[Title] REPORT ON THE PACIFIC BASIN COOPERATION CONCEPT

To: Prime Minister MASAYOSHI OHIRA

Since its establishment on March 6, 1979, the Pacific Basin Cooperation Study Group has conducted an intensive study on Pacific Basin cooperation. In the course of our study, we submitted an Interim Report to you on November 14, 1979, and we now take pleasure in submitting this Report to you.

The Pacific Basin Cooperation Study Group

Summary of the Report

I THE PACIFIC BASIN COOPERATION CONCEPT

Remarkable progress in communications and transport technologies has turned the vast Pacific Ocean into an inland sea and ordered conditions so that the Pacific countries can create a regional community. Indeed, the Pacific countries have already developed a variety of bilateral and multilateral cooperative relations, and there are moves afoot to put forth ideas of building a regional community among them.

The Pacific Basin Cooperation Concept which we espouse, premised as it is upon these developments, is oriented toward the 21st century and intended to maximize the vast potential of this region not simply for the benefit of the Pacific countries but to enhance the well-being and prosperity of human society as a whole.

The Pacific region features two striking characteristics:

(1) Many of the countries in this region, whether industrialized countries or developing countries, are flush with vigor and dynamism and hold great potential.

(2) The countries of this region are extremely diverse in their stage of economic development and also in ethnic, cultural, religious, and other backgrounds.

Upon this recognition, our Concept has the following three features:

(1) It is by no means an exclusive and closed regionalism vis-a-vis outside of the region. Seriously concerned over what appears to be a decline in the free and open international economic system grounded in the GATT and IMF arrangements, we sincerely hope that the Pacific countries can capitalize upon their characteristic vigor and dynamism to become globalism's new supporters.

(2) Within the region as well, the Concept aims at the creation of free and open interdependence. In the cultural sphere, exchanges are to be promoted with the maximum respect for diversity; and in the economic sphere the free transaction of goods and capital is to be vigorously encouraged with the utmost respect for the developing countries' situations and interests. With the industrialized countries taking the initiative in opening their markets further and extending their economic and technical cooperation and the developing countries making steady self-help efforts, this region has great potential for opening a new horizon for tackling the North-South problem.

(3) Our Concept in no way conflicts with the cooperative bilateral and multilateral relations already existing in the region. Rather, the Concept stands on the valuable achievement of these existing cooperative relations, having mutually complementary relations with them.

II TASKS FOR PACIFIC BASIN COOPERATION

A variety of measures are possible and necessary in order to promote the Pacific Basin Cooperation Concept. Some are issues which should be taken up promptly, and others are long-term objectives; some should be dealt with jointly by the countries concerned and on others Japan should take the initiative.

Our Report proposes a number of projects which should be advanced. In this summary, we will simply outline our conceptual framework and cite just a few projects by way of illustration.

Respect for diversity is central to our Concept. Therefore, to nurture profound mutual understanding of this diversity among the peoples of the region is the first step in promoting this Concept. This mutual understanding must be nurtured by various people at all levels.

For example, contacts among people should be encouraged through overseas study programs for youths, a "University of the Seas" (programs for study on board), and home-stay programs, and also mutual understanding among people should be enhanced through a "Pacific Basin Expo" and other festivals held to introduce each other's cultural traditions, artistic products, and ways of life among the countries of the region.

Tourism's potential for enhancing mutual understanding should also be reconsidered and the arrangement of "working holidays" and the like promoted.

Japanese universities must substantially be internationalized in order to promote educational and academic exchange in the region. In this connection, it is, for example, extremely important that discrimination against foreign teaching staff at national universities be eliminated, that internationally open graduate schools be established, and that regional studies be promoted.

The arrangements for the industrialized countries' extending cooperation for human resource development and technical cooperation must be strengthened in order to counter the lack of trained personnel, which is a major impediment to the developing countries' development.

One way in which Japan could contribute further in this area would be to establish a "Technical Cooperation Center" and thus to sharply improve the present system under which specialists are dispatched on an ad-hoc basis as part of their domestic duties.

In order to promote expanded and coordinated trade in this Pacific region and to seek positive adjustment of industrial structures in the region, the countries concerned should draw up a "Pacific Basin Declaration on Trade and International Investment" to make clear their guiding principles. In this Declaration, the industrialized countries should pledge to open their markets further as by liberalizing trade or reducing tariff and non-tariff barriers. The developing countries on the other hand are expected to pledge, among others, to improve the climate for international investment.

At the same time, we propose the establishment of a "Pacific Basin Industrial Policy Consultative Forum" to deliberate on the actual implementation of these guiding principles.

Japan especially, recognizing that contributing to the development of this entire region is very much to Japan's own medium-and long-term interest, should work to expand imports of tropical agricultural commodities and other products of interest to the exporting countries and to promote technology transfer to the newly industrializing countries.

There are many areas in which the countries concerned should cooperate for the development of the Pacific Basin's abundant resources.

For example, one very challenging task would be to implement a "Joint Pacific Ocean Scientific Survey" for the purpose of utilizing the nearly infinite resources contained within this vast ocean.

Other attractive project areas include the joint use of satellites for resource exploration and such joint energy development as for nuclear power, liquefied or gasified coal, solar energy, and biomass.

Agricultural cooperation such as for joint projects to enhance rice production, forestry cooperation such as to develop and utilize unused species of trees, and fishery cooperation such as to promote a more effective use of marine resources are other important areas.

The smooth flow of capital in the region is an indispensable prerequisite to carrying out a variety of projects.

The development of international finance and capital markets in the region is thus important, and Japan must take the initiative in promoting the opening or liberalization of its finance and capital markets as by easing direct and indirect governmental restrictions, reducing closed-market bilateral transactions by the Central Bank and liberalizing interest rates.

While the U.S. dollar will continue to be an important international currency, measures should also be taken in the expectation of a greater international role for the yen.

Moreover, it is also important that the investment climate be improved as through the expansion of financial institutions in the region and the conclusion of investment protection agreements.

The remarkable technical innovations made recently in the transport and communications sectors have yet to be fully utilized in the Pacific region.

On air transportation, it is imperative that regional and island-feeder routes as well as north-south and east-west trunk routes be fully organized and that fare schedules be adjusted to suit the region's diverse passenger and cargo transport needs.

On communication, we should work for the revision of fare schedules and the enhancement of the Pacific communication network, expecting such new technological developments as the glass fiber communications cable. Consideration should also be given to the dream of launching a direct-broadcast relay satellite to serve the entire region.

Moreover, we must also actively promote the internationalization of mass media systems, and immigration and foreign residents control systems.

III TOWARD REALIZING PACIFIC BASIN COOPERATION

This Concept of forming a community in a region so replete with potential and diversity is without historical precedent, a fact which bears witness both to the task's great attraction and to its difficulty. Pacific basin cooperation should not be promoted hastily, but carefully and steadily through the gradual congealing of broad international consensus.

It is expected that the seminar to be held this September at Australian National University will become an important one of a continuing series of international conferences. For the time being, we hope that a non-governmental committee of 15-20 experts from the countries concerned will be established as a steering body to manage such conferences.

After a number of such conferences have been held, this committee might take on the characteristics of a permanent organization for Pacific basin cooperation, and the committee might be able to express joint opinions or make recommendations to the governments concerned on matters where a consensus has been reached among its members.

Apart from this committee, it is also extremely useful for realizing Pacific basin cooperation that working groups of specialists be formed at the governmental or private-sector levels to promote projects in specific areas, as have already been seen in the region.

The next step might be to examine the possibility of establishing an international organization for Pacific basin cooperation among the governments of the countries concerned.

The Report

I THE PACIFIC BASIN COOPERATION CONCEPT

The ties among the Pacific basin countries have become strikingly closer with the remarkable progress in communications and transport technologies, as epitomized by jumbo passenger jet planes and communications satellites. The vast Pacific Ocean, long a barrier separating the countries of the region, has now become more of an inland sea crossed by safe, free, and efficient transport lanes. For the first time in history, the conditions are ripe for the creation of a regional community in the Pacific basin region.

A salient feature of the Pacific region is that the region is full of vitality and potential. Not only does the region include the two greatest economic powers in the world today; it also has other economies in the process of very dynamic growth. Buried under the broad expanses of land and water in the area are rich deposits of natural resources. The great vitality and potential of this region, relative to that of other regions, must be apparent to anyone.

Another feature of the region is its pronounced diversity. It has a wide variety of countries differing in terms of stage of economic growth, ethnic composition, culture, and religion. The Pacific basin is a meeting place of diverse civilizations; it can be said that the major civilizations of the world are represented here in many variations, each with deep roots in the region.

Possessing as a whole great vitality and potential together with rich diversity, the Pacific region is now on the way to becoming a regional community. This may be termed a new experiment directed toward the 21stt{sic} century.

Various efforts have already been made by the Pacific countries to promote cooperative relations among them and to develop the Pacific region as a regional community. A number of proposals have already been put forward for the formation of a so-called Pacific economic community. Such fora as the Pacific Basin Economic Council (PBEC), composed primarily of business leaders from the area's five advanced countries, and the Pacific Trade and Development Symposium (PTDS), linking the area's scholars, have been active since their establishment in the late 1960s. In addition, parliamentary initiatives have been made to promote intraregional cooperation through the activities of the Asian Parliamentary Union (APU) and other exchanges. As a result, there has been a growing realization among the peoples of the Pacific region about its bountiful potential. Furthermore, as will be noted later, bilateral and multilateral cooperative relations among the countries of the region are being formulated in a closer and more diversified manner.

The Pacific Basin Cooperation Concept proposed here is intended to build upon this foundation; it aims to further promote cooperative relations within the region and also to take maximum advantage of the area's potential not just for the benefit of the Pacific basin countries but also for the well-being and prosperity of all peoples in the world.

What appears to be a decline in the free and open international economic system grounded in the GATT and IMF arrangements, the cornerstone of world economic development for more than 30 years since the end of World War II, has seriously concerned us in recent years. Under these circumstances it is our hope that Japan and other Pacific countries will work together to invigorate and preserve the free and open international economic system by strengthening relations of cooperation and interdependence, thereby becoming new standard-bearers of globalism for the sake of the world's economic development and prosperity. Along with the preservation of world peace, the maintenance of the free and open international economic system is of critical importance for the countries of the region as well as for the world economy. We wish to stress the important role that enhanced Pacific basin cooperation may play in attaining these goals.

Accordingly, a regionalism that is open to the world, not one that is exclusive and closed, is the first characteristic of our Concept. We are fully aware that a regional community without a perspective for a global community, a regionalism that excludes globalism, has no possibility of development and prosperity. Nonetheless, not a few problems that confront us today could be most suitably handled by first attempting regional cooperation and then developing this into global cooperation. Globalism without an anchor in regionalism is likely in many cases to make the resolution of problems more complex and difficult.

But it may be asked, are the Pacific countries qualified to be new standard-bearers of globalism? On the one hand, it is easier for countries with more vigor and dynamism to take a free and open stance. The vigor and dynamic characteristic of the Pacific region constitute an advantage in this regard. On the other hand, one need not mention the example of the European Community to know that cooperative relations as a general rule tend to be smoother among countries at the same stage of economic growth and with a common ethnic and cultural background. From this viewpoint, the extreme diversity of the Pacific region may be a discouraging factor. Where there are few common traditions and memories and where social homogeneity is lacking, one may question the feasibility of constructing a regional community bonded by close solidarity.

In today's world, however, where a network of close interdependence covers the entire globe and events in one region draw sensitive responses from many other regions, it is impossible to attain peace and prosperity except through cooperative relations premised on diversity. The so-called North-South problem bears witness to this point. Thus, just as the diversity of the Pacific region portends the difficulty of realizing the Pacific Basin Cooperation Concept, so does this same diversity testify to the historical importance of the Concept's realization looking toward the 21st century. Progress in cooperative relations within the region can be a model for international cooperation on a global scale; in this sense diversity is precisely what makes the Pacific Basin Cooperation Concept attractive.

From this follows the second characteristic of our Concept. Not only does it have to endorse a globalist stance externally; it must aim as well for the formation internally of thoroughly free and open relations of interdependence. Be it in cultural or economic exchange, the Pacific countries should adopt fundamentally open policies.

