Taiwan mourns loss of the little friend stolen by big brother

Aid is China's weapon to win the battle for influence and diplomatic recognition in the Caribbean basin

The Caribbean basin has become the frontline in lingering Cold War battles between two powerful countries half a globe away: China, and, well, China.

The larger of these countries, whose capital is Peking, is locked in a struggle for diplomatic recognition with its island neighbour, which thinks of itself as the Republic of China, but which most of the rest of the world knows as Taiwan. It is an often-sordid war of bribes, threats, diplomatic pressure and high-level visits as China seeks to oust Taiwan from its remaining diplomatic strongholds while the latter fights back with hard cash.

The island of St Lucia in the Lesser Antilles was the latest battlesite. Its new Labour government last week switched diplomatic allegiance from Taiwan to China, saying recognition of the former was "no longer tenable under international law". But the true reason had much more to do with money.

China offered the island - population 150,000 - $1m (pounds 633,000) in immediate aid in the form of badly-needed school textbooks on an island where at least 30 per cent of people live below the poverty line. China and St Lucia also signed an economic co-operation agreement under which Peking will finance a new national stadium, a cultural centre, a four-lane highway and a free trade zone.

Explaining his government's decision to switch allegiance, the Prime Minister, Kenny Anthony, whose Labour Party ousted he long-ruling United Workers Party in June, said the role of Hong Kong was a factor. "Our commercial sector is now seeking new trading opportunities and new frontiers. Hong Kong is now the gateway to mainland China, with the vast trade possibilities which lie there. Taiwan can no longer provide the link with Hong Kong," he said.

In May, the Bahamas ousted Taiwan in favour of China after a Chinese- connected Hong Kong company signed a $114m joint venture agreement for a container port project in Freeport.

But on the western rim of the Caribbean basin, in Panama and Nicaragua, Taiwan is faring better. Taiwanese President Lee Teng-Hui is in Panama this week, heading a 500-member delegation to a "Canal Congress" aimed by Panama at showing the world it can administer the canal when the United States hands over control at the end of 1999.

As a result, Peking boycotted the Congress - also financed by Taiwan. Panama now fears China, the canal's third biggest user in numbers of ships, may boycott the canal itself.

To cover their bets, some 50 Taiwanese investors are in Nicaragua this week looking into financing a project to rival the Panama Canal. The plan is to build an "interoceanic corridor," linking lakes, railways and roads between the Atlantic and Pacific oceans. Such a corridor could save container shippers several days, compared with sailing farther south to Panama, according to the project's supporters.

With St Lucia gone from the fold, Taiwan now has diplomatic relations with only about 30 countries, compared with about 160 for Peking. South Africa has said it is switching to China at the end of this year. Half of those who still recognise Taiwan are in the Caribbean or Central America but several of these are re-appraising the situation, particularly since the handover of Hong Kong to China.

In the Caribbean, Taiwan is left with Dominica, the Dominican Republic, Grenada, Haiti and Saint Christopher and Nevis. The African list, headed by Senegal, Liberia and Chad, is also something less than big-time. In Europe only the Holy See, which has problems with China's establishment of a rival Catholic church, recognises Taiwan.

Heading Taiwan's battle against diplomatic isolation is the International Co-operation and Development Fund established last year with more than $400m in the kitty. It doles out soft loans, project financing for small and medium sized companies and has Costa Rica - Taiwan's biggest diplomatic ally - as its leading recipient.

"Taiwan can only pay money to buy friendship," said Tim Ting, a leading political commentator. China, on the other hand, can offer its far bigger market, political power as a permanent member of the United Nations Security Council and its assistance in supplying arms.

However, while Taiwan is losing its smallest friends to the highest bidder it is actually making discreet but more substantive diplomatic progress with the bigger nations. European countries, including Britain, which do not recognise Taiwan, have nevertheless upgraded the level of their semi-official diplomatic representation.

"It's a dilemma," said Leng Tse-kang of the Institute of International Relations, Taipei's main foreign policy think tank. "Do we increase numbers, or enhance the substantive relationships with countries which do not recognise Taiwan."

He thinks that the substantive relationships are more important, but the Taiwanese government is rather number obsessed.

It proved impossible to find a foreign ministry official who would discuss how St Lucia got away. Although the country is tiny, its very name seemed to send terror down the spines of officials who were most reluctant to say a thing about the loss of this little friend.

The sensitivity is understandable, coming from officials who regularly have to do battle just to be able to use their country's name at international gatherings and suffer the indignity of mass boycotts every time they show up anywhere, as President Lee Teng-Hui is finding this week in Panama.

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