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Good afternoon. It is a pleasure to be at your university today.
This tour marks my first visit to Africa since becoming Secretary of the United States Treasury. In my previous visits I traveled as a businessperson. I am eager to make the most of my time, to witness first hand the efforts underway to engage all the people of Africa in creating a brighter future.
I come here to learn. To hear from entrepreneurs, investors, farmers, artisans and vendors in the market. I want to hear their hopes and dreams and I hope they share with me their insights into how best to eliminate the obstacles to Africa's prosperity.
I come here with an open mind, convinced of only one thing -- that human beings everywhere have the potential to succeed.
The question for us, and for our time, is how to finally realize that vision. How can the people of the African nations and their elected leaders create prosperity -- and how can the people of the United States and the other industrialized countries best support their efforts?
If I had the answer, I would have sent a prescription. It’s not so easy. For some 50 years, thoughtful, compassionate people have struggled to solve poverty here. As Bono, my friend and travelling companion, might say we still haven't found what we're looking for. The results of official development assistance have been disappointing, and many poor countries here have stayed that way, even as others have excelled.
So I have come to Africa. Not to preach, but to listen, and share. I want to see what has worked here, and what has failed. I want to ask how we can do better. I want to learn from Uganda’s political and economic success, so I can share the best of your experience with your neighbors and the world. At the same time, I want to share what we have learned from other successful developing countries around the world, and show our commitment to promoting those practices in Africa.
And I want to take our combined experience and put it to work, to produce results for Africans. Not in the next generation, but right now.
Here is what we know: all people are created equal. Given the tools and incentives for success, they will succeed, no matter who they are or where they live. Of course this is self-evident. But I have also seen this truth first-hand, as a leader in the private sector. As Chairman and CEO of Alcoa, I helped grow the company from 55,000 employees in 13 countries when I joined in 1987, to 140,000 people in 36 countries -- including several African countries -- when I retired in 2000.
During that time I learned about job creation, and about the ways of life and work around the globe. In my travels, I saw that human beings everywhere, with the proper education, good health, and a stable environment, could perform meaningful, value-adding work at world-competitive levels. I saw that in the Americas, I saw it in Europe, I saw it in Asia, and I saw it in Africa.
We also know that in every nation, economic growth and higher living standards come from increasing productivity -- that is, increasing the value that each worker produces each day. When productivity is rising, workers earn more for their work and their quality of life improves, year after year.
Moreover, we know that it is a competitive private sector that drives productivity gains. As companies compete with each other for business, they seek better ways to satisfy their customers. They try to provide more and more value for each dollar. As opportunities to add value emerge, entrepreneurs enter the market. To stay competitive, leaders must constantly invest in new ideas and better methods for production.
So what can a country do to unleash its private sector and increase productivity? What have successful leaders done?
- They rule justly, by fairly enforcing law and contracts, respecting human rights and property rights, and fighting corruption. , by fairly enforcing law and contracts, respecting human rights and property rights, and fighting corruption.
- They encourage economic freedom, by removing barriers to trade – both internal and external – and by opening their economies to investment, allowing companies and entrepreneurs to compete without excessive interference, and pursuing sound fiscal and monetary policies, including government divestment of business operations. , by removing barriers to trade – both internal and external – and by opening their economies to investment, allowing companies and entrepreneurs to compete without excessive interference, and pursuing sound fiscal and monetary policies, including government divestment of business operations.
- And they invest in their people, by providing the best possible systems for education and health care. In particular, we must work to fight the spread of AIDS, which threatens to cripple the economic potential of many African nations and peoples. , by providing the best possible systems for education and health care. In particular, we must work to fight the spread of AIDS, which threatens to cripple the economic potential of many African nations and peoples.
All three of these elements -- ruling justly, encouraging economic freedom, and investing in people -- are essential for successful development.
Among the many nations in Africa, we chose to visit Uganda on this tour because you have been an inspiration for the continent. Uganda’s economy has grown by almost 7% annually over the past ten years, an extraordinary achievement in any part of the world. Because of that growth, poverty fell from 56% of the population in 1992 to 35% in 2000. Inflation is low, the currency is stable, and trade is open.
Foreign investment has increased by ten-fold from its average rate in the early 90s, as Ugandan reforms have raised investor confidence. Just a few weeks ago, President Museveni and I met in Washington to discuss how to further encourage private investment in your country. One of my suggestions was to pursue an investment grade credit rating as an indicator of leadership and good policies.
The transparency and policy environment needed for an investment grade rating disciplines government. Achieving investment grade sovereign debt would allow Uganda to grow on its many merits, as investors could more easily differentiate Uganda’s risks from those of less progressive nations.