We always adhere to respect for the cultural diversity that distinguishes the Pacific region. As technological and economic interdependence becomes deeper, cultural diversity might bring into relief the difference of values between peoples, thus giving rise to various areas of friction. But we hope that this friction would rather provide an occasion for the peoples of the region to come to grips with their cultural differences and thereby to deepen their mutual understanding. In view of the tendency for a mechanized civilization to develop in a direction of uniformity, cultural diversity may be perceived as a constructive asset that will enrich the future of mankind. The various cultures of the Pacific region represent not merely a heritage to be preserved but a valuable medium for creating new technologies and systems.

To be sure, the danger is inherent that rapid and unsettling social changes will undermine the creativity of cultures and societies and generate exclusionist and narrow-minded nationalism. But it cannot be denied that all cooperative relations must rest on increased international exchange and interdependence. The most basic principle of the Pacific Basin Cooperation Concept is thus free and open relations that understand and respect cultural and linguistic autonomy and diverse social institutions and customs.

Free and open interdependence in the economic sphere implies promotion of trade and capital transfer. Since countries at different stages of development exist side by side around the Pacific region, adjustment of conflicting interests between advanced and developing countries in particular is a very important task.

In carrying out this task, it is especially incumbent on the advanced countries to take the lead in opening their own markets and promoting the adjustment of their own industrial structures, while paying full respect to developing countries' positions and interests, making effective use of market-economy mechanisms, and also keeping in mind the maintenance and reinforcement of the free international economic system. This process will be a painful one, but fortunately the advanced countries of the region are endowed with vigor and dynamism, which can help the process proceed comparatively smoothly. In short, the chances are great that the Pacific region can be a pivotal presence in defending free-trade principles.

To be more specific, the advanced countries of the region should make it clear that they will not increase tariff and non-tariff barriers beyond current levels, and that they instead will gradually open their domestic markets to developing countries. It will also be important for advanced and developing countries to agree on principles that facilitate international investment.

Pacific basin cooperation can achieve more than a new globalism for the coming age through the efforts of the advanced countries in opening their markets; by means of the fruits of economic and technological assistance and international investment, Pacific basin cooperation can also be expected to help usher in new relations between advanced and developing countries. That the conflict-ridden North-South problem is nearing a turning point today is a realization that is now spreading widely.

Nonetheless, productive progress in North-South problem cannot be left to the efforts of advanced countries alone. The initiative for development must be taken by developing countries themselves; self-help efforts must be at the core of their development strategies. Even though planned-economy elements are necessary in the process of modernization and industrialization, maximum utilization of market mechanisms and private-sector dynamism ought not be neglected. One of the major obstacles to the development of many developing countries in the past seems to have been the undervaluation of this self-evident truth.

Be that as it may, the Pacific region already contains several countries that are called newly industrializing countries. Furthermore, quite a few other countries, such as the member states of the Association of Southeast Asian Nations (ASEAN), are enjoying political stability and smooth economic growth. It is also noteworthy that the developing countries of the region are maintaining a moderate and realistic stance in the North-South dialogue. The chance is great that the region as a whole will be a model for developing a new pattern in North-South relations.

As noted earlier, various attemps{sic} are already being made to enhance intraregional cooperation and create a regional community in the Pacific region. Thus, the third characteristic of our Pacific Basin Cooperation Concept is that it does not conflict with existing bilateral and multilateral cooperative relations among the countries of the region. It is to be built on the fruits of these cooperative relations and to stand in a mutually complementary relationship with them.

In addition to various bilateral cooperative relations in the Pacific region, a number of organizations also exit. Some are wide-ranging regional cooperative organizations covering political, economic, social, and cultural matters, such as ASEAN; others have specialized functions in the region, such as the South Pacific Bureau for Economic Cooperation (SPBEC), the Asian Development Bank (ADB), and the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP). These cooperative relations all have significant raison d'etre of their own in a region featuring such diversity as the Pacific region does, and as long as the dynamism of the region is sustained, there is no doubt that the multidimensional network of such bilateral and multilateral cooperation will further develop in the future. The Pacific Basin Cooperation Concept, while premised on this existing network of cooperation, seeks to transcend it to better solve the various issues facing all the countries of the Pacific region.

II TASKS FOR PACIFIC BASIN COOPERATION

The first step in promoting Pacific basin cooperation is the mutual appreciation by the peoples concerned of the diversity in the region.

Efforts at mutual understanding must be made by people in all walks of life. In establishments run as joint ventures, for example, differences in thinking and in ways of working are bound to arise when workers from advanced countries work side by side with those from developing countries. Mutual understanding is enhanced when such differences are recognized and overcome; this is cultural exchange in a broad sense. It is of course also important to promote area studies in universities and research institutes, academic exchange, and exchange of leaders in various fields. Student exchange and tourism can also play a great part in the promotion of mutual understanding.

Human resources play a critical role in the development of developing countries. In general, human resources must be fostered in the context of native traditions and social practices, but the role that advanced countries are capable of playing is by no means small.

It is to be hoped that the countries in the Pacific region will further strengthen their cooperation in economic and trade areas. For the cooperation and expansion in trade and investment and for positive adjustment of the industrial structure in the region, it is required to further increase interdependence and establish a higher degree of international division of labor. Opening of advanced countries' markets to all kinds of goods is a necessary first step. Industrial adjustment among countries must be made while keeping the international division of labor foremost in mind.

Steady economic development in the Pacific region will depend in large measure on establishing effective cooperation among the countries concerned for resource development. Numerous areas exist in which cooperation will be beneficial, such as joint development of marine and mineral resources and joint projects in increasing food output. Easy availability of funds in the region will naturally be required to expand trade and carry out joint projects.

Expansion of transport and communications networks and improvement of related systems are also necessary to prepare a foundation facilitating exchange of personnel, materials, ways of thinking, and information throughout the Pacific region. It is our earnest wish that the Pacific countries will renew their policy-making efforts so as to draw fully on the fruits of recent remarkable technological innovations in transport and communciations{sic}.

What measures should the Pacific countries take independently and collectively, and what means should they employ, in order that they may realize the brimming potential of Pacific basin cooperation? This question must be answered through the process of joint discussions among all the concerned peoples of the region. The following indicates our thinking at the present stage on what should be our attitudes in such discussions. The proposals we offer here are not exhaustive of all possibilities. Our hope is that in the process of international discussions, the proposals will gain additional richness of content and practical feasibility.

PROMOTING INTERNATIONAL EXCHANGE AND MUTUAL UNDERSTANDING

All international cooperation begins from the fostering of responsiveness among nations toward their respective problems. The development of such responsiveness depends in turn on the accumulation of numerous international exchanges.

Endowed with different histories and traditions and having a variety of economic development levels, political systems and social customs, the peoples of the Pacific region are especially in need of efforts to promote mutual understanding at all levels if they are to carry out regional cooperation.

International exchange for this purpose is discussed here in accordance with the following three categories: broad cultural exchange among peoples, educational exchange primarily involving students, and academic exchange involving universities and research institutions. Although tourism is slightly different from these exchanges, it is included in our discussion here due to the large contribution in can make as one form of international exchange. Among the items that fall in the category of academic exchange, area studies are treated under a separate heading because of their special importance.

Cultural Exchange

When interdependence reaches the level attained today, a great variety of people come into contact with each other across international borders on an extensive scale and more or less permanent basis. One cannot conclude that deeper mutual understanding will necessarily result from such contact. To the contrary, the meeting of different cultures may even generate friction in various forms. Nonetheless, friction may serve as a stimulus inducing a desire to better know the cultures of others and to reflect anew on one's own culture. From the long-term perspective, culture exchange works in this way to bring about deeper mutual understanding.

Countless efforts have been made in the past in the field of cultural exchange, including bilateral cultural agreements, multilateral exchange carried out under the auspices of ASEAN. It is to be hoped that the countries concerned will take measures designed to further strengthen cultural exchange in all these forms. International cooperation in this sphere has many areas still to be explored, and creative contributions by all the peoples involved are needed. Our proposals here may appear extremely modest in view of this rich potential of cultural exchange. In passing, it is to be remembered that cultural exchange by nature depends on the spontaneous participation of peoples of all social strata; government policies can play at most a supplementary role.

Looking into Japan's current cultural exchange and cooperation in the Pacific region, we can fully appreciate that Japan has begun in recent years to lay appropriate emphasis on cultural factors in its international cooperation. Still, the following improvements can be recommended.

Improving the work of the Japan Foundation, the Japan Society for Promotion of Science, and other institutions

Several private Japanese organizations are actively engaged in cultural exchange, such as the International House of Japan and the Japan Center for International Exchange, but it is necessary to expand the government-level activities of such organizations as the Japan Foundation and the Japan Society for Promotion of Science. For instance, there has been an excessive emphasis on Japanese studies and introduction of Japanese culture abroad. This should be corrected by expanding cultural exchange and cooperation from a much broader perspective. Improved training and better treatment for the specialists engaged in such exchange also deserve special consideration.

Establishing a "Pacific Basin Cultural Fund"

The government of Japan has in recent years made special efforts to assist exchange projects between third countries or on a multilateral basis, such as by establishing the ASEAN Cultural Fund and the Japan Scholarship for ASEAN Youth, and making contributions to the South East Asian Ministers of Education Organization (SEAMEO), the Asian Institute of Technology, and the Universtiy{sic} of South Pacific. As a further step in the future, we propose the establishment of a "Pacific Basin Cultural Fund" which will function as an umbrella organization to promote multilateral exchanges among the Pacific countries. To help set up the fund, Japan should extend an appropriate contribution.

The fund would be useful to countries that may lack adequate organizations, talents and funds for their cultural exchange work. By preventing regional exchange from becoming in fact an exchange benefiting particular countries, and by giving all countries maximum opportunities to participate in exchange, the fund will help generate a sense of solidarity among all the peoples of the Pacific region.

Strengthening ties with international organizations like UNESCO and foreign institutions

In order to efficiently promote cultural exchange in the Pacific region, Japan must step up its efforts to coordinate its work with existing international organizations so as to avoid duplication of activities. In particular, UNESCO, SEAMEO, the Association for Science Cooperation in Asia (ASCA), ASEAN's standing committees concerning science and technology, social and cultural activities and tourism, and the South Pacific Commission (SPC) are all doing useful work. It will be desirable to work in closer cooperation with these organizations. Japan must also pay close attention to the coordination of its own cultural exchange work with that of the Japan-U.S. Educational Exchange Program (Fulbright Program), the Japan-United States Friendship Commission, the Australia-Japan Foundation, and other bilateral cultural cooperation programs.

Practical programs for implementation through these organizations must ultimately be decided on by consultation among the countries involved, but the following projects are suggested for consideration.

(1) Joint production and exchange of films and television programs, such as documentaries, that will facilitate mutual understanding; exchange of folk tales, and folk art.

(2) Staging of festivals, sports competitions, and expositions with participation by many countries in the Pacific region. For example, a "Pacific Basin Expo" will enhance mutual understanding by exhibitions of cultural assets, art works, and life styles of the nations in the region.

(3) Creation of a multilateral network of sister cities for the Pacific basin region. Many sister cities are linked on a bilateral basis at present. If these existing links can be developed into a multilateral network, it will provide a useful channel for various cultural exchanges. This network will serve not only to connect capital cities in the region but also to promote community-level international exchange.

(4) Promotion of student exchange at middle and high school levels. Paralleling the expansion of sister-city relations, the initiatives of local communities are also desirable in expanding programs for youth exchange. Suitable programs include foreign study for middle and high school students, the arrangement of "working-holidays," and home-stay programs. Greater international exchange of young people, with their heightened responsiveness, will be effective in enhancing mutual understanding among the countries of the Pacific region.

(5) Establishment of a "University of the Seas" for working youths and students. This school would address itself to specific themes and hold classes on board and at ports of call for extended periods. With the students living together, studying together, and joining in excursions, the "University of the Seas" would make possible more lasting and deeper mutual understanding than is possible through ordinary tourism. Especially desirable would he for all the nations in the region to run this project cooperatively.

(6) International cooperation in preserving traditional cultures and establishing cultural facilities. Restoration and preservation of its cultural heritage contribute to the affirmation of a nation's identity. Ethnologic museums, for instance, are not only of aid in academic research but also a means of raising a nation's awareness of its own cultural traditions, and of stimulating increased cultural activities. It should also be possible to enlist financial and technical cooperation from public and private sectors in building and managing such cultural facilities as libraries, theaters, and sports arenas.

