Reforms Key to Recovery, U.S. Tells Asia

Secretary of State Madeleine Albright issued a stiff warning to Asian governments Friday that they must accept the “bitter medicine” of economic reforms or face the prospect of further deterioration in the financial crisis that has swept the region.

A day after jitters about Asia contributed to a significant hit on the U.S. stock market, Albright also warned that the effect of Asia’s economic problems are “increasingly” being felt in economies and markets worldwide. “The risk of long-term harm to the global economy and to our own prosperity cannot be ignored,” she said.

As she prepared to leave for the Assn. of Southeast Asian Nations, or ASEAN, summit in Manila, Albright called on the new leadership in Japan, a country she described as “at the center of the crisis,” to speed action to turn its problems around. Tokyo needs swift deregulation of a tightly controlled economy, major banking reform and must stimulate its economy, she said.

“To retake their rightful place in the global economy, it is essential to take these steps. [Prime Minister-designate Keizo] Obuchi has an important job to do,” she told an audience at the International Diplomacy Council here.

She plans to meet Obuchi, who was Japan’s foreign minister, at the ASEAN summit Sunday.

Albright also said the United States will strongly press all the region’s troubled governments to apply democratic principles and the rule of law to the marketplace. Democracies, she noted, are better able to deal with economic and other crises than autocracies. “The medicine of economic reform is bitter. It requires that old ways of doing business must change, inefficient firms close and cozy relationships break up,” she said.

She appealed to Asian governments to provide greater competition, accountability and stronger conditions for direct foreign investment. The immediate consequences for workers and families may be “difficult and unfair.” But if actions are not taken, she warned, “the illness only gets worse. If taken, recovery becomes only a matter of time.”

Albright offered an overview of U.S. goals in some of the region’s hot spots. To deal with Indonesia’s turmoil, she said, the new government needs to reach beyond “traditional centers of power” to devise “profound” economic and political reform based on democratic principles.

In Cambodia, where elections will occur this weekend, Albright said the next government must “replace cronyism and corruption with accountability” and respect basic civil liberties. “The international community cannot impose democracy in Cambodia, but we can encourage it by making our assistance to any government conditional on respect for international norms,” she said.

In a separate appeal, Albright also warned that the effectiveness of U.S. foreign policy is being sapped by the lack of resources. The Clinton administration was losing “historic opportunities” to foster future security, prosperity and freedom around the world because of “crippling” budget cutbacks, she said.

U.S. programs to strengthen democracy in Russia and other former Soviet states are now endangered because of cuts. Money to promote the rule of law in China has been denied outright. And the cash needed to monitor and detect nuclear tests around the world is imperiled.

“There is a growing risk that extremists will exploit openings for mischief that a more active American presence could have prevented,” Albright said.

U.S. support needed to promote international peacekeeping, women’s rights and environmentally friendly technologies are now being “nickeled and dimed to death,” she said. “Today, there is a growing gap between what the American people want to accomplish abroad and what we are able to accomplish,” she said.

The United States also faces “growing resistance” in getting other countries to meet their financial obligations when Washington fails to uphold its fiscal commitments, she said, referring to American lawmakers balking at requests from the United Nations and the International Monetary Fund.