflect changes in foreign exchange cross-rates over the period. (Budapest MTI in English 1719 GMT 9 Feb 94 AU) NATIONAL BANK DEVALUES FORINT 2.6 PERCENT: The Hungarian National Bank has decided to devalue the forint by 2.6 percent as of February 16. The reason given for the devaluation was the improvement of the competitiveness of Hungarian exports. The MNB expects exporting companies to become increasingly profitable and thus able to maintain existing levels of employment. The decision was also prompted by changes in currency exchange rates of Hungary's major trade partners. The currency basket which provides the basis for the forint exchange rate calculation contains the U.S. dollar and the German mark in equal proportions. The dollar has continued to strengthen against European currencies on international money markets and thus the forint rate has been pulled up by the dollar as compared to the European countries which provide Hungary's main export markets. The MNB last devalued the forint by 1 percent on January 3. In 1993, the forint was devalued by 15 percent in five steps. (Budapest MTI in English 1755 GMT 15 Feb 94 AU) NATIONAL BANK PRESIDENT ON DEVALUATION: The Hungarian forint has strengthened considerably, as compared to the German mark, since last October, which did not have justification by the internal processes of the economy. "This is what necessitated the exchange rate correction," Hungarian National Bank Chairman Peter Akos Bod said on 15 February, accounting for the forint devaluation. According to Bod, the step will improve the situation of exporters. Lower indices have come about for both producer and consumer prices over the past months, which is why, as a consequence of the devaluation more than one year ago, there is less danger of inflation this February. Subsequently, the national bank could decide in a bolder manner and on a larger-scale devaluation, Bod said. (Budapest MTI in English 1810 GMT 15 Feb 94 AU) GOVERNMENT HELP FOR BORSOD COUNTY STEEL INDUSTRY: The government has decided on reorganizing steel production in Borsod County, northern Hungary. Accordingly, the Ozd factory will produce electrosteel and upgrade its rolling mill, and the Diosgyor plant will boost the capacity of its existing electrofurnace and set up a second foundry. The government will guarantee a loan of 2.1 billion forints ($1 equals 102 forints) for the program this year and grant nonrefundable support worth 3 billion forints after the industry is privatized. (Budapest MTI in English 2007 GMT 10 Feb 94 AU) LIVESTOCK NUMBERS FALL: The continuous decline in livestock numbers invariably gives rise to anxiety, a Central Statistical Office report states. According to the figures, the cattle stock totalled 999,000 on December 31, 1993, which is 14 percent, or 160,000 less than in the previous year. There were 5.001 million pigs at the end of last year, which is a decline of 7 percent over the previous year. There are no prospects for a major rise as the number of breeding sows declined by an even higher degree, 14 percent. At the end of December, there were 1.2 million sheep, 29 percent less than at the end of 1992. The number of ewes declined by 33 percent. Poultry numbers indicate a decline of 15 percent compared to the previous year. (Budapest MTI in English 0716 GMT 10 Feb 94 AU) GERMAN BANKS TO FINANCE M1/M15 HIGHWAY CONSTRUCTION: Deutsche Bank, Commerzbank, Dresdner Bank, and KFW, the German Institution for Reconstruction Credit, will be involved in the financing of the extension of the M1 motorway and the construction of the M15, KFW announced. The European Bank for Reconstruction and Development (EBRD) and a group of western banks lead by the EBRD and Banque Nationale de Paris will set up an ECU 189 million fund to finance part of the 40 billion forint construction project. One third of the amount to go into the fund will come from the German banks, KFW said. The high level of German involvement reflects the importance placed on the development of the M1 in German financial circles. The M1, which at present runs from Budapest to Gyor, will be extended to the Austrian border at Hegyeshalom. This will involve the construction of 48km of new motorway. The M15, a 15km spur, will connect the M1 with the Slovak border near Bratislava. Contruction is scheduled for completion by the end of 1995. (Budapest MTI in English 1727 GMT 11 Feb 94 AU) CONTRACT SIGNED ON AUSTRIAN-HUNGARIAN GAS PIPELINE: A contract was signed between the Austrian company OMV and the Hungarian oil and gas company (MOL RT) on the construction of a gas pipeline to link Baumgarten in Austria and Gyor in western Hungary. Construction of the 120km pipeline, to be known as Hungaria-Austria Gasleitung (HAG), will begin this March and is scheduled for completion by October 1, 1996. The pipeline will have an annual capacity of 4.5 billion cubic meters and will be linked to Hungary's existing high-pressure gas pipeline near Gyor. The construction of the pipeline will, for the first time, give Hungary access to gas from the West and open new markets to Western European gas producers and suppliers. The pipeline will also safeguard gas supplies from Russia to Austria and Western Europe as gas can be delivered through HAG if there are any problems with existing pipelines through Slovakia, which are currently operating at maximum capacity. The Austrian company will finance the construction of the 50km Austrian section of the pipeline and MOL RT the Hungarian section. The precise means of financing is still uncertain and information on the cost of construction was not disclosed. (Budapest MTI in English 1447 GMT 15 Feb 94 AU) CHINOIN EMPLOYEE PARTICIPATION IN FRENCH PRIVATIZATION: Employees of Budapest's mainly French-owned Chinoin Co. were able to buy shares when the mostly state-owned Elf Aquitaine petroleum group was privatized. The French state held 51 percent of the petroleum company, a Chinoin official said. Employees of firms belonging to the oil company had priority in the sale of French state stakes. Shares were sold for 385 francs, below the stock-exchange price of 420 francs. Workers at Elf member companies and subsidiaries, including Chinoin, could buy shares at 20 percent discount. With Finance Ministry clearance, 108 Chinoin employees with hard-currency accounts and several French citizens working there applied to buy 3,000 shares worth 924,000 francs. In return for the preferences, they cannot sell their shares or get a dividend for three years (to be invested by a French fund). Elf Aquitaine is one of the largest companies in France, with an annual turnover of 200 billion francs. It mainly produces and refines petroleum, but it also processes -chemicals, and is involved in medical and cosmetics production as Elf Sanofi. (Budapest MTI in English 1540 GMT 14 Feb 94 AU) AGREEMENT ON PROTECTION OF WINE BRANDS COMES INTO FORCE: Parliament approved a resolution on the promulgation of the agreement signed in Brussels last November on the mutual protection and control of wine names, concluded between the Republic of Hungary and the European Union. The agreement on origin protection is closely connected to the Hungary-European Union Associate Contract that came into force on February 1. The agreement ensures the protection of 437 Hungarian geographical names and approximately 1,500 Hungarian wine names on the markets of the European Union, while granting protection in Hungary for some 6,000 wine brands of the Union's 12 countries. The origin protection agreement is also related to the agreement signed on preferential wine trade, under which Hungary will be able to export some 263,000 hectolitres of wine to the EU markets under preferential customs tariff rates by 1998. Meanwhile, customs tariff rates on Hungarian wines will decline by an annual 20 percent, while those of European wines will decline by just 10 percent every three years. The agreement also sets down distribution elimination, within 13 years, of European- made wines that have brand names resembling the "Tokaji" name. (Budapest MTI in English 2017 GMT 15 Feb 94 AU) CHANGES IN FINANCIAL LEASING ACCOUNTANCY REGULATIONS: The government has modified the regulations on the reports and auditing of financial institutions. This completes the regulations on financial leasing laid down in the banking law for accounting regulations. In the future, lessees will count items utilized under financial leasing contracts as assets, and they will be authorised to account for amortisation. Financial leasing ensures the right for property transfer or purchase to the lessee at the end of the leasing period. According to Hungarian accounting regulations, it was debated whether in such leasing structure it is the leaser or lessee who has the right to count the item as an asset. In practice, the leasers included the assets in their books and took them out of the books only at the end of the leasing period. In future, financial leasing will function as a credit, as a result of which the leased objects will have to be shown in the financial institution's books as receivables. However, the same asset appears as an investment for the lessee, and must be registered in the books as a tangible asset (regardless of the fact that it is still owned by the leaser). This regulation results in the situation that the lessee is able to amortize the leased asset. A condition of financial leasing is that the asset must be bought by the financial institution on commission by the leaser. If assets are received in any other way -- for instance the enforcement of mortgage right -- then it may be classified as operative leasing. The earlier regulations continue to govern this type of transaction, which means that in the case of operative leasing, it is the leaser who registers the leased asset in his books. As financial leasing is a banking activity, it may basically only be practiced by banks. The license of leasing companies is only valid for operative leasing, and a permit from the banking supervision is neccessary for them to practice financial leasing. (Budapest MTI in English 0910 GMT 15 Feb 94 AU) STATISTICS ON 1993 TOURISM: Almost 41 million foreigners visited Hungary last year, 21 percent more than a year ago, the Central Statistical Office reported. Half the visitors came from the former Yugoslav republics and Romania, mostly for purposes other than tourism. The number of visitors from the former Soviet republics, showing the sharpest increase, was up 2.7 million. Following 1992's decline, arrivals from Germany grew by 23 percent, but fewer visitors were from the Czech Republic, Slovakia, and Poland. Fifty- six percent -- 23 million people -- were tourists spending at least a night in Hungary. Their number increased by 13 percent last year. About 12 million travellers, including over 6 million from former Yugoslavia, spent less than a day here. Tourists in Hungary spent altogether 144 million nights, 37 percent more than the 1992 figure. Their average stay here was 6.3 nights, as compared to 5.2 a year before. Visitors from Romania and the Commonwealth of Independent States stayed in Hungary longer than previously. Canadians spent the longest time here, at two weeks, with the shortest time, three nights, being spent by former Yugoslav citizens. Hungarians travelled abroad 12.1 million times, five percent less than in 1992, with half of them crossing the Austrian border. Slightly more Hungarians left for Austria, Slovenia, Croatia, and Ukraine than a year before, but the number of Hungarians heading for Serbia plummeted by 63 percent. (Budapest MTI in English 1227 GMT 9 Feb 94 AU) TOURISM REVENUE SURPLUS DECLINES: The revenue surplus of tourism declined to a significant degree last year. Although the latest figures show the situation up to the end of November only, it is clear that the surplus fell by some $150 million as compared to 1992. Officials of the Hungarian National Bank (MNB) said that tourism revenues totalled $1,088.8 million by November 30, 1993, which is a 5 percent decline as compared to the corresponding period of 1992. Tourism expenditures totalled $650.2 million, which is a rise of 18 percent. The surplus thus totalled $438.6 million over the first 11 months of 1993, as compared to $591.5 million for the January-November period of 1992. (Budapest MTI in English 1100 GMT 10 Feb 94 AU) PARTICIPATION IN EUREKA PROGRAMS: Hungarian experts are participating in 23 scientific research programs included in the international European Research Coordination Agency's (EUREKA) program. The Hungarian state provided 230 million forints (approx. $2.3 million) in support to the programs in 1992 and 1993. Fifteen Hungarian research institutes and 13 companies are participants of the programs, which run with a total budget of about 400 million European currency unit (ECU), and several hundred Hungarian companies are indirectly interested in the research. The EUREKA scientific research and development program was set up in June 1985. The aim was for participating countries to increase their economic competitiveness and to cut back their arrears compared with the United States and Japan. The major cooperation areas are telecommunications, environmental protection, laser technology, automatization, space research, transport technology, and energy management. At present, more than 20 countries participate in some 800 various EUREKA programs, under a budget of about ECU 14 billion. Hungary had participated in six EUREKA research programs since 1988, as a non-member state. Hungarian researchers achieved outstanding results in three areas initiated by French scientists: The Eurotrack environmental cooperation, the Tor program researching the ozone layer, and in the Biotex program investigation the connection between the biosphere and the atmosphere. In May 1992, Hungary was the first of the Central European countries to become a member of EUREKA. Hungarian researchers participated in 10 programs in 1992, 15 in 1993, and are now engaged in 23 schemes. The largest and most costly of these are the examination of high-capacity lasers in laser technology, the development of simulators of industrial processes that endanger the environment, the development of self- propelled space robots for space research, and the development of technologies for the maintenance and renovation of monuments. Hungarian experts cooperate with French, German, Italian, and Swedish researchers in most of the EUREKA programs. The world's largest firms also participate in the 23 research schemes running with Hungarian participation, including the French pharmaceutic firm Sanofi which has stakes in Hungary, or the world telecommunications giant Sony. The Hungarian government has, through competitions, provided 230 million forints in support to the Hungarian participants since May, 1992. (Budapest MTI in English 0812 GMT 10 Feb 94 AU) POLAND NATIONAL CHAMBER OF COMMERCE'S FIFTH YEAR: The National Chamber of Commerce (KIG) was formed in 1990 with a membership consisting of 13 industry-commerce chambers and also of economic societies. Today, KIG unites over 130 such chambers of commerce, which together assemble about 500,000 economic units. One of the main aims of the organization is the promotion of the Polish economy. (Warsaw GAZETA PRZEMYSLOWA I HANDLOWA in Polish No 8, 22-28 Feb 94 p 1) TRADE WITH SAXONY: A Polish-Saxon working group discussed the possibility of enlarging the scope of its cooperation. Polish-Saxon trade amounted to 429 million DM in 1992, of which the Polish exports accounted for 227 million DM, and Polish imports 192 million DM. Polish-Saxon trade constitutes a full 30 percent of the sales between Poland and the Germany. (Warsaw GAZETA PRZEMYSLOWA I HANDLOWA in Polish No 8, 22-28 Feb 94 p 1) PRIVATIZATION OF GOPLANA: The privatization of the Goplana Sugar Plants in Poznan is completed. The Poznan voivode has moved the property of this state enterprise to a new corporation, which is now known as GOPLANA S.A. Its owners are: the State Treasury and Nestle, each with 47 percent of the shares, and GOPLANA employees, with 6 percent of the shares. (Warsaw GAZETA PRZEMYSLOWA I HANDLOWA in Polish No 8, 22-28 Feb 94 p 1) ENERGY COSTS NOT AS EXPENSIVE: The price hikes planned for this year for energy-transfer carriers will be less than expected in the draft budget law by several percentage points. The results of discussions between the ministries of finance and industry call for the price hikes to be distributed in three, relatively milder, stages than previously expected. (Warsaw GAZETA PRZEMYSLOWA I HANDLOWA in Polish No 6, 9-15 Feb 94 p 1) SHARES IN POLIFARB CARBOLINE: The nominal capital of the company established by Polifarb Cieszyn S.A. and Carboline Co. amounts to 20 billion zlotys and both partners will have equal shares in the new company. The agreement foresees an intensification of exports to both East and West European countries, as well as a substantial improvement in the quality of the anticorrosive coating produced in Cieszyn. (Warsaw GAZETA PRZEMYSLOWA I HANDLOWA in Polish No 6, 9-15 Feb 94 p 1) SHIP FOR FRANCE: The French shipowner Luis Dreyfus commissioned the Gdansk Shipyards to construct the bulk cargo ship Gerard L.D., which recently set off on its trail run on the Baltic. The bulk cargo ship has a load-carrying capacity of 165,000 tons and is able to carry grain, coal, ore, and cement. In the last several years, the Gdansk Shipyards have built eight ships for the French shipowner, and lately signed yet another contract for two more bulk cargo ships. (Warsaw GAZETA PRZEMYSLOWA I HANDLOWA in Polish No 7, 15-21 Feb 94 p 1) GERMAN COOPERATION WITH NOBILES: The German company Herberts, a leading producer of automotive varnishes, has signed a letter of intention with the Nobiles Varnish Factory in Kujawy. The intent is to open a joint venture company as soon as it is possible. Herberts has about 20 firms throughout the world, and every third automobile in Europe uses its varnish. The Kujawy factory was selected based on a high evaluation of its technical capabilities. (Warsaw GAZETA PRZEMYSLOWA I HANDLOWA in Polish No 7, 15-21 Feb 94 p 1) SUGAR INDUSTRY PRIVATIZATION: NSZZ Rural Solidarity has prepared a plan for privatizing the sugar industry, which assumes the establishment of one holding company for the entire country in charge of administering all sugar plants. In addition to the sugar plants, banks, foreign trade enterprises, and manufacturers of beet processing systems will also be able to be part of the company. (Warsaw GAZETA PRZEMYSLOWA I HANDLOWA in Polish No 7, 15-21 Feb 94 p 1) FOREIGN CREDITS AVAILABLE, NOT ALWAYS USABLE: Of the total of $7.25 million in foreign credits available to Poland, only $2.93 million have been actually drawn, according to a Central Planning Office report. The report says that the use of foreign credits could be better. The main reasons for their underutilization are various restrictive clauses applied by lending institutions, time- consuming procedures applied by the administration and banks in the lender countries, and a reluctance to invest on the part of Polish enterprises. The report notes an increasing interest in drawing foreign credits since the middle of last year, suggesting an improvement in the financial condition of Polish firms. So far, the bulk of credits has come from the World Bank, European Bank for Reconstruction and Development, European Investment Bank, Norway, and Germany. The lowest use has been made of credits provided by the United States and South Korea. (Warsaw PAP in English 1846 GMT 24 Feb 94 AU) IRISH BUSINESSMEN PROBE POLISH MARKET: A trade mission from Ireland ended a four-day visit to Poland on 24 February. Businessmen representing different sectors of the Irish economy sought to establish contacts with Polish producers, and were also interested in selling their products on the Polish market, the British Embassy announced. The Irish entrepreneurs offered office equipment; electronic products; devices for the oil industry; water treatment installations; and machines for linen, jute and sisal processing, among other items. The businessmen were interested in finding distributors for their products and also wanted to learn about Polish taxes, customs regulations and import quotas. (Warsaw PAP in English 1935 GMT 24 Feb 94 AU) TRADE WITH ITALY INCREASING: In 1993, Italian imports of Polish goods rose by 73 percent, while Polish imports of Italian goods skyrocketed by 129 percent, Trade Attache Tomasz Bartoszewicz of the Polish Embassy in Rome said at a press conference there. Bartoszewicz cited the latest sales figures of the Italian Ministry of Foreign Trade. Close to fifty percent of the trade between Poland and Italy is carried out on a joint-venture basis, mainly involving the automobile industry, which as Bartoszewicz emphasized, should be an indicator for Italian investors. He confirmed unofficial information about the interest of the Italian railways in cooperating with the Polish railways. Replying to questions from Italian journalists, Polish ambassador to Italy Boleslaw Michalek announced that in the near future Poland will ask the European Commission to accelerate the integration process. He also emphasized that since the dissolution of COMECON, Poland has been able to redirect her economic cooperation, evidence of which is the fact that in 1992 and 1993 the European Union member-states became Poland's main trading partners (i.e. 58 percent of all foreign trade). (Warsaw PAP in English 1247 GMT 25 Feb 94 AU) POLISH GDP FALLS LESS THAN ELSEWHERE IN EAST EUROPE: The fall in Polish GDP was smaller than in other Central and East European countries in the years 1989-93, thus producing more rapid economic growth, labor and social policy department director at the Central Statistical Office Stanislawa Golinowska said at a 25 February news conference devoted to social conditions in that period. The analyses, conducted on the initiative of UNICEF, revealed that the socio-economic situation in Poland and the region was characterized by rising unemployment and a major fall in real wages coupled with a disparity between the poorest and the richest, growing impoverishment, and an increase of pathological social processes. (Warsaw PAP in English 1250 GMT 25 Feb 94 AU) GERMAN INVESTOR TO BUY 75 PERCENT STAKE IN CEMENT PLANT: The German Polen Zement Beteiligungsgesellschaft company intends to buy a 75 percent stake in the Warta cement plant in Dzialoszyno, Sieradz province, the Press Office of the Privatization Ministry announced after an agreement to sell the package was signed in Warsaw on 25 February. According to this tentative agreement, the Polish Ministry of Environmental Protection will have to grant permission for the German investor to buy the stake, while the authorities of the state of North Rhine-Westphalia have to approve credit guarantees. Twenty percent of the shares will be made available to the cement plant work force, while the prospective investor has agreed to sign a social security package which provides for employment guarantees for three years, the maintenance of present social benefits, and wage growth. The German buyer plans to earmark tens of millions of marks for the plant's modernization, the Privatization Ministry has said. The annual production capacity of Warta, employing 1,784 people, is 1.2 million tons of clinker. The cement plant is in serious financial trouble after it failed to repay credits for modernization contracted in the 1980's. (Warsaw PAP in English 1906 GMT 26 Feb 94 AU) EUROPEAN COMMISSION HELPS POLISH AGRICULTURE: The council of the Agroline program, which is financed by the European Commission, has decided to appropriate extra an 19 million ECU for credits for Polish agriculture, program director Urszula Budzich said. The council agreed to open the so called "packages of credits" that are to be appropriated for the purchase of agricultural equipment and machines. Dealers offering agricultural equipment that is produced in Poland, the European Union and countries that take advantage of the PHARE (Poland and Hungary Action for Restructuring the Economy) program will be involved in this action, Budzich said. (Warsaw PAP in English 1830 GMT 27 Feb 94 AU) CONSTRUCTION MINISTRY RELEASES DATA FOR 1993: According to data released by the Construction Market Department at the Ministry of Physical Planning and Construction, private construction firms accounted for 84 percent of the basic production of construction enterprises and employed almost 70 percent of the construction industry work force in 1993. Investment outlays of enterprises rose by 18 percent in 1993 compared to the previous year, chiefly as far as the purchase of equipment and transport means were concerned. In 1993 people received keys to 85,900 apartments, 35.4 percent fewer than the 1992 figure. According to Central Statistical Office data, 707,000 persons were employed in the construction industry between January and September 1993. The average monthly pay in the sector was 3,777,000 zlotys (around $174), and the number of unemployed rose from 236,000 in 1992 to 252,000 in 1993. (Warsaw PAP in English 2103 GMT 27 Feb 94 AU) URSUS TRACTOR FACTORY SIGNS DEAL WITH CREDITORS: On 28 February, the Ursus tractor factory signed an agreement with 1,800 creditors under which the latter agreed to cancel 40 percent of the plant's debt exceeding 2 trillion zlotys (about $92 million). The factory will pay the debt's remaining part in five years, with a one-year grace period, the factory's deputy financial director Wlodzimierz Tylman told journalists. He explained that the factory would pay back its debts to about 1,000 smaller creditors within two months, as soon as the agreement comes into force. From the second quarter of 1995 on, the factory will start paying back 90 billion zlotys quarterly to the creditors, including the State Treasury, which joined the deal. The business plan prepared for the plant shows that it will be able to carry this burden, the deputy director assured. The negotiations with creditors have lasted since May 1992 and their success was determined by a good recovery program prepared for the factory. The Ursus plant is now increasing its production, paying its current liabilities, and winning new foreign markets, Tylman said. (Warsaw PAP in English 1710 GMT 28 Feb 94 AU) NATIONAL BANK WANTS THREE BANKS DECLARED BANKRUPT: The president of the National Bank of Poland (NBP) on 28 February suspended the operation of two cooperative banks and the Wroclaw-based Dolnoslaski Bank Gospodarczy SA (Lower Silesian Economic Bank Inc.), and filed motions with the respective provincial courts to declare their bankruptcy. During the suspension, the three banks are to deal only with liabilities connected with deposits, current accounts and refinance credit. The NBP president also ordered the liquidation of the Poznan-based Merkury Bank SA through its sale to Pierwszy Komercyjny Bank SA (First Commercial Bank Inc.) in Lublin. The Lublin-based bank is to take over all the liabilities and of Merkury. (Warsaw PAP in English 1755 GMT 28 Feb 94 AU) RUSSIAN COMPANY TO SUPPLY CARS FOR WARSAW SUBWAY: After several months of negotiations, the Kolmex Polish foreign trade enterprise on 28 February signed a contract with the Vagonmash firm of St. Petersburg for the supply of 32 coaches for the Warsaw subway between June and August 1994, Warsaw City Hall announced. Payment for the coaches, accounting for 70 percent of the contract's value, will be balanced with Polish goods. (Warsaw PAP in English 2037 GMT 28 Feb 94 AU) INFLATION SAID SCARING FOREIGN INVESTORS: There are foreign investors who are willing to invest hundreds of millions of dollars in Poland, but they are afraid of high inflation, government bureaucracy, and a poor flow of information, Marc Popiolek of the Financial Dynamics Public Relations Agency told a press conference in Warsaw on 28 February, while presenting the results of an opinion poll answered by Europe's biggest banks and investment funds. In the opinion of 16 percent of the respondents, the prospects of the Polish economy are exceptionally good. Some 75 percent considered them good, 8 percent as not bad and only 1 percent as bad, Popiolek added, stressing that the latter group had never been to Poland. According to Popiolek, 90 percent of the respondents considered the political situation in Poland as stable. "Investors complain of difficult access to data concerning the Polish companies listed on the Warsaw stock exchange," Popiolek said. Only 5 percent receive this information regularly, 38 percent receive it irregularly, and 57 percent do not get it at all." In Popiolek's opinion, Poland has an advantage over the Czech Republic and Hungary of being bigger and having a larger population, as all investments are much more profitable when there is a bigger market. Hungary is perceived in the west as a country in a political mess, he added. (Warsaw PAP in English 2041 GMT 28 Feb 94 AU) RENOMINATION OF ZLOTY POSSIBLE NEXT YEAR, NBP PRESIDENT SAYS: NBP president Hanna Gronkiewicz-Waltz confirmed on 1 March that she wants the renomination of the Polish zloty to be held early next year. Speaking on Radio Eska, the NBP president said that the postponement of the zloty renomination has also had positive effects, as it has given people a chance to get used to the idea. She added that the operation should be well-prepared, which requires a close cooperation of the NBP with all interested ministries and institutions. She did not rule out that the NBP could allocate an additional 1 trillion zlotys ($46 million) to finance the budget deficit if the inflation rate did not exceed 20 percent in the mid- 1994. Gronkiewicz-Waltz said that the Polish banking system was facing a crisis at present caused by a faulty tax system, among other factors. (Warsaw PAP in English 1021 GMT 1 Mar 94 AU) WALESA, NBP PRESIDENT DISCUSS CRISIS IN BANKING: On 1 March, President Lech Walesa NBP president Hanna Gronkiewicz-Waltz and the bank's first deputy president Witold Kozinski, who briefed him on the current crisis situation in the banking system and necessary measures to overcome it. Gronkiewicz-Waltz and Walesa shared the view that the delay in appointing a new finance minister was disadvantageous for the functioning of state organs. The president warned against a relaxation of the financial policy, which is a significant element of the success of the Polish reforms. (Warsaw PAP in English 1231 GMT 1 Mar 94 AU) POLISH, HUNGARIAN AGRICULTURAL MARKET AGENCIES COOPERATE: On 1 March, the head of the Polish Agricultural Market Agency Kazimierz Gutowski and the head of the Hungarian Office for Market Regulation Laszlo Rieger agreed in Warsaw to exchange current information and experience, the agency spokesman said. He added that the talks between the two men focused on the forms, scope and sources of financing intervention activities on the agricultural market. The two stressed that the intervention in both countries concerns, above all, grain, meat and diary markets, although the mechanisms fixing intervention prices are different. The cooperation is to embrace issues related to granting credits to firms, the activities of which stabilize the agricultural market. (Warsaw PAP in English 1621 GMT 1 Mar 94 AU) NATIONAL BANK RELEASES 1993 TRADE FIGURES: Polish exports in 1993 amounted to $13.585 million, while imports reached $15.878 million, according to figures released by the National Bank of Poland on 17 February. This results in a trade deficit of $2.293 million, which was the main reason for Poland's negative balance of payments in 1993. Earnings from exports in 1993 were 2.9 percent lower than in 1992, while payments for imports were 17.7 percent higher. The deficit in trade was mainly the result of a strong growth in the domestic economy combined with continuing recession in Western Europe, Poland's most important export market. (Warsaw PAP in English 1700 GMT 17 Feb 94 AU) INFLATION SLOWS, UNEMPLOYMENT GROWS: The fall of monthly inflation to 1.6 perceiit was among the brightest spots in January's economic statistics, according to the Central Office of Planning. The most worrying trend was growing unemployment, which increased by 75,000 people or 2.4 percent. Other positive developments last January were a high production growth (by 9.6 percent compared to January, 1993) and a small budget deficit (0.5 trillion zlotys or about $23 million dollars). The most important threats to economic growth at the present time are growing unemployment, a decline in the volume of bank credits available to enterprises, and an accelerating decline in housing construction and an increase in social tensions, said the planning office. It also reported that real wages last January were higher by 3.6 percent compared to a year ago. (Warsaw PAP in English 1733 GMT 17 Feb 94 AU) UNEMPLOYMENT REACHES 2.9 MILLION IN JANUARY: The number of unemployed stood at 2.9 million in January, up 2.4 percent on the December figure, according to the Central Statistical Office (GUS). In January, the rate of unemployment was 16 percent, an increase of 1.9 percent on December. According to deputy labor minister Jerzy Szreter, the rise in unemployment probably had a seasonal character and should be halted in March. However, he feared that the anticipated number of unemployed of 3.05 million at the end of 1994 might become reality unless more money was allocated for active forms of combating unemployment. Unemployment rose in 48 provinces in January, with the highest growth in Chelm (by 6.3 percent) and Krakow (5.3 percent) provinces. The highest rate of unemployment was recorded in Koszalin province (29.3 percent) and Suwalki province (28.9 percent), the lowest in Krakow province (7.6 percent) and Warsaw province (7.9 percent). (Warsaw PAP in English 1836 GMT 15 Feb 94 AU) FSO, GENERAL MOTORS DISCUSS COOPERATION: The FSO car plant and General Motors, who have signed an agreement to produce Opel Astra cars in Poland, are now developing their cooperation in order to start the assembly of U.S. cars in Warsaw, FSO spokesman Andrzej Smolinski said on 17 February. Representatives of GM, the leading firm in the production of car parts, Inland Fisher Guide, visited the Warsaw factory to discuss the details of cooperation. Also, a GM delegation headed by its deputy president, David Harman, was in Warsaw a few days ago. (Warsaw PAP in English 1947 GMT 17 Feb 94 AU) LOT AIRLINES REPORTS OPERATING NET FOR 1993: For the first time in three years, LOT Polish Airlines has scored a net profit from its 1993 operations. The net profit amounts to 63 billion zlotys (about $3 million) and was achieved without any government subsidies. LOT was losing on its domestic connections but made up for the losses with its European connections, especially those with Vienna, Paris and London. Regular flights to and from London will most likely be resumed on March 28, when the summer timetable takes effect. LOT is also expected to reach a final agreement on strategic cooperation with one of the major U.S. airlines. (Warsaw PAP in English 2201 GMT 19 Feb 94 AU) DANISH BUSES ASSEMBLED IN KOSZALIN: An assembly shop for Danish DAB buses was opened in Koszalin on 10 February. This is the first DAB assembly line outside the company's main factory in Silkeborg. The first five buses have been bought by Koszalin city transport. Eight buses will be assembled during this year. In three years time, 150 buses will leave the factory each year. (Warsaw PAP in English 201 GMT 10 Feb 94 AU) CANADIAN FIRM TO ACQUIRE SHARES IN GLASS WORKS: The Toronto- based International UNP Holdings Ltd. holding company will buy 53 percent of the shares in the "Antoninek" glass works, near Poznan. The state treasury will keep 47 percent of shares. Negotiations should be concluded in two months' time on the subject of an agreement on transforming "Antoninek" into a limited liability company. The Canadians will invest 56 billion zlotys (about $2.6 million) in the modernization of "Antoninek," improving the quality of its products and management system, and marketing. They agreed that the management of the future company would be Polish. The 300 workers of the glass works have their jobs guaranteed for 36 months, the previous agreement on wages, housing and social funds will also be maintained. The workers will probably have a right to buy 8 percent of the shares in "Antoninek." (Warsaw PAP in English 1158 GMT 11 Feb 94 AU) GOVERNMENT CHANGES BUDGET, AGREES TO HIGHER SPENDING: On 11 February, the government presented its own amendments to the 1994 budget, deciding to increase budgetary revenues and expenditure by 3 trillion zlotys ($129 million) each. The cabinet approved the amendments, envisaging increased spending on science, culture and education. According to the new draft budget, state revenues would amount to 613 trillion zlotys and expenditure to 696 trillion zlotys. The budget deficit would stay the same -- 83 trillion zlotys. Some 1.4 trillion zlotys coming from foreign assistance will go to the Foreign Ministry. The Agency for Agricultural Restructuring and Modernization will receive 808 billion zlotys, 297 billion will go to the government reserve, 200 billion will go on research programs, the culture ministry and university education will receive 100 billion zlotys each, regions with a high rate of unemployment will receive 70 billion, local government districts 27 billion, and the remaining 12.6 billion will go the state treasury reserve. The increase in revenues is the result of higher profits of the National Bank of Poland, totalling 1.6 trillion zlotys and a new foreign aid payment from the German Government, totalling 1.4 trillion zlotys. The government is also expecting bigger revenues from taxes such as excise tax, but these would be balanced by lower revenues from excess wage tax. To balance the losses the government decided to increase excise tax on cigarettes by 17,000 zlotys per 1,000 cigarettes. (Warsaw PAP in English 1307 GMT 11 Feb 94 AU) AGRICULTURAL-INDUSTRIAL BANK COMMENCES OPERATIONS: The Bank Rolno-Przemyslowy SA (Agricultural-Industrial Bank) inaugurated its work on 11 February with an initial capital of 170 billion zlotys (about $7.82 million). Bank President Dariusz Ledworowski told a news conference that the bank's main aim would be to finance agriculture-related industries. The bank has no license for international transactions at the moment, so it will be represented by the bank of exports development if necessary. Polish Foreign Minister Andrzej Olechowski stressed that the establishment of the Agricultural-Industrial Bank was the best form of assistance for the Polish economy granted by the European Union, as it provided capital, which Poland was short of. Representative of the European Commission Rolf Moehler said he hoped the Bank would help organize an effective food-processing industry in Poland and consolidate Poland's links with the European Union. (Warsaw PAP in English 2009 GMT 11 Feb 94 AU) POLISH, GERMAN DISTRICTS SIGN COOPERATION PACT: The union of municipalities in the western coastal region of Pomerania and a similar union on the German side, including towns in Mecklenburg- Vorpommern and Brandenburg, signed an agreement on cooperation in tourism, economy, and ecology in Szczecin on 12 February. The Polish and German municipalities are going to establish a Polish- German trans-border organization called "Pomerania," comprising the regions involved and, later, also the Danish island of Bornholm and southern Skania in Sweden. (Warsaw PAP in English 2102 GMT 12 Feb 94 AU) POLISH-RUSSIAN BUSINESS INFORMATION CENTER: The "Inicjatywa" ("Initiative") Center of Information and Business was opened on 15 February at the Russian Center of Science and Culture to support Polish firms interested in investing on eastern markets and in cooperation with firms in the former Soviet republics. (Warsaw PAP in English 2132 GMT 15 Feb 94 AU) ROMANIA NEW BANK OFFERS BUSINESS OPPORTUNITIES: Scheduled for 1 March 1994, the opening of the Bucharest office of the Romanian Inter- Denominational Bank [BIR] will offer new business opportunities in Romania. Founded by the International Ecumenical Center, the bank has among its other founders representatives of all the officially recognized denominations in Romania, private persons and corporate bodies from all over the world. "Just a few years from the fall of communism, this banking institution, the only one of this kind in the world, will tell mankind about the strategic and geographical place of Romania as a bond between East and West, between Christianity, Islam, and Judaism," said Ion Popescu, president of the BIR and director general of the International Ecumenical Center. In his view, "there are plenty of reasons to make the Romanian Inter-Denominational Bank a vanguard institution in Romania and a pleasant surprise for financial-banking circles." (Bucharest ROMPRES in English 0940 GMT 25 Feb 94 AU) PROSPECTS FOR TOURISM IN 1994: "The privatization plans for the tourist industry in Romania were hampered in 1993 by financial blockage, which affected most of those involved in the privatization program and by the absence of firm legislative measures," Minister of Tourism Dan Matei told VOCEA ROMANIEI, the government's newspaper. Nevertheless, the tourist assets that passed into private hands last year stood at 22 percent of the total sold to private entrepreneurs in Romania. The percentage includes eight hotel compounds, 20 hotels, six motels, 85 lodges, 25 mountain lodges, and 33 restaurants, totaling 9.6 billion lei. Sixteen tourist ventures were listed for privatization through sale to their own employees. Another 27 joint ventures were achieved with a joint foreign capital contribution of $118 million and investment requirements of $250 million. Local investors took over 14 joint ventures with a total of over 10 billion lei in capital. The recently established restructuring agency gives hope for a faster privatization process, the minister said. With another 52 tourist companies to be privatized in 1994, state ownership in the tourist sector will be reduced to a half by the end of this year, the same source reported. (Bucharest ROMPRES in?English 1000 GMT 25 Feb 94 ? AU) SPAIN RANKS EIGHTH AS INVESTOR IN ROMANIA: "Spain is currently the eighth largest investor in Romania. The investment totals $35 million and belongs to important companies," Antonio Ortiz, Spanish ambassador to Bucharest said. He added that the Spanish Telefonica company had set up a joint venture with Romtelecom for the development of cellular telephone communications on the Constanta- Bucharest-Brasov connection. "It is an important investment and we hope to mark progress in step with the advance of the economic reform" the diplomat said. (Bucharest ROMPRES in English 1012 GMT 28 Feb 94) COOPERATION WITH LATIN AMERICAN STATES: Talks conducted over 17- 27 February by a delagation of the Romanian Ministry of Trade in several Latin American Countries have led to the signing of numerous cooperation contracts in such fields as car and farm machinery manufacturing, oil processing, iron metallurgy and transportation. The sides agreed on the supply of "Romanian products worth some $4.3 million to Venezuela, such as Aro four-wheel drive cars, tractors and machine tools," according to Romanian Minister of Trade Cristian Ionescu. The Venezuelan side showed interest in the manufacturing of Romanian coaches and buses and in iron ore processing. Prospects exist for several joint ventures. Interest was also shown in the Venezuelan oil processing for which "a diagram is needed for a period of at least five years to ensure supply continuity and to cover the demands of the petrochemical industry," the Romanian minister said. The visit to Colombia ended with the signing of a $26 million contract for assembly works of Aro four-wheel drive cars in that country, and the Colombian side showed interest in the idea of establishing several joint ventures in iron metallurgy, in rolling stock, and in chemical products and machine tools. Under the same contract, some 6,000-7,000 Dacia cars are also to be supplied to Colombia in 1994. The sides also agreed on the opening of a direct Bucharest-Bogota air route in cooperation with Colombia's Avianca Airlines. Brasilia showed interest in Romanian oil and raw sugar and also in the purchase of Romanian Aro four-wheel drive cars, coaches and trucks, according to Cristian Ionescu, who also added that another clearing bilateral agreement was signed during the visit to that country. (Bucharest ROMPRES in English 0744 GMT 1 Mar 94 AU) FPS LEADER VIEWS PRIVATIZATION PROSPECTS: In connection with the State Property Fund [FPS] privatization program for 1994, Emil Dima, chairman of the FPS Administration Board, said that by the end of 1993, after only seven months of FPS actual operation, 270 companies had been privatized, of which there were more than 100 in December. Six hundred more are ready to go private, while about 250-270 are in the process of drawing up the required survey. We expect some 1,900 small companies, over 400 medium ones and 35 large companies to be privatized in 1994. According to the fields of activity, privatization features: 280 small companies in industry, 1,036 in farming, 131 in the food industry, 141 in transportation, 100 in building, 215 in trade, and 27 in tourism. The medium-sized companies to be privatized are: Industry -- 193 companies, farming -- 19 companies, the food industry -- 60 companies, transportation -- 25 companies, building -- 42 companies, trade -- 52 companies, tourism -- 12 companies. The large companies expected to go private this year amount to 35: 11 in industry, 18 in farming, 11 in the food industry, 1 in transportation, 2 in building, 1 in trade, and 1 in tourism. (Bucharest ROMPRES in English 0939 GMT 1 Mar 94 AU) IFABO OPENS IN BUCHAREST: IFABO Bucharest 1994 is the first major technical-economic fair in Romania's capital, specialized in computer technology, telecommunications, and office equipment. It is the result of cooperation between the Austrian Messe Wien company, organizer of major international fairs and congresses, officially represented in Romania by the Export Consult Company and the Bucharest Romexpo Commercial Company. IFABO in Bucharest is the first of a series of specialized annual fairs in one of the most dynamic fields of the modern economy: Computer technology, telecommunications, and office equipment. IFABO Bucharest 1994 meets all the world standards from a technical point of view. Covering 2,400 square meters, 50 companies are presenting the modern equipment of prominent companies in Austria, Denmark, France, Germany, Italy, Great Britain, the United States and others. (Bucharest ROMPRES in English 1045 GMT 1 Mar 94 AU) MODERNIZATION OF BUCHAREST AIRPORT: Bucharest-Otopeni International Airport, Romania's main air gate, will soon have a major face lift. Modernization is expected to affect not only the airport building but also the 760 hectares of runways and parking lots, and will be done by the Romanian-Italian Ital-Strade-CCCF company, winner of the 1991 tender. Only 18 km away from the capital's center, Bucharest-Otopeni International Airport, built in the 1960s, was well regarded at the time from a technical point of view, as well as in terms of its traffic volume. After 1989, when many airlines considerably increased the number of flights to Bucharest, the Bucharest-Otopeni International Airport had to start modernization and increase its passengers and cargo volume. Top technology for air traffic control and surveillance was introduced with repairs and modernization on the airport's runways and parking lots. A new cargo area is being built, while a new wing to improve departure flow and a terminal for viewing airplanes are under construction. The modernization of airport services, the improvement of specific equipment and buses, the training of staff, and the pleasant atmosphere all led to traffic through the Bucharest-Otopeni Airport increasing to some 2 million passengers in 1993. (Bucharest ROMPRES in English 0811 GMT 2 Mar 94) SHIPPING COMPANY SEVERELY HURT BY FRY EMBARGO: The Danube River Shipping Company in Giurgiu, 150 km south of Bucharest, suffered losses amounting to over $7 million in 1993 because of the UN sanctions against Yugoslavia, company director Stan Bone told the press. The company was forced to turn down several shipping contracts because transiting through this country has become very difficult and expensive, as every convoy must have a UN permit and must pay a substantial fee imposed by the Serbs. (Bucharest ROMPRES in English 1806 GMT 17 Feb 94 AU) RESTRUCTURING OF TEXTILE, LEATHER INDUSTRIES: Some 6-7 percent of the 376 state-owned companies operating in the textile and leatherware industries are scheduled to be closed down in 1994. The decision was announced by Secretary of State Sabin Virgiliu Adrian. The restructuring strategy, which is to be submitted to the government for approval in March, provides for the growth of the companies own development fund by raising their profit quota. It also provides for exporting enterprises to have access to low- interest credits, and for bonuses for companies capable of having local raw materials and semi-finished goods account for 70 percent of their export products. The total cost of restructuring the state-run companies over the 1994-96 period will amount to 175 billion lei (about $118 million), which will be raised mainly from internal and external credits. For the second stage of restructuring, from 1996 to 2000, credits worth 70 billion lei (about $47 million) are envisaged. (Bucharest ROMPRES in English 1949 GMT 17 Feb 94 AU) TRADE WITH AFRICA, MIDDLE EAST: In 1993 Romania's exports to countries in Africa and the Middle East amounted to $660.43 million and imports were $732.54 million, according to Constantin Soare, head of the Africa and Middle East Department of the Ministry of Trade. Although imports outgrew exports by some $72 million dollars in 1993, he emphasized that there is a conspicuous trend toward balancing the trade deficit, despite the sharp decrease in the export of elaborate projects, compared with the situation before 1989. Soare mentioned that Romanian exports to that area consist mainly of metallurgical products, chemical fertilizers, sodium products, timber, cement, window-glass, plastics, electric engines and generators, and household items, while imports primarily consist of raw materials: crude oil, phosphates, manganese ore, natural rubber, coffee, and so forth. The Trade Ministry official added that commercial agreements were signed in 1993 with Tunisia, Zambia, and the United Arab Emirates and that sessions of joint cooperation commissions were organized with Tunisia, Zambia, Israel, Iran, the South-African Republic and Jordan. Constantin Soare also said that negotiations went on in 1993 to ensure the repayment of Egyptian debts to Romania. Debts worth some $0.253 million were retrieved from Guinea, through the import of cocoa beans -- an action that will continue in 1994 -- while a timetable was agreed with the Zambian authorities for negotiations on the settlement of the bilateral financial issues; Libya paid back debts worth $14.3 million and Iran $22.6 million in crude oil. (Bucharest ROMPRES in English 0803 GMT 18 Feb 94 AU) INDUSTRIAL OUTPUT INCREASES IN JANUARY: Romania's industrial output increased 1.8 percent in January 1994 compared with December 1993 and 6.6 percent compared with January 1993, while consumer prices increased 4.9 percent, according to a recently released report. Prices for edibles increased 3.9 percent, for non-edibles 5.7 percent, and for services 6.1 percent. (Bucharest ROMPRES in English 0755 GMT 21 Feb 94 AU) S. KOREAN FIRM TO MODERNIZE PRAHOVA COMMUNICATIONS: Romanian Prime Minister Nicolae Vacaroiu received Jang Ito Chung, president of the Korean Goldstar Information and Communication Ltd., in Bucharest on 21 February. Positively assessing the results of the Romanian-Korean cooperation in telecommunications, the Romanian premier said Romania needed assistance in this important economic sector. He estimated that Romanian-manufactured products under Goldstar license would be quite successful on the Eastern European markets. A contract was signed with the Romanian Public Telecommunication Company on 22 February in Bucharest on updating the telecommunication system of Prahova County. (Bucharest ROMPRES English 1905 GMT 22 Feb 94 AU) MACHINE-BUILDING INDUSTRY REVERSES DECLINE: After a continuous decline over three years in a row, 1993 brought a positive course at macro-economic level as an effect of revival of certain industrial branches, a report of the National Statistics Board shows. With its over 300,000 employees, the machine-building industry, one of the basic branches of Romanian industry, has contributed 1.2 percent to industrial growth in 1993. The material production rose, compared to the 1992 level, in the tractor, truck, automobile, and all- terrain cars manufacturing. Although on the rise compared to 1992 figures, industrial production is still below the level of 1989. For example, the 1993 production of machines and equipment represents 107.2 percent compared to 1992, but merely 50.5 percent as compared to 1989. (Bucharest ROMPRES in English 0911 GMT 10 Feb 94 AU) ECONOMIC DECLINE STOPPED IN 1993: "The results of Romanian industry in 1993 are better than those in the previous year, but, as a whole, industry is far from flourishing," Romanian Minister of Industries Dumitru Popescu admitted in a recent interview. The constantly positive evolution of industry in 1993 as compared to 1992 had only one merit: That of having stopped the economic decline, as pledged by Prime Minister Nicolae Vacaroiu's cabinet, Popescu assessed. Industrial production in 1993 rose by 1.3 percent as compared to 1992, labor productivity by 8 percent, and the industry's share in the trade balance stood at $3.7 billion, that is, 80 percent of the whole. "The elaboration of the programs for the restructuring of each sector and sub-sector was already concluded in 1993," minister Popescu said. (Bucharest ROMPRES in English 0938 GMT 10 Feb 94 AU) FOREIGN TRADE DEFICIT SHRANK IN 1993: In 1993 Romania's exports for hard currency were worth $4,527.4 million, which means a 5.6 percent rise over the previous year. Imports for hard currency stood at $5,238.9 million recording a 3.6 percent drop as compared to 1992, daily TINERETUL LIBER informs. Thus the trade deficit amounted to $711.5 million, which is $435.9 million less than in 1992. The structure of exports by main groups of goods was generally similar to that of the previous year: About 95 percent are industrial goods, such as metallurgical products, chemicals, machinery and equipment, textiles, ready-made clothing, and leather products. More than half of the imports were products needed to keep the economy running. (Bucharest ROMPRES in English 1632 GMT 10 Feb 94 AU) MONEY SUPPLY GREW IN 1993: The money supply in Romania rose in 1993 by over 103 percent, reads the weekly ECONOMISTUL citing official reports. In 1993 the money supply reached a high of over 3,800 billion lei. The memorandum on economic policies agreed with the IMF provides for a tight control of the money supply as one of the weapons included in a global anti-inflation program. Official reports say that about 30 percent of the money supply is represented by hard currency funds held by natural persons residing in Romania. The bolder tendency of the recent weeks toward an increased liberalization of the leu's exchange rate shows an effort to curb the "dollarization" process of the Romanian economy, assesses ECONOMISTUL. (Bucharest ROMPRES in English 1310 GMT 11 Feb 94 AU) PREFERENTIAL FINANCING TO ENCOURAGE EXPORTS: On 14 February the National Bank of Romania opened new preferential credit lines for exporters, a measure intended to stabilize the exchange rate of Romania's national currency. Companies exporting a part of their production will be offered credit lines totalling some 40 billion lei, with an interest rate of 70 percent. The preferential financing will further rise to several hundred billion lei, while a part of the costs would come to be supported by the Eximbank and the state budget, so that exporters will actually have to pay even lower interest rates, namely 50 or even 40 percent, said Romanian National Bank Governor Mugur Isarescu. Preferential financing stimulates production, says the governor, including the export-oriented production, but the way to do that is not to subsidize the interests paid for loans, but rather that to increase the capital of the efficient companies. The reason for that is quite simple: Without a really positive interest rate, it is practically impossible to stabilize the exchange rate of the national currency against the dollar. However, the companies do not even want to hear of more expensive loans, because their capital is very small, which compels them to borrow up to 80 percent of the money they need in order to function. When the situation reverses, people will trust the leu more, daily ADEVARUL writes. Actually, the process has already begun. The Bucharest branch of the Romanian Commercial Bank alone is buying U.S. dollars from the population at a daily average rate of about $100,000. A few days ago in Bucharest an exchange house sold dollars at an exchange rate of 1,460 lei, which is below the inter-bank rate of 1,480 lei, an event that has not occurred since 1989. (Bucharest ROMPRES in English 0947 GMT 15 Feb 94 AU) GERMAN ENVOY VIEWS POSITIVE ECONOMIC TIES: In an interview granted to daily VOCEA ROMANIEI, Anton Rossbach, Germany's ambassador to Bucharest assessed Romanian-German relations as "good and without major problems," after which he pointed out that over the past two years Germany was Romania's most important trade partner: "In 1992, Germany covered about 11 percent of the Romanian total exports, being, at the same time, the major supplier, with 13 percent, of Romanian imports. This positive trend continued in 1993 as well, when between January and November Germany held 14 percent of Romanian exports (worth $569 million) and 16 percent of its imports (worth $815 million). Rossbach assessed that German investments in Romania could grow further if the issue of the right to land property were settled in favor of foreign investors. (Bucharest ROMPRES in English 1336 GMT 15 Feb 94 AU) SLOVAKIA NATIONAL BANK BONDS RECEIVE 'BB' RATING: The U.S. rating agency Standard and Poor's has given the Slovak National Bank a rating of BB for its public issue of bonds. This means that Slovakia is the third former CEMA country -- after the Czech Republic and Hungary -- to achieve such a rating. According to National Bank Governor Vladimir Masar, the rating confirms that the republic has managed to achieve macroeconomic stability. "This is an extraordinarily important step from the point of view of Slovakia's incorporation into the international financial community," he said. (Bratislava REPUBLIKA in Slovak 16 Feb 94 p 2 AU) JOINT ENTERPRISES TO BE ESTABLISHED WITH CHINA: The Martimex Martin shareholding company is ready to establish three joint Slovak-Chinese enterprises to assemble earth-moving and road- construction equipment manufactured by the ZTS Turcianske engineering plant in Martin. The components will be imported into China and assembled there. The Chinese capital should amount to roughly $2.0 million. The annual turnover for the Slovak plants could amount to 300-400 million korunas (Sk). (Bratislava REPUBLIKA in Slovak 16 Feb 94 p 3 AU) JOINT ENTERPRISE FORMED WITH GERMAN COMPANY: Representatives from the German Contitech company and the Slovak Vegum Dolne Vestenice shareholding company signed an agreement on a joint venture on 15 February. The agreement involves the establishment of a joint enterprise to produce sealing sections and frames. The joint enterprise has basic capital of Sk57.782 million. Pressing and rubber-metallic products for the automobile industry will be manufactured in the enterprise, which employs 400 people. (Bratislava HOSPODARSKE NOVINY in Slovak 16 Feb 94 p 2 AU) AGRICULTURAL TRADE WITH FRANCE SK13O MILLION IN 1993: Trade in agricultural products between Slovakia and France in 1993 amounted to roughly Sk130 million. Slovakia imports mainly fish, soya, and breeding livestock from France. Slovakia mainly exports beer, hops, and food products to France. (Bratislava HOSPODARSKE NOVINY in Slovak 16 Feb 94 p 2 AU) FRANCO-SLOVAK CHAMBER OF COMMERCE ESTABLISHED: A Franco-Slovak Chamber of Commerce was established on 16 February. The new organization plans to assist in developing relations between small and medium-sized companies in France and Slovakia. It will provide information and documentation services as well as a consulting service, and will publish economic and information bulletins. The Chamber is based in Bratislava. The chairman of its administrative council is Vladimir Valach. (Bratislava HOSPODARSKE NOVINY in Slovak 17 Feb 94 p 1 AU) MILLIONS OF DOLLARS DEPOSITED ABROAD ILLEGALLY: According to financial experts, capital amounting to several hundred million dollars has been taken out of Slovakia illegally and deposited in banks in Austria and Germany. (Bratislava NARODNA OBRODA in Slovak 17 Feb 94 p 12 AU) JOINT ENTERPRISE ESTABLISHED WITH AUSTRIAN COMPANY: An Austrian company, Rohrig Neudorf, has entered into a joint enterprise with Plasmet Vrable, which is part of the former Tesla Vrable company. The Austrian company's involvement includes a direct investment of Sk1O.5 million and a subsequent investment of Sk35 million to purchase new equipment. A further investment of Sk3.O million will be used for repairs to Plasmet's premises. The joint enterprise will create 50 jobs this year. The company will manufacture metallic molds. (Bratislava NARODNA OBRODA in Slovak 17 Feb 94 p 13 AU) BELGIAN FIRM ACQUIRES MAJORITY STAKE IN ZILINA FIRM: Eurofoam, a subsidiary of the Belgian Rectitel company, has acquired 51 percent of the shares in the Zilina-based Poly company, which specializes in transforming polyurethane. Eurofoam is the new name of Schaumstoff- Chemie Holding, a joint enterprise founded in 1992 by Rectitel and its Austrian partner, Greiner. The privatized company Drevonabytok owes 49 percent of the shares in Poly. Eurofoam will invest two million Austrian schillings in new equipment. (Bratislava NARODNA OBRODA in Slovak 18 Feb 94 p 4) CUSTOMS ADMINISTRATION COLLECTS SK32 BILLION IN 1993: The Customs Administration collected more than Sk39.2 billion last year. Revenue from value-added tax amounted to more than Sk32 billion and the revenue from consumer taxes amounted to Sk2.1 billion. Customs duties amounted to Sk4.5 billion. (Bratislava REPUBLIKA in Slovak 19 Feb 94 p 2 AU) RUSSIAN FIRM BUYS SLOVAK AIRCRAFT ENGINES: The Russian Yakovlev company has decided to purchase the DV 2 aircraft engine from the engineering plant in Povazska Bystrica. It will use the engine for its YAK-130 training aircraft, which is not only intended for the CIS. (Bratislava SME in Slovak 19 Feb 94 p 3 AU) 210,000 HECTARES OF LAND TILLED BY PRIVATE FARMERS: According to estimates, private farmers in Slovakia till roughly 210,000 hectares of land. This is 12 percent of the overall acreage. Most people make their living from agriculture in the Komarno, Levice, and Galanta Districts and fewest in the Martin and Zilina Districts. (Bratislava SMENA in Slovak 21 Feb 94 p 2 AU) PRIVATIZATION OF SMZ JELSAVA MAGNESITE PLANT APPROVED: The government has approved a privatization project for the SMZ magnesite plant in Jelsava. It will be privatized by a direct sale to a shareholding company made up of its employees and management, who will own 51-percent of the shares. Almost 88 percent of the plant's employees are involved in the shareholding company. (Bratislava REPUBLIKA in Slovak 21 Feb 94 p 3 AU) FOREIGN CURRENCY RESERVES UPDATED: On 15 February 1994 the National Bank had foreign currency reserves of $330-350 million. Foreign currency reserves in the banking system as a whole amounted to $1.75-1.8 billion. (Bratislava HOSPODARSKE NOVINY in Slovak 22 Feb 94 p 2 AU) ACADEMY OF SCIENCES ISSUES REPORT ON ECONOMY: Following the breakup of Czechoslovakia, the Slovak Republic has maintained its level of price liberalisation and its trade relations, says a Slovak Academy of Sciences report commissioned by the United Nations. The report, written for the UN Economic Commission for Europe, says that although complications are appearing in Slovakia's transformation process, no significant political entity sees them as a reason to interrupt that process. Slovakia experienced a 3.7-percent drop in its gross domestic product [GDP], which the report's authors call "relatively favorable," as it was partly due to reduced industrial production responding to restricted domestic demand. Though the state budget was drawn up balanced, the government closed last year short Sk22.6 billion ($684 million), or 6.5 percent of GDP -- one of the factors in "a disturbance of the inner balance of the economy," the report continues. Slovakia's overall debt in convertible currencies rose to the equivalent of Sk2.9 billion at the end of 1993. The government accounted for 39 percent of that, the central bank for 31 percent, and commercial banks and businesses for the remainder. The government's net debt to Slovak banking institutions was estimated at Sk61 billion, and the public sector's growing indebtedness restricts banks and businesses and "prevents stronger support for restitution aims," the report says. Slovakia's balance of payments is tied to the Czech Republic's because of the two countries' high degree of interdependence. Stopping the "unfavorable development" in this area -- Slovakia's clearing account deficit reached Sk5.4 billion, the Czech National Bank reported -- will require measures to increase Slovakia's exports and decrease its imports with the Czech Republic. (Prague CTK in English 2118 GMT 23 Feb 94 AU) FOREIGN INVESTMENT IN REPUBLIC DECLINES: Direct foreign investment in Slovakia declined from $151 million in 1992 to $135 million in 1993. Overall foreign investment in the republic since November 1989 amounts to $366 million. The largest investor is Austria, which has invested $87 million in 1,141 companies between 1990 and 1993. It was followed by Germany with $77 million in 743 companies, the United States with $47 million in 161 companies, and the Czech Republic with $40 million in 666 enterprises. (Bratislava HOSPODARSKE NOVINY in Slovak 24 Feb 94 p 2 AU) OPTIONS MARKET RECORDS SECOND HIGHEST TURNOVER: Turnover on the Bratislava Options Market in the week beginning 21 February amounted to almost Sk96 million. This is the second highest figure since the introduction of one-day futures in the middle of last year. (Bratislava HOSPODARSKE NOVINY in Slovak 1 Mar 94 p 2 AU) REPUBLIC GRANTED CREDIT OF $33 MILLION: National Bank Governor Vladimir Masar and Japan Exim Bank Executive Director Yukinori Ito signed an agreement in Tokyo on 28 February on providing the Slovak Republic with credit of $33 million. The credit is to be used to support small and medium-sized businesses. (Bratislava HOSPODARSKE NOVINY in Slovak 1 Mar 94 p 2 AU) CONSUMER PRICES ROSE 16.7 PERCENT IN 1993: Consumer prices increased by an average of 16.7 percent in 1993, and the cost of living rose by 15.6 percent. The average consumer prices index was 113.1 for foodstuffs; 115.5 for non-foodstuffs; 127.7 in public catering; and 119.6 in services. During the same period, the average index among white-collar workers was 115.8. It was 113.6 for foodstuffs, 120.8 for beverages, 115.7 for non-foodstuffs, and 115.7 for services. The average index among farmers was 115.7. It was 114.1 for foodstuffs, 118.0 for beverages, 116.2 for non- foodstuffs, and 116.2 for services. The average index among pensioners was 114.2. It was 110.7 for foodstuffs, 121.0 for beverages, 116.5 for non-foodstuffs, and 115.7 for services. The prices of agricultural products in 1993 increased by 14.6 percent compared with 1992 and by 27.9 percent compared with 1989. Prices for plant products, including fruit and vegetables, increased by 14.6 percent in 1993 compared with 1992 and by 35.7 percent compared with 1989. Prices for animal products in 1993 increased by 10.6 percent compared with 1992 and by 22.2 percent compared with 1989. Prices for industrial products in 1993 rose by 14.5 percent compared with December 1992 and by 17.2 percent compared with the average for 1992. These figures were made available by the Slovak Statistical Office. (Bratislava SLOVENSKY DENNIK in Slovak 9 Feb 94 p 1 AU) REVENUE FROM TOURISM UP 13.0 PERCENT IN 1993: The estimated foreign currency revenue from tourism in 1993 increased by 13.0 percent and amounts to $241 million. These results, however, only take into consideration the revenue of businessmen registered in the Business Register, but not in the Tradesmen's Register. (Bratislava SME in Slovak 10 Feb 94 p 2 AU) TATRA AIR IN RED IN 1993: The Tatra Air shareholding company was 7.0 million korunas (Sk) in the red in 1993. This information was made available by its director general, Dusan Podhorsky. Some 6,610 passengers traveled with the company in 1993, and 660 tons of freight were transported. An analysis has indicated that the problem does not lie in the number of passengers, but in increased overhead, especially the cost of fuel and lubricants. (Bratislava REPUBLIKA in Slovak 11 Feb 94 p 2 AU) TAX EVASION COMES TO SK4.4 BILLION IN 1993: Tax evasion last year amounted to Sk4.4 billion. This is double the figure for 1992. However, the actual amount is probably higher. The authorities carried out 166,000 inspections in 1993. Some 94,000 were oriented toward income tax, more than 6,500 were oriented toward value-added tax, and some 16,000 were oriented toward employment tax. Most tax evasion involves consumer taxes, especially on alcohol and tobacco. (Bratislava REPUBLIKA in Slovak 11 Feb 94 p 3 AU) INSOLVENCY CAUSES SHORTFALL IN STATE BUDGET REVENUE: Arrears in income tax from legal persons amounting to Sk11.9 billion represented the largest shortfall in state budget revenue last year. Because profit taxes and employment taxes for previous years amounting to Sk5.7 billion were diverted to the budget, the overall shortfall is around Sk8.O billion. This situation was caused mainly by enterprises' secondary insolvency. The shortfall in value-added tax amounted to Sk3.0 billion; in consumer taxes to Sk4.7 billion; in income tax from physical persons to Sk2.4 billion; and in road taxes to Sk574 million. Some Sk1O.4 billion less than planned was diverted into the insurance funds. (Bratislava SME in Slovak 11 Feb 94 p 2 AU) FOREIGN INVESTMENTS AMOUNT TO SK11 BILLION: To date, foreign businessmen and investors have invested around Sk11 billion in Slovak enterprises. Investments increased by Sk4.0 billion last year. Capital has been invested in 5,143 organizations. The investment is under Sk100,000 in three-quarters of them. Only in 1.6 percent of these businesses have foreign businessmen invested more than Sk10 million. Almost one-quarter of investments come from Austria. It is followed by Germany and the United States. The Czech Republic is in fourth place with 12.9 percent. Most capital was invested in the K-Mart, Volkswagen, Chemlon, and Tatransky Permon shareholding companies and in the Henkel-Palma, Molnlycke, Samsong-Calex, Ludova Banka, Kablo, Credit Bank, Hoechst-Biotika, and LIAZ Velky Krtis limited companies. Most capital was concentrated in Bratislava, almost 59 percent, and in the Poprad, Hummene, Nitra, Stara Lubovna, Kosice-Environs, and Vranov nad Toplou districts. (Bratislava REPUBLIKA in Slovak 12 Feb 94 pp 1,3 AU) COMMERCIAL BANKS' CAPITAL AMOUNTS TO SK11.4 BILLION: Apart from the national bank, there are 16 banks in Slovakia, 14 of which are authorized to conduct general banking activities. The commercial banks' capital amounts to Sk11.4 billion. They have equity of Sk1O.4 billion, of which Sk1.4 billion -- that is, more than 12 percent -- comes from abroad. (Bratislava HOSPODARSKE NOVINY in Slovak 14 Feb 94 p 1 AU) NATIONAL BANK ISSUES FOREIGN CURRENCY PERMITS FOR INVESTMENTS: During the first nine months of 1993, the Slovak National Bank granted business entities more than 170 foreign currency permits enabling them to invest abroad. Some Sk187.5 million korunas were invested in joint enterprises abroad during this period. The Slovak National Bank also issued five permits for investments abroad in the form of shares worth Sk51 million. Most Slovak capital is invested in Ukraine, the FRG, and the Czech Republic. (Bratislava NARODNA OBRODA in Slovak 14 Feb 94 p 2 AU) DROPOFF IN APARTMENT CONSTRUCTION: The number of apartments under construction and completed last year declined compared with the previous year. Cooperative housing construction declined most significantly. According to an analysis by the Statistical Office, citizens prefer individual housing construction and their interest in modernizing apartments and in adding additions and extensions to houses and apartments has increased slightly. The number of completed apartments fell by 14 percent last year. Most new apartments were built in western and eastern Slovakia, while the fewest were built in Central Slovakia. (Bratislava PRAVDA in Slovak 14 Feb 94 p 3 AU) DOLNE VESTNICE FIRM TO COOPERATE WITH FRG COMPANY: Preparations are well under way in the Vegum Dolne Vestnice shareholding company for a joint enterprise with the German Contitech company. This year, they plan to produce foam rubber for the automobile industry and seals for pressure vessels worth at least Sk4O million. The agreement should be signed this month and the new company should commence operations on 1 April. (Bratislava SME in Slovak 14 Feb 94 p 14 AU) ELAG/23 March/ECONF/East Europe Division/ta 25/2007z mar