Educational Exchange

Educational exchange has a limited short-term impact as a means of promoting mutual understanding among the peoples of the countries concerned, but it yields a lasting and reliable effect in the long run. To an extent it overlaps with human resource development and technological cooperation, which will be dealt with in the section "Cooperating in Human Resource and Technology Development." Here we would like to emphasize the importance of educational exchange in a broad sense as a means to elicit common intellectual awareness beyond the national framework, especially among youths. The focus of our discussion is on how Japan has dealt with international exchange in the field of education, defined broadly to include grade schools, colleges and graduate schools, and how Japan can improve its performance.

Promotion of exchange-student systems

Of the 6,000 foreign students enrolled in Japanese schools, some 1,200 are "Japanese government scholarship students" and their number has been steadily increasing. There are two ways government scholarship students are recruited, either through the Japanese embassies abroad or through Japanese universities. When the university level exchange becomes consolidated on a more permanent basis in the future, it will be desirable that universities play a larger role in choosing scholarship students.

In terms of scholarship money, Japanese government scholarships are not inferior to their counterparts in other countries. Several private scholarship funds add to the government's programs. Prominent among them are the Rotary Club scholarships, which reach a large number of students, and the Tokyu Foundation for Inbound Students, which focuses on students from the Asia-Pacific area. Private scholarship programs need to be improved as to both quantity and quality.

With regard to institutional arrangements for foreign students other than financial assistance, the Association of International Education-Japan, the International Student Institute, and the Kansai International Student Institute have been established as caretaking organizations. But much improvement both in facilities (foreign student accomodations{sic}) and services (especially information services for prospective foreign students) need to be made. Equally important is the improvement of accommodations at each host university. Particularly urgent needs are provision of Japanese language instruction and foreign student advisers. As for campus dormitories, studies on exchange-student systems overseas show that it is desirable to avoid the establishment of dorms reserved exclusively for foreigners, instead integrating them with Japanese students. Provision of adequate dormitory facilities is urgent in particular because Japanese housing conditions are not well prepared for lodging students with families.

Recruitment methods, degree-granting procedures, discrepancy in the academic calendar, and instruction in foreign languages are other matters requiring improved systems and procedures to make it easier to accept foreign students in Japan. The relative weight to be attached to proficiency in non-Japanese languages in entrance examinations, especially those to graduate schools, for example, needs further thought. On the granting of degrees (especially doctorates), the practice in Japanese universities, unlike those in Britain, the United States and West Germany, is that they seldom grant degrees except in such fields as medicine and natual{sic} science. This has been a major obstacle for foreign students to study in Japan. The current systems make it possible to grant degrees on receipt of a qualified dissertation instead of only on completion of a prescribed course of study, and the dissertation need not necessarily be written in Japanese. We hope these arrangements will be put more into practice.

There is an idea that the academic calendar in all countries should be synchronized, such as by beginning the school year in the fall and ending it in spring, to make transfer of students easier. This would be extremely difficult because of its involvement with wide-ranging social customs beyond school systems. Still, it is possible for Japanese schools to permit foreign students to begin studies from the second semester in the fall, a practice that some universities have already adopted.

Exchange of students ought to be reciprocal. But both public and private Japanese financial assistance to Japanese nationals going abroad is overwhelmingly directed at those going to advanced countries. Judged in the light of the need to give Japanese youths an opportunity to live abroad so as to increase their concern for and understanding of diverse foreign cultures, the current distribution of destinations is seriously skewed. Privately financed studies aside, public scholarship disbursement should take this uneven distribution into account. Naturally this problem is not caused solely by uneven scholarship distribution; it arises also from the existing flows of personnel between universities, which are very scarce except between certain advanced countries. Such flow also need to be rectified. In connection with our discussion the section "Promoting Area Studies," we recommend that scholarship funds for Japanese graduate students and young researchers desiring to study issues related to the Pacific region should be greatly expanded.

Internationalization of educational and research institutions

Ranking alongside the important issue of student exchange is that of accepting foreign teachers and research personnel; Japanese educational and research institutions should recruit their staff members from abroad freely and in larger numbers. In this regard the present practices in Japan are undeniably behind the times.

National and public universities and research institutions in Japan have difficulty in rectifying the situation because of a rigid interpretation of the public service laws, and the need to make new legislation has been widely debated. We believe that foreign teachers and researchers should be entitled to the same status and treatment as Japanese staff members. At the same time, the current practices in Japan's national and public universities with respect to teaching and research by foreign personnel should be improved, such as by opening the door to foreign staff in fields other than foreign language instruction.

While private universities are not under legal restrictions, they should be encouraged to be more open to foreign teachers and students by an appropriate application of government subsidies and other policy means.

It is also necessary to make arrangements that will increase the chances for Japanese scholars to work in foreign universities and research institutions. The current Government Program of Sending Research Fellows Abroad should be used more effectively for this purpose. Another formula for university exchange is the so-called core-university system, which has been implemented between some Japanese universities and those of Southeast Asian countries with the assistance of the Japan Society for Promotion of Science. By making the most of this system, university exchange can be promoted comprehensively and continuously, involving not only personnel exchange but also cooperation in equipment and facilities.

Another proposal that deserves to be tried in Japan is the establishment of institutions of education and research with at least half the faculty recruited from foreign countries. We urge the establishment of a new national graduate school with an international faculty to test this proposal. The United Nations University located in Japan should be called on to participate actively in this type of endeavor. These measures will be very helpful in internationalizing and improving Japanese education and research, and they would also contribute to enhancing international exchange of personnel and mutual understanding.

Last, no less important than international exchange in university education is the employment of foreign instructors at the middle and high school levels. At present some Japanese schools employ British nationals as English instructors and American nationals as assistants to English teaching-consultants. Such internationalization of schools ought to be expanded, especially in local communities.

In passing, it should be noted that there is a need to expand the joint programs for educational materials development and information exchange which are being carried out by advanced Pacific countries to enhance intraregional understanding.

Academic Exchange

International academic exchange is closely related to the aforementioned educational exchange in terms of content as well as the personnel and institutions involved. Accordingly, we limit our discussion here to subjects suitable for joint research and some supplementary arrrangements{sic} desirable to promote such joint research.

Promotion of joint research

A common concern of scholars in the Pacific region is to analyze various problems in the humanities, social sciences, and natural sciences that pertain to the region. Such studies should not be conducted separately by the scholars of each country in the manner of blind men examining an elephant. If research undertakings come under comprehensive and organic international direction, they will yield effective returns which can be put to use as a common asset of the Pacific region.

In the humanities and social sciences, cultural anthropological studies of ethnic culture, native customs, and cultural transmission will be particularly desirable to enhance mutual understanding. Other significant fields for joint research include area studies, international relations, economic interdependence, transportation, communication, urbanization, international communication, and cultural receptivity of local communities. In the natural sciences, such joint research projects should he further promoted as the studies on meteorology and earthquake observation and prediction that are being conducted under the auspices of the International Council of Scientific Unions (ICSU), the World Meteorological Organization (WMO), and UNESCO. We wish to lay special emphasis on vigorous implementation of a "Joint Pacific Ocean Scientific Survey," including participation in the activities proposed by UNESCO's Inter-Governmental Oceanographic Commission, in order to effectively utilize the natural resources of the Pacific Ocean for the welfare of the peoples of the region. The details of this project are discussed in the section "Marine Development."

Mutual utilization of academic information

For promoting academic exchange and conducting joint international research, efficient utilization of the academic knowledge in the possession of each nation is very important. It would be desirable to establish a comprehensive data and document center capable of monitoring the scholarly knowledge accumulated in universities and research institutions. If these centers are established in every country of the Pacific region, reciprocal use would be facilitated. For this purpose, unification and standardization of the library cataloguing methods of each nation according to an international standard, such as Machine Readable Catalogging{sic} (MARC), a system used by the U.S. Library of Congress, will be worth-while.

In order to disseminate the results of academic research in the Pacific region throughout the world, the publication of authoritative scholarly journals should be considered. Academic conferences can also play an important part in promoting academic exchange in the Pacific region. By such means an international intellectual community in the Pacific region may be fostered. We hope that Japan will take the lead in financing and managing such endeavors to enhance academic exchange.

Tourism

The significance of tourism must be stressed as a popular means of promoting international exchange and mutual understanding among the Pacific nations. If expanded tourism can bring about an increase in wide-ranging personal contacts, an important contribution to international exchange will be realized. The package tours now under way on a commercial basis cannot be said to adequately serve that end. We believe that new ways must be found to make tourism more helpful in increasing mutual understanding. One intriguing system now being studied by Japan and Australia is that of "working holidays" for youths. Hopefully this system can be expanded to include the United States, Canada, and other Pacific countries.

It must be remembered that appropriate development of tourism resources is an attractive industrialization policy for developing countries. Development of tourism resources requires improvement of infrastructure, such as airports and roads, and promotion of native industries, which will absorb surplus labor and increase income in the developing countries. As always, however, it will be prudent to avoid hasty and shortsighted tourism development that leads to the destruction of the natural and social environment. Especially when tourism is being developed by large capital investments from advanced nations, utmost care must be taken to avoid such a negative consequence.

In the total flow of international tourism in today's world, the Pacific region occupies a very small share. The many causes for this state of affairs include some that are economic, but inadequate development of tourism resources and advertising are also involved. In view of the natural beauty, cultural assets, and other tourism resources with which the Pacific region is richly endowed, the region clearly has great potential for international exchange based on tourism.

The Pacific Area Travel Association (PATA), a joint public-private organ of the Pacific countries, has been in existence for promoting tourism in the region. Its primary function has been to draw traffic from Europe and the United States into the Pacific region, but since last year it has also begun to emphasize intraregional tour promotion and to build up its research and development functions. It is to be desired that this organ play a central role in improving arrangements for tourism cooperation in the Pacific region.

PROMOTING AREA STUDIES

Mutual understanding among nations must be predicated on manifold modes of human contact at varied levels. At the same time, area studies focusing on specific relations must be promoted as an academic undertaking. Among the socially and culturally diverse nations in the Pacific region, an extremely important role in deepening mutual understanding can be played by such area studies. Together with the development of area studies, studies on international relations and comparative studies are also necessary, focusing on issues of the Pacifc{sic} region.

Facilitation of Area Studies in Japan

The sphere of area studies is relatively new in academic history. Although a large body of studies has already accumulated in Pacific countries including Japan, while joint international studies have also been conducted to some extent, generally speaking, much is still to be done.

At Japanese universities and research institutions, the importance of area studies has been increasingly recognized in recent years. The number of universities with courses and lectures in area studies has been on the rise, and a number of graduate courses and research bodies are devoted to area studies. It will be possible for the present to further expand existing educational and research programs, but numerous problems that need a more fundamental approach also exist. For instance, as regards Japanese studies of the United States, the country with which Japan has been in the closest relations after World War II, steady progress has been recorded in recent years and appreciable improvement has been seen in related educational programs. Nonetheless, the number of experts in this area is still limited, and data and document centers leave much to be desired in both quality and quantity. Moreover, China studies in Japan following the area-studies approach are still far from adequate.

Japan's studies on the Pacific countries are still markedly retarded. For example, research institutions and courses devoted to the Republic of Korea and the countries of Oceania are almost nonexistent. In order to improve area studies in Japan under these circumstances, the nation's universitites{sic} and research institutions must internationalize so that they may more adequately cope with the current international environment and the needs of society. They must also redouble their efforts for the establishment of a coordinated system for promoting area studies. In this endeavor, it is desirable in view of the diversity of the Pacific region that universities divide the subjects of study among themselves to enhance the efficiency of study on a priority basis, with certain universities focusing their studies on certain areas. In view of the need for both specialization and integration of studies, one useful method will be for universities and research institutions placing emphasis on the same sphere of study to set up associated graduate schools with doctorate courses, thereby facilitating research and fostering research personnel.

We propose as a bold move worthy of consideration the establishment of a research institution based on an entirely new concept. It is difficult to fit area studies into the existing research setup because of their interdisciplinary nature and the need for learning the languages of the area covered and conducting fieldwork. As a pilot plan to remedy this situation, the proposed institution might be a graduate school for area studies with prime emphasis on the Pacific region. As already discussed in the section "Educational Exchange," this school should open its doors to professors and students from all over the world as a truly international organization.

Regional Cooperation in Area Studies

It goes without saying that the development of area studies for the Pacific countries can be facilitated through intraregional cooperation. The United States and other countries in the region have built up reservoirs of knowledge through past area studies, and now it is essential to consider an institutional framework enabling such knowledge to be mutually exchanged so as to stimulate further knowledge. In particular, developing countries are called upon to promote area studies of their own.

