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Bush proposes $5 billion boost in aid to poor nations

US President George W Bush on Thursday proposed a record $5 billion, three-year program to reward impoverished nations that respect human rights, root out corruption and open markets, saying the aid could help ease the despair that fuels Islamic militancy.

As he laid out his philosophy that the United States should not be "writing checks without results," Bush also appealed to other industrialised nations not "to leave behind half of humanity" because there were "no second-class citizens in the human race."

Bush linked the new aid, which would come in the form of grants but not begin to flow until the fiscal 2004 budget, to tangible progress on economic and political reforms, including advances in health and education.

Joined on stage by rock singer Bono and Washington's Roman Catholic Cardinal Theodore McCarrick, Bush told his audience at the Inter-American Development Bank that poverty did not cause terrorism but could nourish it.

"Persistent poverty and oppression can lead to hopelessness and despair. And when governments fail to meet the most basic needs of their people, these failed states can become havens for terror," he said.

Bush set the ambitious goal of doubling the size of the world's poorest economies within a decade. This would require a tripling of current growth rates.

Democrats in Congress welcomed Bush's commitment to increasing foreign aid, but said poor nations needed assistance sooner than fiscal 2004.

"That's simply too little, too late," said Rep Nita Lowey of New York, the ranking Democrat on the House subcommittee that oversees US 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."

The $5 billion proposed by Bush would come on top of the roughly $17 billion the United States distributes each year in development assistance.

Bush made the announcement ahead of next week's UN-sponsored development conference in Monterrey, Mexico, which Bush and other world leaders will attend. "I carry this commitment in my soul, and I'll carry it with me to Monterrey next week," Bush said.

The United States and Europe have been at odds for months over efforts by the Bush administration to overhaul the way the World Bank and other international lending agencies operate.

Bush wants them to provide up to 50 percent of their assistance to the poorest countries in the form of grants.

But Europeans fear grants could eventually jeopardise the capital and future lending base of institutions like the World Bank. They want grants to be limited to 10 per cent of aid.

Bush urged them to reconsider and stepped up pressure on lending agencies to reform.

"We cannot leave behind half of humanity as we seek a better future for ourselves," Bush said, noting that 50 per cent of the world's population lives on less than $2 a day.

Bush directed Secretary of State Colin Powell and Treasury Secretary Paul O'Neill to draft "clear, concrete and objective" criteria for measuring progress by developing nations in carrying out reforms.

"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," Bush said.

He added that the "old models of economic development assistance are outdated" and a waste of taxpayers' money.

"More aid money can actually be counterproductive because it subsidizes bad policies, delays reform and crowds out private investment," Bush said. "The needs of the developing world demand a new approach."

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