In January 1994 the Mongolian Government approved changes in the government structure, including the combining of ministries, merging of institutes, and incorporation of the MONTSAME News Agency into Government. The following changes and personnel assignments in response to these decisions were announced in the 1 February press. In mid-January 1994 major changes occurred in the structure of the Mongolian Government: the Ministry of Geology and Mineral Resources was abolished, its functions were amalgamated with the Ministry of Fuel, Power and Energy, and the Ministry of Power Power, Geology and Mining was established. In conjunction with these changes the Mongolian Government announced the appointments of D. Misha and D. Amgalan as deputy ministers of power, geology and mining at its 27 January 1994 meeting. At this meeting the Government also announced the decision to merge the State and Social Studies Academy, Leadership Development Institute and the Center for the Study of State Policy and Social Issues and create the State Administration and Leadership Development Institute effective 1 February 1994. T. Adiyaa, doctor of economic sciences and former head of a Leadership Development Institute department, was named director of the newly established institute. (Ulaanbaatar ARDYN ERH in Mongolian 1 Feb 94 pp 1, 2) At its 28 January 1994 meeting the Government assigned Minister of Defense S. Jadambaa and Minister of Finance D. Dabaasambuu the task of determining the managerial structure of the State Civil Defense Office, the Tax Administration, and the Custom Administration, revising and approving the wage funds and estimate of expenditure limitations, and appointing directors and deputy directors. In the process of preparing an organizational diagram, the government decided to subordinate offices, which had requested to belong to the substructure of the government, to ministries and offices of similar orientation. The Railroad Administration, the Civil Air Transportation Administration, and the Geodesy and Cartography Office were subordinated to the Ministry of Infrastructure Development, the State Social Welfare Office and the National Welfare Center to the Ministry of Demographic Policy and Labor, the Archives Administration and Detention Units Administration to the Ministry of Justice, and the Patent Office and the National Center for Standardization and Measures to the National Development Office. To comply with the law, the organizations of the Government will no longer be designated "subordinate to the Government" or "subordinate to a minister." Focusing on the subordination of the youth and sports organizations the same meeting passed a resolution to abolish the Committee for Youths and Sports effective 1 February 1994. It assigned to Minister of Demographic Policy and Labor E. Gombojab the organization and operation of the Office for Youths which the ministry's current staff will administer. The Minister of Health P. Nyamdabaa was charged with the responsibility of the Mongolian National Olympic Committee in line with the policy to develop sports as specified in Paragraph 19 of the Law Concerning the Government. The issuance of this resolution also called for the implementation of measures to improve the structure and organization of youths, physical culture and sports in rural areas. In conjunction with the inclusion of the MONTSAME News Agency in the government substructure C. Erdene was appointed its general director. (ARDYN ERH 1 Feb 94 p 2) (AUTHOR: MIAB/CISD. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, MILITARY/INTERNATIONAL AFFAIRS BRANCH, CISD (703) 733-6375.) ENEAG/28 MAR/POLCHF/CIS DIVISION/JF 28/1649Z MAR

