Gore Unveils U.S.-Japan Asia Aid Effort

KUALA LUMPUR, Malaysia —  The United States and Japan put aside their differences Monday and jointly announced $10 billion in new initiatives to revive Asia’s economies, even as Vice President Al Gore sparked a high-level spat in announcing it.

In a speech largely devoted to the U.S.-Japan effort, Gore openly praised the “brave” anti-government protesters who have taken to the streets to demand the resignation of Prime Minister Mahathir Mohamad, Asia’s longest-serving ruler and the host of the banquet at which Gore spoke.

Gore made a point of praising the push for political freedom and democracy by the “reformasi” movement created by Anwar Ibrahim, the now-imprisoned dissident who long served as Mahathir’s second-in-command.

“We hear them today--right here, right now--among the brave people of Malaysia,” Gore told a banquet for Asian business leaders attended by Mahathir.

Gore also took a swipe at Mahathir for imposing currency controls in defiance of the International Monetary Fund and other U.S.-led efforts to open markets and promote the free flow of capital.

“Some . . . cling to the belief that authoritarian rule makes it easier to impose the fiscal discipline and financial sacrifice often necessary to weather economic storms and spark growth. The facts refute that view,” Gore said.

Gore’s provocative comments added more combustion to what already has become a highly contentious gathering of the leaders of 20 nations plus Hong Kong, who are meeting here for the annual Asia-Pacific Economic Cooperation summit.

The remarks also overshadowed a potentially important step in international efforts to help Asia’s economies--an apparent meeting of the minds between the world’s two largest economies on ways to address the region’s woes.

Gore said the United States and Japan would create a joint $5-billion plan to recapitalize failing banks and restructure crushing corporate debt in the troubled region.

Gore said the package, as well as $5 billion in new U.S aid, were aimed at helping reform crumbling corporate and banking systems, spur new private investment and trade and assist those people most severely affected, “especially the poor, children and the elderly.

“Ultimately, our best hope is to let free markets work their magic,” Gore said.

Hundreds of billions of dollars have been lost in Asia’s financial tumult, and the relatively modest assistance packages may be more a symbol than a solution to the regional crisis.

Indeed, the U.S.-Japan plan may be most notable because it represents an apparent truce between warring financial planners in the world’s two largest economies.

The Asian Growth and Recovery Program, as the joint initiative is called, came as a surprise since Washington and Tokyo have openly sparred about the causes and solutions to Asia’s economic crisis. Japanese officials denied as recently as Saturday that a joint effort was likely.

A senior U.S. official, who spoke to reporters on condition of anonymity after Gore’s speech, conceded the new initiative was a “modest” effort to heal Asia’s sick economies. “This is not a big-bang sort of solution,” he said.

A top Japanese official at the briefing said that despite their differences, Tokyo and Washington saw “eye to eye” on the need for an emergency infusion of capital and technical assistance.

Though U.S. leaders have previously criticized Mahathir’s handling of the Anwar case and his economic policies, Malaysian leaders reacted angrily to Gore’s remarks as an insult to Asian sensibilities--a case of the guest criticizing his host.

After the speech, Gore walked over to Mahathir and quickly shook hands before leaving. It was unclear if the two men spoke. Gore will not formally meet with Mahathir or any other Malaysian government official during his three-day visit, to show disapproval of Anwar’s case.

Mahathir later declined to comment on Gore’s speech, but according to Reuters news service, he was overheard saying, “I’ve never seen anybody so rude.”

Rafidah Aziz, Malaysia’s trade minister, responded angrily to what she called interference in Malaysia’s internal affairs. “It was the most disgusting speech I ever heard in my life,” she told reporters.

U.S. business leaders, eager to maintain friendly ties with Malaysia for commercial reasons, also voiced dismay at Gore’s remarks.

Richard Holwill, an executive with Amway Corp. and co-chair of the Asia committee for the U.S. Chamber of Commerce, said the American business community was “absolutely appalled” at Gore’s comments.

“He was ill-informed, ill-timed and ill-mannered, and those were the strong points,” Holwill said.

The normally staid economic sessions have been marred by ongoing street protests, President Clinton’s last-minute pullout to attend to the standoff with Iraq, Secretary of State Madeleine Albright’s abrupt departure after 24 hours to return to Washington and by the failure to reach agreement on a trade liberalization package that was supposed to be this year’s APEC centerpiece.

Albright also angered the Malaysians by meeting Sunday with Anwar’s wife, Wan Azizah Wan Ismail, in a direct diplomatic snub to Mahathir’s regime. Like Gore, she had declined to meet any Malaysian government officials.

U.S. officials had worked for months to craft a plan that President Clinton could announce to the APEC leaders. Clinton abruptly canceled his trip Saturday due to the Iraq crisis, and Gore came early Monday instead.

The president is expected to leave Washington on Wednesday morning and arrive in Japan on Thursday. He would carry out a compressed version of his original schedule, with stops in South Korea and Guam.

Officials said the new joint financing regime would be directed initially at recapitalizing debt-laden banks and will be offered only to governments that have begun comprehensive restructuring programs in conjunction with the World Bank and other international lending institutions.

The new program is to be funded by the Asian Development Bank, the World Bank, the U.S. and Japan and may include loans, guarantees, bonds or other instruments. Many details of the plan remain vague, however, including how much money Washington and the other participants will contribute.

Gore said such specifics will be finalized soon at a meeting the United States will host in Tokyo of senior officials and technical experts from both countries, as well as Asian nations and multilateral institutions.

In addition, Gore said Washington will move separately to authorize the U.S. Export-Import Bank to provide $3 billion more in new medium-term financing for Indonesia, Thailand and South Korea, three of the hardest-hit countries.

The Overseas Private Investment Corp. also will provide more than $2 billion in political risk insurance and project financing to support new private investment in Asia, Gore said. In both cases, the funds will support U.S. firms or Asian companies purchasing U.S. goods and services.

“We want to do all we can to encourage trade and industry here, so American business can be an active partner in your growth and recovery,” Gore told the APEC gathering.