FROM THE OFFICE OF PUBLIC AFFAIRS

AT THE AGOA FORUM

OCTOBER 29, 2001

I would like to welcome our African colleagues to what we hope will be the beginning of a continuing partnership for addressing the challenges and promoting the potential for African development. I have traveled in Africa and seen the tragedy of poverty first-hand: children afflicted by disease because they lack basics such as clean water and sanitation, and adults who cannot earn enough to feed their families. Such personal struggles are intensified when the surrounding social and political fabric is frayed by poor governance, political instability and conflict, HIV/AIDS and other infectious disease, and vulnerability to natural disaster.

A key element of the United States' economic development agenda is to expand trade and investment opportunities around the world, to strengthen ties between developed and developing countries. Our hope is to help improve African economic growth by using the most potent development tools we have - open markets and the private sector - to make a visible, concrete difference in the lives of Africans.

Encouraging There are three major sets of partners with major roles to play in supporting stronger growth and productivity in Africa: African governments themselves, the United States and other countries, and the International Financial Institutions.

African governments have the primary responsibility for creating alone the conditions that make economic growth and development possible. Theose include, first, political and economic stabilitypermit attract ; sto take place. , since both conflict and inflation are toxic for investment and growth. econd, greater investment in health and education, which provide the human capital that is the foundation for increased productivity (all the more true in the face of the AIDS epidemic that is devastating so many African economies); third, an environment conducive to the private sector growth investment, necessaryto attract for creating export-led growth -- private investment including; that means, above all, a more open trade and investment environment that will encourage the import of new technologies and management practices on competitive terms. Finally, better governance (including effective public expenditure management systems) and stronger institutions are needed, to better control corruption and provide an appropriate framework for growth. : every country suffers from corruption, but poor countries can afford it least of all.

An increase in Aagricultural productivity can have an immediate impact. Agriculture has been a foundation for stronger growth in many countries, including the United States. e must have a prominent place in African economic planning, since so much of African society is agrarian. Africa grew 83% of its grain needs in the late 1970s, but only 56% in 2000.Yet Ffood production in Africa has grown by only 2.0 percent annually over the last 25 years. That compares with population growth of nearly 3.0 percent, so Africa is falling farther behind. Productivity losses due to HIV/AIDS and other illnesses further constrain output. , since AIDS dispropor-tionately hurts rural women and girls who grow an estimated 70% of Africa's food. Furthermore, farmers need access to better roads and other infrastructure to provide access to markets, greater availability of credit, and competitive prices for their products. Other problems include inefficient public marketing boards and pricing policies that reduce the return to farmers, poor roads and other infrastructure, lack of credit, and the absence of support services. Few African countries make any use of irrigation. African economies need need to increase their investment in agriculture well above the historic average of 7% of budget outlays.

The United States and other countries have a major role to play as well. They can provide financing, technical and policy assistance, and debt relief. Greater access to our markets is critical. Passage of the African Growth & Opportunity Act was intended as a major contribution, and we are working on a follow-up bill to address some of the problems in the original AGOA. We hope to work with many of your governments on a new round of global trade negotiations. There is great potential for Africa to increase its current 1% share of world trade and to realize major improvements in productivity in the process.

I am fully committed to realizing the promise of the HIPC debt initiative. We are reducing 100% of the bilateral debt owed by qualifying HIPC countries and are contributing our share to funding the multilateral costs of debt reduction. We look for other creditors to do likewise. But all participants, creditors and debtors alike, need to look beyond debt to the broader development challenges that Africa faces.

The International Financial Institutions are Africa's major sources of financial, technical, and policy assistance. But we would like to see them concentrate more of their resources on countries where the policy environment is conducive to good results. Even within those countries, we believe there is scope for better focussing the IFIs' efforts to improve productivity. We should aspire to achieving clear and measurable outcomes, within an acceptable time frame, in such areas as improving education and health, removing constraints to higher productivity, and promoting more efficient governance. We believe that a much higher share of MDB resources for the poorest countries should be provided in the form of grants: up to 50% for IDA-only countries would be given as grants for health, education, water and sanitation. This effort would reduce debt burdens on the poorest countries, and only implies a modest reduction in reflows to the MDBs.

Stemming the flow of funds to global terror is one of the highest priorities of the United States Government. Many countries, in Africa and throughout the world, have committed their strong support to this effort. We hope all countries will continue to do so, in particular by taking concrete actions to locate and block terrorist assets. The United States is ready to assist, including through Treasury's Office of Foreign Assets Control and Financial Crimes Enforcement Network (FinCEN). We understand that some of these actions may be politically difficult, but we respectfully request your help against an enemy that threatens all of us.

I now would like to hear from you: What is going well in your economies? What must be done better? What suggestions do you have for improving the developmental effort in which we all are engaged? Are there some real success stories, and can they be replicated? What is needed to attract more private investment - including the large stock of flight capital that, by some estimates, greatly exceeds Africa's external debt? What can the IFIs do to be more effective? I would also appreciate your comments on our proposal for greater use of IDA grants.