SUMMARY The Government Work Report delivered by Premier Li Peng at the recent National People's Congress (NPC) in Beijing indicates that despite the resolve of party reformers to push ahead with senior leader Deng Xiaoping's new wave of market reforms they have yet to make significant progress in some of the most difficult areas of the reform agenda--price, investment, and enterprise reform. Although party reformers appear to retain the edge in pushing forward Deng's reform agenda, they will be hard pressed to find solutions to China's current economic problems that do not conflict with market principles and that will deflect political pressure coming from Deng's hardline opponents. END SUMMARY Delivered by Li on 10 March, the work report sought to portray Beijing as moving ahead on the far-reaching market reforms prescribed by the authoritative decision of the Third Plenum last November. Calling 1994 a year in which the Chinese economy has "continued to maintain its growth momentum" and an "important" year to "press ahead with reform," the report reaffirmed the course of comprehensive market reform charted by the plenum as the "general blueprint" and "program for action" for creating a "socialist market economic structure" (Beijing radio, 10 March). It went on to claim that fiscal and tax reforms, as well as reforms in investment, finance and foreign trade, had "in the main been promulgated" and are "proceeding quite smoothly." Modest Progress in Financial Reform In an apparent effort to demonstrate concrete progress in fulfilling some goals of the plenum, the work report emphasized recent changes in the method of financing the deficit--a first step toward transforming the People's Bank of China (PBOC) into an independent central bank along Western lines--and further reforms of the fiscal and tax systems that reduce the burdensome fiscal and welfare obligations of state enterprises. For example, the report declared that the government "will solve its deficit this year by issuing state bonds," giving "favorable treatment" to those who purchase them, and "will no longer make overdrafts from banks." Suggesting that reformers are already moving ahead in this area, a 10 March report in Zhongguo Tongxun She, a PRC-affiliated Hong Kong-based wire service, claimed that the PBOC recently refused a loan to the Ministry of Finance to clear the national debt. It went on to quote Politburo Standing Committee member and PBOC head Zhu Rongji as saying that "no bank should be treated as a teller or an accountant for the government." The work report also highlighted fiscal and tax reforms that were introduced after the plenum to ease the market transition of state enterprises by reducing their enormous financial and welfare burden. Echoing media commentary on tax reforms promulgated in January, the report declared that "beginning this year" the State Council will exempt state enterprises from taxes levied to finance energy and infrastructure projects and from the "budget regulatory fund." According to Jingji Ribao on 4 January, these financial obligations have accounted for 25 percent of enterprises' after-tax profits. The work report also pledged to "actively advance" social security reform, both to "ease the burden" of "social welfare projects" such as medical care and housing and to enable enterprises to "compete in the market on an equal footing." Suggesting that the government will exert greater pressure on unprofitable enterprises, the report announced that a "special fund" will be established to "consolidate bankrupt enterprises" and "reset tIe their workers." Slow Movement on Price, Investment Reform Despite these efforts to demonstrate progress in some aspects of the agenda pushed forward by the reformers, the report indicated that at least for now they have backed away from such controversial and potentially destabilizing proposals as price and investment reform. Apparently reflecting leadership concern over mounting inflationary pressures, the report took a considerably more cautious approach to price reform than the plenum last fall. It pledged simply to "appropriately adjust"- -that is, to increase by administrative fiat--the prices of grain, cotton, and energy "this year," a move that stands in sharp contrast to the plenum decision's statements on price reform. The decision stated that the "main tasks" in price reform are to further "decontrol the prices of competitive commodities and services" while "adjusting government-set prices" for only "some" prices and to "establish a mechanism in which prices are set mainly by the market." The decision also called for other price reform measures not reiterated in the NPC report, such as "abolishing the double-track price system for capital goods as quickly as possible" and "accelerating the marketization of the prices of production factors." Underscoring the leadership's concern that removing price controls now might spark social unrest, the report went on to warn that in carrying out price reform, officials must "consider the ability of enterprises and the masses to cope with the consequences" of reform. In an apparent reference to the sharp rise in grain and edible oil prices occurring late last year in major urban centers, the report pointed out that "special attention" must be paid to "controlling increases" in the prices of "basic consumer products" and services that are "closely related to the masses' daily lives." Similarly alluding to leadership worries over social discontent arising from the effects of price reform and fast growth, the report, and Renmin Ribao editorials on the NPC on 13 and 18 March, reiterated media slogans carried in PRC media since the first of the year warning that the push for "reform and development" must be balanced against the need for "social and political stability." The report also indicated that the leadership has backed away from the plenum's commitment to market-based reforms in the investment system, at least in the short term, falling back on traditional socialist measures to rein in what it said was the current "reckless" investment in capital construction projects. Although giving a nod to market-based principles that restrain irrational enterprise investment--a major component of the plenum-approved reforms--the report made clear that for now the leadership will rely primarily on efforts to fine tune the existing state bureaucracy to curb excessive and unprofitable capital expenditure. "This year," it said, investment reform will focus "mainly" on the establishment of a "National Development Bank"--one of several socialist style "policy- lending" banks mandated by the plenum to fund "major state construction projects according to a unified plan." The bank, it explained, will "provide a steady source" of investment funds and "check inflation and investment expansion through the balancing of capital." Similarly, the report reflected continued leadership reliance on administrative fiat to curb current investment excesses, falling far short of far-reaching plenum guidelines on investment outside the state planning sector. The plenum decision had stated that "competitive project investment" should be "decided by enterprises themselves" on the premise that they "bear any risk involved" and had called for the establishment "commercial banks" that would provide credit for such investment and would "assume sole responsibility for profits and losses." However, although the work report urged that "a [market] mechanism for restricting investment" be established by making "investors and banks responsible for investment risks," it went on to simply issue a series of administrative orders, declaring that the state "will not permit" investment capital to be derived from "diverting circulating funds or borrowing money," that new projects "must not begin before necessary funds are available," and that the state would "no longer approve the establishment of new development zones." Apparently reflecting these pressures on the leadership to resort to administrative measures to stem economic overheating, the government has already taken several steps to control inflation and excessive investment. A 1 March Renmin Ribao commentator's article stating that the State Planning Commission had promulgated new regulations to prevent price gouging was followed by the announcement of a nationwide "price inspection" to be carried out in March to "ease inflationary pressure" (China Daily, 8 March). Earlier in the year, during a financial work conference in January, Zhu Rongji also unveiled policies that impose strict limits on credit and investment (Xinhua, 19 January). Difficulty in Enterprise Reform Most likely reflecting these and other obstacles to more rapid reform, the work report implied that progress toward the enormously complex plenum goal of restructuring state enterprises into quasi-public corporations based on various types of share holding arrangements has not met reformers' expectations. Although pledging to "experiment" with new forms of enterprise organization as required by the plenum, the report echoed the cautious tone of Li Peng's remarks to a national economic work conference held shortly after the plenum (Xinhua, 1 December 1993), reiterating Li's observation that enterprise reform is "both the focus and the difficult part of reform" and emphasizing that creating a "modern enterprise system" is "complicated work." Suggesting that the leadership has not reached a consensus on the specifics of the new enterprise structure, PRC media since the plenum have carried a steady stream of articles advocating a variety of positions on share holding, managing state assets, leasing, and related issues. Implications The NPC work report's reaffirmation of the ambitious market-based reform goals approved by the Central Committee's November plenum suggests that party reformers retain the political edge in pushing forward senior leader Deng Xiaoping's aggressive policy agenda. At the same time, the report also indicates that the reformers have made little concrete progress in implementing this agenda and have resorted to traditional administrative means rather than market-based methods to control economic overheating. Inflation, unrestrained investment, and other potentially destabilizing consequences of the reform drive have again put the brakes on the pace of change and no doubt have given party hardliners an opportunity to challenge Deng's authority and restrict the pace and scope of his program. Although pressures to create a more stable and productive economic system through fundamental market reform still appear to favor the reformers' position, they will be hard pressed to find solutions to China's current economic and social problems that are consistent with marketizing the economy and that will undercut criticism from Deng's conservative rivals. (AUTHOR: VOSS. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, CHINA ANALYSIS TEAM, (703) 733-6097.) EAG/HEIPLE/JF 28/1811Z MAR

SUMMARY Pyongyang's carefully calibrated media campaign against Washington and Seoul over the nuclear issue seems designed to convey the impression that while the North Korean leadership is prepared to deal with the full consequences of its refusal to abide by the Nuclear Nonproliferation Treaty (NPT), it still hopes for a negotiated settlement of the nuclear inspection issue. END SUMMARY A measure of rhetorical restraint was evident in a 28 March Foreign Ministry spokesman's statement, the first authoritative statement observed to have been carried by Pyongyang media on the reported U.S. plan to deploy Patriot missiles to the South (Pyongyang radio, 28 March). The statement "sternly denounced" the prospective shipment of Patriots to South Korea, calling it a "dangerous" and "irrational" military action. Seeking to refute the U.S. assertion that the Patriot is a defensive weapon, the statement contended that the topography of the Korean peninsula enables the missile to be used to strike any target in the North with a change of its "warhead" and that it could be used for a preemptive strike on the DPRK. Nevertheless, the statement fell short of an ultimatum and warned only of unspecified "grave consequences" while calling on Washington to give the issue "profound and deliberate consideration." The 28 March statement was in sharp contrast to Pyongyang's earlier nonauthoritative pronouncements, which the North Korean leadership has used for its more vituperative attacks. The shrillest of these pronouncements, carried by Pyongyang radio on 26 March, characterized the reported U.S. plan to resume Team Spirit and deploy the Patriot missiles as actions that are "dangerous in the extreme" and as moves that could bring on "a catastrophic crisis." It accused Washington of "frantically" attempting to "isolate and crush" the DPRK. Similarly, a 26 March Pyongyang radio commentary described U.S. plans to deploy the missiles as "sinister" and charged that there is a U.S. contingency plan to mobilize "two marine divisions, more than 200 warships, and over 1,600 planes" from the U.S. mainland to Korea in case of war, and claimed that the carrier Carl Vinson and 30 other ships have already been deployed "near" the Korean waters. The commentary warned that while Pyongyang does not want war, it is "by no means afraid of war," and went on to liken an attempt to "swallow" North Korea to an attempt to "break a boulder" with "a rotten egg." Harsh as these pronouncements may sound, the North seems to be holding back bigger ammunition in its rhetorical arsenal. For instance, North Korean media have not been observed to repeat once-standard phrases such as "the U.S. imperialists are the sworn enemy with whom the Korean people cannot live under the same sky," "the Korean people will certainly make the enemy pay a thousand-fold for the blood shed by fellow countrymen at the hands of the enemy," and "shameful and humiliating defeat to the aggressors." Such expressions surfaced briefly after the North Korean withdrawal from the NPT last year (Pyongyang radio, 17 March 1993; KCNA, 13 May 1993). Talks With U.S. Pyongyang also seems to be seeking to foster the impression that it is interested in somehow preserving dialogue with the United States. For example, the 28 March Foreign Ministry spokesman's statement, by contending that the introduction of the Patriots would violate last June's DPRK-U.S. joint statement, also seemed to imply that Pyongyang still regards itself and Washington as bound by the statement's principles that have served as the basis for further Washington- Pyongyang dialogue. Further signaling Pyongyang's lingering interest in pursuing dialogue with Washington, the spokesman's statement, by accusing the South Korean government of trying to "frustrate the DPRK-U.S. talks," intimated that resumption of the talks is a goal to be striven for. Although Pyongyang media have begun criticizing U.S. Congressional and Administration leaders, such as Secretary of State Christopher and Secretary of Defense Perry (KCNA, 24 March; Pyongyang radio, 28 March), they have so far refrained from personal attacks on President Clinton. For instance, KCNA on 23 March used the proper title and name--"U.S. President Bill Clinton"--in criticizing the President's decisions on Team Spirit and the Patriots. Talks With South Pyongyang media treatment of South Korea since the breakup of the inter-Korean talks on 19 March also seemed designed to convey the impression that the North has not totally ruled out dialogue with Seoul. Pyongyang media have so far withheld authoritative comment on South Korean Defense Minister Yi Pyong-tae's recent remarks suggesting that the South would view any attack by the North as "an opportunity" to reunify the nation (Seoul Chungang Ilbo, 24 March). Moreover, the 28 March Foreign Ministry spokesman's statement used the neutral term "South Korean authorities" to refer to the ROK Government. Although nonauthoritative pronouncements coming from the North have continued to refer to ROK President Kim Yong-sam as a "traitor" and "puppet," these pronouncements have also contained the less pejorative references to "the Kim Yong-sam regime" and "the Kim Yong-sam group" (KCNA, 25 March). Even a statement attributed to the League of Socialist Youth of Korea, a youth organ traditionally among the most vituperative in its denunciations of South Korean leaders, has mixed terms such as "the South Korean authorities" and "the Kim Yong-sam group" with the "puppet clique." Implications Pyongyang media's fine-tuned campaign against Washington and Seoul suggests that, in spite of its recent hardline stance on the nuclear inspection issue, the North Korean regime finds it politic to convey the impression that it has not ruled out a negotiated settlement of the issue. (AUTHOR: YIM. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM, (703) 733-6534.) EAG/HORTON/SMB 29/0235Z MAR

SUMMARY While campaigning to convince the new legislature of the value of Russian accession to NATO's Partnership for Peace, Russian government officials continue to portray the program as merely an interim step toward broader European security measures that will provide prominent status for Russia. Influential members of the Duma, on the other hand, are taking a skeptical attitude, expressing concern that the terms of Russia's association with NATO will be dictated, rather than negotiated, and will harm Russia's security interests. Although the Defense Ministry newspaper has supported joining the program, other media commentary across the political spectrum appears to reflect nationalistic fears that Russian interests will be damaged whether or not it joins the Partnership. END SUMMARY Testifying at 16-17 March Duma hearings, government officials promoted accession to the NATO Partnership for Peace program, arguing that Russia will gain influence by joining but risks isolation if it does not. Yuriy Nazarkin, head of the coordination and interaction department of the Security Council's staff; Yuriy Ushakov, head of the Ministry of Foreign Affairs' (MFA) Department for European Cooperation; and Major General Pavel Zolotarev from the Defense Ministry all stressed that to "disregard" Partnership for Peace would mean a disastrous self- isolation that would damage Russia's security. Nazarkin and Ushakov warned that refusing to join would strengthen those who were pushing for NATO expansion and argued that in joining Russia could influence the program (Interfax, 17 March). In enumerating a long list of membership advantages, Zolotarev contended that by joining Russia would demonstrate to the world its interest in collective security and "neutralize" the anti- Russian forces that are seeking to exclude Russia from the international arena (Krasnaya Zvezda, 18 March). Moscow's Mixed Signals Despite this supportive testimony and Defense Minister Pavel Grachev's statement that Russia would join the program soon, other signals from the government suggest that it is unsure about how fast to move ahead. After his 17 March meeting with U.S. Defense Secretary William Perry, Grachev told reporters that "groups of experts" are "already completing work" on Russia's membership application, adding optimistically that "we shall be able to join the concept by the end of the month" (ITAR-TASS, 17 March). More cautiously, however, First Deputy Defense Minister Andrey Kokoshin said it was "too early" to discuss when Russia would sign on to the program (Interfax, 18 March). A 19 March Nezavisimaya Gazeta article, discounting speculation that Grachev meant that Russia would "definitely" sign in March, cited a Foreign Ministry "clarification" that the signing might take place in late March or more likely later. The article attributed the delay to the need to finish drafting the documents, "wind up interdepartmental consultations," and "solve a number of technical problems"--including who would sign, Grachev or Foreign Minister Andrey Kozyrev. In addition, Russian President Boris Yeltsin and other senior officials have continued to express reservations about the program--particularly its implications for NATO expansion--and to press for movement toward alternative European security measures: -- In his 24 February address to the Duma, Yeltsin warned against any NATO expansion without Russia and made clear that, while Moscow supported Partnership for Peace, it viewed the program as a waystation to building a pan-European partnership "open to all states of the greater Europe" in which CSCE would take the lead and NATO would be relegated to a subordinate role (Rossiyskaya Gazeta, 25 February). -- After a meeting with FRG Defense Minister Volker Ruehe in Berlin on 11 March, Grachev intimated that he views the program as only a stopgap measure until new European security structures emerge, touting the CSCE as the "main peace-keeping organization in Europe," and noting that "time will tell what the [NATO] structure will be like" (ITAR-TASS, 11 March). These remarks echoed his suggestion to reporters on 2 February that the program was transitional, providing for a coordinated effort to defuse tensions in Europe by NATO and other countries, including Russia, during "an interim period following the breakup of the Warsaw Pact." He also reiterated his previous warnings against the accession of former Warsaw Pact members and the Baltic states to NATO (Interfax, 2 February). -- Kozyrev, likewise, has continued to warn against NATO expansion and laud CSCE merits. In an address to a 10 March MFA Foreign Policy Council session, he complained about "NATOcentrism" within the alliance which has led to a push for a "mechanical" expansion, adding that this demonstrates a "vacuum of strategic thought" and undermines the goal of "moving toward a single, Greater Europe" (Nezavisimaya Gazeta, Kommersant-Daily, 11 March). Although Kozyrev said Russia is close to signing Partnership for Peace documents, he continued to argue that CSCE should become the core of Europe's security system. Like Grachev, he hinted that collaboration within a NATO framework might be only temporary, saying that a "necessary historical period" perhaps "two to three years in length" had "opened up" to "elaborate and implement cooperation programs." Similarly in a 17 March Izvestiya article, he said that NATO was "inadequate" and "unsuitable" for "current purposes" and contended that while Partnership for Peace would provide "a partial answer" to security problems, it could not "be considered the pinnacle of achievement." In a sign that not all of Yeltsin's administration share the view that Russia has more to gain than to lose by joining the program, Presidential Council adviser Andranik Migranyan, in a 15 March Nezavisimaya Gazeta article titled "Why Join, If It Is Better Not To Join," strongly opposed Russian accession. Claiming that there is no consensus on the issue within the Foreign Ministry, he listed numerous adverse consequences if Russia joins. He contended that the program would deepen Russia's isolation and "sharply limit its freedom for foreign policy maneuvering." Doubts in the Duma Many influential members of the Duma apparently remain ambivalent about the Partnership plan, opposing what they view as NATO's "dictat," and worried that a broad range of security interests from the competitiveness of Russia's defense industries to its security arrangements with other CIS countries will suffer: -- Former Ambassador to the United States Vladimir Lukin, a member of the moderately reformist Yavlinsky bloc and chairman of the Duma's international affairs Committee, conceded the Partnership idea was good, but said the "devil was in the details," which had been insufficiently thought through (Moscow radio, 17 March). He said that Russia, "instead of trying to "push to the head of the line" to join, should carefully analyze what should be done for a more active rapprochement with NATO and closely follow NATO's reorganization. Lukin also expressed concern that involvement with the Partnership program could wreck Russia's "strategic intentions to create security structures within the CIS framework" (Krasnaya Zvezda, 18 March) -- Sergey Yushenkov, chairman of the Duma's defense committee and a Russia's Choice member, said while in Washington with a Duma delegation that he objected to membership on the grounds that "the framework agreements were drawn up without [the Duma's] participation and do not conform to Russia's status" and that NATO standardization would be "simply destructive" for Russia's defense industries. He advocated instead a security alliance between Russia and other countries in which the guidelines would not be set by NATO, as in the case of Partnership for Peace, but would be worked out "jointly" (Interfax, 9 March; Rossiyskaya Gazeta, 18 March). More recently, however, he appears to have changed his position on joining. During the Duma hearings Yushenkov said he supports Russian membership, but maintains it should be carried out on special terms given Russia's "status as a nuclear power." Like many government officials, he contended that the NATO program should be viewed as "the beginning of a path toward a common security system" (Interfax, 17 March). -- Konstantin Zatulin, chairman of the Duma's CIS affairs committee and co-chairman of the Party of Russian Unity and Accord faction, warned the MFA Foreign Policy Council session that Russia's participation in the "Partnership" program would dash its hopes [unspecified] in the "near abroad," because even now CIS countries were trying to "blackmail" Russia by appealing to the West for help (Kommersant-Daily, 11 March). Media Reaction Russia media commentary on the Partnership for Peace program has reflected fears about isolation if Russia fails to join, suspicion that Russian interests may suffer if it does join, and resentment that Russia's options thus are limited. NATO bashing has been a staple of procommunist newspapers like Pravda and has intensified in the wake of the February NATO ultimatum to the Bosnian Serbs, but even reformist and pro-Yeltsin newspapers appear ambivalent toward membership, although the Defense Ministry newspaper, Krasnaya Zvezda, supported it: -- The procommunist newspaper Pravda printed a long diatribe on 16 March by retired general Viktor Chudov, who charged that Partnership for Peace was designed as a cover for "peace U.S.- style" and "world domination." The article, which claimed that planned U.S.-Russian exercises were designed to counter "reunification sentiments" in former Soviet republics and to inspire "separatists and nationalists" to "vigorous activity," lambasted the Defense Ministry's "top brass" for engaging in such exercises instead of carrying out its own war games designed to repel aggression "by a coalition of nuclear powers." -- The reformist newspaper Nezavisimaya Gazeta, which printed the highly critical Migranyan article, frontpaged another article on 15 March titled "Russia's Partnership With NATO Is A Misalliance." The article maintained that Russia could have received better terms if it had held out longer before agreeing to join, claiming that there had been growing sentiment in the West to offer Moscow something more in line with its "great power" status. Now, the article warned, Moscow confronts a new dilemma: to face isolation and discrimination if it does not become a full member of NATO, or to place its armed forces, military plans, and budget under the command and control of the United States if it does join, since "under a long-standing tradition, the NATO commander in chief has always been and remains an American general." -- A 23 March article in the mass-circulation newspaper Komsomolskaya Pravda contended that, although Moscow had little choice, it would be "humiliating" for it to follow "in the wake of U.S. policy," "jostling for space on the margins." Complaining that "Washington is the banker and Russia is "forced to play blind," the article noted sarcastically that "you can judge for yourselves how far such 'partnership' can be called mutually beneficial and equal." -- A 16 February article in the usually pro-Yeltsin newspaper Izvestiya warned that Russia could lose its arms market in Eastern Europe as countries switched to NATO standards. A 19 March Izvestiya article admitted that the program was not popular in the Duma and gave minimal support to the government's campaign to promote it, confining its advocacy to pointing out that without Russia the program was "meaningless" and that Moscow had made clear to Secretary Perry that Russia intends to join "on its own terms." -- On 22 March, prominent Krasnaya Zvezda commentator Aleksandr Golts, echoing the government's line, strongly backed Partnership for Peace and criticized the "emotional" arguments of its opponents. Claiming that the actual partnership program had emerged because Washington "was forced to take Moscow's tough stance [on NATO expansion] into consideration," Golts stressed that the main point in the program was that each country would develop its own relationship with NATO on a bilateral basis and that Moscow is elaborating terms "which will take maximum account of Russian interests." Golts insisted that "the fears that Russia condemns itself to a secondary role by signing the partnership program scarcely hold up," while the risks that Russia faces if it does not join "are as clear as can be": the program would "acquire an unambiguously anti-Russian thrust." Outlook While government officials support joining the NATO Partnership for Peace program as beneficial to Russia's security interests, they clearly view the program as a stop gap measure and hope it will foster the creation of a European security system in which Russia will play a major role. Influential legislators, in contrast, appear more fearful that NATO affiliation will further marginalize rather than foster Russian influence in Europe. This reaction from the legislature, coupled with the skeptical reaction from even the independent press, may pressure the government to demonstrate that it remains an equal and assertive player in the working out of the terms of any NATO partnership. (AUTHOR: BELLINGER. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ANALYSIS BRANCH, RUSSIA DIVISION (703) 733-6070.) ENEAG/BLOUGH/DEW 29/1810Z MAR

