U.S. and Japan offering $10 billion in aid to Asia

U.S. and Japan offering $10 billion in aid to Asia

KUALA LUMPUR (Reuters): U.S. President Bill Clinton and
Japanese Prime Minister Keizo Obuchi announced a US$10 billion
initiative on Monday to help restore growth in crisis-stricken
Asia by helping ailing banks and companies restructure.

"Several of the countries hardest hit by the crisis have made
great strides in recent months toward restoring stability,"
Clinton and Obuchi said in a joint statement.

The package was announced as Asia-Pacific Economic Cooperation
(APEC) leaders prepared to meet Tuesday and Wednesday in the
Malaysian capital, Kuala Lumpur.

"The major challenge they face today is restarting growth as
quickly as possible. To support this effort, Japan and the United
States, with the support of the World Bank and Asian Development
Bank, are launching the Asian Growth and Recovery Initiative,"
the two leaders added.

The plan targets $5 billion to help leverage substantial new
private sector financing to help banks deal and companies
restructure so that economies can return to growth.

That money will come from Japan, the Asian Development Bank
and the World Bank. A World Bank official in Washington said the
bank may offer loan guarantees for Asian government bond issues,
providing the cash to recapitalize banks and restructure
corporations. The United States cannot legally contribute to that
fund, but will provide substantial technical assistance, a senior
U.S. official said.

The United States will provide $5 billion to the initiative.

Vice President Al Gore, standing in for Clinton at APEC, said
in a speech to an APEC business summit the United States would
channel the money through Export-Import Bank trade financing
programs and Overseas Private Investment Corporation (OPIC)
insurance programs.

In addition to some $5 billion in short- and medium-term trade
financing made available through the Ex-Im bank at the onset of
the financial crisis, the United States would provide an
additional $1 billion in trade financing each to Indonesia,
Thailand and South Korea, Gore said.

The U.S. Overseas Private Investment Corp will provide over $2
billion in insurance to support new private investment in Asia.

A senior Japanese official said the $10 billion plan was
separate from Japan's $30 billion Miyazawa aid plan for Asia,
although some of the ideas were similar and overlapped.

"The reason we did this is to show the U.S. and Japan
cooperating together along with the ADB," he said, adding that if
other countries wanted to join, they could do so.

The two leaders said the money would be used to support
private financing in countries which have put comprehensive
restructuring programs in place.

The most likely initial candidates for the assistance were
Thailand and Indonesia, a U.S. official told reporters.

"You're going to have to get used to a little fog around the
numbers for a while," said the official when asked exactly how
much the plan was worth.

Details of the initiatives would be finalized at a meeting in
Tokyo, next month, Obuchi and Clinton said in their statement.

"Japan and the United States welcome the participation of
other economies in this initiative and encourage any interested
economies to attend this meeting," the two leaders said in their
statement, released in Kuala Lumpur, Washington and Tokyo.

However, analysts and traders here said the $10 billion joint
aid package is a welcome step but too small to quench Asia's
burning thirst for credit, analysts and traders said on Tuesday.

"It's a step in the right direction because the plan would
help Asian economies to tap the global credit market again," said
Tetsuji Sano, senior economist at Nomura Research Institute (NRI)
in Singapore.

"But the amount is far too small," he said.

Sano reckoned Thailand alone needed $25 billion for bank debt
restructuring, generously assuming that one half of the bad loans
would be recovered.

South Korea had at least $77 billion of bad loans in the
banking sector.

A senior Japanese official with Obuchi at APEC said: "I don't
think the joint initiative is the answer to all the problems in
Asia. But we still have the $30 billion New Miyazawa Initiative
we can mobilize for the region."

The initiative announced in October offers $15 billion in
short-term aid and $15 billion in long-term help to crisis-
stricken Asian economies.