At present, Japan has such bilateral arrangements as the Japan-U.S. Educational Commission, which promotes scientific and educational exchanges between the two nations, and a cultural agreement with Australia covering academic exchange. Such cooperative systems should be expanded to include many more nations. Furthermore, it is essential to consider what contributions and cooperation Japan can extend to existing bodies for area studies in the Pacific region. It will also be useful to establish regional language study centers designed to fit the conditions of each respective area. If possible, mutual cooperation is desirable among these center on management and teaching methods.

The topic of area studies for the promotion of mutual understanding includes more than studies of foreign countries. Also to be considered are efforts to deepen foreigners' understanding of Japan's society and culture, and cooperation and assistance for foreigners specializing in Japanese studies. Such organizations as the Japan Foundation a and the Japan Society for Promotion of Science have been successfully exerting sustained efforts for the promotion of Japanese studies abroad, but it is necessary to further improve Japanese studies programs for overseas researchers.

COOPERATING IN HUMAN RESOURCE AND TECHNOLOGY DEVELOPMENT

The development of developing nations should be based fundamentally on their own self-help efforts. The core of this development initiative must be a group of leaders and specialists capable of mapping out an effective development strategy based on a correct analysis of development objectives and needs. This group must also be able to rally their nation's energies for the attainment of the development targets. In most developing nations, however, such capable personnel tend to be in short supply.

The fostering of such personnel should be undertaken within each country's cultural and social institutions, but advanced nations including Japan can also lend a helping hand. Cooperation in the development of human resources and technology should constitute a principal pillar of economic cooperation with developing nations in the years ahead. Many developing countries in the Pacific region in particular have recently entered the stage of takeoff. These countries will henceforth have greater need than ever for able personnel, such as technicians, intermediate managers, skilled workers, entrepreneurs, and researchers, who can lead the nation in economic, administrative, scientific, and other fields. It should also be noted that cooperation in human resource development will deepen mutual understanding and strengthen friendship between advanced and developing countries.

Cooperation in human resource and technology development is extended not only as Official Development Assistance (ODA) but also at the private level in such forms as technical training of local employees in joint ventures overseas. Moreover, when people of developing countries work side by side with those of advanced countries, informal transfer of technology also occurs through workplace experiences.

Here, however, our discussion is primarily devoted first to issues involved in government-level cooperation in human resource and technology development, and then to desirable patterns of Japanese cooperation as an example of one advanced country's potential contribution.

Problems in Human Resource and Technology Development

It is essential for human resource development that the situation in the recipient nation be correctly recognized, because cooperation in this field is intimately involved with various sectors of the nation's economy and society, including employment opportunities for trained personnel. In addition, such cooperation takes a long time to bear fruit. Sustained and stable relations of mutual trust between advanced and developing nations are a prerequisite for this cooperation. We believe that relations of mutual trust in the Pacific region are now being steadily promoted, strengthening the foundation for expansion of cooperation in human resource development.

To step up cooperation in this field, it is also indispensable to coordinate efforts among advanced countries and to promote collaboration on a regional scale. Given the growing recognition of the need for such cooperation, Japan should appeal to the United States, other advanced countries, and international organizations to promote mutual exchange of experience and information and to intensify cooperation in those fields which are their fortes. The governments of Japan and the United States set up one such forum for exchange of information last year. Even in cases where Japan undertakes aid projects on its own, the aid efficiency can be enhanced by making active use of experts from the recipient nation and other countries without regard to nationality.

Needless to say, it is imperative to develop or transfer technologies befiting{sic} the conditions in the recipient nations when extending cooperation in human resource and technology development. Since advanced countries differ from developing countries in the stage of economic development, natural and social conditions and availability of natural resources, simple transfer of the techniques available in advanced countries to developing countries often will serve no useful purpose. For this reason it will be beneficial for developing countries to mutually cooperate by exchanging technologies in which they respectively excel. One proposal that merits consideration is a multilateral cooperative program to promote such exchange in the Pacific region, to be set up with the financial collaboration of advanced nations.

Improvement of Japan's Cooperation Setup

Within the category of cooperation in human resource development, we have already discussed exchange in education, academic, and research fields. Here we deal mainly with Japan's technical cooperation in the economic and social development of developing nations. Japan's cooperation in this field has been extended primarily through the Japan International Cooperation Agency (JICA) in such forms as the acceptance of foreign trainees, the dispatch of Japanese experts, and the provision of equipment and materials related to these two forms of cooperation. Nevertheless, Japan's technical cooperation in its past has been limited in scale and has a number of problems.

First, technical cooperation has been provided on the basis of individual requests from developing nations and has tended toward an uncoordinated, something-for-everybody pattern. Extension of technical cooperation in line with recipients' requests is not at fault, but such cooperation will not make a full contribution to development unless it is based on an adequate understanding of development needs and coordinated with supplemental projects. Japan should more actively integrate technical cooperation into all its large-scale economic cooperation projects, for overall aid efficiency is greatly enhanced when financial cooperation is organically linked with technical cooperation.

Second, insufficient attention has been paid to the fostering and employment of personnel qualified for technical cooperation. Japan's government-level technical cooperation has been reliant on the supply of personnel from existing domestic organizations in both cases of dispatch of experts and acceptance of foreign trainees. To these domestic organizations, such cooperation has been only a side business. From now on Japan must secure accurate information on the type of personnel and technologies that are deficient in developing nations, striving to foster experts who can be fully conducive to their nation-building efforts.

Third, it is true that experts engaged in technical cooperation must make their best efforts in completing individual development projects, but in the process, they must also transfer their skills to local people as far as possible. Technical cooperation in such forms as feasibility study and project implementation can help further develop human resources as well if such technological transfer is also under way.

Fourth, both government and private organizations accepting foreign trainees must be further expanded in order to strengthen cooperation in human resource development. To this end, the acceptance systems should be better consolidated by alleviating the personnel, material, and financial burden on organizations willing to train foreigners. An urgent need in this regard is improvement of Japanese language instruction for foreign trainees who reside in Japan for an extended length of time.

Fifth, experts devoted to cooperation in human resource and technology development deserve better treatment in terms of economic guarantees. Inadequate efforts have been made in the past to foster technical cooperation experts. So, specialists who have excellent records in related domestic fields should be encouraged to take up jobs involving technical cooperation abroad. For this purpose, constructive efforts are needed to improve status guarantees and treatment for the specialists themselves and to provide their children with adequate educational facilities while they are abroad and after their return to Japan. In addition, a higher social status should be given to technical cooperation experts in Japanese society.

In order to help solve these problems, we propose the establishment of a "Technical Cooperation Center." Since technical cooperation experts often have a difficult time finding jobs upon return to Japan, a system is needed for making full use of their time in Japan as well. A desirable means to this end is to organize these specialists into a pool so that they can capitalize on their experiences by giving guidance to trainees from developing nations, engaging in research and development of science and technology, and fostering young technical cooperation experts. The proposed "Technical Cooperation Center" would thus serve as an integrated facility for fostering talent, implementing training programs, and conducting research.

Selected Fields for Cooperation

There is a wide range of fields in which cooperation should be extended in human resource and technology development. How to conduct this cooperation in each respective field is dealt with at various places in this Report; here we limit our discussion to the problems involved in some selected fields.

Cooperation in employment and vocational training

It is necessary to promote labor-intensive industries and expand agricultural employment in the Pacific developing countries in order to cope with the expected rapid growth of the labor force and create new employment opportunities in the region. Multilateral cooperation through such means as exchange of information and experience and joint research will be of great importance for this purpose. Japan should make active contributions in terms of knowledge, experience, personnel, and funds to multilateral cooperation like the Asian Regional Team for Employment Promotion (ARTEP) and the Asian Regional Project in Labor/Manpower Administration (ARPLA).

For cooperation in human resource development through vocational training, it is especially important to foster skilled workers and instructors for training them. In the past, this type of cooperation has been conducted chiefly on a bilateral basis, but in view of the geographical, social, and economic diversity of the Pacific region, a formula of mutually cooperating among developing nations needs strengthening, as instanced by the Asian Regional Skill Development Program (ARSDEP). Furthermore, to step up Japan's cooperation in vocational training, the proposed "Technical Cooperation Center" could undertake the training of vocational education specialists and accept vocational trainees.

Another field where Japan's active contribution is needed is safety and sanitation, an important field with the progress of industrialization in developing countries.

Cooperation in public health and medical care

As the Organization for Economic Cooperation and Development (OECD) has pointed out, the issue of public health and medical care constitutes a top-ranking topic of common concern to all nations in the world, be they developed or developing. At a time when developed nations are plagued by snowballing national medical expenses and developing nations are striving to secure adequate medical resources such as personnel, equipment, and facilities, Japan has successfully lowered infant mortality and extended life expectancy to the highest level in the world, using limited medical resources and at a relatively low per capita medical expense. Japan's success is attributable in large part to the systematic utilization of medical resources and the expansion of a health care system for mothers and children. Such experience and achievements, we believe, can be of great benefit to developing nations as well.

Japan's public health and medical care cooperation formerly centered on research into tropical diseases, but recently it has branched out to include area-wide public health concerns, such as clinical medicine, family planning, drug management, and even the supply of drinking water. Greater importance must be attached to such regional health and medical care services henceforth, making health and medical cooperation an integral part of comprehensive regional development planning.

Of importance in this endeavor is to cooperate in training doctors, nurses, and health education specialists. Medical service is a field marked by different ways of thinking depending on the people, different medical problems depending on the living environment, and different legislation depending on the country. Nonetheless, a considerable measure of universality has already been achieved in the science of medicine and nursing, which provides a common foundation for problem-solving approaches, medical education, and public health education. Therefore, if Japan actively introduces advanced technologies in these areas and extends cooperation in public health and medical care education, a major contribution can be made in elevating the health standards of the countries concerned.

Cooperation in improvement of product quality and design

One need that will confront the developing nations in the years ahead is to promote the development of sound domestic industries that can contribute to a higher productivity of their economies and a higher quality of their national life. It will be necessary to unify product standards, consolidate inspection systems, and strengthen design-developing capacities in such fields as small-and medium-sized machinery including farm machines, daily life commodities, and durable consumer goods. Since Japan has a wealth of experience and achievements in these fields, it should cooperate in the industrial development of developing nations from this perspective as well. While extending practical assistance for the improvement of systems and for the training of personnel in developing nations, it might be also worth considering the possibility of undertaking special activities, such as holding a "Pacific Basin Design Competition."

PROMOTING TRADE EXPANSION AND ADJUSTMENT OF INDUSTRIAL STRUCTURE

One of the basic objectives of our Pacific Basin Cooperation Concept, as stated in section I "The Pacific Basin Cooperation Concept," is to check the deterioration of free-market mechanisms and the advance of protectionism, which seem to be in progress worldwide, thereby maintaining and expanding the free and dynamic world economy with the Pacific basin countries as standard-bearers.

To this end; transformation of industrial structure in necessary and appropriate directions and at a speed suited to each economy and society is essential so as to promote an efficient division of labor among nations. The issue of industrial adjustment is often discussed without due emphasis on the functions of the free-market system; we believe it essential for the Pacific nations to guide industrial adjustment by making the most of the advantages of the market economy within the framework of the free and open regional system. If the economies of the Pacific region adhere to free-market mechanisms as a common principle, the welfare of the region as a whole will be enhanced and a contribution will be made to the smooth development of the world economy.

To promote trade and industrial cooperation in the Pacific region, certain fundamental guiding principles must first be laid down. Such principles and the concept of international cooperation they lead to must take into full account the diverse stages of development of the countries in the Pacific region. It is also to be hoped that the concept of international cooperation will be so shaped as to reach beyond the confines of academic debate and to contribute to actual trade and industrial activities.

Based on the foregoing, we suggest the following contents for an international cooperation concept to develop industry and trade in the Pacific region. First, the Pacific countries should cooperatively draw up a "Pacific Basin Declaration on Trade and International Investment" to define the region's guiding principles. Next, a consultative forum should be created to deliberate actual application of the principles contained in the Declaration. An information center should also be set up within the forum's secretariat or as its auxiliary organ to facilitate interchange of economic, industrial, and trade information around the region.

Needless to say, this cooperation concept should be formulated to enhance a global perspective. Accordingly, the Pacific basin countries should also draft a new vision and strategy for multilateral industrial and trade cooperation to promote free trade throughout the world. This, we believe, is the natural mission of the Pacific basin as one of the world's most dynamic regions and as an area containing many countries dedicated to free trade.

