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Koizumi pledges aid but rebuffs Vietnam on trade

HANOI - Japanese Prime Minister Junichiro Koizumi concluded a visit to communist Vietnam on Sunday, pledging to maintain or even boost aid but rejecting Hanoi's overtures for a trade pact. Koizumi, who visits East Timor on Monday to meet Japanese soldiers that are part of a U.N. peacekeeping operation, is on a week-long tour of the region aimed at boosting Japanese influence in the face of mounting competition from China.

Vietnam's Prime Minister Phan Van Khai hailed the visit as a new stage in relations based on a long-term "reliable partnership" and said Hanoi supported Japan's inititive to boost ties with the Association of South East Asian Nations (ASEAN). Koizumi called their countries "sincere friends in Asia". But while pledging to maintain and even expand high levels of aid in his talks with Khai, Koizumi made clear Japan was not ready to pursue a Vietnamese proposal for a trade pact that would give greater access for Vietnamese farm products.

Investment treaty first

A senior Japanese government official said Koizumi did not respond when Khai expressed Hanoi's wish to export more rice, shrimps and coffee to Japan. While Japan "did not exclude the possibility" of a trade pact in future, Tokyo's view was that it would be better to conclude an investment treaty it has been pressing for, then look for other areas of cooperation, he said. Japan is seeking a treaty that would guarantee it equal market access to that secured by the United States under a historic pact that took effect last year. The Japanese official said Koizumi stressed Hanoi needed to improve the business environment if it wanted more Japanese investment. He said Khai replied that Hanoi wished to conclude negotiations on the investment treaty by the year-end. Vietnam is the sixth ASEAN country Koizumi has visited this year, an illustration of Japan's concerns about an agreement between China and the 10-member bloc to work for a free-trade area within 10 years.

Agriculture difficult

Japan appeared to be offering little in the way of reciprocal access for farm goods any time soon. The Japanese official said agriculture remained "difficult" for Japan, given its powerful, high-cost farm lobby. "We have to surmount the difficulties we face, but beyond that we were not in a position at this juncture, at this moment in time, to get into this problem more in more detail," he said.

Koizumi's response illustrates the problems Japan now faces in its economic ties with ASEAN countries -- many of which are reliant on commodity exports -- even as Chinese presses ahead with a plan to secure closer trade ties with the bloc. While developing ASEAN states like Vietnam need and welcome Japanese investment, they want more access for their farm products in return for opening up their markets to Japan's goods.

Japan did reach a free trade agreement with ASEAN member Singapore in January, but it is a rich city state and not a major agricultural exporter. Japanese officials said Tokyo wanted to deal bilaterally with ASEAN members on trade and preferred to negotiate issue by issue. In Singapore on Friday, Chinese Vice President Hu Jintao and Singapore Prime Minister Goh Chok Tong agreed on the need for a quick start to talks on a free trade area. At the same time, Goh noted ASEAN concerns about the fast-growing Chinese economy, which has been sucking up the lion's share of foreign investment flows in Asia.

Visiting Vietnam earlier this month, Takashi Imai, chairman of Japan's powerful Federation of Economic Organisations, said Japanese firms intended to maintain their investment emphasis on ASEAN, even as European and U.S. firms shifted theirs to China. After leaving Hanoi, Koizumi will make an overnight stop on the Indonesian island of Bali before flying to East Timor. He is due in Australia on Tuesday and New Zealand on Thursday before flying back to Tokyo on Friday.

By David Brunnstrom - Reuters - April 28, 2002