This Special Memorandum, "Media Developments: Russia and Ukraine," is a periodic series aimed at reporting and analyzing changes to and events affecting the Russian and Ukrainian media. Comments and queries regarding this series may be directed to Chief Analyst, ENEAG at (703) 733-6072. In this issue ... Spotlight on ... Russia: Sovetskaya Rossiya--Zyuganov's Mouthpiece Russia: RIA-Novosti Returned to Government Oversight Features Russia: Zavtra Ambivalent About Zhirinovskiy Russia: Government Daily Tries, Fails at Independence Russia: Editorial Turmoil at Pravda Russia: Government Official Moves To Restrict Media Access Ukraine: Post-Postup--Attempt at a Western-Style Newspaper In Brief Russia: Vladivostok Newspapers Suspended Russia: Rossiyskaya Gazeta To Run Tatar Insert Other Publications of Interest Russia: Journalists Slam TV Campaign as Biased, Uninformative Russia: Last Minute State TV Campaign Against Zhirinovskiy Russia: Pro-Communist Press Keeps Options Open on Zhirinovskiy Russia: Debt Crisis Temporarily Halts State Broadcasting Russia: Yeltsin Restructures Media Bureaucracy Russia: RTV Blasts Yakovlev, Poltoranin Spotlight on ... Russia: Sovetskaya Rossiya--Zyuganov' s Mouthpiece Summary: The opposition newspaper Sovetskaya Rossiya has served as a mouthpiece for Gennadiy Zyuganov's Communist Party of the Russian Federation (CPRF) since at least July 1993, when the newspaper began publishing a regular insert, Pravda Rossii, which carries news of CPRF functions, official party positions, and commentary by party officials. The partnership between the paper and the party is not surprising in view of their shared ideological inclinations, which involve the fusion of nationalism and communism. The evolution of such a nationalist-communist fusion has been evident in the pages of Sovetskaya Rossiya for some time, and the CPRF has steadily moved in that direction under Zyuganov's leadership. Moreover, the Zyuganov-Sovetskaya Rossiya connection pre-dates the August 1991 coup, when Zyuganov's attacks on CPSU reformers were printed and echoed in the pages of what was then the RSFSR's official communist newspaper. Sovetskaya Rossiya began publishing Pravda Rossii on 10 July 1993 with "Special Edition" Number 1 ("Prepared jointly with the Central Executive Committee of the CPRF"), but, at least for now, the CPRF appears only to be extending limited financing to the Pravda Rossii insert and not to Sovetskaya Rossiya as a whole. The "Special Edition" carried an announcement of the election of the Presidium of the Central Executive Committee of the CPRF (whose membership includes Central Executive Committee Chairman Gennadiy Zyuganov), an announcement excerpted from the CPRF action plan" (including a call to Muscovites to attend a mass meeting to protest "the course taken by the government"), news of CPRF regional activities, and a CPRF Central Executive Committee "Announcement," which called on "all patriotically inclined social groups," from "workers to our native private entrepreneurs," to "halt the collapse of Russia, to save her state unity." At the 15 March CPRF Central Executive Committee plenum, Zyuganov chided the party for not paying sufficient attention to the publication of Pravda Rossii and for not "rendering assistance "--presumably financial--to Sovetskaya Rossiya (Sovetskaya Rossiya, 17 March). Subsequent editions of Pravda Rossii have continued to stress patriotic themes, sometimes combined with a socialist-oriented economic line, and to highlight the activities and viewpoints of the CPRF. Pravda Rossii Number 2 published the election platform of the CPRF in anticipation of possible early parliamentary elections. The platform combined nationalistic calls for the preservation of the territorial integrity of the Russian Federation and exhortations that the "salvation and strengthening'' of Russia's indigenous ''spirituality'' are necessary conditions for the rebirth of Russia" with traditional communist denunciations of "the forced capitalization" of Russia (Sovetskaya Rossiya, 22 July 1993). Virtually every edition of Pravda Rossii has reported on activities of local CPRF affiliates. Number 3, for example, carried news from CPRF groups in Northern Ossetia, Ryazan, Orel, Volgograd, and Moscow (Sovetskaya Rossiya, 5 August 1993). Number 4 carried an announcement proclaiming the CPRF to be the party of "state patriotism," whose ideology is directed toward "the salvation and rebirth of Russia," while simultaneously attacking "bourgeois liberalism." In the same edition, the CPRF Central Executive Committee encouraged communists to subscribe to Sovetskaya Rossiya as part of its broader efforts to "spread" the CPRF line in "the party press" (Sovetskaya Rossiya, 7 September 1993). The CPRF-Zyuganov-Sovetskaya Rossiya connection was further illustrated in the political arena on 12 December 1993, when Sovetskaya Rossiya editor Valentin Chikin was elected as a deputy to the State Duma on the CPRF party list. While remaining true to its communist origins, Sovetskaya Rossiya has augmented its communist ideology with a strong dose of Russian nationalism in recent years, including the regular publication of an insert entitled Rus Pravoslavnaya (Orthodox Russia), which frequently features articles by the nationalist Metropolitan Ioann of St. Petersburg. This tilt toward nationalism has been evident for some time. For example, like most prominent Russian newspapers, Sovetskaya Rossiya carried special coverage of the Russian government's commemoration of the first anniversary of the August 1991 coup attempt, but it used the opportunity to attack the "democrats" in a particularly nationalist vein. According to an article published on 20 August 1992, "A certain group among the 'democratic forces' consists of representatives of youth," who are "mesmerized" by "pro-American, anti-Russian and anti-Soviet propaganda, camouflaged as anti- communist." The article maintained that these groups were heavily infiltrated with "agents of influence" carrying out a plan that had been "worked out in Washington" for the "destruction of the USSR, then Russia" (Sovetskaya Rossiya, 20 August 1992). In the same issue the paper's political observer, Eduard Volodin (like Zyuganov, Volodin later joined the nationalist-communist opposition National Salvation Front, whose manifesto was published in the 6 October 1992 edition of Sovetskaya Rossiya and was signed by, among others, Volodin, Zyuganov, and Chikin), called the August 1991 events a loss of "national honor . . . and national dignity," rather than a liberation from "stagnation and dogmatism." According to Volodin, the "democrats" in the government were conscious agents of "the builders of the 'New World Order, '"--an allusion to the United States--who were seeking "the destruction of Russia's international authority" as well as the "dismemberment" of the Russian state. As Sovetskaya Rossiya embraced nationalism, so did the CPRF and its leading figure, Zyuganov. Zyuganov was elected chairman of the CPRF Central Executive Committee by a party congress in February 1993. That same party congress adopted a "Program Statement" that included a section called "The Fatherland in Danger," which urged the "consolidation of all . . . patriotic forces, united by the idea of saving the Fatherland." Other sections of the statement side-stepped communist dogmas by endorsing a mixed economy (although the state sector would still be the "basis" of the "multisector economy") and calling for communist cooperation with all "patriots," including active members of the Orthodox Church (Pravda, 26 February 1993). The extreme nationalist weekly Den subsequently endorsed Zyuganov's election and characterized the "majority of the delegates" to the congress as "not just fans of the long dead writers Marx and Lenin" but as "ordinary citizens" who were concerned with the "fate of the Fatherland" (Den, 21-27 February 1993). Zyuganov himself subsequently trumpeted the nationalist-communist line in Sovetskaya Rossiya and actively participated in organizing and leading nationalist organizations. In an article entitled "The Russian Question," Zyuganov called on leaders of the "patriotic movement" to develop an "ideology of national rebirth" as part of a "national liberation" strategy for Russia (Sovetskaya Rossiya, 3 July 1993). He called his opponents in the "democratic" camp "those who hate Russia," and saw the collapse of the USSR as just another chapter in the "thousand-year" history of efforts to destroy Russia. He repeated similar charges in a front-page article in Sovetskaya Rossiya on 28 August 1993 entitled Derzhava (Great Power), which viewed the Soviet period as simply one stage in the development of the Russian nation and empire. Zyuganov was cofounder of the Council of National-Patriotic Forces of Russia, organized in 1992, a cochairman of the Organizational Committee of the National Salvation Front from 1992 until the October violence in Moscow, and a cochairman of the Duma of the Russian National Assembly, a nationalist organization founded in 1992 by ex-KGB General Aleksandr Sterligov. Old Ties The Sovetskaya Rossiya-Zyuganov connection predates the August 1991 coup attempt, when Sovetskaya Rossiya published a series of Zyuganov articles and interviews attacking reform and carried other articles defending Zyuganov's positions. Zyuganov fired his first salvo in an anti-reform barrage in Sovetskaya Rossiya on 20 March 1991, when he attacked Boris Yeltsin and his efforts to forge ties with Russia's new class of entrepreneurs, which Zyuganov derided as a "homegrown bourgeoisie." He followed with an attack on the "architect" of perestroyka, Aleksandr Yakovlev, whom Zyuganov held responsible for the social and economic problems of the Russian Federation: "What lies in store for us- -the final destruction of all social connections . . . a social explosion?" (Sovetskaya Rossiya, 7 May 1991). A 6 June 1991 article called the reformists "false prophets" and claimed that the Soviet Union had reached the "breaking point." In a subsequent interview, Zyuganov lamented that the Soviet Union found itself on the "verge of national catastrophe" (Sovetskaya Rossiya, 25 June 1991). Zyuganov's views, and his attack on Yakovlev in particular, were defended in a 22 June article by Volodin, in which Volodin continued the attack on reforms in general (Sovetskaya Rossiya 22 June 1991). Zyuganov also signed the open letter, "A Word to the People," widely believed to have been a call to arms in anticipation of the August 1991 coup attempt (Sovetskaya Rossiya, 23 July 1991). Russia: RIA-Novosti Returned to Government Oversight Summary: A recent edict signed by President Boris Yeltsin ends almost two years of organizational turmoil within the RIA-Novosti news agency by placing it under the sponsorship of the Russian Council of Ministers and apparently returning to it a foreign propaganda function similar to that of its predecessor, APN. The edict appears to quash the agency's own efforts in recent years to achieve independence from state or presidential control, but it is not yet clear whether its new official status will affect its domestic news reporting function. An edict signed by Yeltsin on 23 December 1993 ordered the conversion of the RIA-Novosti news agency from a quasi- independent media organization to an agency of the Russian Government and also assigned to it apparent propaganda and analytical functions that differentiate it from the official news agency ITAR-TASS. According to the edict, the transformed RIA- Novosti will become a "state information and analysis agency" whose purpose is to provide "information and analytical support for Russia's domestic and foreign policy and creat[e] a favorable image of the Russian state" (Rossiyskaya Gazeta, 30 December 1993). (See Note 1) The apparent propaganda function assigned to RIA-Novosti underscores its role as the successor to the old Soviet Novosti Press Agency (APN), whose purpose was to promote "mutual understanding, trust, and friendship among peoples" through "widespread dissemination abroad of true information" about the USSR and by "familiarizing" the Soviet public with the "life of people of foreign countries" (Nezavisimaya Gazeta, 24 July 1993). In addition, the 23 December edict stated that the Council of Ministers is to "ratify the charter" of RIA-Novosti, apparently an oblique way of saying that the Council of Ministers is the agency's new founder (sponsor), since the Russian Law on the Mass Media establishes that the founder "ratifies the editorial charter" (Rossiyskaya Gazeta, 8 February 1992). Finally, the edict guaranteed state funding for RIA-Novosti and granted it a number of tax breaks and official privileges. (Note 1) By contrast, a recent Yeltsin edict characterized ITAR- TASS as a "central state news agency" and asserted a more politically neutral purpose for its formal transfer to the government--to create the "conditions for ensuring high quality and timeliness in the collection and dissemination of information" (Rossiyskiye Vesti, 24 December 1993). The impetus for Yeltsin's edict on ITAR-TASS appears to have been the dissolution of the Federal Information Center and the need to transfer formally its media organizations to the jurisdiction of the Council of Ministers. The transfer of RIA-Novosti to government oversight appears to cap a period of restructuring in the agency that began last September and has included the appointment of new management. On 15 September Yeltsin ordered the Council of Ministers to "adopt the necessary measures to fully reconstitute the activity" of RIA-Novosti (Rossiyskaya Gazeta, 18 September 1993). Two days later a government decree appointed Vladimir Markov, a former Novosti political observer, as chairman of the agency (ITAR-TASS, 17 September 1993; Izvestiya, 25 September 1993). Markov replaced Maysarat Makharadze, whose departure from RIA-Novosti may be linked to the appointment of her husband, former Deputy Premier Valeriy Makharadze, as trade representative to Canada (Moskovskiy Komsomolets, 21 September 1993). More recently, a government directive appointed former RIA-Novosti journalist Aleksandr Slabynko and Anatoliy Chebotarev as deputy chairmen of the agency's board (Rossiyskaya Gazeta, 11 March). Foreign, Domestic Information Role Markov, who remains the agency's chairman, has outlined an ambitious program for RIA-Novosti that seeks to combine its role as an instrument of Russian foreign policy and as a domestic news agency capable of competing with ITAR-TASS and the independent news agency Interfax. He has indicated his support for RIA- Novosti's propaganda role--though he himself reportedly does not use that word (Izvestiya, 25 September 1993)--saying that it was a "big mistake" to discard the "services" of APN in providing "informational support for Russia's foreign policy" and affirming RIA-Novosti's "duty" to ensure that "Russia has a worthy image abroad" (Moscow radio, 31 October 1993). Among the tools he will apparently use for this purpose are the old APN methods of preparing articles, commentaries, photos, and television items for and "at the behest of" foreign media (Izvestiya, 25 September 1993). At the same time, he has argued that the "handful" of news agencies currently operating in Russia are "not enough for a huge country" and has said that RIA-Novosti will strive to inform people "at the local level about the activity of all branches of power." Additionally, Markov foresees a "public relations" role for the agency, providing "informational assistance for our new political parties," possibly through the dissemination of party programs and announcements (Izvestiya, 25 September 1993; Moscow radio, 31 October 1993). Organizational Turmoil The transfer of RIA-Novosti to government oversight formally reverses an earlier Yeltsin edict that was to have merged the agency with the TASS state news agency. On 22 January 1992 Yeltsin ordered RIA-Novosti and TASS to merge into one agency, ITAR-TASS, although he apparently authorized some components of RIA-Novosti to operate independently as the RIA joint-stock company (see box 1). However, for reasons that are unclear, the merger of the two news agencies appears never really to have taken effect. On 8 January 1992 Makharadze replaced Andrey Vinogradov as director of RIA-Novosti under circumstances that one experienced journalist called "strange" but are undoubtedly due to her political connections (Moskovskiye Novosti, No. 27, 5 July 1992; Nezavisimaya Gazeta, 24 July 1993) (see box 2). According to the journalist, the impetus for the merger had already "disappeared" with the ouster of former RIA-Novosti chairman Vinogradov (Moskovskiye Novosti, No. 27, 5 July 1992). Under Makharadze, RIA-Novosti continued to function--at least as a domestic news agency--and to enjoy some independence from state control, (See Note 2) but her attempts to merge the RIA joint- stock company with RIA-Novosti into a larger, quasi-independent joint-stock company ultimately failed. In June 1992--perhaps as a result of Makharadze's personal connections--the Russian Government reportedly authorized the transfer of RIA-Novosti's property to the RIA joint-stock company, thus effectively reversing Yeltsin's January 1992 edict that had transferred RIA- Novosti's property to TASS and had ostensibly abolished RIA- Novosti (Nezavisimaya Gazeta, 24 July 1993). Makharadze, however, wanted to go a step further and to merge the RIA joint- stock company with RIA-Novosti into a larger joint-stock company with the state as the majority share holder. She expected a government order to this effect by 1 August 1993 (Nezavisimaya Gazeta, 24 July 1993), but it apparently never materialized, and Yeltsin's most recent edict appears to dash her plans. (Note 2) When Yeltsin created the Federal Information Center (FIC) in December 1992 and appointed Poltoranin to head it, a provision in the edict made the FIC a cofounder (cosponsor) of RIA-Novosti, indicating that the agency still existed, at least on paper (See the FBIS Trends of 21 January 1993, pages 16-22). In an interview more than a year later, Poltoranin said that the "Russian Information Agency"--apparently meaning the joint-stock company--did not belong "structurally" to the FTC and that the FTC had "not yet considered the transfer" of RIA's sponsorship to the FTC (RIA, 26 May 1993). Box 1 The Tumultuous Existence of APN-IAN-RIA-Novosti February 1961. Established as an "information organ of Soviet public organizations," the Novosti Press Agency (APN) formally came under the sponsorship of the USSR Union of Journalists, the USSR Union of Writers, the Soviet Society of Friendship and Cultural Relations With Foreign Countries, and the All-Union Znaniye Society, though in reality it was under the control of the CPSU Central Committee's ideological department, which appointed Novosti's top officials (Moscow Central TV, 1 August 1990; Nezavisimaya Gazeta, 24 July 1993). July 1990. In an apparent response to signs that the Yeltsin-led RSFSR Supreme Soviet wanted to wrest control of Novosti from the Union Government--part of a broader battle waged by the RSFSR to establish its own media outlets--then-USSR President Mikhail Gorbachev signed an edict transforming Novosti from a public agency "subsidized by the state" into a "presidential, state agency" (Moscow Central TV, 1 August 1990). At the same time, its name was changed to the Novosti Information Agency (IAN), but the agency's basic propaganda function reportedly remained the same (Nezavisimaya Gazeta, 24 July 1993). August 1991. In the wake of the failed coup attempt, a Yeltsin edict of 22 August removed IAN Director Albert Vlasov from his post and transferred the agency to the jurisdiction of the RSFSR Ministry of the Press and Mass Media. September 1991. A decree of the RSFSR Council of Ministers merged IAN with the Russian Information Agency (RIA), an independent news agency founded six months earlier by Andrey Vinogradov--himself a former Novosti journalist--but the agency's formal status and sponsorship were unclear. Renamed RIA-Novosti and headed by Vinogradov, the combined agency took legal title to IAN's considerable assets, including publishing houses, printing plants, photography labs, and television production studios as well as an extensive network of foreign bureaus (IAN, 30 August 1991, 12 September 1991; Tokyo Shimbun, 25 September 1991). The merger apparently caused disgruntlement among IAN staffers, who contended that Vinogradov's experience heading RIA's staff of 50 reporters--all based at the time in the RSFSR and former Union republics--left him ill-qualified to manage the complexities of a worldwide news agency (Nezavisimaya Gazeta, 24 September 1991). January 1992. In a highly controversial move that sparked concerns about attempts by the Russian Government to bring the media under tighter control, a Yeltsin edict of 22 January ordered the merger of RIA-Novosti and the official state news agency, TASS, into the newly-named ITAR-TASS. Then-Minister for the Press and Mass Media Mikhail Poltoranin offered the official explanation that the state needed to reduce spending on the agencies, but an official investigation into RIA reports about a purported government order to partially withhold workers' wages allegedly leaked to it by a government source suggested high- level displeasure with the agency and with Vinogradov in particular. The combined news agency was placed under the directorship of TASS's Vitaliy Ignatenko, a former Gorbachev spokesman who became the head of TASS in the wake of the failed coup. End Box 1 Box 2 The Meteoric Rise of Maysarat Makharadze According to Maysarat Makharadze, then-Minister for the Press and Mass Media Mikhail Poltoranin "invited" her to head RIA-Novosti because he liked "the fact that I had a lot of journalistic and industrial experience" (Nezavisimaya Gazeta, 24 July 1993), but this explanation seems disingenuous. By her own account, Makharadze's journalism experience appears limited to provincial media. She began writing for the Chechen newspaper Groznenskiy Rabochiy in 1959 and became a correspondent for Dagestanskaya Pravda within a year. After earning a degree at Makhachkala University in Dagestan, she worked for unspecified regional newspapers and television stations until 1977. Upon her husband's assignment to Udmurtiya in 1977, Maysarat Makharadze left journalism to work in a bottle making factory, rising suspiciously quickly to shop director and, ultimately, factory director. As Valeriy Makharadze's political career flourished and brought him to Moscow, so, too, did Maysarat's. She served briefly at the end of 1991 as deputy press minister under Poltoranin before he appointed her to head RIA-Novosti (Nezavisimaya Gazeta, 24 July 1993). End Box 2 Features Russia: Zavtra Ambivalent About Zhirinovskiy Summary: Interviews and commentary in the ultranationalist weekly Zavtra--the successor to Den--following the December elections (through February) suggest that hard-line nationalist oppositionists regard the electoral success of Vladimir Zhirinovskiy and the Liberal Democratic Party of Russia (LDPR) with ambivalence. While reaction on the whole was hostile, some opposition figures, including Zavtra editor Aleksandr Prokhanov, appear to view Zhirinovskiy as a potential political ally. The first issue of Zavtra--now published in Vladimir--following the elections (No. 4, December 1993) featured a front-page section entitled "Nashi (Our People) in the Duma," which carried interviews with prominent opposition figures who had won election to the State Duma, including August 1991 coup plotters Anatoliy Lukyanov and Vasiliy Starodubtsev, as well as nationalist television personality Aleksandr Nevzorov. No member of the LDPR was interviewed and the evaluations of the LDPR's success were decidedly mixed. Nevzorov yas the most positive in his assessment, observing that he counted Zhirinovskiy among those he considered "nashi." Lukyanov took a more ambivalent view, observing that the voters "did not vote so much for Zhirinovskiy as they did against the [Yeltsin] regime." He maintained that although his own views differ from Zhirinovskiy's, the LDPR nevertheless "expresses the interests of those who feel that the Russian empire is being methodically destroyed" and that the government is conducting "an attack" on "the Russian [Russkiy, that is, ethnically Russian] people and Russian interests." He also complained that ''the patriotic movement'' was not represented" during the elections, claiming that the government had deliberately blocked "patriotic" movements like Sergey Baburin's Russian National Union (RNU) from registering for the elections and had thus "cleared the road" for a Zhirinovskiy victory. Lukyanov asserted that, since Zhirinovskiy had supported the president's efforts to pass the draft constitution, the "democrats" had counted on Zhirinovskiy's continued support. "Now they feel that the constitution can work for Zhirinovskiy as well," he said, alluding to the presidential aspirations of the LDPR leader. In Lukyanov's view, this is why government supporters are currently attacking Zhirinovskiy in the press. Starodubtsev, in the most negative assessment of the three, called Zhirinovskiy's "promises" a form of "dangerous" populism and termed his foreign "ambitions" a "provocation." He added that if Zhirinovskiy did not seek a "clash" with the communists or the agrarians, he would discover that they, too, are "people who sincerely feel pain for Russia." An unsigned front-page article in the same issue seconded Starodubtsev's negative view, taking up the assertion that the "democrats" had deliberately aided Zhirinovskiy in order to thwart the communists and "patriots." The article asserted that Zhirinovskiy was incapable of the kind of "great power leadership" that National Salvation Front or RNU leaders had displayed. The writer considered Zhirinovskiy a "marionette" manipulated by the Yeltsin regime. Zavtra's first issue for January 1994 continued the hostile tone, featuring a savage attack on Zhirinovskiy by Eduard Limonov, a one- time member of his "shadow cabinet." In the article, Limonov called Zhirinovskiy "an enemy of Russian nationalism" who had merely used nationalism as a vehicle for furthering his own personal aims. "Is it not degrading that a former activist of the Jewish movement [Zhirinovskiy] . . . informs us of his plans to protect Russians?" he asked. Limonov also maintained, as Lukyanov had in the previous issue, that Zhirinovskiy's success was due to the government's blocking of the registration of nationalist parties for the December elections. Zhirinovskiy Interview In an interview with Zhirinovskiy published in February (No. 6), Zavtra editor Aleksandr Prokhanov displayed a friendly attitude toward the LDPR leader. Though Prokhanov mentioned Zhirinovskiy's reputation as an "eccentric politician," he noted their shared notions concerning the "Russian idea," which included the conviction that the "mongrel" Russian Federation is "in no way Russia as such." Taking his cue from Prokhanov, Zhirinovskiy contended that the future Russian Empire should include all the territory of the former USSR "at a minimum" and seconded Prokhanov's assertion concerning the just nature of the Russian people and empire. Zhirinovskiy claimed that the empire had "uplifted" all its former subjects, raising primitive cultures, such as that of the Kazakhs, to "cosmic heights." "You and I were not together [previously], in one party, but we think identically," he told Prokhanov. Russia: Government Daily Tries, Fails at Independence Summary: Rossiyskiye Vesti has renewed its government affiliation after a six-week experiment with independence during which it found the financial difficulties entailed in the loss of government funding too harsh to bear. The return to government sponsorship places Chief Editor Valeriy Kucher in a dilemma, as he will likely have to rein in the editorial independence on which the paper had embarked or risk alienating the holders of the purse strings in the government. On 31 December Rossiyskiye Vesti announced that it was severing its ties to its official sponsor, the Russian Council of Ministers, and becoming an independent newspaper. The announcement said that the paper's journalists collective had decided on 29 December to terminate the relationship with the Council of Ministers because the Council of Ministers had failed to fulfill its "statutory obligations" to the editorial office, tried to "impede" the work of the chief editor and the paper's journalists, and attempted to ''get rid of'' the editor as unsuitable." They also charged that the government would not accept" criticism from the, paper. The announcement noted that the paper's status as a government publication had given it an unjust" image as an "obedient" publication that had an "adverse effect" on its standing. It claimed that its new status would allow it to "perform its social role considerably more freely and professionally" (Rossiyskiye Vesti, 24, 31 December 1993). The journalists based their actions on the Law on the Mass Media which stipulates that sponsorship reverts to a publication's editorial office in the event of the sponsor's reorganization, and noted that Russian President Boris Yeltsin had reorganized the Government with his 23 December edict "On the Transformation and Reorganization of the Council of Ministers-Government of the Russian Federation." Following the announcement, the paper continued to publish regularly until 25 January, when it failed to appear. Editorial information published on the back page of each issue now listed the Journalists' Collective of the Editorial Office as the "temporary" sponsor whereas before it had listed the Council of Ministers. The paper reappeared on 1 February, having missed five regularly scheduled issues, and apologized for its "forced interruption." The paper charged that its decision to assume sponsorship in lieu of the Council of Ministers resulted in a cutoff of credits to cover publishing costs (1 February). When it reappeared, however, its distribution was apparently confined to the Moscow region until 2 March, when it published an issue containing an apology to regional readers who, the paper said, had not received their subscriptions for a month. Government Ties Reestablished On 12 February the paper resumed listing the government as sponsor, without offering an explanation, and listed the journalists' collective as a cosponsor. Without mentioning the resumption of government sponsorship, the apology asserted simply that the "suspension of publication" was due to "interruptions in [state] budget financing." In its New Year's message to subscribers, the paper had noted that in the absence of government financial support it would be resorting to increased advertising as a means of self-financing (4 January). However, Russia's weak advertising market apparently made this solution unviable, especially on such short notice. Early Signs of Rift Preliminary signs of tension between Rossiyskiye Vesti's government affiliation and its staffers' desire to exercise editorial freedom appeared during the October 1993 political crisis between the president and the parliament. The paper criticized police for rough handling of journalists attempting to provide coverage of the crisis, including journalists from opposition newspapers who attempted to cover the standoff. The paper also decried Prime Minister Viktor Chernomyrdin's decree putting the defunct Supreme Soviet's official newspaper, Rossiyskaya Gazeta, under government sponsorship, as a violation of the law and of the rights of the paper's staffers (2 October). Rossiyskiye Vesti also questioned the legality of the occupation" by law enforcement personnel of the editorial offices of opposition papers Den, Sovetskaya Rossiya, and Pravda (6 October) and condemned as ''lawlessness'' what it called the extremely dangerous trend" of "closing down media without trial or investigation" (16 October). Not long after the October events, rumors began to appear that efforts were underway to remove Kucher due to "differences" between him and Chernomyrdin over the role of the government press (Kommersant-Daily, 30 November). Eight days before the decision to sever its relationship with the government, a journalists' collective meeting charged that "individual employees" of the Council of Ministers apparatus were "attempting to command" the newspaper and that high- level members of the apparatus had attempted to oust Kucher (Rossiyskiye Vesti, 24 December). The paper accused the government of attempting to "destroy Rossiyskiye Vesti as an independent" newspaper and "return to the old methods of directing the press, to make it an obedient executor of the will of apparatus bureaucrats." The paper also reported that the journalists' collective had given Kucher a vote of confidence. Though the paper claimed that its assertion of independence was not an "attempt to stand in opposition" to the government and that it would "fairly and thoroughly" report the government's efforts to reform the economy (4 January), the move to independence had an almost immediate impact on its editorial line, transforming the paper from a relatively loyal defender of government policy to a harsh critic. On 22 January the paper illustrated its new editorial latitude by publishing an unprecedentedly critical commentary that called the formation of the new cabinet "undemocratic," compared it to a Soviet-era cabinet, and charged that it would not represent the interests of the broad public. The commentary also took aim at Economics Minister Aleksandr Shokhin, accusing him of trying to "reanimate Gosplan," the Soviet-era state planning agency. Since its reacceptance of government sponsorship, no such criticisms have been observed. Implications While the return to government sponsorship has apparently eased the paper's financial difficulties, it does not appear to have solved the fundamental conflict between the journalists and the government. Despite the fact that the journalists' collective has been made cosponsor along with the government, real control is probably wielded by the government via the purse. And although Kucher continues to serve as chief editor, tension between the paper and the government is likely to remain, placing his continued tenure in doubt. Russia: Editorial Turmoil at Pravda Summary: After five months that featured four changes of chief editor, three publishing hiatuses, and a circulation decline of more than half, the situation at Pravda appears to have stabilized, at least temporarily. Most of this turmoil seems to be attributable to a struggle for financial control of the newspaper between ousted editor Viktor Linnik, who, apparently backed by many of the paper's staff, wants to reestablish Russian control, and rival editor Aleksandr Ilin, backed by a Greek businessman who owns a controlling interest in the paper. The latest round of troubles for Pravda began when, during the height of the October crisis in Moscow, the Ministry of the Press and Information, acting under President Boris Yeltsin's declaration of a state of emergency, suspended the paper's publication. Following the suspension First Deputy Press Minister David Tsabriya, overstepping his legal authority, "ordered" that Pravda change its name, reregister, and replace Chief Editor Gennadiy Seleznev with Deputy Chief Editor Ilin. Ilin agreed to the ministry's terms and promised to resume publication of Pravda as a paper of "civilized opposition," echoing the language of press ministry officials in an apparent attempt at appeasement (Izvestiya, 16 October 1993). Ilin appeared ready to assume the role of chief editor of the paper under the new name Put Pravdy [The Way of the Truth] when the paper's staff elected Linnik in his place. Linnik also appeared to appease press ministry officials, stating his intention to turn Pravda into a voice of "civilized opposition" (Radio Rossii, 28 October), and after a month-long hiatus, the paper reappeared on 2 November as Pravda, not Put Pravdy, with Linnik as chief editor. The paper published normally until 19 November and then again disappeared from newsstands until 10 December. The paper then continued to publish through 4 February, but on 5 February it suspended publication briefly following another election by the staff which, on this occasion, elected Ilin as chief editor (Moskovskiy Komsomolets, 8 February). Pravda reappeared on 9 February and has been publishing regularly since. Trojan Horse in the Editorial Office? Left orphaned after the dissolution of the CPSU in December 1991, Pravda eventually found new financial backing through a partnership with a Greek businessman. In August 1992 Rossiyskaya Gazeta reported that the paper, having failed to find backing from Russian businessmen, had signed an agreement with the Greek firm Steel Light Holding, Ltd. and its president, Yannis Yannikos (8 August). Yannikos and Pravda together formed the joint-stock company Pravda International, with Yannikos holding a 55 percent controlling interest but reportedly having "no intention of interfering in the newspaper's content." A Moscow News commentary on the deal questioned Yannikos' credentials and the credibility of Steel Light Holding, Ltd. and quoted Greek journalists who called the deal "shady and highly suspicious" (Moscow News, 23-30 August 1992). The commentary alleged that Yannikos had ties to the CPSU and might be fronting for the party, or alternately, that he was simply a "petty businessman" trying to "lay his hands on anything" that could be "grabbed." Pravda's Election Silence Indications of possible troubles between the paper's chief editor and its Greek sponsor surfaced after the paper went silent at the height of the fall 1993 national election campaign. When it reappeared on 10 December, just two days before the elections, the paper apologized to its readers for disappearing at such a critical moment and, without explicitly naming Yannikos or stating a motive, said simply that an unspecified "they" had "cut off" the paper's "oxygen supply"--presumably a reference to financial support. The paper continued to appear into the new year, but the print run fluctuated from a high of 350,000 on 4 January to a low of 120,000 on 21 January before stabilizing at 172,934 on 9 February. According to Linnik, from December to February, financial backing for publication came not from Yannikos but from Russian entrepreneur Konstantin Zatulin--a deputy from the Party of Russian Unity and Accord--and the Russian Communist Party (CPRF) (Moskovskiye Novosti, 6-13 February). Nationalist Challenge to Greek Ownership A report in Moskovskiy Komsomolets (28 January) asserted that a conflict between Linnik and Yannikos started to develop following the October political crisis when Linnik launched a search for Russian sponsors. In a 5 February Interfax report, Linnik was quoted as saying that most of Pravda's staff wished to see a "Russian corporation" as the paper's sponsor. Meanwhile, an appeal appearing in the weekly Golos (15-21 February) written by a former Pravda journalist noted that the word "pravda is Russian ... but by no means Greek," encouraged Yannikos to go back to Greece if he wishes to publish a newspaper, and called for sponsors who are "serious, respectable, and most importantly, our own Russians." According to Ilin, Linnik's search for long-term domestic financial backing failed (Kommersant Daily, 10 February). Apparently neither Zatulin nor the CPRF were willing or able to give the paper such backing. Linnik Ousted In another round of conflict at the paper, Yannikos apparently engineered Linnik's removal and his replacement by Ilin. After another brief publishing hiatus, which began on 4 February, the paper reappeared on 9 February with a "word to the reader" announcing that on 4 February the "work collective of the editorial office" had elected Ilin as the new chief editor. The announcement also protested "distortions" being spread in the media by some Pravda staffers that the staff was caught in a struggle between the "advocates of a national Russian paper" and those willing to "sell out to foreign capital." Indeed, the accounts of the situation at Pravda that appeared in Moskovskiye Novosti (6-13 February) and Kommersant-Daily (10 February) painted just such a picture. According to these accounts, Seleznev, the chief editor when the deal with Yannikos was first struck, had sold Yannikos the controlling interest "for pennies"- -without consulting the collective--in exchange for promises of high salaries and vacations on the Greek isles. But pay was low or non-existent (except for such loyalists as Ilin who reportedly received 130,000 rubles per month) and the only one to enjoy a Greek vacation was Seleznev himself. Yannikos allegedly interfered in the editorial process, fired one journalist for writing a negative piece about an acquaintance, compiled a "black list" of 13 more journalists he wanted to see fired, and wished to "drive out" Linnik, whom he could not control because he was elected. The accounts also alleged that Yannikos had withheld financing but promised to increase honoraria and resume financing publication in exchange for Linnik's removal, and that the election removing Linnik was conducted in violation of the paper's charter. Staff Split, Duma May Decide Issue Linnik's defeat in the election may not be the end of the internal conflict. While Linnik's name no longer appears on the listing of the editorial staff, he reportedly has not yet relinquished his office (Moskovskiy Komsomolets, 8 February) and claims the support of "most of the staff" (Interfax, 5 February). Ilin has confirmed that a split among the staff continues to exist but played down its impact on the paper's day to day operations, asserting that even those workers who support Linnik "continue to help put out the newspaper" (Kommersant-Daily, 10 February). According to Kommersant-Daily (10 February) on 9 February, unnamed Pravda representatives made a proposal to the State Duma to introduce a draft law forbidding "foreign control" over Russian media sources. Implications Duma action to deprive Yannikos of ownership cannot be ruled out in view of his heavy-handed efforts to establish editorial control over a paper that the many nationalist and communist deputies in the Duma regard as a national institution. If Yannikos remains in control, draconian policies such as his willingness to silence Pravda, one of the leading opposition papers, during a critical political period may delegitimize the paper in the eyes of its readership and result in further declines in its circulation and loss of influence among opposition politicians. Russia: Government Official Moves To Restrict Media Access Summary: In a widely publicized move that raises questions about the government's commitment to openness, Vladimir Kvasov, head of the cabinet's apparatus, attempted to severely restrict media access to meetings of the Russian Government. Although Kvasov subsequently asserted that the tight restrictions applied only to the 3 February Government meeting, he has continued to advocate restricting media access and shown only limited tolerance for public airing of official debate on contentious issues. In an apparent response to widely publicized reports about his recent attempt to restrict media access to government meetings, Kvasov has attempted to portray the move as a temporary measure made necessary by concerns about lax procedures for accrediting journalists. As initially reported by the news agencies Interfax and ITAR-TASS on 3 February, Kvasov issued an order barring all journalists except those from the newspaper Rossiyskaya Gazeta- -which came under the government's sponsorship after the dissolution of the Supreme Soviet in September--from attending meetings of the Russian Government "from now on." Kvasov's order coincided with the 3 February Government meeting which was scheduled to discuss the potentially divisive issue of subsidies for agriculture in 1994 (ITAR-TASS, 3 February). According to one report, Kvasov's move even "took the government's own press service by surprise" (Moscow radio, 3 February). Defending his action, Kvasov said in an interview to Rossiyskaya Gazeta (8 February)--whose staffers were not observed to challenge either the initial media restrictions or Kvasov's explanations--that the restrictions were necessary after the government's move to new quarters created "confusion," prompting his "verbal instruction" that the accreditation system for journalists "should be regulated." Suggesting that Kvasov is still trying to restrict media access and defend the government's apparent preference to avoid media scrutiny, Kvasov has set limits on the media's access and justified the exceptions made for the official media. Kvasov explained the preferential access extended to Rossiyskaya Gazeta by saying that only media outlets "accredited to us [the government]" should be able to attend working meetings, later adding that journalists from the official news agency ITAR-TASS would also be allowed to cover such meetings (Moscow radio, 3 February; ITAR-TASS, 4 February). Kvasov added that media accreditation in the future will depend on the agenda of the Government sessions, with broad access granted to general meetings but only ITAR-TASS and Rossiyskaya Gazeta allowed to cover more specialized sessions that affect the "interests of a narrow circle of specialists" (Moscow radio, 3 February; ITAR- TASS, 4 February). Kvasov's arguments for restricting media access suggest that the government has only limited tolerance for media scrutiny and- -perhaps of more significance to the development of a civil society in Russia--is unwilling to extend to the media a role in fostering public debate on contentious issues. Underscoring his reluctance to allow the media to report official debate on current issues--and thus to increase the potential for public opinion to exert pressure on officialdom--Kvasov stated that the government is "ready" to provide the media with "necessary materials, but only after a final decision is made on the discussed problems" (ITAR-TASS, 4 February). He expounded on this theme in his interview to Rossiyskaya Gazeta, criticizing the media for reporting issues that were "still at the discussion stage" and claiming that this practice "disinformed society, destabilized the situation in the country, and cast the government in an unfavorable light." Ukraine: Post-Postup--Attempt at a Western-Style Newspaper Summary: Since its establishment in September 1991, the newspaper Post-Postup has distinguished itself by its comprehensive coverage of national, local, and international news. Linked to a news agency of the same name, the newspaper in 1993 began consciously to model itself after Western-style journalism while serving as a proponent of moderate Ukrainian nationalism and economic reform. Post-Postup is a small-circulation (30,000), independent weekly based in Lviv in western Ukraine. Like other unsubsidized newspapers, its financial situation is rather shaky, sometimes leading it to suspend publication for a time (it did not publish at all during January 1994, although the press agency of the same name continued to function). Originally a small locally-oriented newspaper, it was revamped in 1993 into a Western-style newspaper with a tabloid format. The paper covers national, local, and international news in a more thorough manner than is usual in the Ukrainian press, which tends to be more focused on national news or exposes. Post-Postup's editor, Oleksandr Kryvenko, is running for parliament in the March 1994 election with the Nova Khvylya (New Wave) bloc, a group of moderate nationalists from Lviv including Ihor Yukhnovskyy and Viktor Pynzenyk, who favor political and economic reform. The newspaper can be characterized as moderately nationalist, strongly in favor of economic reform, and critical of Ukrainian President Leonid Kravchuk and the conservatives in power in Kiev. Nevertheless, it does not emphasize the historical and patriotic themes of other Lviv papers such as Za Vilnu Ukrayinu. The newspaper contains less editorializing by correspondents--although some remains--and more straight reporting than is typical in the Ukrainian press. Unlike other independent newspapers, such as Nezavisimost and Vechirniy Kyyiv, it does not strongly bear the personal stamp of the editor. It does not have signed front-page editorials or regular columns by the editor. The newspaper was officially registered in September 1991 along with a separate press agency with the same name, which has correspondents in all major western Ukrainian towns and nearly all oblast centers. Originally Post-Postup appeared to be aimed at a youth audience, publishing a great deal of satire and racy material to attract readership. It focused on local material and national news, as is typical of most Ukrainian papers. In 1993 the newspaper was revamped completely, dropping the satirical and racy material in favor of serious reporting. Post-Postup is divided into three sections: Politics (including national, regional, and international), Business, and Culture (including the arts, sports, and cultural commentary). As might be expected, national politics is covered extensively. Issues have featured, for example, the government's economic decrees and an overview of the political parties (9 December 1993), Rukh election tactics, and the activities of the Kuchma-Hrynyov election bloc (16 December 1993). One of the distinguishing features of Post-Postup is its detailed coverage of regional politics, especially from eastern Ukraine. There are regular reports from Odessa, Poltava, Donetsk, and Kherson, as well as other cities. The 2 December issue included reports on Kharkiv political groupings, while later issues covered Donetsk, Kherson, and Odessa politics (16 December 1993) as well as the election chances of various party candidates in Zaporizhzhya, Odessa, and the Crimea (28 February). Another feature that sets Post-Postup off from other Ukrainian papers is its international coverage. Usually the Ukrainian press limits itself to coverage of its immediate neighbors, primarily Russia. While events in Russia are well covered by Post-Postup (the Russian elections and the success of ultranationalist candidate Vladimir Zhirinovskiy, etc.), other world events receive attention as well, for example, the Anglo- Irish talks, U.S. policy toward Russia (9 December 1993), Serbian elections, and Turkish-Israeli relations (30 December 1993). Economic reporting is not neglected either. There is wide coverage of business issues with a particular emphasis on the views and activities of private bankers and entrepreneurs. Government credit and exchange rates are criticized (9, 16, 23 December 1993); private bankers give their 1994 economic prognoses (30 December 1993); joint venture troubles and privatization in Lviv are explored (9, 23 December 1993); and articles on computer systems and-safety are published (2, 9 December 1993). Notably absent are old-style articles glorifying production or long interviews with officials giving their views and remedies for the current economic crisis. In Brief Vladivostok Newspapers Suspended An ITAR-TASS item carried in the 23 March Izvestiya reports that the Vladivostok newspapers Bolshoy Vladivostok [Greater Vladivostok], Utro Rossii [Russia's Dawn], and Krasnoye Znamya [Red Banner] have been suspended in the wake of the ousting of Mayor Viktor Cherepkov. Both Bolshoy Vladivostok and Utro Rossii reportedly had supported Cherepkov, while Krasnoye Znamya, according to ITAR-TASS, "sided with his opponents from the Kray administration." Anatoliy Lyapyakin, editor of Bolshoy Vladivostok, together with other unnamed "human rights defenders," has, according to the ITAR-TASS report, "appealed to the U.S. Consulate General," requesting "permission to travel outside Russia's borders." Rossiyskaya Gazeta To Run Tatar Insert An 11 January Rossiyskaya Gazeta article announced that a weekly insert on Tatar affairs and culture will be added to the paper. The Tatar Berdemlek-Yedinstvo--founded jointly by Rossiyskaya Gazeta and the Government of the Republic of Tatarstan--will reportedly be the first ethnic publication to obtain nationwide circulation. The publication reportedly targets ethnic Tatars living outside Tatarstan by featuring lessons in the Tatar language and articles on Tatar customs and holidays; the insert will be published in Russian. Last year Tatar officials initiated the dubbing of Russian Television's "Vesti" news program into Tatar as a reflection of Tatarstan's official "state languages" of Russian and Tatar (Russian TV, 17 June 1993). According to editor-in-chief Natalya Polezhayeva, Rossiyskaya Gazeta is "prepared" to cooperate both with ethnic republics and with "other peoples"--"Ukrainians, Germans, Jews, Koreans"--who lack national formations in the Russian Federation. Other Publications of Interest Russia: Journalists Slam TV Campaign as Biased, Uninformative Even before the official television campaign got underway with the broadcast of the first free programming, some print journalists had charged that government-controlled television was biasing the campaign in favor of Russia's Choice by its continuing coverage of the official activities of many prominent government officials running for the legislature on the Russia's Choice ticket. A front page article in the 19 November issue of the independent newspaper Nezavisimaya Gazeta, for example, cited what it claimed were "a great multitude of examples illustrating Ostankino's obvious political affiliation." According to the article, programs presenting Russia's Choice candidates were "camouflaged as being 'simply' programs." (See Note 3) (Note 3) See the FBIS Trends of 15 December 1993, pages 18-20, for the full text of this article. Russia: Last Minute State TV Campaign Against Zhirinovskiy On the eve of the 12 December legislative elections, state television broke with its previous policy of providing uncritical coverage of the contending partied by airing two programs attacking Vladimir Zhirinovskiy, chairman of the misnamed Liberal Democratic Party of Russia. This last-minute attempt to turn voters against Zhirinovskiy suggests that high-level officials within the Russian Government had become aware of strong popular support for Zhirinovskiy, at least by the eve of the election. (See Note 4) (Note 4) See the FBIS Trends of 15 December 1993, pages 57-58, for the full text of this article. Russia: Pro-Communist Press Keeps Options Open on Zhirinovskiy Pro-communist newspapers Pravda and Sovetskaya Rossiya have reacted cautiously to the success of Vladimir Zhirinovskiy's Liberal Democratic Party (LDPR) in the party preference voting in the 12 December Russian legislative elections. Perhaps in part out of fear of offending a disaffected electorate that they too are attempting to woo with their own nationalistic appeals, they have refrained from harsh criticism of him and have left open the possibility of communists cooperating with the LDPR in the new legislature. At the same time, they have laid the lion's share of the blame for Zhirinovskiy's success on what they consider the misguided policies of the reformers in the government. (See Note 5) (Note 5) See the FBIS Trends of 5 January 1994, pages 8-11, for the full text of this article. Russia: Debt Crisis Temporarily Halts State Broadcasting Protesting state-owned television and radio companies' prolonged failure to pay for broadcasting services, Ministry of Communications workers struck on 10 February, disrupting broadcasts across much of Russia. Although Prime Minister Viktor Chernomyrdin persuaded the broadcasters to end their strike the same day by promising to pay the debt, he hinted that the government may turn to privatization of some television and radio companies to reduce the debt problem. The belated government response to the strike threat suggests that new state television chief Aleksandr Yakovlev, who is not a member of the cabinet, may not be well positioned in the government to serve as an effective spokesman for his sector. (See Note 6) (Note 6) See the FBIS Trends of 23 February 1994, pages 18-20, for the full text of this article. Russia: Yeltsin Restructures Media Bureaucracy Using his decree power to reorganize the media bureaucracy, Russian President Boris Yeltsin has consolidated his control over the broadcast media and attenuated the influence of the other branches of government and the cabinet. At the same time he has taken the first step in what is likely to be a far reaching, if reversible, reduction of the state's role in television by giving a private television company access to Russia's 4th television channel. The reorganization appears to signal that long-time close Yeltsin adviser Mikhail Poltoranin, who once shaped Yeltsin's media policy, no longer enjoys the President's confidence in this area. (See Note 7) (Note 7) See the FBIS Trends of 2 March 1994, pages 11-19, for the full text of this article. Russia: RTV Blasts Yakovlev, Poltoranin On 16 March Russian Television's primetime edition of its "Vesti" news program launched a scathing attack on media bigwigs, including Aleksandr Yakovlev, head of both the Federal Service of Russia for Television and Radio Broadcasting and the Ostankino Television and Radio Broadcasting Company, and Mikhail Poltoranin, head of the State Duma Committee for Information Policy and Communications. Showing video of the two taking in the performance of an exotic dancer at a club for media elite, the program juxtaposed the officials' expensive and decadent perquisites with state television's acute shortage of operating funds. (See Note 8) (Note 8) See the FBIS Trends of 23 March 1994, pages 28-29, for the full text of this article. (AUTHORS: ALLENSWORTH, CRIMMINS, ELDRIDGE, NERO, O'CONNELL, VILLHAUER. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHTEF, ANALYSIS BRANCH, RUSSIA DIVISION (703) 733-6070.) ENEAG/BLOUGH/DEW 29/1852Z MAR

