WASHINGTON, June 3: Two key proposals in a US-led Middle East reform initiative with Group of Eight allies may be altered significantly or dropped, US officials said on Wednesday, in what may be another sign of scaled-back American ambitions.

The Bush administration proposed several new institutions that could be endorsed by the G8 summit at Sea Island, Georgia, next week to permanently promote fledgling regional economic, political and social reform efforts.

Officials said a 'forum for the future' that would offer a regular venue to discuss Middle East reform was taking center stage at the June 8-10 summit but the fate of a proposed democracy assistance group and a foundation for democracy was uncertain.

As proposed by the administration, the summit's centrepiece is to be the Greater Middle East Initiative, now renamed the G8 Broader Middle East and North Africa Initiative, reflecting concerns about the US plan.

After an initial draft provoked heated objections from Europeans and Arabs, the administration scaled down its ambitions, which are aimed at advancing long-term democratic and economic reforms in a region that has become a breeding ground for anti-Western extremists.

But a more recent draft included the assistance group to coordinate American and European foundations sponsoring nongovernmental democracy programmes and a democracy foundation to take that further by creating a Mideast-focused multilateral foundation.

This would be similar to the US National Endowment for Democracy, a private non-profit group that aims to strengthen democratic institutions around the world. The US effort has been complicated by instability in Iraq, Israeli-Palestinian violence and an Iraqi prisoner abuse scandal that has stoked new anti-American sentiment.

COMPLICATIONS: "It does appear that the democracy foundation has been dropped and it does appear as if the democracy assistance group is changing," one US official told Reuters.