U.S. Department of the Treasury

(Archived Content)

President Kabbaj, My Fellow Governors, Honored Guests, Ladies and Gentlemen:

It is a pleasure for me to be here in Ethiopia for the 37 ^th Annual Meeting of the African Development Bank. I extend my sincere thanks to our Ethiopian hosts for their gracious arrangements, and to President Kabbaj and his staff for their hard work in organizing these meetings.

At this gathering of some 50 African nations plus non-regional member countries, we have an important opportunity to talk about how the African Development Bank can meet the challenge of promoting more effective development on this continent.

My visit to Ethiopia concludes a ten-day journey in Africa that has included visits to Ghana, South Africa, and Uganda. Each stop on this trip has underlined the need for the work performed by the African Development Bank. Each stop has also provided overwhelming evidence that the people of Africa have the potential to succeed greatly. The challenge for every person, every agency of government and every non-governmental organization that cares about Africa is to work together to accelerate the movement from human deprivation to the full realization of individual human potential.

From the start of his administration, President Bush has been clear that the goal of the United States is to spur economic growth and reduce poverty throughout the world. Our agenda for the multilateral development banks is guided by a focus, first, on supporting growth in productivity as the key to broad and deep gains in per capita incomes; second, on ensuring the effectiveness of development assistance through close measurement and monitoring; and third, by insisting on results.

In recent years, the African Development Bank under the leadership of President Kabbaj has undergone one of the most far-reaching and comprehensive restructuring programs ever undertaken by a multilateral development bank.

Our support for the Bank is demonstrated by President Bush’s request to Congress for an 18% increase in the U.S. contribution to the African Development Fund.

These added resources are needed to support the continuing reforms at the Bank. President Bush also is proposing an 18% increase in the U.S. contribution to IDA, much of which will go to Africa.

I am hopeful that the Bank can form strong partnerships with donors and borrowing member countries to target its interventions in Africa more precisely on increasing human productivity, promoting private sector development, and thereby accelerating economic growth.

Examples would include improving education and health; promoting private enterprise, including small and medium enterprises (SMEs); expanding the rule of law; strengthening public expenditure management, accountability and anti-corruption; and promoting more open trade and investment environments. Every AfDB operation should be assessed with these goals in mind and with a clear vision of the AfDB’s comparative advantage. I applaud the Bank’s Vision Statement that makes basic education and health a priority, and I am encouraged by the recent agreement to allocate a greater share of African Development Fund resources to these areas.

Investment by private enterprise, African as well as foreign, is critical to increasing productivity, employment, and growth. I believe that the AFDB can do much more in the area of private sector development, and I urge it to find new ways to support entrepreneurs in Africa, especially small and medium-sized enterprises, which are an important source of income and employment generation. I also would urge the AfDB to work closely with its borrowing member countries to promote investment climate reform, spur privatization of many state-owned enterprises, and to lay the foundation for a more vibrant private sector in Africa.

To ensure that AfDB programs support higher productivity, measurable results should be the hallmark of all its operations, with progress tracked against a set of key objectives for each investment, each country, and the AfDB itself. I am encouraged by the Bank’s agreement under AfDF-9 to develop a results-based management system that links project inputs with clear measurable indicators related to improving the lives of people. Implementation of this system will be key, as will the feedback of findings into new projects. By measuring results, we want to see not necessarily that a school was built, but that, for example, an African child after six years of schooling is able to read, write, and compute at grade level. If this goal has not been met, then something must be changed, and quickly.

To be effective, assistance should be delivered on appropriate financial terms and by appropriate instruments. President Bush’s proposal for a substantial move from loans to grants in the multilateral development banks, coupled with continued progress under HIPC, can help African countries to increase productivity through investments in people, but without adding to debt burdens.

Investments in education, health care, control of HIV/AIDS and other diseases, nutrition, clean water, and sewerage do not directly generate the funds needed to repay loans; it makes more sense to finance these activities with grants. We look forward to reaching final agreement soon on a substantially increased grants program in the ninth replenishment of the African Development Fund.

On March 14, President Bush outlined a major new vision for development, based on the common interests of developed and developing countries in peace, security, and prosperity. His Compact for Development proposes an historic, shared effort to achieve substantial, sustainable increases in the average income level in developing countries, and defines a new partnership between the United States and governments in the developing world that are making an effective commitment to the reforms necessary for sustained growth.

To support the US commitment, the President is proposing to create a new development assistance account, called the Millenium Challenge Account. Beginning in 2004, it would be funded by increases in the budget that would reach $5 billion per year by FY 2006. These amounts would be additional to the roughly $10 billion we currently devote to official development assistance.

To gain access to the Millenium Challenge Account, developing countries need to show that they are implementing sound policies that promote growth and development. We will channel these funds to countries that demonstrate a strong commitment to ruling justly and transparently, encouraging economic freedom and a competitive environment for the private sector, and investing in their people by improving education, health, and water supplies, and fighting the deadly scourge of AIDS.

This initiative is based on the belief that good policies have universal application, and that development partnerships can be effective only if rooted in a sound policy framework. President Bush has asked Secretary Powell and me to design indicators that will govern use of the new funds, and has asked us to reach out to the world community in the process of developing these indicators. I have begun that effort with this trip.

The New Partnership for African Development (NEPAD) initiated by the Presidents of South Africa, Nigeria, and Algeria, embodies many of the ideas that I have been discussing today. We congratulate them, as well as the President of Senegal and other leaders who have been involved, for providing a framework for effective action. Now there is a need to fill in the blanks and to show how it would work.

They will find that the US commitment to support reforming countries in the region will be substantial and unwavering.

The Millenium Challenge Account builds on our previous initiatives, including the Africa Growth and Opportunity Act, the multilateral development bank grants initiative, the increase in funding for IDA and the African Development Fund, the HIPC debt relief initiative, establishment of the HIV/AIDS Trust Fund, and expanding technical assistance from Treasury and other agencies. These initiatives demonstrate that African countries that are committed to raising productivity growth and reducing poverty will have a strong partner in the United States.

Thank you.