Drawing up a "Pacific Basin Declaration on Trade and International Investment"

The Pacific Declaration should have the dual objectives of opening advanced countries' markets and creating a proper environment for international investment in both advanced and developing countries. Among the conditions for industrial adjustment in the Pacific region in a form that does not run counter to the principle of free trade, advanced countries must open their markets wider to the products of newly industrializing and developing countries without taking recourse to protectionist policies, and they must make positive efforts to upgrade and adjust their industrial structures. As an existing arrangement for preparing an environment conducive to international investment, mention should be made of the "PBEC Charter on International Investments." Building on such achievements, we must now work together with the region's developing nations toward the conclusion of bilateral and multilateral investment protection agreements.

The drafting of the Declaration, insofar as initiated by the governments concerned, will probably require a long time and a great deal of effort. Nonetheless, apart from the utility of the Declaration itself, the multilateral dialogue in the process of its drafting will have immense significance. In adopting this Declaration, advanced countries should be expected to make pledges on trade liberalization and reduction of tariff and non-tariff barriers. From the standpoint of the developing countries, the relationship between the Declaration and existing guiding principles, such as the Lima Declaration, will come into question but efforts should be made to harmoniously adjust the Declaration with such principles and to make it as practical as possible.

Establishing a "Pacific Basin Industrial Policy Consultative Forum"

With regard to industrial restructuring among advanced countries, debate on "positive adjustment policies" (PAP) is in progress in the OECD, while various frameworks for cooperation already cover specific industrial sectors. However, as the impact of industrial growth of the Pacific region's newly industrializing and developing countries gains in intensity, a forum will be needed for more effective debate and cooperation on North-South industrial adjustment. Believing that one of the major objectives of the Pacific Basin Cooperation Concept should be to explore a new form of North-South cooperation, we propose the establishment of a "Pacific Basin Industrial Policy Consultative Forum" as an important vehicle for shaping new North-South relations.

The proposed Forum would be neither an UNCTAD-type body mainly devoted to adoption of resolutions nor a GATT-type body dedicated to concluding arrangements. Its principal tasks would be to increase the transparency of mutual industrial activities and policies and foster common understanding of them through exchange of information, and also to formulate a structure of dynamic international division of labor around the region. In the light of experience at the OECD and elsewhere, the participation of employers, workers, and others will be indispensable for industrial-restructuring deliberations at the proposed Forum. The Forum's activities should initially center on information exchange, surveys, and research. Eventually, however, it should be developed into a policy-oriented body. International cooperation in wide-ranging fields of trade and industry is now making headway among advanced countries under the leadership of the OECD. With regard to the possibility of introducing a similar cooperative organization to the Pacific region, one proposal has been advanced for the establishment of an Organization for Pacific Trade and Development (OPTAD). This possibility should be studied as one agenda item in the process of managing the proposed Forum. Newly industrializing countries' attitudes toward international cooperation will hold an important key to the establishment of such an organization.

Establishing a "Pacific Basin Economic Information Center"

The Declaration and the Forum proposed above aim at working toward concrete activities and objectives, but it can be foreseen that nations that are economically strong and have a fully developed free-market economy will tend to have a controlling role in the effectiveness of cooperation. Hence we also propose the establishment of a "Pacific Basin Economic Information Center" as a body extensively and equally benefiting all the countries concerned. The Center should be a repository for all relevant information on the economies, industries, and trade in the region; it should promote the exchange of this information to contribute to the drafting of economic development plans of the countries concerned and the promotion of private business activities; and it should support research activities in these fields.

Finally, we wish to stress that Japan has a major role to play in bringing into being the cooperation concept proposed here. For this purpose, it will be important for Japan to improve its internal setup first of all. Adjustment of industrial structure in such a region as the Pacific region where a large variety of nations exist will entail great political difficulties. However, it is essential to formulate a full consensus among the Japanese people that Japan's medium-and long-term benefits will only he realized by overcoming such political difficulties and making contributions to the entire Pacific region. Since Japan is in a position to live by the principle of free trade, it must make its guiding principles for industry and trade over the medium and long term as clear and as specific as possible. Japan must also work out projections and policies of its own on the basis of the long-range prospects of the world economy as a whole.

Moreover, Japan must overcome domestic political difficulties to create a freer trade environment for such commodities as farm products, and it must also accelerate the transfer of technology abroad without fearing the so-called boomerang effect provided by newly industrializing countries. For example, imports of tropical farm products that are of interest to the nations of ASEAN and the South Pacific need to be expanded. Efforts are also needed to shape a stance satisfying all the Pacific countries in terms of increased transparency of Japan's domestic industrial policies and administrative guidance procedures.

COOPERATING IN RESOURCE EXPLOITATION

In this so-called age of finite resources, energy, food, marine, and other resources are of immense importance for the Pacific region. Signs of instability in relations between resource-supplying and resource-consuming countries on the global level have recently come to the fore, occasioned by the strengthening of international cartels like OPEC. One major responsibility of the Pacific countries in this context is to perseverantly{sic} promote cooperative relations of mutual benefit among resource suppliers and consumers of the region. An initiative designed first to realize such cooperative relations within the region and then to expand them on a global scale will not run counter to efforts for global cooperation orchestrated by the OECD and other organizations. In maintaining and developing such a cooperative system, resource suppliers and consumers should limit cartel activities and protectionist policies as much as possible, adhering to market mechanisms and the principle of free trade.

Vast quantities of resources are found in the Pacific region, and intraregional self-sufficiency is very high for all resources but petroleum. Moreover, the region has a great supply capacity of agricultural products and is a net exporter in overall terms. Since Japan is a major consumer of both energy and food, its cooperation with the Pacific suppliers of energy and food in the exploitation and joint stockpiling of resources will not only serve Japan's interests but also contribute in no small measure to the stability and growth of the economies of the Pacific region and also of the world economy as a whole.

As the Pacific basin countries tackle the problems of resources like energy and food in a cooperative manner and in joint programs, they will be forced to deal with North-South issues within the region. In this regard, such factors as long lead time, colossal fund needs, and the high degree of accompanying risks must be borne in mind in such cases as resource exploitation and large-scale agricultural projects. If advanced and developing nations in the region overcome these obstacles through mutual cooperation, and if they organize effective cooperative setups among many nations for mammoth development projects, this will greatly contribute to the development of the region as whole and will further strengthen intraregional interdependence. The promotion of such joint projects will provide the region with a framework for an effective vertical and horizontal division of labor, and be conducive to the independent development of developing nations.

From this point of view, we wish to explore the possibilities for joint projects to develop energy resources, marine resources, and agricultural, forestry, and fishery resources in this section, suggesting directions in which cooperation among the Pacific countries should proceed toward the 21st century.

Energy Development

Exploitation of existing resources

The Pacific region is blessed with tremendous quantities of oil and natural gas resources yet to be tapped. Moreover, the steep climb of oil prices has all but obviated the need to consider tanker freightage differences due to transport distance, heretofore a major factor in petroleum economics, and has also made profitable the development of even small-scale oil and gas deposits. Leeway for active exploration and exploitation of oil and natural gas resources has hence increased in the Pacific region. There has also been an increase in the number of development projects where more than one oil firm takes part, spreading the growing risk through cooperation. In these circumstances, a mounting need is present for the joint development of oil and natural gas resources.

Latin America has vast development potential, as evidenced by the discovery of large oilfields in Mexico, stepped-up oil prospecting in Brazil and Argentina, and confirmation of new natural gas reserves in Mexico, Argentina, and Bolivia. Other promising areas for oil exploitation include the continental shelf between Japan and the Republic of Korea, areas offshore Vietnam, areas in and around Indonesia, and both Australia and China; other promising natural gas sites include the East China Sea, the South China Sea, and Australia's northwestern continental shelf.

If development projects make smooth progress in these areas, the intraregional energy supply-and-demand situation should improve to a great extent. However, we must stress that cooperation with the Middle East will continue to be important. Not only will there be no change in the Middle East's pivotal role in world oil supplies for the time being, but also the possibility is strong that so-called oil money of the Middle East will be recycled into development projects in the Pacific region through the international monetary market.

To stabilize supply and demand for oil in the Pacific region, it is desirable that oil stockpiling be stepped up. In addition to each individual nation's stockpiling policies, a program for joint stockpiling bases is necessary. From this point of view, close attention should he paid to such plans as a Lombok Central Terminal Station (CTS) and a pipeline across southern Thailand, both of which are mammoth projects oriented toward the 21st century.

Development of alternative energy and advanced energy technologies

To cope with increasing constraints on oil supply, efforts are underway worldwide to develop alternative or new energy sources, such as nuclear power, liquefied and gasified coal, solar energy, marine energy, geothermal energy, wind force, and biomass. Cooperation in those fields should also be intensified among the Pacific countries from now on.

Cooperation in nuclear power research should be positively pursued, through, for example, the expansion of the Regional Cooperative Agreement for Research, Development, and Training Related to Nuclear Science and Technology. Currently limited to non-energy fields, this arrangement could be extended to cover energy for active promotion of research cooperation. In order to take advantage of the abundant solar energy in the Pacific region, many technological developments have been seen in various parts of the region for such projects as solar heat power generation, solar light power generation, and hot water supply. International cooperation in this field is also being promoted, in particular between Japan and both the United States and Australia as well as through the International Energy Agency (IEA). Research and development on coal energy is under way mainly in the United States, Australia, and Japan, while studies on the harnessing of geothermal energy are well advanced in the United States, New Zealand, the Philippines, and Japan. Further intensification of joint technological development and information exchange in these fields is desired.

One proposal to facilitate international cooperation in the development of alternative energy sources would be to set up a "Pacific Basin Resources and Energy Research Institute," an organization devoted to research in those fields of resources and energy of particular interest to the Pacific countries. The funds required to run the Institute should be shared by all participating nations, which would also supply the institute's researchers. It would also be desirable for the institute to have a function of fostering researchers from developing nations.

In the development of such advanced technologies as resource exploration using satellites and nuclear fusion, the United States and Japan are forging far ahead of other Pacific countries, and it will still be some time before international cooperation in this field can be enlarged widely throughout the region. Nonetheless, remote-sensing technology utilizing satellites can make contributions to a wide range of activities such as agricultural, forestry, and fishery resource surveys, mineral deposit surveys, oceanographic observation, environmental protection, and disaster prevention. One project worthy of study is therefore joint development of a network of ground stations in the region so that developing countries can also benefit from resource exploration by satellite.

Marine Development

The ocean has been utilized from ancient times for transportation of humans and goods and acquisition of marine products. In recent years, rapid progress in social and economic activities has increased the need for developing and using the resources, energy, and space of the ocean. Scientific and technological advances are now making it possible to tap this potential of the ocean, and the dream of fully utilizing marine development for humankind is rapidly coming true. Nonetheless, it is also true that stepped-up utilization of the ocean, such as for fishery purposes and to exploit manganese nodules and other seabed resources, has tended to generate serious conflicts of interest among nations.

In these circumstances, smooth development of the Pacific Ocean in the years ahead is dependent on adjustment of conflicts of interest among the nations concerned - especially between technologically advanced nations and coastal states. Also necessary is to establish a system of international cooperation for this great undertaking of developing the Pacific Ocean, as by promoting joint development projects.

The research and development projects to be put in motion need to be determined by discussion among the nations concerned. The following proposals are submitted for consideration.

Promotion of a "Joint Pacific Ocean Scientific Survey"

To make effective use of the almost infinite value of the seas, the first need is to gain ample knowledge of the marine environment and the fundamental phenomena of the ocean. Existing knowledge of the seas is not adequate in all respects due to their vastness and the insufficiency of the means of observation. Through various interactions such as exchange of heat and material with the atmosphere, the ocean also has important influences on the weather, climate, and other natural conditions of land areas. Moreover, a long stretch of seabed running along the rim of the Pacific has the highest frequency of earthquakes on earth. Clarification of such realities of the Pacific is a matter of common interest for the Pacific countries.

To investigate the Pacific we propose that a "Joint Pacific Ocean Scientific Survey" be conducted. For the survey, such facilities as satellites, ocean-going observation ships, bathyscaphs, and moored and drifting buoys would be jointly used to research a wide range of subjects, including oceanic circulation of the Pacific, ocean-atmosphere interaction, long-term changes in climatic and oceanic phenomena, marine and seabed resources, formation and distribution of fishery resources, and protection of the oceanic environment. This survey should be carried out in a comprehensive manner, including active participation and cooperation in the joint study on the Western Pacific (WESTPAC) to be conducted under the auspices of UNESCO.