SUMMARY While campaigning to convince the new legislature of the value of Russian accession to NATO's Partnership for Peace, Russian government officials continue to portray the program as merely an interim step toward broader European security measures that will provide prominent status for Russia. Influential members of the Duma, on the other hand, are taking a skeptical attitude, expressing concern that the terms of Russia's association with NATO will be dictated, rather than negotiated, and will harm Russia's security interests. Although the Defense Ministry newspaper has supported joining the program, other media commentary across the political spectrum appears to reflect nationalistic fears that Russian interests will be damaged whether or not it joins the Partnership. END SUMMARY Testifying at 16-17 March Duma hearings, government officials promoted accession to the NATO Partnership for Peace program, arguing that Russia will gain influence by joining but risks isolation if it does not. Yuriy Nazarkin, head of the coordination and interaction department of the Security Council's staff; Yuriy Ushakov, head of the Ministry of Foreign Affairs' (MFA) Department for European Cooperation; and Major General Pavel Zolotarev from the Defense Ministry all stressed that to "disregard" Partnership for Peace would mean a disastrous self- isolation that would damage Russia's security. Nazarkin and Ushakov warned that refusing to join would strengthen those who were pushing for NATO expansion and argued that in joining Russia could influence the program (Interfax, 17 March). In enumerating a long list of membership advantages, Zolotarev contended that by joining Russia would demonstrate to the world its interest in collective security and "neutralize" the anti- Russian forces that are seeking to exclude Russia from the international arena (Krasnaya Zvezda, 18 March). Moscow's Mixed Signals Despite this supportive testimony and Defense Minister Pavel Grachev's statement that Russia would join the program soon, other signals from the government suggest that it is unsure about how fast to move ahead. After his 17 March meeting with U.S. Defense Secretary William Perry, Grachev told reporters that "groups of experts" are "already completing work" on Russia's membership application, adding optimistically that "we shall be able to join the concept by the end of the month" (ITAR-TASS, 17 March). More cautiously, however, First Deputy Defense Minister Andrey Kokoshin said it was "too early" to discuss when Russia would sign on to the program (Interfax, 18 March). A 19 March Nezavisimaya Gazeta article, discounting speculation that Grachev meant that Russia would "definitely" sign in March, cited a Foreign Ministry "clarification" that the signing might take place in late March or more likely later. The article attributed the delay to the need to finish drafting the documents, "wind up interdepartmental consultations," and "solve a number of technical problems"--including who would sign, Grachev or Foreign Minister Andrey Kozyrev. In addition, Russian President Boris Yeltsin and other senior officials have continued to express reservations about the program--particularly its implications for NATO expansion--and to press for movement toward alternative European security measures: -- In his 24 February address to the Duma, Yeltsin warned against any NATO expansion without Russia and made clear that, while Moscow supported Partnership for Peace, it viewed the program as a waystation to building a pan-European partnership "open to all states of the greater Europe" in which CSCE would take the lead and NATO would be relegated to a subordinate role (Rossiyskaya Gazeta, 25 February). -- After a meeting with FRG Defense Minister Volker Ruehe in Berlin on 11 March, Grachev intimated that he views the program as only a stopgap measure until new European security structures emerge, touting the CSCE as the "main peace-keeping organization in Europe," and noting that "time will tell what the [NATO] structure will be like" (ITAR-TASS, 11 March). These remarks echoed his suggestion to reporters on 2 February that the program was transitional, providing for a coordinated effort to defuse tensions in Europe by NATO and other countries, including Russia, during "an interim period following the breakup of the Warsaw Pact." He also reiterated his previous warnings against the accession of former Warsaw Pact members and the Baltic states to NATO (Interfax, 2 February). -- Kozyrev, likewise, has continued to warn against NATO expansion and laud CSCE merits. In an address to a 10 March MFA Foreign Policy Council session, he complained about "NATOcentrism" within the alliance which has led to a push for a "mechanical" expansion, adding that this demonstrates a "vacuum of strategic thought" and undermines the goal of "moving toward a single, Greater Europe" (Nezavisimaya Gazeta, Kommersant-Daily, 11 March). Although Kozyrev said Russia is close to signing Partnership for Peace documents, he continued to argue that CSCE should become the core of Europe's security system. Like Grachev, he hinted that collaboration within a NATO framework might be only temporary, saying that a "necessary historical period" perhaps "two to three years in length" had "opened up" to "elaborate and implement cooperation programs." Similarly in a 17 March Izvestiya article, he said that NATO was "inadequate" and "unsuitable" for "current purposes" and contended that while Partnership for Peace would provide "a partial answer" to security problems, it could not "be considered the pinnacle of achievement." In a sign that not all of Yeltsin's administration share the view that Russia has more to gain than to lose by joining the program, Presidential Council adviser Andranik Migranyan, in a 15 March Nezavisimaya Gazeta article titled "Why Join, If It Is Better Not To Join," strongly opposed Russian accession. Claiming that there is no consensus on the issue within the Foreign Ministry, he listed numerous adverse consequences if Russia joins. He contended that the program would deepen Russia's isolation and "sharply limit its freedom for foreign policy maneuvering." Doubts in the Duma Many influential members of the Duma apparently remain ambivalent about the Partnership plan, opposing what they view as NATO's "dictat," and worried that a broad range of security interests from the competitiveness of Russia's defense industries to its security arrangements with other CIS countries will suffer: -- Former Ambassador to the United States Vladimir Lukin, a member of the moderately reformist Yavlinsky bloc and chairman of the Duma's international affairs Committee, conceded the Partnership idea was good, but said the "devil was in the details," which had been insufficiently thought through (Moscow radio, 17 March). He said that Russia, "instead of trying to "push to the head of the line" to join, should carefully analyze what should be done for a more active rapprochement with NATO and closely follow NATO's reorganization. Lukin also expressed concern that involvement with the Partnership program could wreck Russia's "strategic intentions to create security structures within the CIS framework" (Krasnaya Zvezda, 18 March) -- Sergey Yushenkov, chairman of the Duma's defense committee and a Russia's Choice member, said while in Washington with a Duma delegation that he objected to membership on the grounds that "the framework agreements were drawn up without [the Duma's] participation and do not conform to Russia's status" and that NATO standardization would be "simply destructive" for Russia's defense industries. He advocated instead a security alliance between Russia and other countries in which the guidelines would not be set by NATO, as in the case of Partnership for Peace, but would be worked out "jointly" (Interfax, 9 March; Rossiyskaya Gazeta, 18 March). More recently, however, he appears to have changed his position on joining. During the Duma hearings Yushenkov said he supports Russian membership, but maintains it should be carried out on special terms given Russia's "status as a nuclear power." Like many government officials, he contended that the NATO program should be viewed as "the beginning of a path toward a common security system" (Interfax, 17 March). -- Konstantin Zatulin, chairman of the Duma's CIS affairs committee and co-chairman of the Party of Russian Unity and Accord faction, warned the MFA Foreign Policy Council session that Russia's participation in the "Partnership" program would dash its hopes [unspecified] in the "near abroad," because even now CIS countries were trying to "blackmail" Russia by appealing to the West for help (Kommersant-Daily, 11 March). Media Reaction Russia media commentary on the Partnership for Peace program has reflected fears about isolation if Russia fails to join, suspicion that Russian interests may suffer if it does join, and resentment that Russia's options thus are limited. NATO bashing has been a staple of procommunist newspapers like Pravda and has intensified in the wake of the February NATO ultimatum to the Bosnian Serbs, but even reformist and pro-Yeltsin newspapers appear ambivalent toward membership, although the Defense Ministry newspaper, Krasnaya Zvezda, supported it: -- The procommunist newspaper Pravda printed a long diatribe on 16 March by retired general Viktor Chudov, who charged that Partnership for Peace was designed as a cover for "peace U.S.- style" and "world domination." The article, which claimed that planned U.S.-Russian exercises were designed to counter "reunification sentiments" in former Soviet republics and to inspire "separatists and nationalists" to "vigorous activity," lambasted the Defense Ministry's "top brass" for engaging in such exercises instead of carrying out its own war games designed to repel aggression "by a coalition of nuclear powers." -- The reformist newspaper Nezavisimaya Gazeta, which printed the highly critical Migranyan article, frontpaged another article on 15 March titled "Russia's Partnership With NATO Is A Misalliance." The article maintained that Russia could have received better terms if it had held out longer before agreeing to join, claiming that there had been growing sentiment in the West to offer Moscow something more in line with its "great power" status. Now, the article warned, Moscow confronts a new dilemma: to face isolation and discrimination if it does not become a full member of NATO, or to place its armed forces, military plans, and budget under the command and control of the United States if it does join, since "under a long-standing tradition, the NATO commander in chief has always been and remains an American general." -- A 23 March article in the mass-circulation newspaper Komsomolskaya Pravda contended that, although Moscow had little choice, it would be "humiliating" for it to follow "in the wake of U.S. policy," "jostling for space on the margins." Complaining that "Washington is the banker and Russia is "forced to play blind," the article noted sarcastically that "you can judge for yourselves how far such 'partnership' can be called mutually beneficial and equal." -- A 16 February article in the usually pro-Yeltsin newspaper Izvestiya warned that Russia could lose its arms market in Eastern Europe as countries switched to NATO standards. A 19 March Izvestiya article admitted that the program was not popular in the Duma and gave minimal support to the government's campaign to promote it, confining its advocacy to pointing out that without Russia the program was "meaningless" and that Moscow had made clear to Secretary Perry that Russia intends to join "on its own terms." -- On 22 March, prominent Krasnaya Zvezda commentator Aleksandr Golts, echoing the government's line, strongly backed Partnership for Peace and criticized the "emotional" arguments of its opponents. Claiming that the actual partnership program had emerged because Washington "was forced to take Moscow's tough stance [on NATO expansion] into consideration," Golts stressed that the main point in the program was that each country would develop its own relationship with NATO on a bilateral basis and that Moscow is elaborating terms "which will take maximum account of Russian interests." Golts insisted that "the fears that Russia condemns itself to a secondary role by signing the partnership program scarcely hold up," while the risks that Russia faces if it does not join "are as clear as can be": the program would "acquire an unambiguously anti-Russian thrust." Outlook While government officials support joining the NATO Partnership for Peace program as beneficial to Russia's security interests, they clearly view the program as a stop gap measure and hope it will foster the creation of a European security system in which Russia will play a major role. Influential legislators, in contrast, appear more fearful that NATO affiliation will further marginalize rather than foster Russian influence in Europe. This reaction from the legislature, coupled with the skeptical reaction from even the independent press, may pressure the government to demonstrate that it remains an equal and assertive player in the working out of the terms of any NATO partnership. (AUTHOR: BELLINGER. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ANALYSIS BRANCH, RUSSIA DIVISION (703) 733-6070.) ENEAG/BLOUGH/DEW 29/1810Z MAR

This Special Memorandum, "Media Developments: Russia and Ukraine," is a periodic series aimed at reporting and analyzing changes to and events affecting the Russian and Ukrainian media. Comments and queries regarding this series may be directed to Chief Analyst, ENEAG at (703) 733-6072. In this issue ... Spotlight on ... Russia: Sovetskaya Rossiya--Zyuganov's Mouthpiece Russia: RIA-Novosti Returned to Government Oversight Features Russia: Zavtra Ambivalent About Zhirinovskiy Russia: Government Daily Tries, Fails at Independence Russia: Editorial Turmoil at Pravda Russia: Government Official Moves To Restrict Media Access Ukraine: Post-Postup--Attempt at a Western-Style Newspaper In Brief Russia: Vladivostok Newspapers Suspended Russia: Rossiyskaya Gazeta To Run Tatar Insert Other Publications of Interest Russia: Journalists Slam TV Campaign as Biased, Uninformative Russia: Last Minute State TV Campaign Against Zhirinovskiy Russia: Pro-Communist Press Keeps Options Open on Zhirinovskiy Russia: Debt Crisis Temporarily Halts State Broadcasting Russia: Yeltsin Restructures Media Bureaucracy Russia: RTV Blasts Yakovlev, Poltoranin Spotlight on ... Russia: Sovetskaya Rossiya--Zyuganov' s Mouthpiece Summary: The opposition newspaper Sovetskaya Rossiya has served as a mouthpiece for Gennadiy Zyuganov's Communist Party of the Russian Federation (CPRF) since at least July 1993, when the newspaper began publishing a regular insert, Pravda Rossii, which carries news of CPRF functions, official party positions, and commentary by party officials. The partnership between the paper and the party is not surprising in view of their shared ideological inclinations, which involve the fusion of nationalism and communism. The evolution of such a nationalist-communist fusion has been evident in the pages of Sovetskaya Rossiya for some time, and the CPRF has steadily moved in that direction under Zyuganov's leadership. Moreover, the Zyuganov-Sovetskaya Rossiya connection pre-dates the August 1991 coup, when Zyuganov's attacks on CPSU reformers were printed and echoed in the pages of what was then the RSFSR's official communist newspaper. Sovetskaya Rossiya began publishing Pravda Rossii on 10 July 1993 with "Special Edition" Number 1 ("Prepared jointly with the Central Executive Committee of the CPRF"), but, at least for now, the CPRF appears only to be extending limited financing to the Pravda Rossii insert and not to Sovetskaya Rossiya as a whole. The "Special Edition" carried an announcement of the election of the Presidium of the Central Executive Committee of the CPRF (whose membership includes Central Executive Committee Chairman Gennadiy Zyuganov), an announcement excerpted from the CPRF action plan" (including a call to Muscovites to attend a mass meeting to protest "the course taken by the government"), news of CPRF regional activities, and a CPRF Central Executive Committee "Announcement," which called on "all patriotically inclined social groups," from "workers to our native private entrepreneurs," to "halt the collapse of Russia, to save her state unity." At the 15 March CPRF Central Executive Committee plenum, Zyuganov chided the party for not paying sufficient attention to the publication of Pravda Rossii and for not "rendering assistance "--presumably financial--to Sovetskaya Rossiya (Sovetskaya Rossiya, 17 March). Subsequent editions of Pravda Rossii have continued to stress patriotic themes, sometimes combined with a socialist-oriented economic line, and to highlight the activities and viewpoints of the CPRF. Pravda Rossii Number 2 published the election platform of the CPRF in anticipation of possible early parliamentary elections. The platform combined nationalistic calls for the preservation of the territorial integrity of the Russian Federation and exhortations that the "salvation and strengthening'' of Russia's indigenous ''spirituality'' are necessary conditions for the rebirth of Russia" with traditional communist denunciations of "the forced capitalization" of Russia (Sovetskaya Rossiya, 22 July 1993). Virtually every edition of Pravda Rossii has reported on activities of local CPRF affiliates. Number 3, for example, carried news from CPRF groups in Northern Ossetia, Ryazan, Orel, Volgograd, and Moscow (Sovetskaya Rossiya, 5 August 1993). Number 4 carried an announcement proclaiming the CPRF to be the party of "state patriotism," whose ideology is directed toward "the salvation and rebirth of Russia," while simultaneously attacking "bourgeois liberalism." In the same edition, the CPRF Central Executive Committee encouraged communists to subscribe to Sovetskaya Rossiya as part of its broader efforts to "spread" the CPRF line in "the party press" (Sovetskaya Rossiya, 7 September 1993). The CPRF-Zyuganov-Sovetskaya Rossiya connection was further illustrated in the political arena on 12 December 1993, when Sovetskaya Rossiya editor Valentin Chikin was elected as a deputy to the State Duma on the CPRF party list. While remaining true to its communist origins, Sovetskaya Rossiya has augmented its communist ideology with a strong dose of Russian nationalism in recent years, including the regular publication of an insert entitled Rus Pravoslavnaya (Orthodox Russia), which frequently features articles by the nationalist Metropolitan Ioann of St. Petersburg. This tilt toward nationalism has been evident for some time. For example, like most prominent Russian newspapers, Sovetskaya Rossiya carried special coverage of the Russian government's commemoration of the first anniversary of the August 1991 coup attempt, but it used the opportunity to attack the "democrats" in a particularly nationalist vein. According to an article published on 20 August 1992, "A certain group among the 'democratic forces' consists of representatives of youth," who are "mesmerized" by "pro-American, anti-Russian and anti-Soviet propaganda, camouflaged as anti- communist." The article maintained that these groups were heavily infiltrated with "agents of influence" carrying out a plan that had been "worked out in Washington" for the "destruction of the USSR, then Russia" (Sovetskaya Rossiya, 20 August 1992). In the same issue the paper's political observer, Eduard Volodin (like Zyuganov, Volodin later joined the nationalist-communist opposition National Salvation Front, whose manifesto was published in the 6 October 1992 edition of Sovetskaya Rossiya and was signed by, among others, Volodin, Zyuganov, and Chikin), called the August 1991 events a loss of "national honor . . . and national dignity," rather than a liberation from "stagnation and dogmatism." According to Volodin, the "democrats" in the government were conscious agents of "the builders of the 'New World Order, '"--an allusion to the United States--who were seeking "the destruction of Russia's international authority" as well as the "dismemberment" of the Russian state. As Sovetskaya Rossiya embraced nationalism, so did the CPRF and its leading figure, Zyuganov. Zyuganov was elected chairman of the CPRF Central Executive Committee by a party congress in February 1993. That same party congress adopted a "Program Statement" that included a section called "The Fatherland in Danger," which urged the "consolidation of all . . . patriotic forces, united by the idea of saving the Fatherland." Other sections of the statement side-stepped communist dogmas by endorsing a mixed economy (although the state sector would still be the "basis" of the "multisector economy") and calling for communist cooperation with all "patriots," including active members of the Orthodox Church (Pravda, 26 February 1993). The extreme nationalist weekly Den subsequently endorsed Zyuganov's election and characterized the "majority of the delegates" to the congress as "not just fans of the long dead writers Marx and Lenin" but as "ordinary citizens" who were concerned with the "fate of the Fatherland" (Den, 21-27 February 1993). Zyuganov himself subsequently trumpeted the nationalist-communist line in Sovetskaya Rossiya and actively participated in organizing and leading nationalist organizations. In an article entitled "The Russian Question," Zyuganov called on leaders of the "patriotic movement" to develop an "ideology of national rebirth" as part of a "national liberation" strategy for Russia (Sovetskaya Rossiya, 3 July 1993). He called his opponents in the "democratic" camp "those who hate Russia," and saw the collapse of the USSR as just another chapter in the "thousand-year" history of efforts to destroy Russia. He repeated similar charges in a front-page article in Sovetskaya Rossiya on 28 August 1993 entitled Derzhava (Great Power), which viewed the Soviet period as simply one stage in the development of the Russian nation and empire. Zyuganov was cofounder of the Council of National-Patriotic Forces of Russia, organized in 1992, a cochairman of the Organizational Committee of the National Salvation Front from 1992 until the October violence in Moscow, and a cochairman of the Duma of the Russian National Assembly, a nationalist organization founded in 1992 by ex-KGB General Aleksandr Sterligov. Old Ties The Sovetskaya Rossiya-Zyuganov connection predates the August 1991 coup attempt, when Sovetskaya Rossiya published a series of Zyuganov articles and interviews attacking reform and carried other articles defending Zyuganov's positions. Zyuganov fired his first salvo in an anti-reform barrage in Sovetskaya Rossiya on 20 March 1991, when he attacked Boris Yeltsin and his efforts to forge ties with Russia's new class of entrepreneurs, which Zyuganov derided as a "homegrown bourgeoisie." He followed with an attack on the "architect" of perestroyka, Aleksandr Yakovlev, whom Zyuganov held responsible for the social and economic problems of the Russian Federation: "What lies in store for us- -the final destruction of all social connections . . . a social explosion?" (Sovetskaya Rossiya, 7 May 1991). A 6 June 1991 article called the reformists "false prophets" and claimed that the Soviet Union had reached the "breaking point." In a subsequent interview, Zyuganov lamented that the Soviet Union found itself on the "verge of national catastrophe" (Sovetskaya Rossiya, 25 June 1991). Zyuganov's views, and his attack on Yakovlev in particular, were defended in a 22 June article by Volodin, in which Volodin continued the attack on reforms in general (Sovetskaya Rossiya 22 June 1991). Zyuganov also signed the open letter, "A Word to the People," widely believed to have been a call to arms in anticipation of the August 1991 coup attempt (Sovetskaya Rossiya, 23 July 1991). Russia: RIA-Novosti Returned to Government Oversight Summary: A recent edict signed by President Boris Yeltsin ends almost two years of organizational turmoil within the RIA-Novosti news agency by placing it under the sponsorship of the Russian Council of Ministers and apparently returning to it a foreign propaganda function similar to that of its predecessor, APN. The edict appears to quash the agency's own efforts in recent years to achieve independence from state or presidential control, but it is not yet clear whether its new official status will affect its domestic news reporting function. An edict signed by Yeltsin on 23 December 1993 ordered the conversion of the RIA-Novosti news agency from a quasi- independent media organization to an agency of the Russian Government and also assigned to it apparent propaganda and analytical functions that differentiate it from the official news agency ITAR-TASS. According to the edict, the transformed RIA- Novosti will become a "state information and analysis agency" whose purpose is to provide "information and analytical support for Russia's domestic and foreign policy and creat[e] a favorable image of the Russian state" (Rossiyskaya Gazeta, 30 December 1993). (See Note 1) The apparent propaganda function assigned to RIA-Novosti underscores its role as the successor to the old Soviet Novosti Press Agency (APN), whose purpose was to promote "mutual understanding, trust, and friendship among peoples" through "widespread dissemination abroad of true information" about the USSR and by "familiarizing" the Soviet public with the "life of people of foreign countries" (Nezavisimaya Gazeta, 24 July 1993). In addition, the 23 December edict stated that the Council of Ministers is to "ratify the charter" of RIA-Novosti, apparently an oblique way of saying that the Council of Ministers is the agency's new founder (sponsor), since the Russian Law on the Mass Media establishes that the founder "ratifies the editorial charter" (Rossiyskaya Gazeta, 8 February 1992). Finally, the edict guaranteed state funding for RIA-Novosti and granted it a number of tax breaks and official privileges. (Note 1) By contrast, a recent Yeltsin edict characterized ITAR- TASS as a "central state news agency" and asserted a more politically neutral purpose for its formal transfer to the government--to create the "conditions for ensuring high quality and timeliness in the collection and dissemination of information" (Rossiyskiye Vesti, 24 December 1993). The impetus for Yeltsin's edict on ITAR-TASS appears to have been the dissolution of the Federal Information Center and the need to transfer formally its media organizations to the jurisdiction of the Council of Ministers. The transfer of RIA-Novosti to government oversight appears to cap a period of restructuring in the agency that began last September and has included the appointment of new management. On 15 September Yeltsin ordered the Council of Ministers to "adopt the necessary measures to fully reconstitute the activity" of RIA-Novosti (Rossiyskaya Gazeta, 18 September 1993). Two days later a government decree appointed Vladimir Markov, a former Novosti political observer, as chairman of the agency (ITAR-TASS, 17 September 1993; Izvestiya, 25 September 1993). Markov replaced Maysarat Makharadze, whose departure from RIA-Novosti may be linked to the appointment of her husband, former Deputy Premier Valeriy Makharadze, as trade representative to Canada (Moskovskiy Komsomolets, 21 September 1993). More recently, a government directive appointed former RIA-Novosti journalist Aleksandr Slabynko and Anatoliy Chebotarev as deputy chairmen of the agency's board (Rossiyskaya Gazeta, 11 March). Foreign, Domestic Information Role Markov, who remains the agency's chairman, has outlined an ambitious program for RIA-Novosti that seeks to combine its role as an instrument of Russian foreign policy and as a domestic news agency capable of competing with ITAR-TASS and the independent news agency Interfax. He has indicated his support for RIA- Novosti's propaganda role--though he himself reportedly does not use that word (Izvestiya, 25 September 1993)--saying that it was a "big mistake" to discard the "services" of APN in providing "informational support for Russia's foreign policy" and affirming RIA-Novosti's "duty" to ensure that "Russia has a worthy image abroad" (Moscow radio, 31 October 1993). Among the tools he will apparently use for this purpose are the old APN methods of preparing articles, commentaries, photos, and television items for and "at the behest of" foreign media (Izvestiya, 25 September 1993). At the same time, he has argued that the "handful" of news agencies currently operating in Russia are "not enough for a huge country" and has said that RIA-Novosti will strive to inform people "at the local level about the activity of all branches of power." Additionally, Markov foresees a "public relations" role for the agency, providing "informational assistance for our new political parties," possibly through the dissemination of party programs and announcements (Izvestiya, 25 September 1993; Moscow radio, 31 October 1993). Organizational Turmoil The transfer of RIA-Novosti to government oversight formally reverses an earlier Yeltsin edict that was to have merged the agency with the TASS state news agency. On 22 January 1992 Yeltsin ordered RIA-Novosti and TASS to merge into one agency, ITAR-TASS, although he apparently authorized some components of RIA-Novosti to operate independently as the RIA joint-stock company (see box 1). However, for reasons that are unclear, the merger of the two news agencies appears never really to have taken effect. On 8 January 1992 Makharadze replaced Andrey Vinogradov as director of RIA-Novosti under circumstances that one experienced journalist called "strange" but are undoubtedly due to her political connections (Moskovskiye Novosti, No. 27, 5 July 1992; Nezavisimaya Gazeta, 24 July 1993) (see box 2). According to the journalist, the impetus for the merger had already "disappeared" with the ouster of former RIA-Novosti chairman Vinogradov (Moskovskiye Novosti, No. 27, 5 July 1992). Under Makharadze, RIA-Novosti continued to function--at least as a domestic news agency--and to enjoy some independence from state control, (See Note 2) but her attempts to merge the RIA joint- stock company with RIA-Novosti into a larger, quasi-independent joint-stock company ultimately failed. In June 1992--perhaps as a result of Makharadze's personal connections--the Russian Government reportedly authorized the transfer of RIA-Novosti's property to the RIA joint-stock company, thus effectively reversing Yeltsin's January 1992 edict that had transferred RIA- Novosti's property to TASS and had ostensibly abolished RIA- Novosti (Nezavisimaya Gazeta, 24 July 1993). Makharadze, however, wanted to go a step further and to merge the RIA joint- stock company with RIA-Novosti into a larger joint-stock company with the state as the majority share holder. She expected a government order to this effect by 1 August 1993 (Nezavisimaya Gazeta, 24 July 1993), but it apparently never materialized, and Yeltsin's most recent edict appears to dash her plans. (Note 2) When Yeltsin created the Federal Information Center (FIC) in December 1992 and appointed Poltoranin to head it, a provision in the edict made the FIC a cofounder (cosponsor) of RIA-Novosti, indicating that the agency still existed, at least on paper (See the FBIS Trends of 21 January 1993, pages 16-22). In an interview more than a year later, Poltoranin said that the "Russian Information Agency"--apparently meaning the joint-stock company--did not belong "structurally" to the FTC and that the FTC had "not yet considered the transfer" of RIA's sponsorship to the FTC (RIA, 26 May 1993). Box 1 The Tumultuous Existence of APN-IAN-RIA-Novosti February 1961. Established as an "information organ of Soviet public organizations," the Novosti Press Agency (APN) formally came under the sponsorship of the USSR Union of Journalists, the USSR Union of Writers, the Soviet Society of Friendship and Cultural Relations With Foreign Countries, and the All-Union Znaniye Society, though in reality it was under the control of the CPSU Central Committee's ideological department, which appointed Novosti's top officials (Moscow Central TV, 1 August 1990; Nezavisimaya Gazeta, 24 July 1993). July 1990. In an apparent response to signs that the Yeltsin-led RSFSR Supreme Soviet wanted to wrest control of Novosti from the Union Government--part of a broader battle waged by the RSFSR to establish its own media outlets--then-USSR President Mikhail Gorbachev signed an edict transforming Novosti from a public agency "subsidized by the state" into a "presidential, state agency" (Moscow Central TV, 1 August 1990). At the same time, its name was changed to the Novosti Information Agency (IAN), but the agency's basic propaganda function reportedly remained the same (Nezavisimaya Gazeta, 24 July 1993). August 1991. In the wake of the failed coup attempt, a Yeltsin edict of 22 August removed IAN Director Albert Vlasov from his post and transferred the agency to the jurisdiction of the RSFSR Ministry of the Press and Mass Media. September 1991. A decree of the RSFSR Council of Ministers merged IAN with the Russian Information Agency (RIA), an independent news agency founded six months earlier by Andrey Vinogradov--himself a former Novosti journalist--but the agency's formal status and sponsorship were unclear. Renamed RIA-Novosti and headed by Vinogradov, the combined agency took legal title to IAN's considerable assets, including publishing houses, printing plants, photography labs, and television production studios as well as an extensive network of foreign bureaus (IAN, 30 August 1991, 12 September 1991; Tokyo Shimbun, 25 September 1991). The merger apparently caused disgruntlement among IAN staffers, who contended that Vinogradov's experience heading RIA's staff of 50 reporters--all based at the time in the RSFSR and former Union republics--left him ill-qualified to manage the complexities of a worldwide news agency (Nezavisimaya Gazeta, 24 September 1991). January 1992. In a highly controversial move that sparked concerns about attempts by the Russian Government to bring the media under tighter control, a Yeltsin edict of 22 January ordered the merger of RIA-Novosti and the official state news agency, TASS, into the newly-named ITAR-TASS. Then-Minister for the Press and Mass Media Mikhail Poltoranin offered the official explanation that the state needed to reduce spending on the agencies, but an official investigation into RIA reports about a purported government order to partially withhold workers' wages allegedly leaked to it by a government source suggested high- level displeasure with the agency and with Vinogradov in particular. The combined news agency was placed under the directorship of TASS's Vitaliy Ignatenko, a former Gorbachev spokesman who became the head of TASS in the wake of the failed coup. End Box 1 Box 2 The Meteoric Rise of Maysarat Makharadze According to Maysarat Makharadze, then-Minister for the Press and Mass Media Mikhail Poltoranin "invited" her to head RIA-Novosti because he liked "the fact that I had a lot of journalistic and industrial experience" (Nezavisimaya Gazeta, 24 July 1993), but this explanation seems disingenuous. By her own account, Makharadze's journalism experience appears limited to provincial media. She began writing for the Chechen newspaper Groznenskiy Rabochiy in 1959 and became a correspondent for Dagestanskaya Pravda within a year. After earning a degree at Makhachkala University in Dagestan, she worked for unspecified regional newspapers and television stations until 1977. Upon her husband's assignment to Udmurtiya in 1977, Maysarat Makharadze left journalism to work in a bottle making factory, rising suspiciously quickly to shop director and, ultimately, factory director. As Valeriy Makharadze's political career flourished and brought him to Moscow, so, too, did Maysarat's. She served briefly at the end of 1991 as deputy press minister under Poltoranin before he appointed her to head RIA-Novosti (Nezavisimaya Gazeta, 24 July 1993). End Box 2 Features Russia: Zavtra Ambivalent About Zhirinovskiy Summary: Interviews and commentary in the ultranationalist weekly Zavtra--the successor to Den--following the December elections (through February) suggest that hard-line nationalist oppositionists regard the electoral success of Vladimir Zhirinovskiy and the Liberal Democratic Party of Russia (LDPR) with ambivalence. While reaction on the whole was hostile, some opposition figures, including Zavtra editor Aleksandr Prokhanov, appear to view Zhirinovskiy as a potential political ally. The first issue of Zavtra--now published in Vladimir--following the elections (No. 4, December 1993) featured a front-page section entitled "Nashi (Our People) in the Duma," which carried interviews with prominent opposition figures who had won election to the State Duma, including August 1991 coup plotters Anatoliy Lukyanov and Vasiliy Starodubtsev, as well as nationalist television personality Aleksandr Nevzorov. No member of the LDPR was interviewed and the evaluations of the LDPR's success were decidedly mixed. Nevzorov yas the most positive in his assessment, observing that he counted Zhirinovskiy among those he considered "nashi." Lukyanov took a more ambivalent view, observing that the voters "did not vote so much for Zhirinovskiy as they did against the [Yeltsin] regime." He maintained that although his own views differ from Zhirinovskiy's, the LDPR nevertheless "expresses the interests of those who feel that the Russian empire is being methodically destroyed" and that the government is conducting "an attack" on "the Russian [Russkiy, that is, ethnically Russian] people and Russian interests." He also complained that ''the patriotic movement'' was not represented" during the elections, claiming that the government had deliberately blocked "patriotic" movements like Sergey Baburin's Russian National Union (RNU) from registering for the elections and had thus "cleared the road" for a Zhirinovskiy victory. Lukyanov asserted that, since Zhirinovskiy had supported the president's efforts to pass the draft constitution, the "democrats" had counted on Zhirinovskiy's continued support. "Now they feel that the constitution can work for Zhirinovskiy as well," he said, alluding to the presidential aspirations of the LDPR leader. In Lukyanov's view, this is why government supporters are currently attacking Zhirinovskiy in the press. Starodubtsev, in the most negative assessment of the three, called Zhirinovskiy's "promises" a form of "dangerous" populism and termed his foreign "ambitions" a "provocation." He added that if Zhirinovskiy did not seek a "clash" with the communists or the agrarians, he would discover that they, too, are "people who sincerely feel pain for Russia." An unsigned front-page article in the same issue seconded Starodubtsev's negative view, taking up the assertion that the "democrats" had deliberately aided Zhirinovskiy in order to thwart the communists and "patriots." The article asserted that Zhirinovskiy was incapable of the kind of "great power leadership" that National Salvation Front or RNU leaders had displayed. The writer considered Zhirinovskiy a "marionette" manipulated by the Yeltsin regime. Zavtra's first issue for January 1994 continued the hostile tone, featuring a savage attack on Zhirinovskiy by Eduard Limonov, a one- time member of his "shadow cabinet." In the article, Limonov called Zhirinovskiy "an enemy of Russian nationalism" who had merely used nationalism as a vehicle for furthering his own personal aims. "Is it not degrading that a former activist of the Jewish movement [Zhirinovskiy] . . . informs us of his plans to protect Russians?" he asked. Limonov also maintained, as Lukyanov had in the previous issue, that Zhirinovskiy's success was due to the government's blocking of the registration of nationalist parties for the December elections. Zhirinovskiy Interview In an interview with Zhirinovskiy published in February (No. 6), Zavtra editor Aleksandr Prokhanov displayed a friendly attitude toward the LDPR leader. Though Prokhanov mentioned Zhirinovskiy's reputation as an "eccentric politician," he noted their shared notions concerning the "Russian idea," which included the conviction that the "mongrel" Russian Federation is "in no way Russia as such." Taking his cue from Prokhanov, Zhirinovskiy contended that the future Russian Empire should include all the territory of the former USSR "at a minimum" and seconded Prokhanov's assertion concerning the just nature of the Russian people and empire. Zhirinovskiy claimed that the empire had "uplifted" all its former subjects, raising primitive cultures, such as that of the Kazakhs, to "cosmic heights." "You and I were not together [previously], in one party, but we think identically," he told Prokhanov. Russia: Government Daily Tries, Fails at Independence Summary: Rossiyskiye Vesti has renewed its government affiliation after a six-week experiment with independence during which it found the financial difficulties entailed in the loss of government funding too harsh to bear. The return to government sponsorship places Chief Editor Valeriy Kucher in a dilemma, as he will likely have to rein in the editorial independence on which the paper had embarked or risk alienating the holders of the purse strings in the government. On 31 December Rossiyskiye Vesti announced that it was severing its ties to its official sponsor, the Russian Council of Ministers, and becoming an independent newspaper. The announcement said that the paper's journalists collective had decided on 29 December to terminate the relationship with the Council of Ministers because the Council of Ministers had failed to fulfill its "statutory obligations" to the editorial office, tried to "impede" the work of the chief editor and the paper's journalists, and attempted to ''get rid of'' the editor as unsuitable." They also charged that the government would not accept" criticism from the, paper. The announcement noted that the paper's status as a government publication had given it an unjust" image as an "obedient" publication that had an "adverse effect" on its standing. It claimed that its new status would allow it to "perform its social role considerably more freely and professionally" (Rossiyskiye Vesti, 24, 31 December 1993). The journalists based their actions on the Law on the Mass Media which stipulates that sponsorship reverts to a publication's editorial office in the event of the sponsor's reorganization, and noted that Russian President Boris Yeltsin had reorganized the Government with his 23 December edict "On the Transformation and Reorganization of the Council of Ministers-Government of the Russian Federation." Following the announcement, the paper continued to publish regularly until 25 January, when it failed to appear. Editorial information published on the back page of each issue now listed the Journalists' Collective of the Editorial Office as the "temporary" sponsor whereas before it had listed the Council of Ministers. The paper reappeared on 1 February, having missed five regularly scheduled issues, and apologized for its "forced interruption." The paper charged that its decision to assume sponsorship in lieu of the Council of Ministers resulted in a cutoff of credits to cover publishing costs (1 February). When it reappeared, however, its distribution was apparently confined to the Moscow region until 2 March, when it published an issue containing an apology to regional readers who, the paper said, had not received their subscriptions for a month. Government Ties Reestablished On 12 February the paper resumed listing the government as sponsor, without offering an explanation, and listed the journalists' collective as a cosponsor. Without mentioning the resumption of government sponsorship, the apology asserted simply that the "suspension of publication" was due to "interruptions in [state] budget financing." In its New Year's message to subscribers, the paper had noted that in the absence of government financial support it would be resorting to increased advertising as a means of self-financing (4 January). However, Russia's weak advertising market apparently made this solution unviable, especially on such short notice. Early Signs of Rift Preliminary signs of tension between Rossiyskiye Vesti's government affiliation and its staffers' desire to exercise editorial freedom appeared during the October 1993 political crisis between the president and the parliament. The paper criticized police for rough handling of journalists attempting to provide coverage of the crisis, including journalists from opposition newspapers who attempted to cover the standoff. The paper also decried Prime Minister Viktor Chernomyrdin's decree putting the defunct Supreme Soviet's official newspaper, Rossiyskaya Gazeta, under government sponsorship, as a violation of the law and of the rights of the paper's staffers (2 October). Rossiyskiye Vesti also questioned the legality of the occupation" by law enforcement personnel of the editorial offices of opposition papers Den, Sovetskaya Rossiya, and Pravda (6 October) and condemned as ''lawlessness'' what it called the extremely dangerous trend" of "closing down media without trial or investigation" (16 October). Not long after the October events, rumors began to appear that efforts were underway to remove Kucher due to "differences" between him and Chernomyrdin over the role of the government press (Kommersant-Daily, 30 November). Eight days before the decision to sever its relationship with the government, a journalists' collective meeting charged that "individual employees" of the Council of Ministers apparatus were "attempting to command" the newspaper and that high- level members of the apparatus had attempted to oust Kucher (Rossiyskiye Vesti, 24 December). The paper accused the government of attempting to "destroy Rossiyskiye Vesti as an independent" newspaper and "return to the old methods of directing the press, to make it an obedient executor of the will of apparatus bureaucrats." The paper also reported that the journalists' collective had given Kucher a vote of confidence. Though the paper claimed that its assertion of independence was not an "attempt to stand in opposition" to the government and that it would "fairly and thoroughly" report the government's efforts to reform the economy (4 January), the move to independence had an almost immediate impact on its editorial line, transforming the paper from a relatively loyal defender of government policy to a harsh critic. On 22 January the paper illustrated its new editorial latitude by publishing an unprecedentedly critical commentary that called the formation of the new cabinet "undemocratic," compared it to a Soviet-era cabinet, and charged that it would not represent the interests of the broad public. The commentary also took aim at Economics Minister Aleksandr Shokhin, accusing him of trying to "reanimate Gosplan," the Soviet-era state planning agency. Since its reacceptance of government sponsorship, no such criticisms have been observed. Implications While the return to government sponsorship has apparently eased the paper's financial difficulties, it does not appear to have solved the fundamental conflict between the journalists and the government. Despite the fact that the journalists' collective has been made cosponsor along with the government, real control is probably wielded by the government via the purse. And although Kucher continues to serve as chief editor, tension between the paper and the government is likely to remain, placing his continued tenure in doubt. Russia: Editorial Turmoil at Pravda Summary: After five months that featured four changes of chief editor, three publishing hiatuses, and a circulation decline of more than half, the situation at Pravda appears to have stabilized, at least temporarily. Most of this turmoil seems to be attributable to a struggle for financial control of the newspaper between ousted editor Viktor Linnik, who, apparently backed by many of the paper's staff, wants to reestablish Russian control, and rival editor Aleksandr Ilin, backed by a Greek businessman who owns a controlling interest in the paper. The latest round of troubles for Pravda began when, during the height of the October crisis in Moscow, the Ministry of the Press and Information, acting under President Boris Yeltsin's declaration of a state of emergency, suspended the paper's publication. Following the suspension First Deputy Press Minister David Tsabriya, overstepping his legal authority, "ordered" that Pravda change its name, reregister, and replace Chief Editor Gennadiy Seleznev with Deputy Chief Editor Ilin. Ilin agreed to the ministry's terms and promised to resume publication of Pravda as a paper of "civilized opposition," echoing the language of press ministry officials in an apparent attempt at appeasement (Izvestiya, 16 October 1993). Ilin appeared ready to assume the role of chief editor of the paper under the new name Put Pravdy [The Way of the Truth] when the paper's staff elected Linnik in his place. Linnik also appeared to appease press ministry officials, stating his intention to turn Pravda into a voice of "civilized opposition" (Radio Rossii, 28 October), and after a month-long hiatus, the paper reappeared on 2 November as Pravda, not Put Pravdy, with Linnik as chief editor. The paper published normally until 19 November and then again disappeared from newsstands until 10 December. The paper then continued to publish through 4 February, but on 5 February it suspended publication briefly following another election by the staff which, on this occasion, elected Ilin as chief editor (Moskovskiy Komsomolets, 8 February). Pravda reappeared on 9 February and has been publishing regularly since. Trojan Horse in the Editorial Office? Left orphaned after the dissolution of the CPSU in December 1991, Pravda eventually found new financial backing through a partnership with a Greek businessman. In August 1992 Rossiyskaya Gazeta reported that the paper, having failed to find backing from Russian businessmen, had signed an agreement with the Greek firm Steel Light Holding, Ltd. and its president, Yannis Yannikos (8 August). Yannikos and Pravda together formed the joint-stock company Pravda International, with Yannikos holding a 55 percent controlling interest but reportedly having "no intention of interfering in the newspaper's content." A Moscow News commentary on the deal questioned Yannikos' credentials and the credibility of Steel Light Holding, Ltd. and quoted Greek journalists who called the deal "shady and highly suspicious" (Moscow News, 23-30 August 1992). The commentary alleged that Yannikos had ties to the CPSU and might be fronting for the party, or alternately, that he was simply a "petty businessman" trying to "lay his hands on anything" that could be "grabbed." Pravda's Election Silence Indications of possible troubles between the paper's chief editor and its Greek sponsor surfaced after the paper went silent at the height of the fall 1993 national election campaign. When it reappeared on 10 December, just two days before the elections, the paper apologized to its readers for disappearing at such a critical moment and, without explicitly naming Yannikos or stating a motive, said simply that an unspecified "they" had "cut off" the paper's "oxygen supply"--presumably a reference to financial support. The paper continued to appear into the new year, but the print run fluctuated from a high of 350,000 on 4 January to a low of 120,000 on 21 January before stabilizing at 172,934 on 9 February. According to Linnik, from December to February, financial backing for publication came not from Yannikos but from Russian entrepreneur Konstantin Zatulin--a deputy from the Party of Russian Unity and Accord--and the Russian Communist Party (CPRF) (Moskovskiye Novosti, 6-13 February). Nationalist Challenge to Greek Ownership A report in Moskovskiy Komsomolets (28 January) asserted that a conflict between Linnik and Yannikos started to develop following the October political crisis when Linnik launched a search for Russian sponsors. In a 5 February Interfax report, Linnik was quoted as saying that most of Pravda's staff wished to see a "Russian corporation" as the paper's sponsor. Meanwhile, an appeal appearing in the weekly Golos (15-21 February) written by a former Pravda journalist noted that the word "pravda is Russian ... but by no means Greek," encouraged Yannikos to go back to Greece if he wishes to publish a newspaper, and called for sponsors who are "serious, respectable, and most importantly, our own Russians." According to Ilin, Linnik's search for long-term domestic financial backing failed (Kommersant Daily, 10 February). Apparently neither Zatulin nor the CPRF were willing or able to give the paper such backing. Linnik Ousted In another round of conflict at the paper, Yannikos apparently engineered Linnik's removal and his replacement by Ilin. After another brief publishing hiatus, which began on 4 February, the paper reappeared on 9 February with a "word to the reader" announcing that on 4 February the "work collective of the editorial office" had elected Ilin as the new chief editor. The announcement also protested "distortions" being spread in the media by some Pravda staffers that the staff was caught in a struggle between the "advocates of a national Russian paper" and those willing to "sell out to foreign capital." Indeed, the accounts of the situation at Pravda that appeared in Moskovskiye Novosti (6-13 February) and Kommersant-Daily (10 February) painted just such a picture. According to these accounts, Seleznev, the chief editor when the deal with Yannikos was first struck, had sold Yannikos the controlling interest "for pennies"- -without consulting the collective--in exchange for promises of high salaries and vacations on the Greek isles. But pay was low or non-existent (except for such loyalists as Ilin who reportedly received 130,000 rubles per month) and the only one to enjoy a Greek vacation was Seleznev himself. Yannikos allegedly interfered in the editorial process, fired one journalist for writing a negative piece about an acquaintance, compiled a "black list" of 13 more journalists he wanted to see fired, and wished to "drive out" Linnik, whom he could not control because he was elected. The accounts also alleged that Yannikos had withheld financing but promised to increase honoraria and resume financing publication in exchange for Linnik's removal, and that the election removing Linnik was conducted in violation of the paper's charter. Staff Split, Duma May Decide Issue Linnik's defeat in the election may not be the end of the internal conflict. While Linnik's name no longer appears on the listing of the editorial staff, he reportedly has not yet relinquished his office (Moskovskiy Komsomolets, 8 February) and claims the support of "most of the staff" (Interfax, 5 February). Ilin has confirmed that a split among the staff continues to exist but played down its impact on the paper's day to day operations, asserting that even those workers who support Linnik "continue to help put out the newspaper" (Kommersant-Daily, 10 February). According to Kommersant-Daily (10 February) on 9 February, unnamed Pravda representatives made a proposal to the State Duma to introduce a draft law forbidding "foreign control" over Russian media sources. Implications Duma action to deprive Yannikos of ownership cannot be ruled out in view of his heavy-handed efforts to establish editorial control over a paper that the many nationalist and communist deputies in the Duma regard as a national institution. If Yannikos remains in control, draconian policies such as his willingness to silence Pravda, one of the leading opposition papers, during a critical political period may delegitimize the paper in the eyes of its readership and result in further declines in its circulation and loss of influence among opposition politicians. Russia: Government Official Moves To Restrict Media Access Summary: In a widely publicized move that raises questions about the government's commitment to openness, Vladimir Kvasov, head of the cabinet's apparatus, attempted to severely restrict media access to meetings of the Russian Government. Although Kvasov subsequently asserted that the tight restrictions applied only to the 3 February Government meeting, he has continued to advocate restricting media access and shown only limited tolerance for public airing of official debate on contentious issues. In an apparent response to widely publicized reports about his recent attempt to restrict media access to government meetings, Kvasov has attempted to portray the move as a temporary measure made necessary by concerns about lax procedures for accrediting journalists. As initially reported by the news agencies Interfax and ITAR-TASS on 3 February, Kvasov issued an order barring all journalists except those from the newspaper Rossiyskaya Gazeta- -which came under the government's sponsorship after the dissolution of the Supreme Soviet in September--from attending meetings of the Russian Government "from now on." Kvasov's order coincided with the 3 February Government meeting which was scheduled to discuss the potentially divisive issue of subsidies for agriculture in 1994 (ITAR-TASS, 3 February). According to one report, Kvasov's move even "took the government's own press service by surprise" (Moscow radio, 3 February). Defending his action, Kvasov said in an interview to Rossiyskaya Gazeta (8 February)--whose staffers were not observed to challenge either the initial media restrictions or Kvasov's explanations--that the restrictions were necessary after the government's move to new quarters created "confusion," prompting his "verbal instruction" that the accreditation system for journalists "should be regulated." Suggesting that Kvasov is still trying to restrict media access and defend the government's apparent preference to avoid media scrutiny, Kvasov has set limits on the media's access and justified the exceptions made for the official media. Kvasov explained the preferential access extended to Rossiyskaya Gazeta by saying that only media outlets "accredited to us [the government]" should be able to attend working meetings, later adding that journalists from the official news agency ITAR-TASS would also be allowed to cover such meetings (Moscow radio, 3 February; ITAR-TASS, 4 February). Kvasov added that media accreditation in the future will depend on the agenda of the Government sessions, with broad access granted to general meetings but only ITAR-TASS and Rossiyskaya Gazeta allowed to cover more specialized sessions that affect the "interests of a narrow circle of specialists" (Moscow radio, 3 February; ITAR- TASS, 4 February). Kvasov's arguments for restricting media access suggest that the government has only limited tolerance for media scrutiny and- -perhaps of more significance to the development of a civil society in Russia--is unwilling to extend to the media a role in fostering public debate on contentious issues. Underscoring his reluctance to allow the media to report official debate on current issues--and thus to increase the potential for public opinion to exert pressure on officialdom--Kvasov stated that the government is "ready" to provide the media with "necessary materials, but only after a final decision is made on the discussed problems" (ITAR-TASS, 4 February). He expounded on this theme in his interview to Rossiyskaya Gazeta, criticizing the media for reporting issues that were "still at the discussion stage" and claiming that this practice "disinformed society, destabilized the situation in the country, and cast the government in an unfavorable light." Ukraine: Post-Postup--Attempt at a Western-Style Newspaper Summary: Since its establishment in September 1991, the newspaper Post-Postup has distinguished itself by its comprehensive coverage of national, local, and international news. Linked to a news agency of the same name, the newspaper in 1993 began consciously to model itself after Western-style journalism while serving as a proponent of moderate Ukrainian nationalism and economic reform. Post-Postup is a small-circulation (30,000), independent weekly based in Lviv in western Ukraine. Like other unsubsidized newspapers, its financial situation is rather shaky, sometimes leading it to suspend publication for a time (it did not publish at all during January 1994, although the press agency of the same name continued to function). Originally a small locally-oriented newspaper, it was revamped in 1993 into a Western-style newspaper with a tabloid format. The paper covers national, local, and international news in a more thorough manner than is usual in the Ukrainian press, which tends to be more focused on national news or exposes. Post-Postup's editor, Oleksandr Kryvenko, is running for parliament in the March 1994 election with the Nova Khvylya (New Wave) bloc, a group of moderate nationalists from Lviv including Ihor Yukhnovskyy and Viktor Pynzenyk, who favor political and economic reform. The newspaper can be characterized as moderately nationalist, strongly in favor of economic reform, and critical of Ukrainian President Leonid Kravchuk and the conservatives in power in Kiev. Nevertheless, it does not emphasize the historical and patriotic themes of other Lviv papers such as Za Vilnu Ukrayinu. The newspaper contains less editorializing by correspondents--although some remains--and more straight reporting than is typical in the Ukrainian press. Unlike other independent newspapers, such as Nezavisimost and Vechirniy Kyyiv, it does not strongly bear the personal stamp of the editor. It does not have signed front-page editorials or regular columns by the editor. The newspaper was officially registered in September 1991 along with a separate press agency with the same name, which has correspondents in all major western Ukrainian towns and nearly all oblast centers. Originally Post-Postup appeared to be aimed at a youth audience, publishing a great deal of satire and racy material to attract readership. It focused on local material and national news, as is typical of most Ukrainian papers. In 1993 the newspaper was revamped completely, dropping the satirical and racy material in favor of serious reporting. Post-Postup is divided into three sections: Politics (including national, regional, and international), Business, and Culture (including the arts, sports, and cultural commentary). As might be expected, national politics is covered extensively. Issues have featured, for example, the government's economic decrees and an overview of the political parties (9 December 1993), Rukh election tactics, and the activities of the Kuchma-Hrynyov election bloc (16 December 1993). One of the distinguishing features of Post-Postup is its detailed coverage of regional politics, especially from eastern Ukraine. There are regular reports from Odessa, Poltava, Donetsk, and Kherson, as well as other cities. The 2 December issue included reports on Kharkiv political groupings, while later issues covered Donetsk, Kherson, and Odessa politics (16 December 1993) as well as the election chances of various party candidates in Zaporizhzhya, Odessa, and the Crimea (28 February). Another feature that sets Post-Postup off from other Ukrainian papers is its international coverage. Usually the Ukrainian press limits itself to coverage of its immediate neighbors, primarily Russia. While events in Russia are well covered by Post-Postup (the Russian elections and the success of ultranationalist candidate Vladimir Zhirinovskiy, etc.), other world events receive attention as well, for example, the Anglo- Irish talks, U.S. policy toward Russia (9 December 1993), Serbian elections, and Turkish-Israeli relations (30 December 1993). Economic reporting is not neglected either. There is wide coverage of business issues with a particular emphasis on the views and activities of private bankers and entrepreneurs. Government credit and exchange rates are criticized (9, 16, 23 December 1993); private bankers give their 1994 economic prognoses (30 December 1993); joint venture troubles and privatization in Lviv are explored (9, 23 December 1993); and articles on computer systems and-safety are published (2, 9 December 1993). Notably absent are old-style articles glorifying production or long interviews with officials giving their views and remedies for the current economic crisis. In Brief Vladivostok Newspapers Suspended An ITAR-TASS item carried in the 23 March Izvestiya reports that the Vladivostok newspapers Bolshoy Vladivostok [Greater Vladivostok], Utro Rossii [Russia's Dawn], and Krasnoye Znamya [Red Banner] have been suspended in the wake of the ousting of Mayor Viktor Cherepkov. Both Bolshoy Vladivostok and Utro Rossii reportedly had supported Cherepkov, while Krasnoye Znamya, according to ITAR-TASS, "sided with his opponents from the Kray administration." Anatoliy Lyapyakin, editor of Bolshoy Vladivostok, together with other unnamed "human rights defenders," has, according to the ITAR-TASS report, "appealed to the U.S. Consulate General," requesting "permission to travel outside Russia's borders." Rossiyskaya Gazeta To Run Tatar Insert An 11 January Rossiyskaya Gazeta article announced that a weekly insert on Tatar affairs and culture will be added to the paper. The Tatar Berdemlek-Yedinstvo--founded jointly by Rossiyskaya Gazeta and the Government of the Republic of Tatarstan--will reportedly be the first ethnic publication to obtain nationwide circulation. The publication reportedly targets ethnic Tatars living outside Tatarstan by featuring lessons in the Tatar language and articles on Tatar customs and holidays; the insert will be published in Russian. Last year Tatar officials initiated the dubbing of Russian Television's "Vesti" news program into Tatar as a reflection of Tatarstan's official "state languages" of Russian and Tatar (Russian TV, 17 June 1993). According to editor-in-chief Natalya Polezhayeva, Rossiyskaya Gazeta is "prepared" to cooperate both with ethnic republics and with "other peoples"--"Ukrainians, Germans, Jews, Koreans"--who lack national formations in the Russian Federation. Other Publications of Interest Russia: Journalists Slam TV Campaign as Biased, Uninformative Even before the official television campaign got underway with the broadcast of the first free programming, some print journalists had charged that government-controlled television was biasing the campaign in favor of Russia's Choice by its continuing coverage of the official activities of many prominent government officials running for the legislature on the Russia's Choice ticket. A front page article in the 19 November issue of the independent newspaper Nezavisimaya Gazeta, for example, cited what it claimed were "a great multitude of examples illustrating Ostankino's obvious political affiliation." According to the article, programs presenting Russia's Choice candidates were "camouflaged as being 'simply' programs." (See Note 3) (Note 3) See the FBIS Trends of 15 December 1993, pages 18-20, for the full text of this article. Russia: Last Minute State TV Campaign Against Zhirinovskiy On the eve of the 12 December legislative elections, state television broke with its previous policy of providing uncritical coverage of the contending partied by airing two programs attacking Vladimir Zhirinovskiy, chairman of the misnamed Liberal Democratic Party of Russia. This last-minute attempt to turn voters against Zhirinovskiy suggests that high-level officials within the Russian Government had become aware of strong popular support for Zhirinovskiy, at least by the eve of the election. (See Note 4) (Note 4) See the FBIS Trends of 15 December 1993, pages 57-58, for the full text of this article. Russia: Pro-Communist Press Keeps Options Open on Zhirinovskiy Pro-communist newspapers Pravda and Sovetskaya Rossiya have reacted cautiously to the success of Vladimir Zhirinovskiy's Liberal Democratic Party (LDPR) in the party preference voting in the 12 December Russian legislative elections. Perhaps in part out of fear of offending a disaffected electorate that they too are attempting to woo with their own nationalistic appeals, they have refrained from harsh criticism of him and have left open the possibility of communists cooperating with the LDPR in the new legislature. At the same time, they have laid the lion's share of the blame for Zhirinovskiy's success on what they consider the misguided policies of the reformers in the government. (See Note 5) (Note 5) See the FBIS Trends of 5 January 1994, pages 8-11, for the full text of this article. Russia: Debt Crisis Temporarily Halts State Broadcasting Protesting state-owned television and radio companies' prolonged failure to pay for broadcasting services, Ministry of Communications workers struck on 10 February, disrupting broadcasts across much of Russia. Although Prime Minister Viktor Chernomyrdin persuaded the broadcasters to end their strike the same day by promising to pay the debt, he hinted that the government may turn to privatization of some television and radio companies to reduce the debt problem. The belated government response to the strike threat suggests that new state television chief Aleksandr Yakovlev, who is not a member of the cabinet, may not be well positioned in the government to serve as an effective spokesman for his sector. (See Note 6) (Note 6) See the FBIS Trends of 23 February 1994, pages 18-20, for the full text of this article. Russia: Yeltsin Restructures Media Bureaucracy Using his decree power to reorganize the media bureaucracy, Russian President Boris Yeltsin has consolidated his control over the broadcast media and attenuated the influence of the other branches of government and the cabinet. At the same time he has taken the first step in what is likely to be a far reaching, if reversible, reduction of the state's role in television by giving a private television company access to Russia's 4th television channel. The reorganization appears to signal that long-time close Yeltsin adviser Mikhail Poltoranin, who once shaped Yeltsin's media policy, no longer enjoys the President's confidence in this area. (See Note 7) (Note 7) See the FBIS Trends of 2 March 1994, pages 11-19, for the full text of this article. Russia: RTV Blasts Yakovlev, Poltoranin On 16 March Russian Television's primetime edition of its "Vesti" news program launched a scathing attack on media bigwigs, including Aleksandr Yakovlev, head of both the Federal Service of Russia for Television and Radio Broadcasting and the Ostankino Television and Radio Broadcasting Company, and Mikhail Poltoranin, head of the State Duma Committee for Information Policy and Communications. Showing video of the two taking in the performance of an exotic dancer at a club for media elite, the program juxtaposed the officials' expensive and decadent perquisites with state television's acute shortage of operating funds. (See Note 8) (Note 8) See the FBIS Trends of 23 March 1994, pages 28-29, for the full text of this article. (AUTHORS: ALLENSWORTH, CRIMMINS, ELDRIDGE, NERO, O'CONNELL, VILLHAUER. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHTEF, ANALYSIS BRANCH, RUSSIA DIVISION (703) 733-6070.) ENEAG/BLOUGH/DEW 29/1852Z MAR

