May 14, 2007
HP-537

United States Statement
by Kenneth Peel
2007 African Development Bank Annual Meetings
Shanghai, China

I am honored to represent the United States at this 42nd Annual Meeting of the African Development Bank.  On behalf of Secretary Paulson, I would like to extend our gratitude to our generous hosts – Governor Zhou and President Kaberuka. 

Africa is on the move.  Improved economic policies, debt relief, and high commodity prices supported high growth rates.  This growth has transformed the economic landscape in many African countries.  As sub-Saharan Africa's largest trading partner and donor, the United States has played a role in this transformation. In 2006, U.S. merchandise trade with sub-Saharan Africa grew 17% to over $70 billion.  U.S. assistance, which is broadly targeted toward countries undertaking robust reforms, rose 33% to $5.6 billion.  The United States is on track to meet its Gleneagles' commitment to double assistance to Africa to $7 billion by 2010.

We strongly support President Kaberuka's efforts to narrow the African Bank's focus to areas where it has a comparative advantage.  We hope and expect that this will be more formally reflected in the Bank's emerging 2008-2010 Strategic Plan.  A natural starting point is working to shrink Africa's huge infrastructure gap.  Only 10% of Africa's trade occurs between African countries, due partly to poor physical connections.  Transport costs are on average 50% higher for landlocked countries than for coastal ones.  The Bank can play a major role in this vital work. 

We are pleased with the Bank's reinvigorated Private Sector and Infrastructure Department, but urge them to look beyond the easy, large projects in countries with market access.  The Bank should seek opportunities in the more difficult environments where its efforts can have greater impact. The Bank must ensure that its financing achieves real results, adds value, and catalyzes – rather than competes with – the private sector. 

Through the 11th replenishment, we hope to make the African Development Fund more effective in fighting poverty in the poorest countries of Africa.  There is a growing consensus that the Bank must be more accountable for achieving results. While the Bank has made progress, it needs to do more to shift the institution from an approval culture to a results culture. 

We must continue to ensure that new financing does not undermine the hard-won gains of the HIPC and MDRI debt reduction initiatives by avoiding the new buildup of unsustainable debt burdens.  All donors and creditors should base their financing decisions on country Debt Sustainability Analyses.  Developing countries must set clear priorities in their borrowing decisions and ensure a high return on investments.

The Fund's effectiveness also depends on allocating the bulk of its limited resources to countries most committed to economic reform.  Longstanding research supports this approach.  Maintaining the primacy of performance in the Fund's allocation system will be a central consideration in our support for the replenishment.

This is not to ignore the very real challenges facing those fragile states that may have the willingness, but not yet the capacity, for implementing sound policies and building strong institutions.  The Bank's emerging strategy on fragile states needs to be based on three key principles.  First, it must be selective and clearly define "fragility," to avoid simply turning the entire institution into a fragile states bank.  Second, it must have a clear timetable for a country to transition out of treatment as a fragile state, and avoid giving special status to perennial poor performers.  And third, it must focus on effectiveness, not on aid volume.

We welcome the hopeful developments in the Bank's Host country, Cote d'Ivoire, since the Ouagadougou Accords.  Sadly, the Bank has been unable to operate out of a permanent Headquarters for more than four years, and this extended uncertainty is an increasing problem for the Bank's long-term effectiveness.  For this reason, we are pleased that the GCC will meet again in  April to evaluate whether Cote d'Ivoire's progress warrants a return to Abidjan.  Based on the GCC's recommendations, we hope that Governors will be able to make this decision at next year's Annual Meeting.  If that is not possible – and again, we have every expectation that it will be possible – then we will need to begin discussing alternative approaches.  The United States would like to emphasize that in all these considerations we look to the leadership of our African partners.  Together, we need to ensure that it can effectively carry out its noble mission of combating poverty and promoting economic growth for all of Africa. 

Finally, we commend President Kaberuka, his new senior management team, and the Bank's committed staff.  We sense a new dynamism, vision, and willingness to take risks and try new things.  We believe that shareholders have an equal responsibility.  We should be open to innovations that increase the Bank's efficiency and governance such as those recommended by the Center for Global Development, including a shift to a non-resident Board of Directors. 

In conclusion, let me reaffirm the commitment of the United States to the African Development Bank.  We are proud to be a shareholder of an institution that is committed to realizing the potential of a dynamic continent. 

Thank you.