Furthermore, it is necessary to actively promote a "Joint Study of Crustal Movements of the Pacific Ocean," a project covering studies on plate movements, preparation of magnetic charts, and research on a precise geodesic network, as instanced by the international deep-sea drilling project led by the United States.

To carry out surveys and studies efficiently and make the most of their results, it will be essential to establish a system for accumulation and systematic use of data and to train the researchers and technicians who will undertake the surveys and studies.To this end, such organizations as the Responsible National Oceanography Data Center (RNODC) under UNESCO's Inter-Governmental Oceanographic Commission should be expanded. We believe it will also be worthwhile to consider establishing an "Integrated Marine Science Research and Training Center."

Joint exploitation of giant kelp

Giant kelp, a kind of seaweed that has been growing mainly in the southeastern Pacific, is counted on as a resource usable for such varied purposes as food and, after processing, fuel. We propose that the nations concerned establish a joint experimental plant for conducting feasibility studies on possible uses of giant kelp, including its effect on the ocean ecosystem, and for carrying out research on its raising in appropriate parts of the Pacific.

Joint study and development of ocean thermal energy conversion and wave-power generation

Ocean thermal energy conversion and wave-power generation are considered highly promising ways of harnessing ocean energy. Sea areas near the equator are deemed most fitting for construction of ocean thermal energy conversion plants, and pilot plants are now being developed. Wave-power generation may be most effective for island countries in the Pacific that can make effective use of their shoreline areas. We consider it desirable that Pacific countries jointly step up studies on the construction, operation, and management of these power plants so as to ensure power supplies to Southeast Asian and South Pacific nations.

Agriculture, Forestry, and Fishery Cooperation

The ASEAN members states and other developing countries in the Pacific region are seeking to establish a solid foundation for their national economies by resolving food shortages, promoting agriculture, forestry, and fisheries, and developing rural communities. The advanced nations in the region should extend active cooperation to the endeavors in these spheres while keeping the need for harmonious development of the international economic community in mind.

Various long-term projections of world food supply and demand, such as the 1985 outlook of the Food and Agriculture Organization (FAO) and the forecasts for 2000 by the OECD and U.S. Department of Agriculture (USDA), indicate that even though a balance may be attained for the world as a whole, the pattern of surplus in developed nations and shortage in developing nations including those in Southeast Asia will become more and more pronounced. A major task confronting trade and aid involving food is how the expected interregional supply-and-demand gaps can be filled.

When the food problem of developing nations in the Pacific region is viewed from this angle, it becomes apparent that the basic need is to develop their agriculture further, although food aid by advanced nations will also be an effective policy means. It will be particularly meaningful for advanced nations to cooperate more actively in the developing countries' plans for increased food production, placing priority on rice, the staple food in many of the developing nations in the Pacific. For example, it will be useful to set up a consultative forum of experts from Pacific countries and relevant international bodies, taking into account the Program of Doubling Rice Production in Asia proposed by the Trilateral Commission, so that active studies may be undertaken to increase food production in those nations. In this context, it must be noted that little room is left for increasing rice-planted acreage, especially in Asia, and therefore that increased rice production basically must rely on increasing the yield per unit area. Among the means of boosting the yield per unit area, attention should be paid to improving irrigation and drainage, introducing high-yielding rice strains, increasing the use of fertilizers and farm chemicals, and establishing and disseminating new rice-growing techniques.

As for forestry, various international organizations are now conducting studies on the extent of forest resources, establishment of lumbering industry and afforestation in the ASEAN states, Pacific island countries and elsewhere. Bilateral cooperation is also being extended by the United States, Canada, New Zealand, Japan, and other countries. These forms of cooperation should henceforth be intensified further. It is to be noted that the tropical broadleaf trees grown in the ASEAN area require a lengthy maturation period, making afforestation difficult. It is essential, therefore, to devote major efforts to the development of natural renewal techniques for the purpose of maintaining and cultivating such important forestry resources.

Many developing countries of the Pacific region are striving to establish lumbering industries of their own as part of their self-help programs for economic development, and it is necessary to extend a helping hand in this sector as well. In view of the limits now being reached in the volume of lauan and other tropical broadleaf trees felled for use as a raw material, the time is appropriate for active cooperation in the utilization and development of tree species yet to be exploited.

The fishery sector has seen a rising overall fish catch in the Pacific region from year to year with the exception of the anchovy catch. Still, wide gaps remain in fishery resource exploitation and the level of consumption between developed and developing nations and among different parts of the region. In these circumstances, fishery cooperation for developing countries needs to be extended so as to more effectively utilize marine resources in nearby waters, increasing the catch and augmenting the volume of fish consumption. Desirable new trends in fishery cooperation include assistance based on the concept of shifting from fish catching to fish farming and also assistance that extends beyond fishing to cover local processing of marine products. Moreover, bilateral and multilateral cooperative systems require reinforcement to facilitate fishery cooperation in the region. Through such rein-forced cooperative systems, specialists serving as fishery consultants, upon request from interested countries, could draft development plans for fisheries and related industries, carry out the necessary studies, and act as advisers and intermediaries for securing financial cooperation.

ENHANCING SMOOTH FLOW OF FUNDS

In view of the brimming vitality of the Pacific countries, strong demand for funds can be expected moving toward the 21st century to finance projects for domestic development, resource exploitation, and marine development. It is necessary to assure smooth and broad supply channels of funds in response to this demand.

Economic transactions and trade relations are expected to continue growing not only among the Pacific countries but also between these countries and the countries of other regions, creating economic relations of ever greater interdependence. In responding to these developments, it will be important to establish updated financial facilities and settlement machinery within the Pacific region.

The topic of fund flows within the Pacific region will be addressed here by examining the tasks that confront those offering funds and those receiving funds in the region. First, however, it must be clarified that we by no means favor an exclusionist approach of financing all the fund needs of the Pacific region with funds raised only within the region.

The financial facilities that we propose be provided for the Pacific region should be sufficiently capable of meeting fund needs outside the-region as well. As long as the Pacific countries remain politically stable and are managed with economic vitality, the region will continue to be an attractive area of investment for the advanced countries of Europe and the oil-producing countries of the Middle East. Some of the funds needed for the region hence may be reasonably expected to flow in from outside the region. By the very nature of financial affairs, the financial facilities to be formed around the Pacific region will develop close and mutually complementary relations with the existing international and global finance and capital markets.

Taking this basic position, we discuss here the flow of funds from a global perspective that presumes that all systems remain open to interests outside the Pacific region. The topics that we consider by turn are (1) requirements for the region's advanced countries as the expected principal fund providers; (2) requirements for the region's developing countries as the expected principal fund recipients; (3) evaluation and prospect of the region's finance and capital markets as the expected principal financial facilities; (4) the expected role of the international financial institutions primarily serving the region; and (5) the means of external settlement and the settlement systems primarily serving the region.

Requirements for Fund Providers

Taking Japan as an example, let us examine what the advanced Pacific countries should do to enhance fund flows as fund providers with large economies and great financial strength relative to other countries in the region.

For the supply of funds at the government level administered through such working facilities as the Export-Import Bank of Japan and the Overseas Economic Cooperation Fund, the main task is that of strengthening the financial cooperation system for developing countries. In question here are quantitative facets of financial cooperation and assistance, such as an increase of the funds involved; qualitative facets, such as easing the terms of financial cooperation and assitance{sic} and stepping up feasibility studies; and also institutional facets, such as improving the efficiency of governmental organs and offices that handle such finances. Improved performance is required in all these fields.

The foremost need for fund supply at the private level is accelerated internationalization of Japan's finance and capital markets. Further liberalization is required to expand the scope of non-residents who are eligible for market participation, and to enable their free procurement and management of funds in Japan's finance and capital markets. To this end, what is basically required is a reduction to the maximum possible extent of direct and indirect restrictions and controls applied by administrative organizations including the central bank in such forms as the authority to grant licences. It is also important to minimize government involvement in interest rates except in certain limited monetary policy sectors and to develop policies utilizing the relationship of interest rate with international finance and capital markets, thus permitting natural fixing of interest rates through free-market mechanisms.

As a peculiarity in Japan, barriers have come into existence due to a sectoral approach to all financial organizations including securities companies, with a separate administration for each sector. These barriers must be eliminated as much as possible, providing foreign individuals and organizations with smooth access to finance and capital markets for procurement and management of financial resources. The means of offering and procuring funds in finance and capital markets must be diversified to give the market participants a wide variety of choices from which they can freely choose on their own judgment. It is desirable that monetary policies be administered in keeping with such markets, using open market operations instead of close-market bilateral transactions by the Central Bank.

In enhancing a smooth flow of funds in line with the Pacific Basin Cooperation Concept, one cannot overexaggerate the critical importance of implementing these measures in order to make Japan's finance and capital markets both free and resilient.

A second need for fund supply at the private level concerns providers of funds and institutions that act as financial intermediaries. We have already discussed the problems relating to finance and capital markets; here it might be noted that in financing various projects in the Pacific region, problems are involved in increased portfolio and direct investments by private individuals and corporations and in increased investments and loans by private financial institutions. These investments and loans are all made by private individuals, corporations, and financial institutions on the basis of their own evaluation of risk and potential profit depending on the project and the country concerned. As mentioned later, countries on the receiving end of these investments and loans need to take steps to enhance the flow of such private funds.

It is not the purpose of this report to give an itemized rundown of all measures that may be taken to met the vigorous demand for funds in the Pacific region. We would like to stress, however, that the important point is for Japan, in developing financial measures for the short, medium, and long term, to recognize the enormous economic power it possesses and to contribute energetically to the active flow of funds around the Pacific region. In developing financial measures, needless to say, the current foreign exchange rates, the balance of payment trends, and the domestic situation are important factors to be kept in mind, but evaluation of their significance should always be made from medium-and long-range view-points. In line with the present policy of liberalizing foreign exchange controls, Japan should avoid depending heavily on direct regulatory means, shifting gradually to adjustment through the finance and capital markets in all cases except when emergency controls are required.

The foregoing comments, it should be noted, apply not just to Japan but also to other countries with well-developed financial markets in the Pacific region, such as the United States, Canada, Australia, Hong Kong, and Singapore. It is necessary for both financial authorities and private businesses in these countries to endeavor for a smooth supply of funds at both government and private levels as the situation may demand.

Requirements for Fund Recipients

At both government and private levels, the volume of external funds that flows into a specific country or project is not determined solely by the amount of funds available to fund suppliers. Also involved are the efficacy and purpose of fund utilization, the quality of fund management, the certainty of repayment, and other factors determined at the receiving end. One condition of decisive importance in the facilitation of investments and loans is that complete economic statistics be available and that financial management and accounting systems be well developed among fund recipients, enabling fund providers to objectively assess the economic and financial situation on the recipients' side. Most Pacific countries including developing nations are relatively advanced by world standards in these respects. Still, there is room for improvement in view of the prospective increase in direct and portfolio investments.

As relations of interdependence grow stronger, direct investments will further increase on the private level. Accordingly, it will facilitate financial flows if the concerned countries can agree to ground rules governing the conduct of investors and recipients. An attempt to formulate such rules has been made by the Pacific Basin Economic Council, leading to the "PBEC Charter on International Investments." The nature of the Council prevented sufficient consultations with developing countries, however, and the Charter has not been endorsed by the governments concerned. These bring into question the effectiveness of the Council's Charter.

Advanced countries of the Pacific region have been cooperating to provide know-how on public finances, banking, securities, accounting, and other matters that developing countries need to master to consolidate systems for receiving foreign funds. It is necessary to continue providing technical cooperation of this type at both government and private levels.

Importance of Intraregional Finance and Capital Markets

As mentioned earlier, in procuring funds for the Pacific region, finance and capital markets not only within the region but also in such advanced areas as Europe should be considered as possible supply sources. Likewise, the recipients of the region's funds should be selected on a global basis. In this connection, it is hoped that the finance and capital markets fronting on the Pacific basin, such as Tokyo, Hong Kong, Singapore, and California (with New York in the background), will be more sensitive and receptive than other markets to fund demands from the Pacific region nd{sic} especially from the developing countries within it. In the same sense, we earnestly hope for the growth of new international finance and capital markets within the region.