Thanks to President Museveni’s leadership, Uganda has become the first country in Africa to reduce its AIDS infection rate. At the same time, primary school enrollment has increased from about half (55%) of children in 1994 to nearly all of them (94%) in 1999, and half (over 47%) of the students are girls. Education quality is improving as well.
Uganda shows the positive difference that leadership can make. There is still much more work to do -- fighting corruption and building democracy, improving infrastructure, strengthening the financial sector, and expanding exports. But there is much to learn here. And so, we will visit The AIDS Support Organization clinic in Kampala and several AIDS research centers. This morning we visited a Universal Primary Education school and a community water project. A cut-flower factory we will visit exemplifies Uganda’s export efforts. And later today, we will meeth entrepreneurs building businesses with micro-finance loans from USAID.
When we return to Washington, we will push ahead with President Bush’s reform agenda.
One key component of this reform agenda is that official development assistance, through USAID, through the World Bank, the African Development Bank or bilaterally, stands a better chance of success when local leaders are already improving the economic framework of the nation.
That is the premise of the President’s Millennium Challenge Account and the New Compact for Development. The President has proposed $5 billion in additional US bilateral aid annually, channeled to those countries that can use the money effectively. To access the Millennium Challenge Account, developing countries must demonstrate a strong commitment to ruling justly, encouraging economic freedom, and investing in people.
We are in the process of developing the criteria for measuring countries’ policies in this area, so we can begin to disburse funds. As part of the process, President Bush has asked us to reach out to the world community, and that is one reason for this tour of Africa.
Uganda was the first beneficiary of the World Bank and IMF Heavily Indebted Poor Country initiative, which has freed substantial debt service resources for worthwhile social investments. Washington has supported the HIPC initiative. But we want to go even further, to overcome the causes of excessive debt for countries whose leaders embrace reform.
President Bush has proposed that up to 50% of World Bank and other development bank funds for the poorest countries be provided as grants rather than as loans. This proposal acknowledges the long-term development challenges facing these countries, their vulnerability to economic shocks, and the reality that essential investments in social sectors such as education and health care -- investments in people -- cannot directly generate the incremental revenue to service new debt.
Replacing loans with targeted grants will eliminate the need for governments to repay principal and interest on long-term investments in people. It will thereby eliminate the next generation of debt service problems. It is time to end the sad cycle of indebtedness for countries committed to success.
We have to be hard-headed and demand results—that is our responsibility to the impoverished people of Africa. If we don’t insist on results for the dollars provided by compassionate people all over the developed world, then we are not meeting our responsibility as world leaders to improve the lives of people everywhere.
Since I became Treasury Secretary, I have been determined to reform the way in which the World Bank and the other multilateral development banks do business. They must improve the effectiveness of their assistance. Rather than focusing on inputs, I want them to focus on results. For example, don’t tell me how many children you’ve enrolled in school, or how much you’ve spent on enrollment programs -- tell me how many of the children can read, write and compute at their grade level after six years of schooling. That’s what matters – it’s the only thing that matters to those children and their future.
President Bush has created new incentives in our development assistance programs to encourage a greater focus on results. He has committed to an 18% increase in funding for the African Development Bank and an 18% increase in funding for IDA, the World Bank’s lending program for the poorest nations, so long as those programs can show they are achieving measurable improvements in development.
In the long-term, domestic entrepreneurship as well as trade and foreign investment are far more important for economic growth than official aid. I agree with President Museveni, who wrote in our Wall Street Journal last week that there is now a broad a agreement that no national or international strategy for addressing poverty can be successful unless it promotes expanded trade and investment.
The United States has created the Africa Growth and Opportunity Act, or AGOA, to open U.S. markets to exports from sub-Saharan Africa. AGOA provides duty-free treatment for African exports to the United States, including preferential treatment for certain products. The Ugandan government has qualified for AGOA, which will advance export-driven private sector growth. As President Museveni said If somebody buys what Uganda produces, then he is rendering my country the best assistance possible.
I would also encourage Uganda and all African nations to reduce trade barriers amongst themselves, so that all can benefit from their different comparative advantages, and relative proximity to each other.
I believe strongly in development assistance that makes a difference in people’s lives.
I am optimistic that our efforts together will produce results in Uganda, and throughout Africa. This is an exciting time for those of us who relish the challenge of unleashing human potential around the world, especially in Africa. We are making progress on many fronts. With the right government policies, we can accelerate the spread of private sector production around the world. We can create vibrant, self-sustaining local economies and a rising standard of living for people everywhere. We can unleash the human potential -- and we will not be satisfied with anything less.
Thank you.