- The Washington Times - Friday, March 15, 2002

President Bush yesterday proposed giving developing countries another $5 billion in aid, but said the cash would come only with a commitment to reform their economies, root out corruption, promote the rule of law and open their markets to trade.

"To make progress, we must encourage nations and leaders to walk the hard road of political, legal and economic reform so all their people can benefit," said Mr. Bush, who was joined by rock star Bono at the Inter-American Development Bank, where he made the announcement.

"Along with significant new resources to fight world poverty, we will insist on the reforms necessary to make this a fight we can win," the president said.

Mr. Bush linked poverty and illiteracy to war, chaos and eventually the rise of terrorists.

"When governments fail to meet the most basic needs of their people, these failed states can become havens for terror. Development provides the resources to build hope and prosperity and security," he said.

The president, who will travel next week to Monterrey, Mexico, for a U.N.-sponsored development conference, said handouts to poor nations will not work without reform.

"The evidence shows that where nations adopt sound policies, a dollar of foreign aid attracts $2 of private investment. And when development aid rewards reform and responsibility, it lifts almost four times as many people out of poverty, compared to the old approach of writing checks without regard to results," he said.

Still, Mr. Bush again called for world development banks to provide "up to half of the funds devoted to poor nations in the form of grants, rather than loans."

He said that grants are preferable to loans because they are often not repaid, driving governments into heavy debt.

The Inter-American Development Bank, established in 1959, is the oldest and largest regional multilateral development institution to help accelerate economic and social development in Latin America and the Caribbean. The bank has 46 member nations and it loaned out almost $5.3 billion in 2000.

The new $5 billion in new U.S. aid which is subject to congressional approval would go into a new "Millennium Challenge Account" beginning in 2004 that would fund initiatives to help developing nations improve their economies and standards of living.

Mr. Bush directed Secretary of State Colin L. Powell and the Treasury Secretary Paul H. O'Neill to work with other nations to develop a set of "clear, concrete and objective criteria for measuring progress" in several areas, including whether nations are:

•Rooting out corruption, upholding human rights and adhering to the rule of law.

•Reforming economic policies that foster enterprise and entrepreneurship.

•Opening markets to trade.

•Investing in schools, health care and immunization.

While many Democrats applauded the proposal, House Minority Leader Richard A. Gephardt panned the plan.

"Unfortunately, the vague plan unveiled by the president today does nothing until 2004 to help these nations and their peoples. So, I urge the president to accelerate the timetable of his development assistance proposal and to provide real resources immediately," Mr. Gephardt said.

"That's simply too little, too late," said Rep. Nita M. Lowey of New York, the ranking Democrat on the House subcommittee that oversees U.S. foreign aid. "The need to increase resources to fight disease, improve education, combat poverty, prevent conflict and promote democracy is severe right now, and it requires an immediate and dramatic response."

But Republican Rep. Jim Kolbe of Arizona, chairman of that subcommittee, said the proposal "recognizes that economic development assistance can be successful only if it is linked to sound policies in developing countries."

Last year, Mr. Bush proposed that the World Bank should increase to 50 percent the amount of money it gives in grants to poor countries through its International Development Association. The banks now lend about $6 billion yearly, which means Mr. Bush wants to increase grants now less than 5 percent of the funds directed to poor nations to $3 billion annually.

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