FROM THE OFFICE OF PUBLIC AFFAIRS

I am pleased to address this second annual ministerial meeting of the U.S.-North Africa Economic Partnership. This is a wonderful opportunity for me to see friends from the region, to review the activities of the Partnership over the past year, and to look ahead with anticipation to the continued growth and development in each of the three economies that comprise this Initiative.

When I visited Morocco and Tunisia in the summer of 1998, I was struck by the desire of business people and government officials to broaden their range of economic relations and forge closer commercial links with the United States. Only ten days ago I returned to Tunisia, albeit for a sad occasion, to head the US delegation to the funeral of former President Habib Bourguiba. I hope to return to the region some time this summer or fall to pursue our US-North Africa Partnership.

In my capacity as Under Secretary of State, I sought to foster an enhanced, senior-level dialogue with the Governments of Algeria, Morocco, and Tunisia, to encourage increased trade, investment and job creation in this region of nearly 70 million people. This dialogue has taken the form of the U.S.-North Africa Economic Partnership, and it has two basic components -- 1) to enhance the bilateral relationship between the US and the three member countries; and 2) to break down the barriers to intra-regional trade and maximize the growth potential that private sector-led development will help to achieve.

We have demonstrated our commitment to the first component of close engagement with Morocco, Tunisia and Algeria over the past year. Several of my colleagues -- Robert Mallet and Molly Williamson from the Department of Commerce, James Harmon and Maria Haley of Eximbank, and Mark van der Water from OPIC, among others -- traveled to the region in 1999 as part of our Partnership. They met with their government counterparts and, equally important, they met with businesspeople in Morocco, Tunisia, and Algeria to get a first-hand look at the market, the needs, and the opportunities for profitable business ventures.

As a step to further enhance bilateral relations, we are pleased that the Government of Morocco has concluded a TIFA -- a Trade and Investment Framework Agreement -- with us. The US-Morocco TIFA Council held its first meeting last October, which was a very fruitful exchange on trade and investment issues. Algeria and Tunisia are each in the process of reviewing US draft proposals for TIFA's within their governments. Concluding a TIFA will send a very positive signal to prospective investors and we encourage both Tunisia and Algeria to respond soon to these draft agreements. Once TIFA's are in place in all three countries, they will provide a broad framework to address trade and investment issues that will reap benefits for each country and for the entire region.

Turning to the second component of intra-regional trade, access to world markets, a larger customer base, and economies of scale would significantly increase the attractiveness of the North African market. We recognize that the barriers to free flow of trade between your countries cannot be resolved overnight, but we encourage you to recognize the benefits that would accrue from a larger, regional market, and take the necessary steps to resolve those barriers.

Ongoing dialogue provides continuity to the Partnership's activities. That is why I am very pleased that Al Larson announced this morning that a Partnership Steering Committee will be formed. This is something I strongly favored. The Steering Committee will consist of the Ambassadors of Algeria, Morocco, and Tunisia here in Washington, working closely with senior officials at the State Department and in consultation with other USG economic agencies, to monitor progress on the range of investment promotion, technical assistance, and educational programs that are planned for the coming year. This new Steering Committee will ensure that progress and follow-up will occur between our annual Ministerial meetings.

This Partnership was never intended to be an aid program. On the contrary, it was designed to harness the know-how and capital of the private sector -- in the region and in the US - to create sustainable investments that will generate jobs, foster growth, and build the region's prosperity and stability.

Investment capital flows to those countries that offer a conducive investment climate -- a predictable and transparent regulatory climate, an educated workforce, physical proximity to other buoyant markets, a vibrant and independent private sector, and an established infrastructure to support new business ventures. A "business-friendly" environment is created by forward-looking governments that enact the necessary reforms -- sometimes painful and politically unpopular ones -- to lay the groundwork for sustained growth. This involves reducing the role of the state in the economy, liberalizing the trade regime through tariff reduction and other measures, and investing in the country's human capital through increased spending on education and health. Only then will private business activities take hold and prosper, and create much-needed jobs. The Partnership activities for the coming year that were announced by Under Secretary Larson this morning were carefully selected to support those structural reforms.

To give credit where credit is due, each of these three countries has already undertaken bold and courageous economic reforms.

For example:

• Tunisia privatized 3 large cement companies in 1998/99, with additional firms slated to be sold this year. The government has enhanced banking supervision standards and bank mergers have helped to consolidate Tunisia's financial sector.

• Morocco enjoyed an overwhelming response to last year's sale of the second GSM license, netting $700 million for its Treasury. The attractiveness of this tender bodes well for future privatization. Allocating those funds to social sector projects will help address Morocco's poverty and rural development needs. The approval of Morocco's new Labor Code will help to deploy labor more efficiently across the economy.

• Algeria's new economic team under President Bouteflika has ambitious plans for privatization, reform of the banking system, and continued efforts in the housing sector.

I understand that at this morning's meetings, each of the Ministers stressed their concerns about their respective external debt burdens. Each of these countries has taken steps over the past several years to reduce its debt burden and I congratulate you on this. While we do have authority for limited debt swaps for activities such as tropical forest conservation, we do not now have the legal authority to engage in debt swaps with your countries. More fundamentally, however, we believe that the best approach to addressing debt burdens is continued fiscal prudence and structural reforms that will spur added growth and investment.

Toward that end, participation of the private sector is crucial to the success of this Partnership. This is highlighted by the presence of so many distinguished businessmen and women here today. At this morning's business-government roundtable discussion, US business representatives discussed their experiences in the region and aired their concerns about regulatory issues and other aspects of the investment climate. The North African government officials articulated their growth and development objectives in terms of the US businesses that can help them to achieve them. This give-and-take format is extremely valuable. To build on this exchange, I am pleased that OPIC is planning to organize an investment conference in North Africa to bring US businesses together with prospective clients and partners in the region. I hope that this will be the first of at least one investment-related event per year, in North Africa or in the US. The region deserves an annual place on our investment agenda.

We can talk about government policies and we can talk about the factories, refineries, and banks that will be built in the region. But a critical resource to this growth initiative is PEOPLE -- two-way exchanges between Americans and the people of North Africa who will make these business ventures thrive. For this reason, I look forward to greater "people-to-people" exchanges in the year ahead, whereby electric utility regulators, or stock brokers, or tax administrators from the region will see the US "up close", meet American counterparts, share experiences, and participate in training programs. In the reverse direction, US executives will visit the three countries to share their experience and know-how as they see the North African markets first-hand. These people-to-people exchanges will be a top priority of ours in the year ahead.

Looking ahead, our goals for economic growth and stability in North Africa are ambitious. There is an exciting array of initiatives planned for the coming year. We are pleased that we secured $5 million from Congress to fund our North Africa Initiative for this fiscal year. However, because funding for additional Partnership activities is modest in the current US budget environment, we must leverage the resources that were appropriated by Congress to achieve maximum benefit.

In our efforts to support economic growth and the emergence of a genuine regional Maghreb market, technical assistance programs, for example, may be applicable to all three countries and thereby share the benefits of US expertise with the entire region. Each country will not fully enjoy the economic benefits of reform until intra-regional barriers to trade are removed. You are natural trading partners and we hope to work with you to remove barriers to trade and commerce that will be mutually beneficial to each of your countries.

The US Government remains committed to supporting the economic aspirations of Morocco, Algeria, and Tunisia. I am gratified by the continued vitality and momentum of this Partnership. I look forward to staying closely involved with this effort, in my new capacity as Deputy Secretary of the Treasury; to observing the continued economic reform, growth and progress in these three countries; and hopefully, to see the development of an integrated North African market.

Thank you very much.