All finance and capital markets of the region must develop in a close relationship with the international finance and capital markets of other regions. Conspicuous among the new intraregional markets of the Pacific region are those that developed from the latter half of the 1960s in and around Singapore and Hong Kong to handle "Asian dollars." In the sense that they deal mainly in U.S. dollars that are outside the United States, these Asian dollar markets function similarly to the Eurodollar markets that cluster around London. There are differences, however. For one thing, the Asian dollar markets are open during a different span of hours from the Eurodollar markets and the New York market due to the different time zones they are located in. Furthermore, Asian dollar markets serve supply and demand largely based on the Pacific region to facilitate the management and procurement of funds there, and thus are capable of serving the region's indigenous needs. These markets hence have their own characteristics and play a role supplementing the functions of the advanced finance and capital markets of other regions.

As these Asian dollar markets developed, financial institutions of various countries began one after another to set up Asian bases in Hong Kong and Singapore. This prompted the development of communications and transport facilities and encouraged demand for housing, office space, and other items of real estate. Besides financial activities, legal practices, accounting offices, and other commercial activities also proliferated. Such developments triggered further growth of the national finance and capital markets, and as a result financial transactions have become a leading industry in Hong Kong and Singapore.

It is hoped that such new finance and capital markets around the Pacific region will work to serve the region's large fund demand as they link together with and supplement the finance and capital markets of the United States, Japan, and other countries, contributing to the recycling of oil money. In other countries as well, development and gradual internationalization of their own finance and capital markets are desirable in line with their stage of economic development. Such progress will greatly facilitate servicing of the region's fund demand and will assure smooth financial transactions.

It is also indispensable for developing countries to develop financial institutions and foster finance and capital markets that can handle developmental and commercial financing, for this will prompt the inflow of development funds and enable these funds to be appropriately managed. It is hoped that: advanced countries will actively offer technical cooperation in this field.

To provide additional momentum to such developments and to enhance financial cooperation on a reciprocal basis, one pertinent proposal would be to hold "Pacific Basin Finance Conferences" attended by private financiers from the region. Frequent gatherings of the heads of the region's central banks and active exchange of information among the central banks will also help build a firm foundation for smooth fund flows in the region.

Strengthening of Intraregional Financial Institutions

In facilitating the interflow of funds in the Pacific region, it will not be appropriate for the flow of investment to be based mainly on economic enticement by advanced countries. An increased flow of investment through international institutions is desirable to neutralize the influence of any particular country.

Fifteen years after its foundation, the Asian Development Bank (ADB) has developed into a major international financial institution whose main theater of operation is the Pacific region, and its investments have become of large scale. Still, the expectations among the developing countries for "soft loans" with long terms and low interest rates are great. The ADB has been acting as an intermediary for project finances to meet many of the developing countries' needs and it is hoped that the bank will further expand this intermediary role and take the initiative in the region's joint development projects.

Needless to say, the work of promoting joint development projects cannot be left only to the region's financial institutions. These projects require positive cooperation and support from both public and private sectors of the countries concerned. As the principal institution to handle the financing of these projects, however, the ADB has an important role to play.

Besides the ADB, which is a public institution, other international financial institutions have been established by concerned countries through joint investment at the private level to serve the region's financial needs, and still more are being proposed. One institution already in operation is the Private Investment Company of Asian (PICA); two proposed institutions are the Pacific Fund and the Japan-ASEAN Investment Fund. Such privately initiated institutions to finance regional joint development projects face the difficult operational problem of how much responsibility and authority the investors of disparate interest will relegate to the management of the jointly founded institution.

While continuing to promote the region's joint development projects on the official level, the concerned governments must also do whatever is within their power to assist the establishment of regional development institutions at the private level and to perform whatever adjustment is necessary.

Instruments and Systems for Financial Settlement

Insofar as the Pacific Basin Cooperation Concept envisages an open style of cooperation and aims to contribute to the development of the global community, the proposed instruments and system for financial settlement should not be of a closed nature but must fit the context of the international monetary system. This system by nature has a global character. The instruments of settlement in the period following the end of World War II were characterized by the consistent use of the U.S. dollar as the world's key currency, backed by America's outstandingly large gold reserves and economic might. Fixed rates of foreign exchange were maintained under a gold-dollar standard.

After the 1973 collapse of the Bretton Woods regime, the international monetary system moved to a managed float of foreign exchange rates. But this hardly changed the role of the dollar as the world's key currency, in which regard the Pacific region is not an exception. As the world moved through the 1970s, the economic growth of West Germany, Japan, and other advanced countries caused a sharp relative decline of America's position in the world economy. This cause unrest in the international monetary system, which depended on the dollar as virtually the sole key currency. Even though new developments may occur in the international monetary system, however, it cannot be imagined that they can damage the relative position of the United States in the world economy to the extent that the U.S. dollar ceases to function as the world's most important key currency.

The Pacific region is a vast region of great diversity and vitality, and its trade and economic activities can be expected to continue expanding. Securing proper settlement means and smooth functioning of the settlement machinery are hence matters of great significance to the entire world economy. As a country of the Pacific region with an economy second in size only to the U.S. economy, Japan is one of the region's biggest exporters and importers. It is also one of the central countries for capital transactions, and it accounts for a major share of the region's economic transactions.

Given this status of Japan, it may be expected that the yen will be used increasingly as an instrument of settlement in the regions' economic transactions and also as a reserve currency, supplementing the role of the U.S. dollar.

Instead of trying to inhibit this trend, Japan should take a comprehensive policy initiative in support of increased international use of the yen. This implies the building of a foundation for smooth and steady use of the yen by both residents and non-residents. In this regard, the Japanese government has already switched its foreign exchange management from the long-standing exclusionist and highly regulated system to one that is free in principle and allows controls only in exceptional cases. Japan is also making efforts to free interest rates and to open its finance and capital markets. Policies such as these must be accorded praise.

In the European-Atlantic Economic region, West German marks, Swiss francs, and other currencies are being used to supplement the U.S. dollar. In addition, the European Currency Unit (ECU) can be expected to play an increasingly important role as an instrument of settlement among public institutions and as a reserve currency within the European Community. In the Pacific region as well, there have been moves to create intraregional settlement systems designed specifically for the use of the yen or some other currency. Our Pacific Basin Cooperation Concept respects the individuality and diversity of the region's countries, however, and calls for free and open cooperation. The international monetary system, moreover, is an open system by its very nature. In the light of the political and economic circumstances in the Pacific region in the context of its historical and cultural diversity, it is unrealistic to try to set up a special settlement system for all or for part of the region. Such a system might even tend to restrict the expansion of the region's markets.

As we move toward the early 21st century, the possibility exists that a multicurrency system built around the U.S. dollar will emerge in the Pacific and Atlantic regions. As mentioned, the West German mark and the Swiss franc have to some extent already joined the key-currency basket. It can be reasonably expected that the Japanese yen as well will become an auxiliary currency to the dollar, with its use relatively concentrated in the Pacific region. In a multicurrency system, the problem will be how to maintain stable rates of exchange among several currencies with the U.S. dollar at the centre.

Whatever the case may be, a smooth flow of funds within the Pacific region requires efforts by advanced countries to overcome short-term fluctuations and achieve monetary stability through a system of active cooperation. It behooves developing countries to realize that these efforts by advanced countries will also work to their own benefit and to cooperate in support of these efforts.

EXPANDING AND CONSOLIDATING TRANSPORT AND COMMUNICATIONS SYSTEMS

For the Pacific countries to deepen their mutual understanding, they must facilitate exchange in various fields. For them to promote economic development, they must strengthen relations of economic cooperation. For this purpose of smoothly developing intensified relations among the Pacific countries, the infrastructural basis of such relations, including air, sea and other transport systems and also communications systems, must be up-graded. Improvement is also required in administrative procedures governing such matters as entry of foreigners into each country.

Consolidation of Transport Systems

Air transport

There has been remarkable development of air transport around the Pacific region in recent years. Still, further improvement and expansion of air traffic networks and augmentation of air transport capacity must be realized to encourage the interflow of people among the Pacific countries and to facilitate intraregional economic development.

The major cities of the region need to be directly linked in a well-serviced air traffic network. The basic framework of such a network should include east-west trunk routes (for example, ASEA-Japan and the Republic of Korea-the United States; ASEAN-Australia and New Zealand-the United States and Latin America) and north-south trunk routes (for example, the Republic of Korea and Japan-Australia and New Zeland{sic}). This framework should be enclosed by a loop route circling the basin with stops at major cities facing the Pacific. At present, as a consequence of the region's differing degrees of interdependence, the development of north-south services lags behind that of east-west services.

Island countries geographically located at points of intersection of this east-west and north-south air transport grid should be better linked with major coastal cities around the Pacific. Among these islands, those that are centrally located (such as Guam, Fiji, Tahiti, and Apia) should be better linked with nearby islands in a finely designed web of air transport networks. By this means, an air transport system can be realized to enhance personal exchange, economic development and friendship throughout the Pacific region. Use of dirigible airships might be considered for island-feeder services.

The purpose of such an air transport system for the Pacific region is to enable prompt and smooth transportation around the region. Keeping in mind the establishment of what could be called a Pacific basin international air transport system, the concerned countries should make steady efforts to resolve the various issues concerning civil aircraft agreements and the problems surrounding airports, expand services by opening new routes and increasing flights, and introduce larger aircraft. Since the international air transport business also represents national interests, improvement of air traffic is often attended by conflicts of interest among the countries concerned. This makes it all the more necessary that they act in the spirit of cooperation and reciprocity for the development of a friendly air transport setup.

Improvement of air transport networks is not work that is reserved exclusively for countries with advanced air transport industries. It is to be hoped that the Pacific island countries as well will play an increasing role by developing their own air transport services individually or in joint projects. Countries with well-developed air transport industries should cooperate in this endeavor, such as by offering their technical knowledge. For example, advanced countries might train the personnel of developing countries in freight and passenger services and cooperate in airport maintenance. Training centers need to be expanded for this purpose.

As air service networks become more complete and transport capacity is augmented, it will become increasingly important for the Pacific countries to plan for more efficient mutual use of fuel and other resources.

In promoting personal exchange and economic development of the Pacific region through the growth of air transport, introduction of passenger fares and freight charges that serve the diverse needs on both trunk and local routes will be indispensable. Service charges have been climbing due to the recent drastic increase of oil prices, but the recent commissioning of larger aircraft has created surplus capacity, and carriers are resorting to various forms of fare discounts to generate demand and utilize this surplus. In view of the disparate passenger and cargo needs depending on the route and the destination, low and diversified service charges need to be made available while maintaining overall balance in the fare schedule.

Maritime transport

For the Pacific countries to promote economic development through mutual cooperation, stable development of maritime transport within the region is indispensable. The region's maritime transport has traditionally been managed mainly by the enterprises of Japan and other countries with well-developed shipping industries, and they have created an established economic order. Against this background, the countries that have only recently entered the merchant marine field have been endeavoring to promote international shipping business, building up their own merchant fleets as a major policy goal.

From the viewpoint of promoting friendship and cooperation among the countries of the region and facilitating the growth of marine traffic, the Pacific countries with well-developed maritime transport industries must strive to serve the needs of other countries to develop their own shipping industries, extending economic and technical cooperation and also planning phased adjustments of their policies. As an example of such cooperative activities, we believe that Japan and other advanced maritime countries should consider the establishment of a new government-level cooperative scheme to more effectively promote economic and technical assistance. The objectives of this scheme would include studies to facilitate the conclusion of private shipping agreements and operational tie-up agreements, training of shipping specialists, and research and funding for projects to build and procure ships.

The following long-term projects are offered to improve efficiency of maritime transport in the Pacific. For the immediate future, it will be sufficient for the countries concerned to jointly undertake feasibility studies.

(1) Consolidating cargo distribution centers to improve the efficiency of cargo movements around the Pacific basin through Asia, North America, Latin America and Oceania, with the presupposition of the use of large ships in intraregional transport and improvement in secondary distribution. (The "Asian port scheme," for example.)

(2) Expanding narrow straits and canals and constructing new ones to accommodate a greater volume of cargo traffic and the use of larger ships. (The Second Panama Canal Project, for example.)

Expansion of Communications Systems

International communication plays a major role in the promotion of mutual understanding and economic activities in the Pacific region. With the phenomenal development of communications and computer technologies, made possible by such breakthroughs as semiconductors and large-scale integrated circuits (LSI), many new communication means are being developed today including video transmission, data transmission, and facsimiles. These technological advances will bring further expansion in international communication within the Pacific region.