SUMMARY While campaigning to convince the new legislature of the value of Russian accession to NATO's Partnership for Peace, Russian government officials continue to portray the program as merely an interim step toward broader European security measures that will provide prominent status for Russia. Influential members of the Duma, on the other hand, are taking a skeptical attitude, expressing concern that the terms of Russia's association with NATO will be dictated, rather than negotiated, and will harm Russia's security interests. Although the Defense Ministry newspaper has supported joining the program, other media commentary across the political spectrum appears to reflect nationalistic fears that Russian interests will be damaged whether or not it joins the Partnership. END SUMMARY Testifying at 16-17 March Duma hearings, government officials promoted accession to the NATO Partnership for Peace program, arguing that Russia will gain influence by joining but risks isolation if it does not. Yuriy Nazarkin, head of the coordination and interaction department of the Security Council's staff; Yuriy Ushakov, head of the Ministry of Foreign Affairs' (MFA) Department for European Cooperation; and Major General Pavel Zolotarev from the Defense Ministry all stressed that to "disregard" Partnership for Peace would mean a disastrous self- isolation that would damage Russia's security. Nazarkin and Ushakov warned that refusing to join would strengthen those who were pushing for NATO expansion and argued that in joining Russia could influence the program (Interfax, 17 March). In enumerating a long list of membership advantages, Zolotarev contended that by joining Russia would demonstrate to the world its interest in collective security and "neutralize" the anti- Russian forces that are seeking to exclude Russia from the international arena (Krasnaya Zvezda, 18 March). Moscow's Mixed Signals Despite this supportive testimony and Defense Minister Pavel Grachev's statement that Russia would join the program soon, other signals from the government suggest that it is unsure about how fast to move ahead. After his 17 March meeting with U.S. Defense Secretary William Perry, Grachev told reporters that "groups of experts" are "already completing work" on Russia's membership application, adding optimistically that "we shall be able to join the concept by the end of the month" (ITAR-TASS, 17 March). More cautiously, however, First Deputy Defense Minister Andrey Kokoshin said it was "too early" to discuss when Russia would sign on to the program (Interfax, 18 March). A 19 March Nezavisimaya Gazeta article, discounting speculation that Grachev meant that Russia would "definitely" sign in March, cited a Foreign Ministry "clarification" that the signing might take place in late March or more likely later. The article attributed the delay to the need to finish drafting the documents, "wind up interdepartmental consultations," and "solve a number of technical problems"--including who would sign, Grachev or Foreign Minister Andrey Kozyrev. In addition, Russian President Boris Yeltsin and other senior officials have continued to express reservations about the program--particularly its implications for NATO expansion--and to press for movement toward alternative European security measures: -- In his 24 February address to the Duma, Yeltsin warned against any NATO expansion without Russia and made clear that, while Moscow supported Partnership for Peace, it viewed the program as a waystation to building a pan-European partnership "open to all states of the greater Europe" in which CSCE would take the lead and NATO would be relegated to a subordinate role (Rossiyskaya Gazeta, 25 February). -- After a meeting with FRG Defense Minister Volker Ruehe in Berlin on 11 March, Grachev intimated that he views the program as only a stopgap measure until new European security structures emerge, touting the CSCE as the "main peace-keeping organization in Europe," and noting that "time will tell what the [NATO] structure will be like" (ITAR-TASS, 11 March). These remarks echoed his suggestion to reporters on 2 February that the program was transitional, providing for a coordinated effort to defuse tensions in Europe by NATO and other countries, including Russia, during "an interim period following the breakup of the Warsaw Pact." He also reiterated his previous warnings against the accession of former Warsaw Pact members and the Baltic states to NATO (Interfax, 2 February). -- Kozyrev, likewise, has continued to warn against NATO expansion and laud CSCE merits. In an address to a 10 March MFA Foreign Policy Council session, he complained about "NATOcentrism" within the alliance which has led to a push for a "mechanical" expansion, adding that this demonstrates a "vacuum of strategic thought" and undermines the goal of "moving toward a single, Greater Europe" (Nezavisimaya Gazeta, Kommersant-Daily, 11 March). Although Kozyrev said Russia is close to signing Partnership for Peace documents, he continued to argue that CSCE should become the core of Europe's security system. Like Grachev, he hinted that collaboration within a NATO framework might be only temporary, saying that a "necessary historical period" perhaps "two to three years in length" had "opened up" to "elaborate and implement cooperation programs." Similarly in a 17 March Izvestiya article, he said that NATO was "inadequate" and "unsuitable" for "current purposes" and contended that while Partnership for Peace would provide "a partial answer" to security problems, it could not "be considered the pinnacle of achievement." In a sign that not all of Yeltsin's administration share the view that Russia has more to gain than to lose by joining the program, Presidential Council adviser Andranik Migranyan, in a 15 March Nezavisimaya Gazeta article titled "Why Join, If It Is Better Not To Join," strongly opposed Russian accession. Claiming that there is no consensus on the issue within the Foreign Ministry, he listed numerous adverse consequences if Russia joins. He contended that the program would deepen Russia's isolation and "sharply limit its freedom for foreign policy maneuvering." Doubts in the Duma Many influential members of the Duma apparently remain ambivalent about the Partnership plan, opposing what they view as NATO's "dictat," and worried that a broad range of security interests from the competitiveness of Russia's defense industries to its security arrangements with other CIS countries will suffer: -- Former Ambassador to the United States Vladimir Lukin, a member of the moderately reformist Yavlinsky bloc and chairman of the Duma's international affairs Committee, conceded the Partnership idea was good, but said the "devil was in the details," which had been insufficiently thought through (Moscow radio, 17 March). He said that Russia, "instead of trying to "push to the head of the line" to join, should carefully analyze what should be done for a more active rapprochement with NATO and closely follow NATO's reorganization. Lukin also expressed concern that involvement with the Partnership program could wreck Russia's "strategic intentions to create security structures within the CIS framework" (Krasnaya Zvezda, 18 March) -- Sergey Yushenkov, chairman of the Duma's defense committee and a Russia's Choice member, said while in Washington with a Duma delegation that he objected to membership on the grounds that "the framework agreements were drawn up without [the Duma's] participation and do not conform to Russia's status" and that NATO standardization would be "simply destructive" for Russia's defense industries. He advocated instead a security alliance between Russia and other countries in which the guidelines would not be set by NATO, as in the case of Partnership for Peace, but would be worked out "jointly" (Interfax, 9 March; Rossiyskaya Gazeta, 18 March). More recently, however, he appears to have changed his position on joining. During the Duma hearings Yushenkov said he supports Russian membership, but maintains it should be carried out on special terms given Russia's "status as a nuclear power." Like many government officials, he contended that the NATO program should be viewed as "the beginning of a path toward a common security system" (Interfax, 17 March). -- Konstantin Zatulin, chairman of the Duma's CIS affairs committee and co-chairman of the Party of Russian Unity and Accord faction, warned the MFA Foreign Policy Council session that Russia's participation in the "Partnership" program would dash its hopes [unspecified] in the "near abroad," because even now CIS countries were trying to "blackmail" Russia by appealing to the West for help (Kommersant-Daily, 11 March). Media Reaction Russia media commentary on the Partnership for Peace program has reflected fears about isolation if Russia fails to join, suspicion that Russian interests may suffer if it does join, and resentment that Russia's options thus are limited. NATO bashing has been a staple of procommunist newspapers like Pravda and has intensified in the wake of the February NATO ultimatum to the Bosnian Serbs, but even reformist and pro-Yeltsin newspapers appear ambivalent toward membership, although the Defense Ministry newspaper, Krasnaya Zvezda, supported it: -- The procommunist newspaper Pravda printed a long diatribe on 16 March by retired general Viktor Chudov, who charged that Partnership for Peace was designed as a cover for "peace U.S.- style" and "world domination." The article, which claimed that planned U.S.-Russian exercises were designed to counter "reunification sentiments" in former Soviet republics and to inspire "separatists and nationalists" to "vigorous activity," lambasted the Defense Ministry's "top brass" for engaging in such exercises instead of carrying out its own war games designed to repel aggression "by a coalition of nuclear powers." -- The reformist newspaper Nezavisimaya Gazeta, which printed the highly critical Migranyan article, frontpaged another article on 15 March titled "Russia's Partnership With NATO Is A Misalliance." The article maintained that Russia could have received better terms if it had held out longer before agreeing to join, claiming that there had been growing sentiment in the West to offer Moscow something more in line with its "great power" status. Now, the article warned, Moscow confronts a new dilemma: to face isolation and discrimination if it does not become a full member of NATO, or to place its armed forces, military plans, and budget under the command and control of the United States if it does join, since "under a long-standing tradition, the NATO commander in chief has always been and remains an American general." -- A 23 March article in the mass-circulation newspaper Komsomolskaya Pravda contended that, although Moscow had little choice, it would be "humiliating" for it to follow "in the wake of U.S. policy," "jostling for space on the margins." Complaining that "Washington is the banker and Russia is "forced to play blind," the article noted sarcastically that "you can judge for yourselves how far such 'partnership' can be called mutually beneficial and equal." -- A 16 February article in the usually pro-Yeltsin newspaper Izvestiya warned that Russia could lose its arms market in Eastern Europe as countries switched to NATO standards. A 19 March Izvestiya article admitted that the program was not popular in the Duma and gave minimal support to the government's campaign to promote it, confining its advocacy to pointing out that without Russia the program was "meaningless" and that Moscow had made clear to Secretary Perry that Russia intends to join "on its own terms." -- On 22 March, prominent Krasnaya Zvezda commentator Aleksandr Golts, echoing the government's line, strongly backed Partnership for Peace and criticized the "emotional" arguments of its opponents. Claiming that the actual partnership program had emerged because Washington "was forced to take Moscow's tough stance [on NATO expansion] into consideration," Golts stressed that the main point in the program was that each country would develop its own relationship with NATO on a bilateral basis and that Moscow is elaborating terms "which will take maximum account of Russian interests." Golts insisted that "the fears that Russia condemns itself to a secondary role by signing the partnership program scarcely hold up," while the risks that Russia faces if it does not join "are as clear as can be": the program would "acquire an unambiguously anti-Russian thrust." Outlook While government officials support joining the NATO Partnership for Peace program as beneficial to Russia's security interests, they clearly view the program as a stop gap measure and hope it will foster the creation of a European security system in which Russia will play a major role. Influential legislators, in contrast, appear more fearful that NATO affiliation will further marginalize rather than foster Russian influence in Europe. This reaction from the legislature, coupled with the skeptical reaction from even the independent press, may pressure the government to demonstrate that it remains an equal and assertive player in the working out of the terms of any NATO partnership. (AUTHOR: BELLINGER. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ANALYSIS BRANCH, RUSSIA DIVISION (703) 733-6070.) ENEAG/BLOUGH/DEW 29/1810Z MAR

Arab boycott offices will soon submit a report to the Arab League, according to a dispatch from Damascus published in the Kuwaiti daily AL-WATAN, alleging that the Israeli Government plans to take advantage of its Arab neighbors in comprehensive fashion. The dispatch enumerates the ways in which the plan is taking shape, and complains of U.S. and other governments' acquiescence to it. The Kuwaiti Arabic-language daily AL-WATAN carries an article from Damascus on 9 March 1994 by Safwan al-Bunni which summarizes a report the correspondent obtained which is purportedly to be submitted by the offices of the Arab boycott of Israel to the Arab League ministerial session "next month." Al-Bunni says the report reviews Israel's economy and Israeli moves to end the boycott. He claims the report will aver that Israel is striving for "a strategic political security plan which will "...permit Israel, quantitatively a small, weak country, to be a strong, large country with the stamp of a regional great power." He further quotes it as saying, "Israeli thinking is shifting to a superpower strategy with the goal of transforming itself into a regional superpower, which it would not be able to do without the solid start that it achieved with the implementation of projects described at the time as very ambitious." The report states that the necessary conditions for national security are military power supported by economic power, according to al-Bunni, and also claims Israel is trying to obtain U.S. aid in currency instead of goods, because of its belief that this type of investment will enable it to experience "a second industrial revolution." The report to the Arab league warns, says al-Bunni: That Israel turned to the arms trade in the Eighties because of the tremendous profits to be gained there, which were necessary to continue operating its military industries. That Greenpeace charged that Israel's production of methyl bromide for pesticides has caused 3 percent of the hole in the ozone layer and that its Bromine plant in the Negev Desert produces one third of the world's supply of this chemical. That an Egyptian diplomatic document claimed that Israel "still continues to steal water in the occupied territories in the Syrian Golan, southern Lebanon, and Jordan That the same Egyptian document said the Israelis are researching the water table near the Egyptian border and that they are planning to build 32 dams, "beginning at the headwaters of the Nile River in Ethiopia." That a joint U.S.-Israeli project will enable Israel to expand in the Mediterranean, that Israel is intensifying its exploitation of Jordan and Litani River waters, and that it is also making progress on the proposed Mediterranean-Dead Sea canal. That Israeli Prime Minister Yitzhaq Rabin has affirmed that "Unified Jerusalem is the capital of Israel, is not negotiable, and is not on the agenda of the Israeli delegation's talks with the Palestinian delegation." According to al-Bunni, the report terms the 1982 law annexing Jerusalem and establishing it as Israel's capital as "the strategic guide for Israeli public policy" no matter which party leads the country. Turning to the Arab boycott of Israel itself, Bunni says that the report states that the United States has attempted to break it by various means, citing in particular remarks in March 1993 by Edward Djerejian, the U.S. Assistant Secretary of State for Near East and South Asian Affairs, to a Congressional committee that Secretary of State Warren Christopher had emphatically urged the Arab governments to end the boycott. The report also cites Jewish Agency sources on the poor prospects for significant immigration from the Commonwealth of Independent States and U.S. data on the emigration of Israelis to the United States over the last six years. The report, Bunni says, concludes by outlining the U.S. position on the boycott--that ending it is a positive move that supports the peace process--noting that the Japanese, Korean, and German Governments have bowed to U.S. pressure in the last two years, allowing their companies to do business in Israel. (QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, PERSIAN GULF/SOUTH ASIA BRANCH AT (703) 733-6518) ENEAG/29 Mar/POLCHF/NEASA Division/SM 30/0256Z MAR

