ASUNCION - TAIWAN has offered increased aid to Paraguay, one of a dwindling group of countries that has diplomatic ties with the island, Taiwanese President Ma Ying-jeou said on Thursday.

Mr Ma met with former Roman Catholic Bishop Fernando Lugo a day before he is sworn in as president of Paraguay, one of just 23 countries that recognises Taiwan instead of mainland China.

'We can even increase the flow of aid', Mr Ma told reporters through a translator during his first official overseas trip since taking office in May. He will also visit another ally, the Dominican Republic.

Mr Lugo, who begins a five-year term on Friday, has said he will seek closer ties to China, signalling a possible end to Paraguay's 51-year alliance with Taiwan. But he has also said, 'It's not our idea to break relations with any country'.

Mr Ma said he and Mr Lugo did not discuss what Taiwan's reaction would be if China set up a business interest office in poor, landlocked Paraguay, the world's No. 4 soy exporter.

Paraguay receives millions of dollars every year in agricultural and other aid from Taiwan and is the only South American country that does not recognise China, a major consumer of soy, minerals and other raw materials from the region.

China and Taiwan have long played checkbook diplomacy, showering aid and investment on their respective allies.

Mr Lugo, who heads a centre-left coalition including farm groups and unions, broke 61 years of rule by the center-right Colorado Party, which had tight relations with Taiwan.

China-friendly Ma declared a diplomatic ceasefire with Beijing, which sees the self-ruled island as its own and has sought to limit its international dealings.

Competition
Mr Ma said Taiwan wanted to maintain close relations with its allies even as it pursues closer relations with China, and said the important thing is that Taiwan and China cease their 'vicious competition' over each others' allies.

Losing diplomatic recognition from Paraguay would undermine the legitimacy of Mr Ma's cornerstone strategy - engaging China - since it would imply that Beijing is still trying to win countries away from Taipei.

Taipei's shrinking list of diplomatic allies - mostly small countries in Central America, the Caribbean, South Pacific and Africa - compares with China's 170 foreign partners.

Mr Ma said that this year Taiwan will adopt a new strategy as far as its campaign to enter the United Nations, because the Taiwanese people did not approve a referendum earlier this year regarding UN membership.

'Due to these new indications we must make the necessary adjustments. We will soon be announcing what our new campaign will be this year', he said.

But he said he and Mr Lugo did not discuss whether Taiwan would be asking for Paraguay to vote for its entry into the United Nations this year, as it has in the past.

For 15 consecutive years China has blocked Taipei's bid to join the United Nations. Taiwan was expelled from the United Nations in 1971 in favour of Beijing's People's Republic.

From Paraguay, Mr Ma heads to the Dominican Republic, where incumbent President Leonel Fernandez, who is not expected to change relations with Taiwan, takes office again on Saturday. -- REUTERS