Today's international communications are carried mostly via submarine cables and satellites, and these two means will continue to be used in tandem to secure stability and reliability in communications. In satellite communications, new digital technologies are bringing high-quality and economical type of multilateral communications to international communication in the Pacific region. In submarine cable technology, the newly invented "optical fiber" cables are expected to replace conventional coaxial cables in the near future. Optical fiber communication is a technique enabling the transmission of digital and other information using glass fibers; compared with conventional coaxial cables, the new cables carry a larger volume of data more efficiently.

With these technological prospects in international communication in mind, we offer the following ideas as ways to realize dramatic communications development in the Pacific region.

Improvement of communication networks in the Pacific region

Today all the countries in the Pacific region except a few island countries in the South Pacific are linked to each other by submarine cables or communications satellites. In view of the expected increase and diversification in demand for international communication, expansion and improvement of the present communication networks is required. At present many projects are already being planned, such as the Trans-Pacific Cable III program, the ASEAN Cable System Program, a Japan-ROK cable system, a plan for launching a new Pacific satellite by INTELSAT (International Telecommunications Satellite Organization), and a plan for launching a maritime satellite by INMARSAT (International Maritime Satellite Organization). We hope for steady progress of these projects.

To promote intraregional communications, efforts need to be made by the individual countries concerned. Beyond that Japan should work actively through such international organizations as the Asia-Pacific Tele-community (APT) to establish and efficiently operate Pacific basin communication networks through cooperation by the countries concerned. Also worth consideration in achieving these ends is the establishment of a new regional communication organization for research, development, and training purposes.

Improvement of rates and fees

The foremost necessity in international communication is high-quality, low-breakdown, and prompt communications provided at low cost. On the one hand, international communication calls for heavy investment in facilities to secure stable communication channels and to develop new technologies so as to meet the growth of communication demand. On the other, technological development is working to bring down costs for international communication services. Here we would like to emphasize the need to make further efforts, in recognition of the importance of the Pacific region, for lower rates and fees for international communication in the region.

In planning for the future, introduction of a system of uniform rates should be studied for the Pacific region. Rate policies today in the concerned countries emphasize reduction of rate differentials based on distance, with an eventual target of a uniform rate system of the type that exists in mail service. As the sense of solidarity deepens throughout the Pacific region, this approach to rates will naturally gain momentum on a regional scale.

Reinforcement of cooperation with developing countries

Some developing countries in the Pacific region lack the kind of domestic communication networks that are a prerequisite for providing high-quality international communication systems. They are lagging behind in the construction and operation of satellite earth stations and the building of submarine cable facilities. In these countries, therefore, it is necessary first to upgrade domestic communication networks, then to expand them into international communication systems. For this purpose, advanced countries must actively provide technical and financial cooperation to developing countries, especially to island countries, drawing on their accumulated experience and expertise to assist the consolidation and improvement of telephone and microwave communications in developing countries.

Study of a direct-broadcast relay satellite system for the Pacific region

The United States, Canada, the Soviet Union, and Japan have been conducting experiments since 1974 on satellite broadcasting, leading to the conviction that direct-broadcast relay satellites will be technically feasible in the near future. As a conseqence{sic}, the concerned countries are conducting studies for application of a satellite broadcasting system.

Direct-broadcast relay satellites send programs directly to TV receivers in homes and elsewhere. If such a satellite is orbited for common use by the countries of the Pacific, it will prove extremely useful in strengthening their sense of solidarity and deepening their mutual understanding. It will also contribute to TV dissemination in developing countries lacking adequate domestic broadcast systems. For such a satellite broadcasting system to be operated cooperatively by the countries concerned, a "Pacific Basin Satellite Broadcasing{sic} Organization" will become necessary. It is our hope that Japan will make a large contribution toward the realization of this idea.

Promotion of information exchange by mass media

The flow of information across national boundaries is indispensable for deepening mutual understanding on the international level, and in this regard the mass media have a major role to play. And yet mass communication among the countries of the Pacific region is far from an adequate level. To improve the present situation, study is required to establish international news agencies based in this region, to increase funds for journalist exchange, and to found a fellowship program for journalists, especially of developing countries. These possibilities must be investigated to supplement the aforementioned plans for improving the region's international communication networks. In this connection, Japan should cooperate in the news-gathering activities of visiting journalists and foreign journalists stationed in Japan by expanding the functions of the Foreign Press Center and by allowing these journalists to join governmental and other domestic press clubs.

Improvement of Immigration Systems

The promotion of international cooperation and exchange in the Pacific region must be endorsed by improved institutional frameworks governing the movement of people across national borders.

In the region's countries today, conditions for foreigners' entry, exit, and residence are specified by various procedures, regulations, and restrictions. To encourage the flow of people across borders, each country should strive to simplify and rationalize these controls in the direction of liberalizing foreigners' entry for purposes other than work and permanent residence.

From this viewpoint, more agreements for mutually waiving visa requirements are needed and more multiple entry visa systems must be put into force. Japan, for example, now has agreements with 45 countries to mutually waive visa requirements for short-term visitors. But among these 45 countries, only a handful including Canada, New Zealand, Singapore, Mexico, and Peru are Pacific countries. Multiple entry visa systems in the region are virtually non-existent except among advanced countries. The present situation is of course due to the differing circumstances of the countries concerned; still, they should take mutually cooperative steps to improve the situation as rapidly as possible.

Many improvements apart from waiving visa requirements and utilizing multiple entry visa systems are needed in immigration systems. For instance, Japan's Immigration Control Order was drawn up and put into force in 1951 when Japan was still under Allied occupation and had only a limited degree of personal exchange with other countries. This order not only involves complex procedures but also tends to be used for restrictive purposes. A review of the order is required from the viewpoint of promoting an international flow of people.

More specifically, for the short-term visitors to Japan, who account for the majority of all foreigners visiting Japan, study is needed to liberalize the purposes of stay, now limited to tourist purposes, and to extend the length of stay from the present 60-day period to at least 90 days. As for temporary landings requiring no visa (landing at port of call, landing in transit), the present regulations require that entry and departure be on the same ship or at the same airport. For the benefit of these short-term visitors, it is hoped that the conditions for entries and departures without a visa will be made less stringent, applying them to travelers who change ship on departure and permitting stays on land of a week or two.

As a more fundamental solution of the many immigration troubles of foreigners, Japan should study the introduction of an arrangement for overseas stationing of immigration inspectors, as practiced among the United States and some West European countries. (Under this arrangement, immigration inspectors of Country A are permanently stationed at airports and other points in Country B to process entries into Country A prior to their departure from Country B.)

As to resident qualifications, applications other than for work and permanent residence should be accepted unless they involve particular problems, and the procedures should be simplified.

From the long-term perspective, foreigners' applications for work and permanent residence also need to be studied with a more positive stance. Although consideration must be given to the labor situation and the economic and social circumstances at home and abroad, active efforts are needed in the spirit of promoting international exchange and cooperation and in view of the direct and long-term benefits that foreigners bring to other countries. It is hoped that qualifications for work and permanent residence will be improved, such as by establishing immigration quotas per field of work, and that better conditions for foreign labor will be systematically organized. The control of foreigners' entry to a country and the control of their stay in the country are complementary administrative matters; hence an open system of control over resident foreigners is also needed to contribute to international exchange.

III TOWARD REALIZING PACIFIC BASIN COOPERATION

Realization of Pacific basin cooperation and construction of a prosperous and stable Pacific regional community are long-range tasks with a purview stretching well into the 21st century. From this recognition, the specific proposals offered in section II "Tasks for Pacific Basin Cooperation" include those that require immediate attention as well as those that will have to be tackled over the long run. Our proposals for Pacific basin cooperation also cover both tasks that the countries concerned should handle jointly and tasks that Japan can promote on its own initiative. We hope that the Japanese government will constructively and steadily deal with the latter tasks. For the former tasks, we hope that broadly based studies will be undertaken among the concerned countries and that concrete projects for cooperation will be engendered.

Pacific basin cooperation should be promoted deliberately and steadily. While the vitality and dynamism of the Pacific region are receiving increasing attention, it is also true that some people take a skeptical view on the particular emphasis on Pacific basin cooperation. Because the Pacific Basin Cooperation Concept involves long-range tasks that require much patience, haste is to be avoided at all costs in its realization.

Be that as it may, it is gratifying to see the great mutual interest that is now evolving among the peoples of the region. Various ideas have been put forward to promote Pacific basin cooperation in many countries of the region, and specialists and others from public and private sectors have held frequent international conferences and symposiums throughout the region. Recent examples include the international symposiums "Asia-Pacific in the 1980s: Toward Greater Symmetry in Economic Interdependence," held in Bali, Indonesia, in January this year, and the "Pacific Islands Conference: Development of the Pacific Way," held in Hawaii in March.

Today, as the concerned countries undertake vigorous initiatives and make diversified approaches to tackle this issue, it is becoming clearer that broadly based cooperative relations within the Pacific region are essential and feasible. Gradually but surely the specific direction of cooperation is emerging into open view. In the midst of such international endeavors, it is our hope that Japan will draw on its valuable past experiences and achievements, enter into thoroughgoing consultations with other countries, and participate in the joint task of realizing a Pacific basin community.

On the occasion of his visit to Australia in January this year, Prime Minister Masayoshi Ohira exchanged views with Australian Prime Minister Malcolm Fraser on holding an international seminar on Pacific basin cooperation around September this year, to be hosted by Australian National University in Canberra. The seminar is expected to make a major contribution to further advance the international discussions on Pacific basin cooperation at many international gatherings in the past. Japan will be well advised to host further seminars of this sort in the near future.

We have several expectations for such international conferences to be held regularly and attended by leading figures from countries interested in promoting Pacific basin cooperation. First, past studies and proposals on Pacific basin cooperation should be reviewed for articulation of specific fields of possible cooperation. Second, a consensus should be formed among the concerned countries on measures of cooperation that are acceptable to all parties concerned. Third, studies should be made of the possibilities of establishing an organization for long-range promotion of Pacific basin cooperation. Through continued international studies and discussions, a broad regional consensus will be gradually formed among the concerned governments as well.

The need for such a Pacific basin cooperation organization is apparent from the fact that the cooperation envisaged is a long-range concept oriented toward the 21st century. Various proposals have been presented concerning this organization. Some are for the creation of a government-level consultative organization by the countries concerned; others favor a private organization with leading figures from each country participating. Yet another proposal is to form what can be called a wisemen's group consisting of men of broad experiences who are respectively appointed by, or have certain links with the government concerned. Upon considering these propositions, we offer the following proposal based on our assumption of a gradual approach.

First, a committee could be set up to manage a series of international conferences. This represents the first step in building machinery for Pacific basin cooperation. The committee would review the results of past conferences and prepare for future ones. After a number of such conferences have been held, the committee should come to assume the characteristics of a private consultative forum for promoting Pacific basin cooperation, and in time it should emerge as an authoritative standing organization bringing to attention items of common interest among the concerned countries and working out better solutions to them. When the committee attains this status, it might be able to express joint opinions or make recommendations to the government concerned on matters where a consensus has been reached among its members.

Certain conditions must be met for the committee to play such a role. First, it must be formed by persons of authority who have influence with their respective governments. Therefore, it is strongly desired that the committee members either be drawn in their respective countries from a large body of intellectuals who are interested in Pacific basin cooperation, or be given the endorsement of their respective governments in one form or another. Second, the committee must be of a workable size, enabling it to engage in full discussion and reach consensus. A membership of about 15 to 20 persons should be appropriate.

It will be important for Pacific basin cooperation to start from matters of common concern which the concerned countries find comparatively easy to take up with little involvement of conflicts of interest. Accordingly, it will also be profitable to set up working groups separately from the aforementioned private committee, each group to be established on the government or private level and to be entrusted with execution of a particular project. For realizing Pacific basin cooperation, it may be most realistic to promote such individualized approaches as have already been undertaken in a variety of forms. Among the various ideas and projects cited in section II "Tasks for Pacific Basin Cooperation," a considerable number have already drawn the interest of the concerned countries and are unlikely to cause much clash of interest among them. We hope that they will be taken up as subjects of such individualized approaches.

If the foregoing developments proceed smoothly, it may not be unrealistic as a long-range goal to look forward to an international organization formed by the governments concerned. This international organization would function as a consultative body to promote mutual understanding on and pave the way for cooperative resolution of matters of common interest in all fields of economy, society, culture, transport, communications, and science and technology. A permanent secretariat of the organization would also become necessary. In the meantime, it should open its membership to all the Pacific countries interested in promoting cooperative relations in the region.