The central press has been publishing articles discussing the political, social and economic ramifications of a Russian-Belarusian monetary union. Economic experts, journalists and officials are debating the pros and cons of such a union in articles appearing in a variety of sources. No Consensus in Belarus Belarusian Radicals Call for a Strike KRASNAYA ZVEZDA published an article by Valeriy Kovalev entitled "An Ordinary Meeting Instead of a Strike Took Place in the Belarusian Capital." Kovalev reported that a group of deputies from the opposition Belarusian National Front issued a statement claiming that a Belarusian-Russian monetary union would cause "the destruction of the Belarusian economy and the Belarusian state." The deputies called on their countrymen to engage in a "national liberation struggle" and to participate in a demonstration demanding removal of Kebich's government, dissolution of the Supreme Soviet, and early presidential elections. However, only about 1,000 people attended the rally in Minsk's central square, which led Kovalev to observe that "hardly anyone will be successful in coming to power in Belarus under the banner of fervent Russophobia." (Moscow KRASNAYA ZVEZDA in Russian 16 Feb 94 p 3) Belarusian Deputy Favors Union Henadz Kazlow, coordinator of the "Belarus" faction in the Supreme Soviet, in an interview responded to a question about a monetary union, noting that despite attempts to "foil" the agreement he believed "in the pragmatism of practical politicians who drafted this agreement," and added that "an economic union is already being discussed quite seriously. There is no other way out." (Minsk ZVYAZDA in Belarusian 23 Feb 94 pp 1, 3) Some Belarusians and Russians Agree Belarusian and Russian Enterpreneurs Appeal for Union The business-oriented paper DELOVOY MIR carried on page 1 an "Appeal from the Russian Union of Industrialists and Entrepreneurs and the Belorussian (Belarusian) Scientific-Industrial Association to the Governments of Russia and Belorussia." The appeal, signed by Russian Union chairman A.I. Volskiy and president of the Belorussian Association M.F. Lavrinovich, pointed out that the time is ripe for integrating the monetary systems of the two republics and noted that possible temporary expenses due to unifying the monetary systems are commensurably small in comparison with the benefits from regulating economic and cooperative ties, broadening the market and increasing incomes from the development of production." The two organizations called upon their respective governments to "take this decisive and necessary step" which would benefit both "the economic situation and the population's standard of living." (Moscow DELOVOY MIR in Russian 25 Feb 94 p 1) Economists Emphasize Benefits of a Monetary Union The same issue of DELOVOY MIR ran an article by two candidates of economic science, Vladimir Safronov of Moscow and Aleksandr Yarosh of Minsk. In their article, entitled "Russia and Belarus: There are no Losers," they provided a number of statistics to prove that negative influences on either state's economy would be negligible. A model developed by Belarusian and Russian economists showed that in the former USSR Belarus provided one-tenth of all interrepublic imports and delivered almost one-fourth of its products to the other republics. At the same time, its dependence on economic ties with other republics was among the highest. If a Belarus-Russia monetary union also includes unified economic relations with the other republics, according to the model, Russian national income would grow 1.9 percent and Belarusian 7.9 percent. "Thus," the economists stated, "the results of the calculations prove that negative consequences for both states are insignificant." They concluded that "unification of the monetary-credit systems of Russia and Belarus provide more positive than negative results. The course toward reintegrating Russia and Belarus and creating an economic union answers their long-range state interests." (Moscow DELOVOY MIR in Russian 25 Feb 94 p 4) Bones of Contention Only Premiers Can Resolve These Two Issues In an article entitled "Moscow-Minsk: Will the Ruble Zone Expand?," ROSSIYSKAYA GAZETA correspondent Aleksandr Shinkin reported the Belarusian leadership's recognition that "the economic stability of the republic is scarcely possible without Russia." He added that both former Supreme Council speakers Shushkevich and current leader of parliament Hryb "have advocated the unification of the monetary systems." Shinkin cited Chernomyrdin, who "considers that there are two questions which can be resolved only at the level of the premiers of the two states." Prices for energy and the exchange rate between Russian and Belarusian rubles were the two issues. Quoting a Russian Ministry of Economics staffer, Shinkin reported that the supporters of a monetary union were divided between those who favored "meeting Belarus' demands halfway" while the other group was "insisting essentially upon a single budget." (Moscow ROSSIYSKAYA GAZETA in Russian 17 Feb 94 p 6) Belarusian Demands Continue to Increase On 26 February SEGODNYA published an article by Yelena Kolokoltseva entitled "Belorussia (Belarus) is Insisting on Cheap Gas from Russia." Despite an agreement on lowering the price for a tonne of gas from 80 to 55 dollars, Kolokoltseva cited a Russian official who said that "Belorussia's appetites keep on growing." Belarus's demands were strengthened "by threats to impose tariffs on the transit of Russian energy sources through Belorussian territory." Belarus's goal, Kolokoltseva stated, was "to receive cheap energy resources and guarantee the sale to Russia of products which cannot compete in Western markets." She concluded that it is only Russian Central Bank chairman Viktor Gerashchenko who "can explain to the Russian leadership the financial consequences for the Russian economy of the unification of the Belorussian and Russian monetary systems. The question is whether he wants to do so." (Moscow SEGODNYA in Russian 26 Feb 94 p 2) Areas of Disagreement A SEGODNYA commentary by Aleksandr Bekker, entitled "Belorussia (Belarus) is Getting Russian Rubles but Does Not Want to Give Up Sovereignty," cited Deputy Russian Finance Minster Andrey Kazmin who identified three basic areas of disagreement between Russia and Belarus: Budget functions during the transition period; the status of Belarus' National Bank, which would lose its right of money emission; and prices for energy. Bekker stated that "the course of negotiations in Moscow show that Belorussia is not in the mood to part with important attributes of national sovereignty--its own budget and national bank--and these aspects will probably be used by the Belorussian parliamentary opposition." He added that "it is indicative, that even without having agreed with Russia on the size of the current year's budget deficit, the Belorussian parliament (went ahead and) allotted R2.8 trillion to its farmers for the sowing." (Moscow SEGODNYA in Russian 1 Mar 94 p 2) Kebich Remains Optimistic A Valentin Zhdanko report on the 18 March closed meeting of the Belarusian parliament, entitled "Vyacheslav Kebich Does Not Abandon His Dream about Single Ruble Zone. Belarusian Prime Minister Bets on Russian Parliament," appeared in SEGODNYA. Zhdanko quoted Kebich's accusation that "Mr. Tulin, deputy Central Bank chairman, and Mr. Kazmin, deputy finance minister, and some others revised the documents, a procedure that has entirely distorted the original draft treaty that was to be signed." Minsk rejected as unacceptable demands that the "two countries' budgets be merged and that the Belarusian National Bank be stripped of its independence." According to Zhdanko, however, Kebich remained optimistic and he cited a telephone conversation between him and Russian Prime Minister Chernomyrdin: "The Russian leaders have expressed their political will and unequivocal desire to sign the document about setting up a money union as early as this month." Zhdanko added that in the upcoming talks with Nikolay Gonchar, Russian Federation Council Financial Committee chairman, "any unification of the two countries' budgets or infringement on the BNB's rights will not even be mentioned..." (Moscow SEGODNYA in Russian 19 Mar 94 p 1) Disadvantages for Russia and Belarus In March NOVOYE VREMYA ran an article by Yelena Vishnevskaya entitled "How Russia and Belorussia (Belarus) Will Combine and Divide Money." Vishnevskaya cited some objections to a monetary union from Boris Fedorov, former Finance Minister and currently head of the Duma commission on monetary and credit policy. She quoted Fedorov's statement that "pseudointegrated constructions cannot be viable" and his opinion that "nowhere and never has there been nor can there be a unified currency and two emission banks." Vishnevskaya then went on to refute some of Fedorov's assertions, stating, among other things, that "the National Bank of Belorussia does not have the right of currency emission." However, she admitted that a monetary union might be disadvantageous for Russia, citing a one-trillion ruble price tag for settling Belorussia's debts to Russian energy suppliers. She concluded that "in the future the expenditures can be justified--in an inviolable union oil and gas extracting enterprises can be erected precisely on Belorussian territory while relying on raw materials from Russia. If Russia wants to change from a raw material appendage of the Western economy into an exporter of at least semi-finished products it must build plants on its own territory, but this is not cheaper than including Belorussia in the ruble monetary system." (Moscow NOVOYE VREMYA in Russian No 10, (signed to press 5 Mar 94) pp 12-13) Monetary Union May Cost Belarus Too Much IZVESTIYA correspondent Aleksandr Starikevich and economist Nikodim Dubalevich described what Belarus might lose from a monetary union in an article entitled "Unification of Monetary Systems is Dangerous for Belarus Too." The authors pointed out that those in favor of monetary unification foresee two basic benefits--lower prices for Russian raw materials, specifically energy, and lower prices for Belarusian products and thus greater sales in Russia. But, the authors said, "there is no economic or political substantiation for these two hopes." The problem arises in determining the exchange rate, where an exchange rate of one to one means in practice a revaluation of the Belarusian ruble in relation to the Russian ruble and, as a consequence, a sharp increase in the prices of Belarusian output....In addition, the unification of monetary systems means the loss of some state sovereignty." The authors claimed that "this step is based not on economic but on political considerations" and accused the Kebich government of being unable to work independently and using monetary union as "its only salvation...." (Moscow IZVESTIYA in Russian 11 Mar 94 p 2) Fedorov Says Russia Will Pay For Union Former Russian Finance Minister and current Duma Deputy Boris Fedorov expressed his opinion about a monetary union in an IZVESTIYA article entitled "Cart Before the Horse: Merging the Belarusian and Russian Monetary Systems." Fedorov called the merger of the two currencies a "mutant" which would be unlikely to survive for even a short while because "the compatibility necessary between the economic and political systems is lacking." He added that they, meaning the political leaders of both countries, "intend to carry out the merger at Russians' expense" because the terms demanded by the Belarusians "will ultimately cause inflation to rise." Fedorov believed that political reunification must come before economic unification. Any price that must be paid then "will be a conscious price paid for the reunification of fraternal peoples, which will ultimately also yield economic results." (Moscow IZVESTIYA in Russian 15 Mar 94 p 2) (AUTHOR: ENGELBERG. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, POLITICAL/ECONOMIC BRANCH, RUSSIA DIVISION (703) 733-6376.) ENEAG/29 MAR/ECONF/RUSSIA DIVISION/SM 30/0314Z MAR

Confronted by a significant expansion of South Korean shipbuilding capacity, Japanese shipbuilders are reportedly opting to coexist, rather than compete, with South Korean shipbuilders through technological cooperation and division of labor. According to the 16 March Nihon Keizai Shimbun, Japanese shipbuilders are seeking to expand cooperative relationships with the South Korean shipbuilding industry, which surpassed Japan in 1993 in the tonnage of shipbuilding orders received. The Japanese firms' current overtures--coming on the heels of a recent deal between Mitsubishi Heavy Industries and South Korea's Samsung Heavy Industries--reportedly mark a ''major change" in the business strategy of Japanese shipbuilding companies. In the past they had sought to dissuade South Korean shipbuilders from increasing production capacity in order to avoid a worldwide plunge in ship prices. Now, with capital investment by South Korean shipbuilders having increased to a level that even Japanese shipbuilders cannot match, Japanese companies have reportedly decided to adopt a new strategy to cooperate and share work, rather than compete with their South Korean counterparts. According to Nihon Keizai Shimbun, the strategy of the leading Japanese shipbuilding firms is now focused on forming an international shipbuilding consortium. To this end, the paper reported, Ishikawajima-Harima Heavy Industries (IHI) has asked Samsung to join a group composed of IHI, Sumitomo Heavy Industries and an Italian shipbuilder to participate in the bid for a fifth Liquefied Natural Gas (LNG) tanker for the Korean Gas Corporation. The paper also reported that IHI hopes Samsung's participation will increase the group's heretofore low chance of winning the bid. In return, IHI has offered Samsung technological assistance in building LNG tankers, it added. (AUTHOR: INNES. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM, (703) 733-6534.) EAG/BIETZ/CB 30/1521z Mar

SUMMARY Announcing a sharp swing away from its dependence on imported food in recent years, the Russian government, prompted by the agrarian lobby's desire to protect farms from foreign competition, has declared it will import no grain in 1994 and has slapped import duties on most other food products. The moves were made despite a poor grain harvest in 1993 and an expected further decline this year and provoked outcry by the mayors of Moscow and St. Petersburg, whose constituents face higher food prices and possible future shortages as a result of the cutoff of their large-scale food imports. But the moves were accompanied by reformist measures seeking, for example, to reduce the state's role in agriculture in order to develop private marketing channels. END SUMMARY Russian President Boris Yeltsin told reporters on 9 March that "for the first time in three or four decades, Russia will not import grain, linen or wool this year" and "we have enough grain to last us until the new harvest'' (ITAR-TASS, 9 March). He told Interfax (9 March) that he had made this decision after talking to Deputy Premier for agriculture Aleksandr Zaveryukha that morning, and on 12 March Zaveryukha publicly applauded Yeltsin's statement and said that his own calculations showed that there is sufficient food and no grain need be purchased abroad (Russian TV, 12 March). In a further move against food imports, Premier Viktor Chernomyrdin on 10 March signed a decree ordering imposition of duties on many types of food imports, including fish, shellfish, milk, potatoes, vegetables, and apples, although not on grain (Rossiyskaya Gazeta, 18 March). Previously, most foods were imported duty free (Interfax, 16 March). Reaction The import duties brought an outcry, especially from big city leaders who had been trying to prevent this move for weeks. Moscow Mayor Yuriy Luzhkov in mid-January had written an open letter to Chernomyrdin complaining that some members of the cabinet were trying to push through a plan to "protect the interests of Russian agricultural producer5?? by eliminating federal food stocks, introducing high customs duties on imported food, and abolishing subsidies for foreign food prices. He argued that by raising prices for foreign foods the duties would enrich Russian farmers at the expense of Russian consumers, pointing out that foreign sugar sells for 600 rubles a kilo whereas Russian sugar costs 900 rubles (ITAR-TASS, 17 January; Rossiyskaya Gazeta, 18 January). After the 10 March decree, the mayors of Moscow and St. Petersburg and the head of the Yekaterinburg Administration sent Yeltsin an appeal protesting the increase of import duties (Krasnaya Zvezda, 22 March). Luzhkov on the television program Itogi on 20 March assailed the increases, which he attributed to Zaveryukha, and said he had gone to Chernomyrdin to complain and try to defend the interests of cities. Izvestiya reported on 22 March that Moscow's food suppliers ''immediately jacked up prices'' after import duties were raised, especially for livestock products. Zaveryukha and Agriculture Minister Viktor Khlystun held a news conference on 22 March to defend the decision, arguing that Russia can feed itself, but an influx of foreign food is hurting Russian farming. They complained that Moscow and St. Petersburg consumed 70 percent imported food and ignored Russian-produced food (Russian TV, 22 March). Zaveryukha complained that imported food ''has started to flood in from abroad via various commercial structures'' and that big city leaders, primarily in Moscow and St. Petersburg, prefer imported foods to Russian foods (Selskaya Zhizn, 24 March). In a 24 March Rossiyskaya Gazeta interview he argued that ''we have plentiful supplies of our own food products'' and therefore food prices will not rise. As an example of how imports have damaged domestic agriculture, he complained that last year's importation of large amounts of dried milk had cut demand for milk in Moscow and disrupted Russian milk production. He said that "unless the chaotic situation with imported products--which are often of poor quality--is stopped, entire sectors in our own country, such as livestock raising, poultry farming, and flax growing, are doomed to disappear" (Rossiyskaya Gazeta, 24 March). Food Supplies Zaveryukha has long talked of cutting or ending imports, and in fact, imports had been reduced to 10.4 million tons in 1993--the lowest in 15 years (Interfax, 14 January) and down from 25.5 million in 1992 (Interfax, 20 January). Zaveryukha had told a press conference in early March that Russia will export 3-4 million tons of grain this year (Interfax, 2 March). He recently argued that Russia has enough grain reserves to last until October when the new harvest comes in and may actually be able to export 2 million tons (Interfax, 16 March). Aleksandr Kudelya, first vice president of Roskhleboprodukt (the company that buys grain for the government), at the beginning of this year contended that farms really have more grain than they admit and indicated that Roskhleboprodukt has already contracted with farmers for 32 million tons and has actually bought 26 million tons of this, compared to 25 million tons actually bought in 1992 (Interfax, 14 January). Despite this optimism, the decision to end imports is clearly not based on increased production, since last year's harvest was not very high and domestic production this year is expected to be much worse. Khlystun has forecast a grain harvest of only 89 million tons for 1994 (Rossiyskaya Gazeta, 17 March)--far below the 99 million tons produced in 1993 (Nezavisimaya Gazeta, 11 March), reflecting dim prospects for 1994 as farmers continue to experience financial difficulties in buying fuel, equipment, and seed. Others assert that even predictions of 89 million tons are far too optimistic and that Russia will run out of grain, pointing out, for example, that fall planting of winter grain was down 20 percent from 1992 (Rossiyskaya Gazeta, 23 March). An Agriculture and Food Ministry official, speaking before Yeltsin and Zaveryukha announced that there would be no imports, said the country will need 113.9 million tons of grain (28 million for food, 28 million for seed, and about 62 million for fodder) and will have to import 13-14 million tons this year (Interfax, 17 February). Zaveryukha's optimism seems based largely on reduced demand, especially for livestock fodder, rather than increased production, and he has said that his calculations show that Russia has enough fodder grain this year (Selskaya Zhizn, 29 January). Much of Russia's grain has traditionally been used to feed livestock--more than in other countries--and much of the imported grain is precisely fodder grain. Under the pressure of higher grain prices and limited grain supplies, livestock herds have been cut recently, reducing the amount of grain going to fodder and cutting grain consumption markedly. An agricultural institute estimated that grain consumption by livestock has fallen from 70 million tons in 1988 to 56 million tons in 1993 (Interfax, 14 January). Roskhleboprodukt President Leonid Cheshinskiy recently said that the lower import needs were based on lower fodder consumption since the number of hogs had fallen 36 percent since 1992 and cattle and poultry 19 percent (Interfax, 23 March). Kudelya said that last fall's freeing of bread prices had led to a 15 percent drop in its consumption (Interfax, 14 January), discouraging human consumption as well as feeding cheap bread to animals. Ironically, the reduction of livestock herds now seems to be treated as a positive step- -reducing wasteful use of grain--even though in the past cutting herds because of fodder shortages was viewed as a major setback to agriculture, reducing meat and dairy production for years to come and setting back efforts to improve the Russian diet. Zaveryukha has also raised the idea that demand will be reduced by cutting the state's role in procurement. He argued that a new procurement system being introduced will decrease the number of consumers dependent on the federal food fund and make more of them depend on regional food funds and non-government markets (Selskaya Zhizn, 29 January). He has also claimed that federal food reserves would be reduced this year and would cover fewer areas, and that wholesale markets would form "the basis of stable food provision'' (Interfax, 2 February). An edict ''On Liberalizing the Grain Market in Russia'' adopted by Yeltsin on 24 December formed a federal grain fund and regional funds and announced that the federal and regional governments would no longer require mandatory deliveries from farms (Sobraniye Aktov Prezidenta i Pravitelstva Rossiyskoy Federatsii, 27 December 1993; Rossiyskaya Gazeta, 15 January). The state set a target of only 10-11 million tons for its 1994 federal grain fund (10 million, according to Interfax, 14 January 1994; 10.7, according to Russian TV, 16 March; and 11 million, according to Cheshinskiy in the 23 March Rossiyskaya Gazeta). A 23 March Rossiyskaya Gazeta article called the decree on liberalizing the grain market "essentially aimed at considerably reducing state purchases of grain for the federal fund" and creating competition in the grain market by privatizing grain procurement centers and creating grain markets. Reducing the federal food fund would directly allow a cut in imports because this fund is largely formed from imported grain (Interfax, 17 February). Despite Zaveryukha's assertions, however, the new procurement system does not seem likely to bring a drastic reduction of state grain needs compared to last year since most of its features had already been introduced last year. The government had also established separate federal and regional food funds in 1993, with the federal fund only covering the military, Moscow and St. Petersburg (Rossiyskiye Vesti, 16 February 1993) and had set federal reserves at only 11.8 million tons for 1993--as against about 30 million in previous years (Interfax, 2 March 1993). The federal fund actually bought 11.5 million tons in 1993 (Interfax, 14 January)--not much more than this year's target. Total needs- -including regional as well as federal--may be not much smaller than the 30-some million purchased in most past years. Interfax on 20 January said that present federal and regional funds comprised 27 million tons. Financial Aid Zaveryukha's drive against food imports is part of his campaign to rescue the ailing farm sector by increasing government financial aid. He stated at a February Ministry of Agriculture and Food meeting that the main thing this year is to prevent ''disintegration'' of Russian farming and ''preserve Russia's food independence" and that farms are counting on financial support in a new government decree on the agroindustrial complex and on introduction of customs duties on imports (Rossiyskaya Gazeta, 18 February). Zaveryukha appeared to achieve considerable success recently in protecting agricultural interests by pushing through cabinet approval of a decree "On Functioning of the Agroindustrial Complex in 1994?' that orders the government to pay farms for the products they sold to the state in 1993, to allow farms to postpone payment of their debts, and to retain existing state subsidies for equipment, parts, fuel, and fertilizer. According to the Agriculture and Food Ministry, the decree, approved by the cabinet on 3 February, was to cost the government 14 trillion rubles, but according to critics, its cost would more likely be 34 trillion, and this big sum from an already hard- pressed budget caused a big political uproar. Even after the cabinet decision, controversy over the decree's financial aid to agriculture continued, and Chernomyrdin delayed signing it, alarming agrarian lobbyists. Zaveryukha assured the Agriculture and Food Ministry on 15 February that the premier would soon sign the decree (Segodnya, 17 February), but 39 worried Agrarian Party Duma deputies visited Chernomyrdin on 18 February to urge him to sign, and Chairman Aleksandr Nazarchuk of the Duma's Committee on Agrarian Matters afterward announced the premier would sign it before the 25 February cabinet discussion of the budget (Segodnya, 19 February), presumably to nail down agriculture's allocations before final decisions on the budget. When finally signed, the controversial decree, now titled "On Economic Conditions for Functioning of the Agroindustrial Complex of the Russian Federation in 1994," did include big financial aid for farms but less than the draft approved on 3 February. Chernomyrdin signed it on 23 February, and it was published in the 26 February Selskaya Zhizn and 28 February Sobraniye. Like the earlier version the cabinet approved on 3 February, the final decree ordered paying off of 1993 state debts to farms and subsidizing of farms' purchase of electricity, fuel, fertilizer, equipment, and seed, but, according to Nazarchuk, it provided for considerably less funding for spring sowing and other items (Segodnya, 24 February). Zaveryukha portrayed the decree as a "victory for agrarians," although he admitted that he was ??not entirely satisfied?? with it (Trud, 26 February), and he insisted it will provide enough to finance spring sowing (Interfax, 24 February). Later, farmers complained that banking and finance officials are dragging their feet in distributing the funds allotted for the 1994 spring sowing, leaving farmers without the needed financial help at this critical time (Selskaya Zhizn, 24 March). It is still unclear whether the amounts promised to agriculture by the decree conform to the draft budget's allocations. Prospects Zaveryukha's moves to bar imports, accepted by Chernomyrdin and Yeltsin, seem prompted more by the desire to protect Russian farmers than by the prospect of satisfactory food supplies. It may, however, give needed incentives to farms and help restore proper domestic production by making the government and others buy from farmers rather than seek food abroad. Moreover, the 23 February agroindustrial complex decree, in addition to protectionist and subsidy aspects, appears to contain reform features. It ordered creation of a network of "food markets'' and agromarketing services'' as "alternative channels" for selling grain, helping create free market conditions for farmers and following up on Yeltsin's 24 December edict that abolished mandatory deliveries and ordered other steps to create a freer market for food. But little has been seen yet about the new system of private markets and regional food funds, and it is not clear how well it will ensure supplies. (AUTHOR: HAHN. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ANALYSIS BRANCH, RUSSIA DIVISION (703) 733-6070.) ENEAG/BLOUGH/CB 30/1602z Mar

Reflecting a hardening of its opposition to the prospective introduction of Patriot missiles in South Korea, North Korea has staged a "mass rally" and sharpened its rhetoric against Seoul and Washington. At the 29 March rally in Pyongyang--the first such rally Pyongyang media have reported being staged against deployment of the missiles--the main speaker, a city People's Committee functionary, characterized current tension on the peninsula as such that a "nuclear war" could be touched off "by accident." He went on to warn that if the United States and the South "challenge" the DPRK, it will "punish them hundreds and thousand times"(Pyongyang radio, 29 March)--a departure from Pyongyang's heretofore cautious pronouncements that went no further than to promise unspecified "countermeasures." Like the speaker at the rally, an authoritative Nodong Sinmun commentator's article on 29 March also pledged to "deal a thousand-fold retaliatory blow" if the South unleashed a war against the North "in league with outside forces" (KCNA, 29 March). In a similar vein, KCNA on 30 March, commenting on the "increased [U.S.] military threat to the North," ominously warned Washington that "if one likes fire he is bound to get burnt." Pyongyang has balanced its harsher rhetoric on the Patriot issue with indirect appeals for resumption of negotiations with Washington. Thus, a KCNA report on 29 March claiming that foreign leaders are calling for a peaceful resolution of the nuclear issue cited the Malaysian prime minister as saying that the Korean nuclear issue "should be resolved through negotiations" and not "by means of pressure." It portrayed the Congolese prime minister as similarly prescribing "dialogue and negotiation" for the issue. The report also cited the Senegalese prime minister as ''expressing hope'' that the issue will be resolved through "DPRK-U.S. talks." (AUTHOR: YIM. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM, (703) 733-6534.) EAG/HORTON/CB 30/1928z Mar

SUMMARY The Japanese Government appears to be sharply divided over whether to support economic sanctions against North Korea if the United Nations decides to impose them. Securing the backing of some members of the coalition for sanctions could require considerable effort and could divert the coalition's attention from other issues, such as easing trade frictions with the United States. END SUMMARY Prime Minister Hosokawa, perhaps reflecting the tensions within his government, has recently sent out increasingly conflicting signals about Japan's position on possible economic sanctions against North Korea. Hosokawa most frequently has been reported as making somewhat guarded statements that have been interpreted in the Japanese press as meaning that Japan would support sanctions if the United Nations votes to impose them. For example, during Hosokawa's news conference with President Clinton on 11 February, he stated that if the UN imposes sanctions "Japan will do as much as it can within the limits of its constitution" (NHK Television, 11 February). At a 20 March news conference in Beijing, he made a similar statement, saying that "as a general rule . . . Japan for its part will also have to take responsible action" if the UN imposes sanctions. Unnamed Ministry of Foreign Affairs (MOFA) officials quoted Hosokawa as telling Korean President Kim Yong-sam on 25 March during Kim's visit to Japan that if sanctions were imposed, Japan would take "responsible" measures within the limits of its constitution. During his news conference with Kim on 26 March, however, Hosokawa appeared to be more non-committal. He refused to answer a South Korean reporter's question about how Japan would react to any imposition of sanctions, arguing that it would be pointless to answer since the UN Security Council had not yet discussed the issue. While saying that he thought it was "very important" for the international community to "indicate its solid attitude toward North Korea," he added that it was also "important to leave the door open for dialogue with North Korea" --a position that is also taken by some members of the ruling coalition who oppose sanctions. Hosokawa's ambivalent public stance may represent an effort to avoid exacerbating tensions within his government over the sanctions issue. Judging from statements in the Japanese media, the ruling coalition is sharply divided over whether Japan should support sanctions. On one side there appears to be a group of coalition members around Shinseito Secretary General Ichiro Ozawa, who appears to believe that Japan should support sanctions as part of an effort to play a larger international political role. The 23 March Nihon Keizai Shimbun quoted Ozawa, widely considered as the most influential politician in the coalition, as stating that Japan should "cooperate" with the United Nations on the issue. The 23 March Mainichi Shimbun also reported that Ozawa strongly backs sanctions, although the quotes it cited were more ambivalent. According to the paper, on 22 March Ozawa said that Japan "has to act according to the principles of our constitution, which seeks world peace through the United Nations and preserves our country's peace, security, and existence." He added that if Japan did not act in accordance with this principle, "the international community will not trust Japan." Opposition to Sanctions In contrast to Ozawa's position, there appears to be strong opposition to, or reservations about, sanctions within several parties in the coalition. The strongest opposition reportedly comes from the Social Democratic Party of Japan (SDPJ), which has long been sympathetic to North Korea. Outlining the party's position at a 22 March news conference, SDPJ Chairman Tomiichi Murayama reportedly argued that Japan should "do everything we can to reach a settlement [of the North Korean nuclear issue] through consultations, rather than through immediate sanctions" (Mainichi Shimbun, 23 March). The 28 March Yomiuri Shimbun quoted the party's secretary general, Wataru Kubo, as stating that the party favored "a policy of dialogue" with North Korea because it feared that Pyongyang might respond to sanctions with acts of terrorism and because the party did not believe that sanctions would be successful in forcing North Korea to accept nuclear inspections. Moreover, in an apparent effort to explore all avenues to a negotiated settlement of the DPRK nuclear issue, the party, according to the 24 March Mainichi Shimbun, decided on 24 March to send a mission led by its vice chairman, Issei Inoue, to China for 3 days beginning 1 April to press Beijing to use China's influence with North Korea to get Pyongyang back to the negotiating table. Despite its leadership's public opposition to sanctions, the SDPJ itself may in fact be divided over how to respond if the rest of the ruling coalition decides to support any possible sanctions. Judging by statements the Japanese press has attributed to various party leaders, some senior members of the party are apparently arguing that the SDPJ should back any government decision to support sanctions rather than risk breaking up the ruling coalition by continuing to oppose them. For example, the 26 March Nihon Keizai Shimbun quoted an unidentified SDPJ leader as stating that despite the SDPJ's long relationship with the DPRK, "as one of the coalition partners, the SDPJ is in the position of shoring up the coalition government." In addition to the opposition within the SDPJ, some leaders in other coalition parties who were once involved in efforts to normalize Japan's relations with the DPRK as members of the Liberal Democratic Party appear to have reservations about imposing sanctions. The 23 March issues of both Nihon Keizai Shimbun and Mainichi Shimbun reported that some members of the Shinseito and the Sakigake--the party headed by Chief Cabinet Secretary Masayoshi Takemura--were opposed to sanctions. Wavering Within MOFA Coalition members who argue that Japan should support sanctions appear to have some backing within the Ministry of Foreign Affairs (MOFA), which evidently fears that Japan will damage its international credibility if it fails to support sanctions imposed by the United Nations. MOFA has also been pressing for a permanent seat for Japan on the UN Security Council, and may fear that failure to support sanctions imposed by the UN would damage Japan's chances of attaining this goal. A 24 March Kyodo report quoted MOFA Administrative Vice Minister Kunihiko Saito as telling a meeting of defense experts and businessmen that Japan would change its laws if necessary in order to support any economic sanctions imposed upon North Korea by the UN. "Japan," Kyodo quoted Saito as saying, "will be remembered as an irresponsible country in the future" if it fails to support any UN sanctions on North Korea. MOFA supporters of sanctions, however, have wavered in their public commitment to any UN moves in this direction, suggesting that they would prefer initially that the UN take a low-key approach to the North Korean nuclear issue. For example, Administrative Vice Minister Saito on 28 March reportedly told a news conference that Japan was prepared to back a Chinese proposal that the Security Council issue a nonbinding statement urging North Korea to accept full nuclear inspections. Kyodo quoted Saito as saying that the international community's "aim is to make North Korea change its policy, not to take punitive action." Business Community Ambivalence The apparent lack of widespread public--especially business- -support for a strong Japanese stance on sanctions may complicate the resolution of differences within the coalition. For example, Gaishi Hiraiwa, the chairman of Japan's largest business organization the Keidanren [Federation of Economic Organizations], reportedly told a news conference on 24 March that he believed the international community should exhaust all possibilities for a negotiated solution to the North Korean nuclear issue before considering sanctions. "As much as possible," the 24 March Mainichi Shimbun quoted him as saying, "it is necessary not to carry out sanctions and isolate North Korea." Measures to Resolve Differences The coalition and MOFA appear to be taking some tentative measures to resolve the differences within the government over the sanctions issue and come up with a unified government stance. These measures are evidently just in their initial stages, however, and progress is likely to be slow. According to the 28 March Yomiuri Shimbun, the SDPJ decided at a 24 March meeting of its central executive committee to undertake a study of how the party should handle the sanctions issue--a move possibly designed to help resolve the differences between the SDPJ's policy and that of the rest of the coalition. In addition, according to the 24 March Nihon Keizai Shimbun, MOFA has established a task force to consider how Japan will deal with issues surrounding economic sanctions against North Korea if the UN imposes them. The work of this task force, however, will probably be slowed by apparent divisions within the government over how to handle some of the issues it is considering. One of these issues is how to stop remittances to North Korea from ethnic Koreans living in Japan. According to the 27 March Asahi Shimbun, the Ministry of Finance is examining various ways to restrict these remittances. The paper reported, however, that some government officials are opposed to some of the measures under considerations--such as refusing reentry permits to North Korean residents of Japan who visit North Korea and limiting the amount of money carried out of the country by travellers to the DPRK--because they might be perceived as discriminating against and violating the rights of Japanese residents of North Korean ancestry. According to the 23 March Nihon Keizai Shimbun, some officials are also arguing that it will be impossible to stop remittances that are sent to the DPRK through third countries such as China. Outlook If the UN imposes sanctions against North Korea, the Japanese Government will probably support them in order to preserve its relationships with the United States and South Korea and avoid damaging its chances of winning a permanent seat on the Security Council. Getting the SDPJ to go along with such a position, however, will almost certainly take considerable time and effort, which, in turn, would probably divert the attention of the government from such pressing issues as resolving the current economic tensions with the United States. (AUTHOR: BOUNDS. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, ASIA DIVISION ANALYSIS TEAM, (703)-733-6096.) EAG/HORTON/CB 30/2142z Mar

