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[Note: A transcript of this meeting is unavailable. The discussion is summarized below.]

Project Director: Elizabeth Economy, C.V. Starr Senior Fellow

and Director, Asia Studies, Council on Foreign Relations

1. What we know:

Asia today is rife with domestic challenges that both threaten stability in the region and impact U.S. policy. In light of last weekend’s bombing in Bali (October 12, 2002), questions tended to focus largely on Islamic extremism in Indonesia. However, the current domestic situations in both China and Japan, and North Korea’s nuclear arms admission, were also discussed. Surrounded by unknowns and a sense of urgency, “APEC, Al-Qaeda and Shifting Alliances” thus provided an important and timely forum for the exchange of knowledge and ideas.

Indonesia

In post-Suharto Indonesia there are a variety of Islamic groups operating, including radical extremist groups who use indiscriminate violence to achieve their purposes, and political parties who hope to install Shariah law. For many, Islam has become a political rallying cry. President Megawati needs to establish her authority, and yet must do so without alienating herself and her government.

China

U.S.-China relations today appear rather stable, leading to feelings of guarded optimism in the days preceding President Jiang Zemin’s visit to Crawford. Evidence of progress can be found in the U.S. addition of the East Turkestan Islamic Movement (ETIM) to the worldwide list of terrorists and China’s announcement of new missile technology control regulations. We can be fairly confident that at the upcoming 16th CCP Congress, Jiang will retire and Vice president Hu Jintao will come to power.

Japan

It is hoped that Japanese Prime Minister Koizumi’s appointment of Heizo Takenaka as Minister of Financial Services will help to save Japan’s failing banks. Japan has many companies which depend on bad loans for survival, creating a banking crisis. Thus far, signs of the impact of this crisis on the Japanese population have not been very visible; however, under Takenaka’s critical reforms, this is certain to change. Southeast Asia, where Japanese foreign direct investment is vital, will also be affected.

2. What we don’t know:

Indonesia

The bombing in Bali requires us to ask what (and who) is the real “threat” in Indonesia. Furthermore, it is still largely unknown to what extent Al-Qaeda is actually operating in Indonesia—where extremist groups have been focused predominantly on domestic issues rather than adopting Al-Qaeda’s global plan.

China

Despite China’s recent efforts to accommodate U.S. power and cooperate in the U.S.-led war on terrorism, there are several long-term strategic issues that must be watched, including Taiwan, U.S. presence/activity in Central and Southeast Asia, and China’s fear of the Bush administration’s preemption doctrine.

Japan

High hopes for repairing Japan’s banking crisis could fail to meet expectations. This is largely because it is still uncertain how far the LDP will be willing to let Takenaka go in his reform efforts.

North Korea

The Asia Pacific region is anxious as a result of North Korea’s nuclear weapons admission. The U.S. response and reaction is, and will continue to be, influenced by what the Japanese and South Koreans do.

3. What are the next steps; what should be done and by whom?

Indonesia

Several suggestions were made concerning what actions should be taken by President Megawati and the Indonesian government. Two possible options included an anti-terrorism bill and granting the military the authority to crack down on extremist groups. One participant suggested placing economic sanctions on Indonesia; however, both the reasoning behind and the effectiveness of such an action were questioned.

Another participant questioned the role that social/economic/cultural groups and institutions such as ASEAN and APEC could potentially have in confronting regional problems—including terrorist activity. Building upon the existing socio-economic connections of such groups was discussed. Strengthening and cleaning up existing domestic institutions, for example, the Indonesian police force, were mentioned as being key in maintaining stability and boosting domestic economies.

North Korea

It was warned that the U.S. dealings with Iraq ought not to drive our response toward North Korea.