Clinton Hopes ‘Worst Is Over’ in Asian Crisis

President Clinton said Friday that he hopes “the worst is over” in the Asian financial crisis, but he warned that governments in the region must put more reforms into place if they want to avoid a new round of economic shocks.

Clinton used a meeting with Thailand’s prime minister, Chuan Leekpai, to both praise that country for overhauling its economy and, by implication, to urge Indonesia to begin carrying out economic changes that it has promised.

The president made his remarks as U.S. and International Monetary Fund policymakers launched a fresh push to bring Indonesia into the fold by sending negotiating teams to Jakarta to meet with President Suharto’s new Cabinet, which is expected to be named this weekend.

In January, Suharto pledged to carry out economic reforms recommended by the IMF. So far, however, he has balked at fulfilling his promises, and instead is considering a plan to link the Indonesian currency to the dollar--a plan the IMF opposes.

Key U.S. and IMF officials said they do not know what to expect when negotiations begin early next week. U.S. Treasury Secretary Robert E. Rubin conceded to reporters Friday: “We are not predicting anything.”

U.S. officials have warned that if Suharto does not carry out the prescribed reforms, the 182-country IMF will withhold further installments of a $43-billion rescue package that it has assembled for Indonesia, leaving Jakarta to rebuild its economy on its own.

If that happens, some analysts fear, the Indonesian economy will collapse entirely, worsening the already worrisome civil unrest in that country and possibly exacerbating the financial and political problems throughout Asia.

In an effort to head off such “contagion,” as financial analysts call it, U.S. officials have been urging investors to look at each country individually, rather than lumping them together in deciding whether to pull out their money.

Clinton said pointedly that “we’re beginning to see a differentiation” by investors in assessing the Asian situation. “We don’t want to see the whole region thrown into a long-term recession because of the perception that everything is the same everywhere,” he said.

As a way of reinforcing its warnings to Indonesia, the administration showered Thailand with about $1.7 billion worth of trade financing and debt relief, ostensibly as a reward for having moved vigorously to carry out the reforms prescribed by the IMF.

In a briefing at the White House, Deputy U.S. Treasury Secretary Lawrence H. Summers said Thailand had taken major steps to overhaul its banking structure and has been following the kinds of policies that have restored financial markets’ confidence in its economy.

“We have been much encouraged by the progress since the Chuan government came to power last fall,” Summers said.

Chuan’s visit was designed partly to recognize his government’s efforts in carrying out politically difficult economic reforms and partly to make up for Thailand’s resentment at the U.S.’ failure to come to its rescue quickly when the financial crisis broke out last July.

Although Bangkok has been a longtime U.S. ally, the Clinton administration declined to participate in an emergency financial rescue package then being assembled for Thailand, contending that the turmoil in the markets was an Asian problem that needed no U.S. response. Treasury officials said then that the administration feared a backlash in Congress.

The administration changed its position when the crisis spread to other Asian countries.

The aid package announced for Thailand on Friday contained these major elements:

* The U.S. Export-Import Bank will extend $1 billion in short-term trade financing to Thailand to enable the country to step up its exports and to begin importing more goods from the United States.

* The Pentagon will relieve Thailand of its obligation to buy eight F/A-18 fighter aircraft from McDonnell Douglas Co., which is now part of Boeing Co. The jets will be purchased instead by the U.S. Marine Corps.

* The U.S. Overseas Private Investment Corp. will provide Thailand with $400 million worth of technical assistance on four major power-plant projects. It also will make available $45 million in investment guarantees to encourage investment in Thai companies.

U.S. and IMF officials said they still are not certain whether they will be able to persuade Indonesia to go along with the IMF’s prescriptions. Suharto himself has been noncommittal, and rumors are that his new Cabinet will be made up of hard-line conservatives.

Rubin said David Lipton, undersecretary of the Treasury, was expected to arrive in Jakarta this weekend to begin talks with the Suharto government. But he insisted that Washington had no new incentives to offer. “We are not going with a plan,” he told reporters.