SUMMARY Already tense relations between the illegal but largely tolerated Muslim Brotherhood (MB) and its electoral ally the Socialist Labor Party (SLP) have been further strained by reports that the Egyptian government is considering a new change in the law governing parliamentary elections. While an official decision on changing the law is evidently still far off, the MB has evinced concern that such a change would benefit the SLP to the Brotherhood's detriment. END SUMMARY Over the past few months, both Egypt's state-owned and opposition newspapers have published reports that the ruling National Democratic Party (NDP) is contemplating yet another change in the parliamentary election system, presumably to take effect prior to the elections expected to occur at the expiration of the current People's Assembly term in late 1995. According to the reports and news commentaries, the change being considered would restore in some form the recently abolished proportional representation party list system, which was introduced by President Husni Mubarak in 1984. Under that system, the banned Muslim Brotherhood could enter candidates only if legal parties integrated them in their lists. The party list system was abolished prior to the 1990 parliamentary elections, after the Constitutional Court ruled that it did not give independent candidates sufficient opportunity to compete; it was replaced by a system based on individual candidacies (see Note 1). According to the government-owned daily Al-Ahram, the government's interest in restoring the old system is largely motivated by its concern to rein in independent-minded NDP deputies by ensuring that they are beholden to the party (Al-Ahram international edition, 30 March). (Note 1) The Brotherhood--together with its SLP ally and two other parties--nonetheless opted to boycott the 1990 elections in protest against what they claimed was the absence of guarantees for free and honest elections. Minister of People's Assembly and Consultative Council Affairs Muhammad Zaki Abu-'Amir appeared to confirm in February that the government is seriously considering restoring the party slate system with modifications that would bring it into compliance with the 1990 court ruling. In comments reported by the weekly Al-Akhbar Al-Yawm, Abu-'Amir denied that he knew of any official inclination to change the system. He added, however, that the government's "economic liberalization policy will force a return to the proportional system," because individual candidacies are more susceptible to the "influence of money." The same report quoted Fawziyah 'Abd-al-Sattar, head of parliament's Legislative Committee, as saying that a compromise might be found in which half the seats in every district are reserved for independents and the other half for party slates (5 February). One suggested modification to the electoral system--lowering the threshold for parliamentary representation--would theoretically enable the SLP to contest the next People's Assembly elections without having to rely on its Muslim Brotherhood allies. Deputy Prime Minister and NDP Secretary General Yusuf Wali reportedly told SLP officials that restoring the proportional list system might also involve a lowering of the threshold for parliamentary representation from 8 percent of the vote that a party was required to win under the old system to 4 percent (Al-Ahram international edition, 5 January). It was that threshold that forced the SLP into its "Islamic Alliance" with the Brotherhood and a smaller party--the Liberals--in 1987 (see Note 2). Accordingly, lowering the threshold would make the SLP less dependent on the MB and would diminish MB opportunities to contest parliamentary seats independently, through the individual candidacies of organization members. (Note 2) The SLP fell just short of the threshold when it contested the previous elections of 1984 on its own. To the extent that the projected change could serve to undermine the MB-SLP alliance and damage MB chances in coming elections, it would be consistent with government attempts in the past couple of years to marginalize the organization through legislative action: --In February 1993, the People's Assembly passed a law aimed at turning back MB advances in professional syndicates by invalidating elections that fail to draw fifty percent of the eligible voters (Uktubar, 28 February 1993). --In December 1992, an amendment to the law governing political parties was passed, banning all political activities by organizations seeking party status that have not yet been legally recognized (Al-Ahram, 19 December 1992). That legislation followed rumors--evidently encouraged by NDP officials to intimidate the SLP and the Brotherhood--that the government was considering a bill to ban any alliance with an illegal organization. Rising Tensions in Islamic Alliance Concern over the possible electoral change has been an evident factor in recent tensions between MB and SLP leaders. Those relations have been particularly strained by the SLP's decision to engage in discussions with NDP officials on the "national dialogue"--which President Mubarak called for last November (see Note 3)--without MB representatives, despite the fact that the MB, along with most other opposition parties, signed a statement conditionally agreeing to participate in the dialogue (text of statement published in Al-Wafd, 7 December 1993). It was in a meeting with the SLP on the national dialogue that NDP Secretary General Wali reportedly indicated official openness to restoring the party list election system and lowering the threshold for representation. The dispute over participation in the dialogue broke out into the open last January with public bickering in the pages of the semiweekly SLP organ and MB mouthpiece Al-Sha'b, as well as the international edition of Al-Ahram. Although differences between leaders of the two groups have occasionally been expressed publicly in the past, such open bickering is extremely unusual, particularly in the Islamic Alliance's own paper. (Note 3) Mubarak invited "all the democratic forces in Egypt," including not only the political parties but "all of Egypt's thinkers and individuals, regardless of their affiliation," to join in a national dialogue that would "contribute toward drafting a sound scientific outlook for Egypt during the 21st century" (Cairo radio, 11 November 1993). More recently, Mubarak said he would call for the dialogue to take place in April (MENA, 20 March). Prime Minister 'Atif Sidqi asserted in an interview that "only the legitimate forces will take part" in the dialogue and that "the Muslim Brotherhood is an illegitimate and illegal force" (Al-Musawwar, 4 February). But neither Sidqi nor his interviewer referred to press reports that the MB might participate in the dialogue at some point through the professional syndicates under its control. MB official Ma'mun al-Hudaybi used the organization's regular column in Al-Sha'b to attack the SLP together with four other opposition parties for allegedly agreeing to engage in the dialogue under reported government conditions that would exclude, at least initially, the MB and other parties (11 January). He devoted a separate box in the same column to chastising SLP Secretary General 'Adil Husayn for his account in the paper's previous issue of his meeting with NDP officials. Alluding, inter alia, to Husayn's report that the SLP representatives said they would "welcome" discussion of a change to the proportional list system as a topic of the "national dialogue," al-Hudaybi accused Husayn of flouting MB interests at the meeting "in the knowledge that your party leans toward agreement to the party list [electoral system] and that the political forces, foremost the MB, will be unable to participate in those elections if this is realized" (11 January). Responding to al-Hudaybi's remarks, Husayn objected to much of the criticism directed at him; but he made no effort to deny al- Hudaybi's allegation that the SLP supported a return to the proportional party list system (Al-Sha'b, 14 January). (For a summary of the exchange, see box.) Subsequent public bickering has brought to the surface other objects of longstanding tension between elements of the MB and SLP--tension that could increase if the government decides to restore the proportional party list system. Most notably, MB domination of the most prominent professional syndicates has evidently bred some resentment on the part of some SLP officials. Thus, SLP Assistant Secretary General and Secretary for Organization Affairs 'Abd-al-Hamid Barakat was quoted as complaining that "the Brotherhood is working on monopolizing" the syndicates throughout the country and "not opening the door to participation by members of the party, except to a minimal degree that does not meet the party's aspirations." He asserted that the Brothers "view these syndicates as their legitimate party, as they have no legal presence" as an organization and thus believe "that the [Socialist] Labor Party may not compete with them in their party." This dispute, Barakat was quoted as saying, "has had a clear impact on the course of the alliance as it now stands" (Al-Ahram international edition, 15 January). Heading Toward a Break? The strains within the Islamic Alliance have led to open suggestions from SLP officials of ending the partnership; but it is unclear how much of the discussion is simply posturing or, if it is serious, whether it reflects the views of a significant sector of the party's leadership. Naji al-Shihabi, an assistant secretary general of the SLP and member of its Executive Bureau, was quoted in the press as claiming that a consensus was reached at a recent Bureau meeting in support of his proposal to end the alliance. He added, however, that it was agreed to wait until the thousands of elected local councils in Egypt are dissolved- -presumably as a result of an eventual court decision striking down that electoral system on the same basis that the parliamentary electoral system was earlier struck down (see Note 4). Noting that Alliance candidates won control over a number of these local councils in the elections of November 1992, al- Shihabi said the delay in ending the alliance would serve to prevent "a weakening of the members of the party in these councils" (Al-Ahram international edition, 8 January). While indicating that no firm decision has been made to abandon the Islamic Alliance, the SLP's Barakat, in his subsequent comments to Al-Ahram, implied that the party would be ready to break with the MB when the local councils are dissolved, unless the latter is ready to meet tough demands from the SLP. He was quoted as saying that "the existence of the local councils call for the continuation of the alliance in view of their division between the MB and Labor [Party]," adding that "should there be a decision dissolving the local councils, the matter will be reviewed" and certain understandings would have to be worked out before the alliance is renewed. (Note 4) The issue is awaiting a ruling by the Constitutional Court, to which it was referred immediately following the 1992 local council elections (Al-Wafd, 4 November 1992). Consistent with the SLP leaders' expression of a commitment to maintaining the Islamic Alliance at least until the local councils are dissolved, the open bickering between the MB and SLP ended in late January and al-Shihabi himself has made clear that party leaders unhappy with the alliance are not yet ready to burn their bridges with the MB. Most recently, al-Shihabi was cited as saying that his party is already "preparing for the possibility of a change in the election law to the unconditional proportional list system" --presumably referring to the absence of any threshold for representation--and that his party might form a "unified slate" that would include elements of both the MB and the [secular leftist] Nasirites (Al-Ahram international edition, 19 March). However, highlighting the potential for further discord, at least some within the MB leadership have reportedly opposed cooperation with Nasirites (Rose Al-Yusuf, 31 May 1993, Al-Yasar, February 1994)--anathema to many Brothers who recall the long years (mid-1950s to 1970) of brutal oppression of MB leaders by the late President Jamal 'Abd-al-Nasir and abhor the Nasirites' secular orientation. Complicating any assessment of prospects for the continuation of the alliance--even following a change in the electoral law--are the conflicting indications of the extent to which the MB has succeeded in taking control of the SLP party structure. Officials from both groups--but particularly the MB--often stress that they remain separate organizations. For example, al-Hudaybi was quoted as claiming that "there has never been a merger between the Brothers and the [Socialist Labor] party or a taking over of the party by the MB." Moreover, he pointed to what he claimed was SLP support for the regimes of Iraq's Saddam Husayn and Libya's Mu'ammar al-Qadhdhafi--regimes which the MB strongly opposes--as evidence of their separate identities (Al-Ahram international edition, 22 January). The very ability of the SLP to participate in the dialogue with NDP officials over MB objections appears to confirm al-Hudaybi's claims. Nonetheless, the SLP's Barakat acknowledged in his mid-January statements to Al-Ahram that "there did take place a certain merger of the organizational structures [of the two parties] in some areas," saying that it is "necessary to make this clarification publicly" and that "there is no embarrassment in that." In addition, the state-owned but relatively independent anti-fundamentalist weekly Rose Al-Yusuf claimed in a detailed report on SLP internal elections that, while the SLP leadership has attempted in some respects to curb the MB's influence in the party, the Brothers were increasingly taking over leadership positions in the SLP organizational structure. It claimed that "many" MB members "have spread throughout the party institutions" and that 28 of them had become members of the party's 45-member Executive Bureau (31 May 1993). Implications While the government's contemplation of a reversion to the proportional party slate system may be motivated largely by an interest in strengthening discipline among the NDP deputies, it may also be driven in part by a desire to drive a wedge in the Islamic Alliance and thus limit the organization's potential advances in the next elections. While such a change, if it materializes, might ultimately be extremely modest in light of constitutional constraints, Al-Hudaybi's expressed concern suggests that the Brotherhood itself assumes that it can only be hurt by the change--notwithstanding indications of growing MB domination of the SLP structure. The MB probably also fears that if the government is considering restoring a party slate system for parliamentary elections, it may also be determined not to abandon entirely the current party slate system governing local council elections--even in the face of the expected court ruling against the current system. BOX Brotherhood and SLP Leaders Exchange Bitter Words In his 11 January article, al-Hudaybi expressed astonishment at the reported agreement by five opposition political parties, including the SLP, to engage in a "national dialogue" with the ruling NDP that would exclude, at least initially, MB representatives as well as other parties and political organizations. "We say clearly that these six parties do not represent anyone but themselves," he asserted. In a separate box, he sharply criticized 'Adil Husayn for his 7 January account of a meeting on the national dialogue between the SLP and the NDP, accusing Husayn of ignoring MB interests. Although Husayn's account stressed the SLP's insistence on political reform, al- Hudaybi noted accurately: "You repeatedly said that the elections should be held with the participation of what you called the legal parties. You did not say one word about the need to recognize other political forces, notably the MB." Claiming that the SLP would not have reached the People's Assembly through the elections of 1987 without its MB partners, al-Hudaybi asserted that their joint campaign slogan--"Islam is the Solution"--was "originally an MB slogan." Responding to al-Hudaybi, Husayn took issue with both the substance and tone of his criticisms, claiming that "those who do not wish for the good fortune of the Islamic Alliance were gladdened by what you published." He claimed that, by signing the joint opposition statement welcoming the national dialogue, the MB had agreed to allow itself to be represented initially by the SLP. (According to its text, that statement asserted that the dialogue "must be conducted, at least during its first phase, among the parties and political forces through their leaders or accredited representatives"--a point stressed by Husayn.) Husayn took particular objection to al-Hudaybi's claim that the slogan "Islam is the Solution" was taken from the MB, saying "it is the slogan of Muslims everywhere and in every age" and that the SLP had used it prior to the formation of the Islamic Alliance. Expressing objection to the "tone" of the article from "beginning to end," Husayn concluded: "The enemies of Islam are lying in wait for its proponents and concocting plots and sedition. We must be wary and vigilant....I pray that God will clear up the differences between you and me according to righteousness. May this chapter be closed." END BOX (AUTHOR: BROWN. QUESTIONS AND/OR COMMENTS, PLEASE CALL CHIEF, NEAR EAST ANALYSIS BRANCH (703) 733-6094.) cs 31/0003z mar

Inkatha Freedom party leader Mangosuthu Buthelezi said millions of King Zwelithini's followers will not take part in the elections unless demands for a Zulu kingdom are met. Dr. Buthelezi and King Goodwill today held talks in Ulundi with Minister of Home Affairs Danie Schutte. [Begin recording] [Schutte, in English] From our side I can just say that the government is committed to an honorable recognition for the position of the Zulu king and kingdom in the new constitutional dispensation. There are restrictions and limitations but we are committed to that, and we will do everything in our power to try and bring that about. [Buthelezi, in English] We don't think that it's a matter that's impossible to resolve as such because kingdoms exist in Africa. There was a kingdom in Uganda -- I think there are four kingdoms in Uganda, including the most (?northern) part of Uganda. Kingdoms have been accommodated in the colonialization period in Africa. [end recording]

The summit of Central African heads of state on the consequences of the devaluation of the CFA franc has just completed its deliberations in Libreville, Gabon. Here is an excerpt of the communique issued at the end the deliberations. It is read by Gabonese Finance Minister Paul Toungui: [Begin recording] Concerning the consequences of the devaluation of the CFA franc, the heads of state noted that prices skyrocketed and this resulted in a substantial fall in purchasing power, as was predicted. They examined the backup measures taken for three different purposes. The measures were implemented through the Bank of Central African States, BEAC, to check rising inflation; the states in the subregion to minimize increases in prices of essential commodities; and through international financial institutions, including the IMF, with whom letters of intent were signed to ensure an influx of funds needed to reestablish financial balances and relaunch economic activities in our countries. Analyzing the effects of the monetary adjustment on the BEAC's balance-sheet, the heads of state noted the negative effects that the new exchange rate has had on their transaction accounts, all of which are now in debt. They therefore stressed the need to rapidly offset this loss. [end recording] This summit, which has just ended in Libreville, began 24 hours before the meeting of African finance ministers, which will examine a very important issue: problems related to the financing of development in Africa. This meeting, which is their fifth one, is held every two years.

[Excerpt] Libreville, 28 Feb (AFP) -- The heads of state of six Central African countries, meeting on 28 February in Libreville at a summit that focused on the impact of the devaluation of the CFA franc, asked Gabonese President Omar Bongo to mediate between Cameroon and Nigeria, currently at odds in a border conflict. According to the final communique read after the session, which lasted several hours, by Gabonese Finance Minister Paul Toungui, participants "expressed deep concern over the tension prevailing along the border between the two sisterly republics of Cameroon and Nigeria." "They expressed their wish that the current negotiations will yield satisfactory results as soon as possible through dialogue and that a speedy solution will be found so as to preserve peace and African unity," the communique continued. "Thus, in light of his experience, they have asked their colleague, President Omar Bongo of Gabon, to undertake a mediation mission between the two countries." [passage omitted]

Addis Ababa, 28 Feb (MENA)--Ambassadors of the countries participating in the central apparatus for the mechanism of settling disputes in Africa today discussed the implementation of the resolutions passed by the apparatus since its establishment at the OAU summit held in Cairo last year. Majdi Hifni, Egypt's ambassador to Ethiopia, chaired the meeting because Egypt is the current OAU chairman. Ambassador Hifni said that the ambassadors discussed aspects of the mechanism's work in light of the resolutions passed at the summit meeting of the central apparatus, chaired by President Mubarak in Cairo last December. Ambassador Hifni told a MENA correspondent in Addis Ababa that discussions during the meeting also dealt with the mechanism's functions and the creation of an OAU peace fund. The Egyptian ambassador said that the conferees agreed that a plan should be drawn up to finance the mechanism. Such a plan, they agreed, will be formulated by a working team from the OAU General Secretariat and African countries, with the aim of raising donations from companies, African institutes, and non-government organizations. The budget plans, Hifni added, will be submitted to the ministerial meeting of the mechanism, which will meet in Addis Ababa in March under the chairmanship of Foreign Minister 'Amr Musa. The ambassadors also discussed the formulation of a general legal framework governing the participation of OAU member countries in peacekeeping operations in the continent. The ambassadors discussed a report by the OAU secretary general's special envoy to Burundi and reviewed the conflicts in Somalia, Liberia, and Angola, Hifni noted.

Addis Ababa, 28 Feb (PANA) -- Somali faction leader, General Mohamed Farah Aidid, Monday [28 February] in Addis Ababa, held a 30-minute discussion with the OAU assistant secretary general in charge of political affairs, Tobias Muparanga, on the situation in war-torn Somalia. "He briefed me on the efforts he has been making with other Somali factions towards resolving the Somali crisis", Muparanga told PANA after the meeting in an Addis Ababa hotel. Aidid arrived in the Ethiopian capital on Sunday from Eritrea where he briefed the Eritrean leader, Isayas Afewerki on efforts by his Somali National Alliance (SNA) to end the impasse in Somalia, which has not had a central government since the fall of President Mohamed Siad Barre in January, 1991. Since the failed Somali informal political consultations in Addis Ababa in December 1993, Aidid has been staying in Nairobi, Kenya, where he has met several Somali factions and briefed Kenyan President Daniel arap Moi on the outcome of the Addis Ababa consultations. He also travelled to Uganda to brief President Yoweri Museveni. According to the OAU official, Aidid will also visit Tanzania in efforts to brief the leaders of the sub-region on the future of Somalia when American troops withdraw and the destruction of the country's infrastructure. Muparanga led an OAU fact-finding mission to Mogadishu in November 1993 where he met Somali faction leaders as well as civic leaders and discussed with them efforts by the continental body to end the Somali crisis. Since the United Nations Security Council lifted the hunt for Aidid, for alleged killing of Pakistani peacekeepers serving with the UN Operation in Somalia (UNOSOM) in June, blamed on his supporters, he has been on a diplomatic offensive to drum up support from the leaders of the region for a future government in Somalia in which he is to play a leading role. Aidid's aide said he is expected to meet the Ethiopian president, Meles Zenawi, Tuesday before returning to Nairobi to continue with further consultations with the Somali factions. President Meles was mandated by the 1993 June summit of the OAU in Cairo to resolve the Somali crisis on behalf of the African leaders. American troops and those from other Western nations are due to withdraw from the war-torn east African country by the end of March.

Yaounde, 28 Feb (CAMNEWS/PANA) -- A French military contingent landed on Sunday [27 February] at an air base in Yaounde on a mission connected with the current border dispute between Nigeria and Cameroon over the 1000 square kilometre Bakassi Peninsula, believed to be rich in oil. The CAMEROON NEWS AGENCY (CAMNEWS) reported in a dispatch to PANA Monday that the arrival of the French soldiers and diplomats was prompted by what it termed as "the illegal occupation" of parts of the Bakassi Peninsula in southwestern Cameroon. CAMNEWS did not give the number of French soldiers who arrived. The agency said that the French mission is in Cameroon "to evaluate the situation created by the invasion of Bakassi by troops of the Nigerian Army and the agression of Cameroonian soldiers on their territory". CAMNEWS said that there were clashes between Cameroonian and Nigerian troops on 18 and 19 February around the fishing zone around Kumbo and Janea. The agency claimed that Nigeria's green and white flag has been flying in Jabana and Diamond areas since 3 January 1994. The Cameroonian agency quoted Radio Kano of Nigeria which reportedly said that in three assaults, Nigeria lost 30 soldiers while one Cameronian soldier was killed and two others injured. A journalist from the national Cameroonian daily, CAMEROON TRIBUNE, who accompanied the country's minister of state in the president's office, Edouard Akame Mfoumou, on a visit to the area wrote that: "Troops from the two armies have occupied the fishing zones which have been transformed into combat areas and are only 100 metres away from each other in the Diamond and Ibabato area". CAMNEWS wrote that the French troops arrived around the same time as a French delegation of French diplomats from the French president's office and Foreign Ministry. Among those in the French diplomatic team is the special chief of staff of President Francois Mitterrand. The diplomats are also expected to visit Abuja, Nigeria's federal capital, on "reconciliation" the agency added. France and Cameroon have a defence pact dating back from when the central African state became independent from France on 20 May 1960.

Yaounde, 28 Feb (AFP) -- Cameroonian President Paul Biya late this morning received a high-ranking delegation led by General Christian Quesnot, special chief of staff of President Francois Mitterrand, official sources in Yaounde said. The arrival of this delegation comes in the wake of tension between Cameroon and Nigeria in the border region of the Bakassi peninsula. According to the national radio, no statement was made after this meeting, and contents of discussions was not made public. The delegation was composed of Bruno Delaye, diplomatic adviser of President Mitterrand; Jean-Marc Rochereau de la Sabliere, director of African and Malagasy Affairs at the Ministry of Foreign Affairs. The delegation was accompanied by the ambassador in Yaounde, Mr. Gilles Vidal, and another military officer, Colonel Rentegeat, the radio added without specifying the function of this officer. Well-informed Cameroonian official sources were pointing out this morning that the delegation hoped to go to Abuja, the Nigerian federal capital, immediately after the audience with President Biya to meet the Nigerian head of state, General Sani Abacha. A military detachment of about 30 soldiers also arrived in Yaounde yesterday from their base at Bouar in Central African Republic. The detachment is charged with an "exploratory mission on the conflict situation at the borders," in accordance with the defense accord signed between France and Cameroon. The Foreign Ministry today pointed out that while sending a delegation to the two countries, France is also "undertaking an intensive diplomatic activity" at the OAU and the UN Security Council.

[Government communique on 25 February Council of Ministers meeting issued on 26 February in Bangui; read by Gerard Gaba, minister in charge of the general secretariat of the government and relations with parliament--recorded] [Excerpts] [Begin Gaba recording] The Council of Ministers held a meeting on 25 February from 1000 to 1530 under the chairmanship of President Patasse. During the session, a few reports were heard and five draft decrees presented by the minister of interior and national security. [passage omitted] The government postponed the examination of the drafts until the next meeting when additional information will be provided. Before rounding up the session, the government made the following clarification: For some time now, groups of demonstrators have decided to systematically sequester cabinet members and senior state officials and have been making (?threatening) statements. The government is aware of the miserable conditions in which the Central African people are living. It is a well-known fact that this situation was inherited from the defunct regime. As everyone knows, the new government is consistently trying to gradually put an end to the pains inflicted by that regime and then to put the country back onto the path to development and social welfare. For this reason, the government maintains that it will not yield to any blackmail or any kind of threat. There are legal procedures that each citizen must follow to exercise his right to make demands, instead of resorting to anarchy. The government once again pledges its openness to dialogue. It however reminds those who prefer violence and blackmail that Ordinance No. 81/027 of 22 May 1981, which punishes acts of violence and vandalism perpetrated by groups, is still in force. [passage omitted] [end recording]

[Announcer] The guest on Afrique Midi today is the Chadian civil service minister. Following the ruling of the International Court of Justice in favour of Chad in the border dispute concerning the Aouzou Strip, Abdelkader Kamougue has just been to Tripoli to hand over a message from the Chadian president to Colonel al-Qadhdhafi. Libya has not said yet if it will abide by the ruling of the International Court. Ghislaine Dupont first asked Abdelkader Kamougue if the Libyan leader confirmed that his country would withdraw from the Aouzou Strip. [Begin recording] [Kamougue] From what I could gather, Colonel al-Qadhdhafi seems to accept the ruling, insofar as he said that as far as this border dispute is concerned, the matter is now closed. What does he mean by a closed matter? He said that a page has now been turned and that the future should be considered in a different light. However, we have not noticed any offical sign through the radio or the press since he said that. Nevertheless we are not losing hope since, following our proposal, a meeting of foreign ministers will shortly take place, which will enable us to go into the matter more deeply. [Dupont] Do you believe that this lack of official statement is, in a way, a bad omen? [Kamougue] We could be tempted to say that. However, since dialogue between the two countries is continuing, since we maintain our links, since we have an embassy there, and since we believe that the Libyan foreign minister will come to N'djamena, we believe that there is room for hope. [Dupont] Has Chad received any assurances yet that Libya will pull out from the Aouzou Strip? [Kamougue] The ruling was given, and I believe that it is necessary for the two countries to get closer to consider the conditions under which Libya could return the strip and evacuate it. So the issue will start being addressed at the next meeting of foreign ministers. [Dupont] Several Chadian officials, particularly diplomats in post in Tripoli, say that the Libyans have reinforced their military presence in the Aouzou Strip. [Kamougue] During our meeting Colonel al-Qadhdhafi denied this reinforcement and gave us assurances that in fact their presence in the zone has been reduced. Like Saint Thomas, we can say that we must see before we believe, so we remain somehow confused by all this for the time being. [Dupont] Will the Chadian Government set a deadline for the Libyan pullout from Aouzou? [Kamougue] We believe that the enforcement of this ruling should take place in the shortest possible time. Regarding the setting of a deadline, I believe that it will be possible for both delegations to make proposals and to find a compromise concerning the agenda of this pullout. [Dupont] If the Libyans were to procrastinate, what could the Chadian authorities do? [Kamougue] For our part, we have been choosing peace and justice since the 1989 Algiers agreement, and we will continue in that direction. We do not intend to embark on any violent action against Libya, we believe that the UN system should help us obtain the evacuation of this territory which has become Chadian. [Dupont] Mr. Kamougue, Chadian nationals living and working in Libya have been rounded up in the past weeks, have you discussed this issue with Colonel al-Qadhdhafi? [Kamougue] It goes without saying that we discussed this issue during our meeting, and Colonel al-Qadhdhafi allowed us to visit our fellow countrymen who were detained in the (Zanzur) camp. These Chadians were rounded up over a question of residence documents which they allegedly did not possess. A total of 365 Chadians have been rounded up, 165 of them in Tripoli itself, and the others shared between Sabha and Benghazi. [Dupont] A communique from the Chad president's office implies that the aim of these Chadians was to reactivate groups hostile to the authorities in Chad. [Kamougue] All theories are possible. That is one. But we hope that as far as the national question is concerned, the Chadians opposed to the transitional government will not take up arms to contest the verdict of the International Court of Justice. I don't think these Chadians will fall into that trap. [end recording]

(Paul Bi Ogemba), a member of the National Assembly, the government, and the Gabonese Democratic Party [PDG], has just made a surprising statement in which he says he disagrees with the policies of President Omar Bongo and of the PDG. He forwarded two letters to the president of the Republic and to the PDG general secretary. (Paul Bi Ogemba) was minister of state control in charge of parastatal reforms.

Libreville, 26 Feb (AFP) -- The Gabonese Democratic Party (PDG) asked the government to take court action today against those responsible for acts of violence which marked the start of a general strike action this week. "The PDG calls on the government to restore order, guarantee the security of persons and property, and throw full light on the recent riots so that all the authors are made to answer before the law for their acts," stated the party's deputy secretary general and spokesman, Rene N'demezo Obiang at a news conference. According to him, "apart from soldiers and strangers, victims of the recent violence were essentially PDG activists and supporters." The official casualty report on the four days' clashes between groups of demonstrators and security forces in several residential districts in Libreville and Oyem, the opposition stronghold in the north of the country, lists nine dead, including two soldiers; six seriously wounded; five persons kidnapped and later released; about 50 burned vehicles, and over a hundred shops and street stalls ransacked. One of the victims is Jean Kamga-Komo, a local PDG official in Libreville. "The PDG wants the authors of the cowardly murder of our comrade to be identified and punished in accordance with the law," Mr. N'Demezo stressed. The government has accused opposition parties, especially Father Paul Mba Abessole's National Lumberjacks Rally of "politically recuperating" and capitalizing on the general strike launched by the Gabonese Free Trade Unions Confederation to call for salary increases following the devaluation. Defense Minister Martin-Fedele Magnaga said "certain opposition party leaders recruit, train, and arm militias" and have "overrun the capital with people that loot and go on the rampage." Questioned on possible self-defense measures by supporters in the event of renewed disturbances, the PDG spokesman stressed that his party did not want "a kind of Lebanization of the country with "independent armed troops who take the law into their own hands." The party's main position is to ask government to enforce law and order, he further stated, "but we cannot continue to leave our supporters to be sacrificed as victims...and if government does not do anything about the situation, we will have no other choice but to create private militias as in Lebanon. But we do not want it to come to that," the spokesman said.

A press statement just in from the National Lumberjacks Rally says the leader of that party, Father Paul Mba Abessole, is still living with his family and several militants met him. Next week, he will give a news conference to restore the truth, nothing but the truth of the facts and to propose political solutions to the current crisis. The venue and time will be made known later.

It is better late than never. After several hours of negotiations, political leaders of the five parties that form the current government have finally managed to make a breakthrough towards the establishment of the remaining transitional institutions. A marathon meeting interrupted by a brief pause at 1830 discussed the problem of the functioning of the government led by Madame Agathe Uwilingiyimana, and the obstacles to the establishment of the national assembly and the transitional government extended to include the Rwandan Patriotic Front [RPF]. Two meetings -- since there had to be two -- on 25 February and 27 February were led by President Juvenal Habyarimana in the presence of the two prime ministers, Agathe Uwilingiyimana and Faustin Twagiramungu. The meeting concluded with a communique whose contents are read to us by the principal secretary at the presidency of the Republic, Enoch Ruhigira. [Begin recording] President Juvenal Habyarimana chaired meetings on 25 and 27 February, which brought together the political parties which form the current transitional government, namely the Republican National Movement for Democracy and Development, the Republican Democratic Movement [MDR], the Social Democratic Party, the Christian Democratic Party, and the Liberal Party [PL]. Prime Minister Agathe Uwilingiyimana and Prime Minister-Designate Faustin Twagiramungu participated in the two meetings, which studied the problem of the functioning of the current government led by Madame Agathe Uwilingiyimana as well as the obstacles hampering the establishment of the transitional institutions. Concerning the functioning of the current government, it was stated that so long as the transitional broad-based government has not been put in place, the current government must continue functioning through ministerial council meetings in order to tackle the challenges facing our country, particularly the problems relating to security and the problem of establishing transitional institutions. In regard to obstacles to the establishment of the transitional institutions, the 27 February meeting reached the following conclusions in order to help come up with a solution enabling the MDR and PL parties to participate in the institutions: Concerning the MDR, the list of deputies is that established on 5 January, with reservations concerning cases pending in court and the settlement that will ensue. Concerning the ministers, [words indistinct] on the MDR side, will be entitled to two ministers chosen from a list to be presented to the prime minister-designate, while Prime Minister-Designate Faustin Twagiramungu will be entitled to one ministerial portfolio. Concerning the PL party, the Mugenzi faction will nominate five deputies from its ranks, while the Ndasingwa faction will choose six. Concerning ministers, the Mugenzi faction will have two while the Ndasingwa faction will have one and will provide candidates for the post of transitional national assembly speaker. Landwald Ndasingwa expressed reservations about the (?proposal), notably on the distribution of ministries. Any faction not satisfied by the above compromise will draw lessons from the conclusions reached and will assume liability. [sentence as heard] The two PL factions will send the final lists of deputies to the president of the Republic and the prime minister by 1900 on 28 February at the latest. The prime minister-designate will present the list of ministerial candidates to the president of the Republic by 1200 on 1 March. The establishment of the transitional institutions will take place at a date to be jointly agreed upon with the RPF. Signed in Kigali on 27 February 1994. Thank you. [end recording]

Kinshasa, 25 Feb (PANA) -- Zairean President, Mobutu Sese Seko and his staunch opponent, Etienne Tshisekedi, whom he sacked as prime minister in late 1992, reportedly met Wednesday [23 February] night in Gbadolite, the birthplace of the former, Zairean papers revealed Friday. The alleged meeting took place a few days before the resuming of the plenary session of the transition parliament, due to open Saturday in Kinshasa to elect the prime minister. The papers said the meeting between the two was the crowning of a series of secret deals which have been undertaken by a number of prominent Zaireans. Among those who involved in the secret conciliation efforts was the chairman of the Zairean National Union of Employers, Bemba Saolona, who is a close associate of President Mobutu. Tshisekedi and his radical Union for Democracy and Social Progress (UPDS) have insisted that his sacking from the premiership was illegal because he was democratically elected by the 1991 national conference and not by the president.

[News conference on weekly cabinet meeting by N'Gongo Luwowo, government spokesman and minister of communications and press, in Kinshasa on 25 February--recorded] [Excerpt] A cabinet meeting was held on 25 February to review the state of the nation at month's end. The meeting was presided over by Mr. Faustin Birindwa, prime minister and head of government. The meeting began with a wide overview of the general national situation, and observed that general calm prevailed over the entire, vast national territory. Nevertheless, according to information received from the chief of general staff of the Zairian Armed Forces, there have been rebel infiltrations from a neighboring country into the Ruwenzori and Wataninga areas in North Kivu. After combat troops were dispatched to the affected areas, the Zairian Armed Forces rapidly repelled the invaders, kicking them out of our country. [passage omitted]

General Mohamed Farah Aidid, leader of the Somali National Alliance, has said that foreign countries and organizations are interfering in the Somali issue and trying to create an obstacle to peace efforts. He said that he will not participate in today's Cairo meeting, to which he was invited by the Egyptian Government. Gen. Aidid, explaining why he will not participate in the meeting, said that the Somali issue should only be decided by the countries appointed by the OAU and that any new ideas would disrupt efforts to bring peace in Somalia. He also said that all Somali political organizations who share this view will not participate in the meeting. Gen. Farah Aidid stated this at a news conference with the ERITREAN NEWS AGENCY prior to his departure from Asmara yesterday.

His Excellency President Daniel arap Moi today told wananchi [citizens] in Lugari constituency in Kakamega District [western Kenya] to ignore threats by opposition parties and turn out in large numbers on Thursday, 3 March to vote for Kenya African National Union [KANU] in the by-elections. The president said in a democratic society people should be free to decide their own destiny and wondered why opposition politicians were intimidating voters in the run-up to the elections. He, however, assured wananchi that the government had enough security machinery to contain any situation that may arise from those threats. President Moi said KANU stood for peace, love, and unity and the government shall not condone any acts of violence in the country. President Moi was speaking at various centers on his way to Nzoia chief's camp in Lugari to address a campaign rally on behalf of the KANU candidate in the constituency by-elections, Mr. Apili Wawire. Among the centers he stopped at were Uasin Gishu Kakamega border, Nangili, Kongoni, Matunda, and Kona Mbaya. Thousands of jubilant wananchi, waving the popular one-finger KANU salute, assured the president that they will vote in the KANU candidate, Mr. Apili Wawire. President Moi told those wananchi that by voting for Mr. Wawire they will have voted for KANU, which stands for progress and stability. President Moi dismissed as cheap politics by a Forum for the Restoration of Democracy [FORD]-Kenya candidate, Burudi Nabwera, that part of Lugari constituency would be made part of Rift Valley Province. He said it was a pity that such an old man would stoop so low as to tell such lies only for the sake of wooing votes. President Moi, who is also the president of the ruling party, KANU, wondered why the opposition was against harambee [communal fund raising] and yet that spirit had contributed a lot to the development of this nation. The president said that KANU will always concern itself with development matters and the general welfare of all Kenyans without discriminating. The president reiterated that it was the opposition parties which started off the tribal clashes in parts of Rift Valley and Western province and they should not use the same against KANU. President Moi recalled how he had appointed Mr. Nabwera to head several parastatals, including appointing him a minister of state in his office and [word indistinct] why he was not grateful to the KANU government.

Nairobi, 28 Feb (KNA) -- The chairman of the Electoral Commission Mr. Zacheus Chesoni has warned outsiders out to unleash violence in Lugari constituency to keep off and give the constituents a chance to elect their own representative. Mr. Chesoni said that the constituency had no past history of violence and blamed outsiders, some of whom he said are members of Parliament, for introducing insecurity in the area. He at the same time reminded voters in the constituency to exercise their democratic rights of choosing their member of parliament without fear or intimidation. Mr. Chesoni, who was addressing a press conference in his office today, appealed to all the political parties and their supporters to restrain themselves from any acts of violence for the remaining electioneering period. He said that voting takes place as scheduled, on 3 March 1994 from 6:00 AM to 6:00 PM and said that time will only be extended in polling stations which opened late. He told all the election officials taking part in the by-election to be fair and impartial and warned that anybody found interfering with the election process will be prosecuted. He assured the voters that the commission will liaise with the police commissioner to ensure that adequate security is provided during and after the by-election. To avoid cheating, Mr. Chesoni said that only original national identity cards will be used and told those who might have lost their identity cards to keep off the polling stations. Asked whether there will be any foreign observers during the by election, Mr. Chesoni said that the British and American embassies have indicated their willingness to send their political counselors as observers on the voting day. He took issue with a local daily for criticizing the commission's decision to increase polling stations in the constituency and explained that the decision was only made to encourage more voters to turn up. He was accompanied by commissioners Samuel Kivutu and the deputy chairman, Mr. Mwathani Mbaka. [Nairobi DAILY NATION in on 28 February on page 1 adds the following: "Heavily armed police clashed with Forum for the Restoration of Democracy [FORD]-Kenya supporters yesterday at Malava, Kakamega District, when a district officer tried to stop acting FORD-Kenya Chairman Kijana Wamalwa from opening a local party office. The paper said no-one was injured in the `pushing and brawling', during which it said the crowd shouted anti-government slogans."]