FROM THE OFFICE OF PUBLIC AFFAIRS

Let me start by thanking Renee Poussaint for that introduction. It is a pleasure to join you this evening in honoring Andrew Young, who is not only an important leader in the United States, but an important leader in US-Africa relations. It is also good to speak with a group that has a commitment to fighting poverty and broadening opportunity for Africans -- a commitment that I think is of enormous importance to all of us, no matter where we live. Helping the nations of Africa attain better education, better health care, stronger legal systems, good governance regimes and the other underpinnings for economic success is not only the right thing to do, it is in the enlightened self-interest of the industrial nations. An Africa that succeeds economically, that is at peace domestically, and that protects its environment, will contribute to a better and more prosperous world for all of us.

Even as the Administration has been intensely focused on the current global financial crisis, we have continued to focus on the enormous importance of fostering growth and development in Africa. I remember meeting with President Clinton in the Oval Office soon after his return from Africa. He spoke with enormous enthusiasm of his trip, particularly about the people he met there, and what enormous potential Africa had. And he very much wanted his Administration to intensify engagement with African nations to work on areas of mutual concern and to help convey to Americans an accurate and balanced picture of the many countries of Africa.

This summer, I traveled to Africa for the first time, as a follow up to the President's trip. It was truly a remarkable experience. I visited Cote d'Ivoire, South Africa, Mozambique and Kenya, and met with the SADC Finance Minister in Namibia. I met with a wide diversity of people -- business leaders, village leaders, students, government officials, and representatives from non-governmental organizations -- all of whom gave me a deeper understanding of the opportunities and challenges facing African nations. Like the President, I was very impressed by so many of the people I met and by their understanding of their nations' issues.

They clearly believe -- and we strongly believe -- that while Africa's challenges are enormous, so too are its opportunities. Take, for example, Mozambique, a nation once beset by years of Marxist mis-rule and civil war. While I was there, the Minister of Finance, part of a government committed to economic reform, announced that the Mozambican economy grew at a double digit rate the previous year, the fifth consecutive year of solid growth, albeit from an extremely low base. And that progress has not gone unnoticed. Most of a small group of American CEOs that I invited to lunch to discuss Africa before departing were contemplating the possibility of investments of one kind or another in Mozambique.

But clearly, there are enormous challenges ahead in all the nations of Africa. On my trip, a key area of discussion was how to create the economic conditions for attracting private investment. While foreign investors have begun to notice Sub-Saharan Africa, the region still drew less than 3 percent of total private capital flows to developing countries last year. The region remains heavily dependent on concessional loans and grants from multilateral and bilateral donors. Moreover, Africa's share of global trade and investment has actually declined over the last thirty years. Ironically, Sub-Saharan Africa's relative lack of integration with the global economy has actually insulated it from the financial market effects of the current financial crisis, although many countries have been affected by the declining commodity prices that have resulted from the crisis.

But let me be clear: countries cannot develop in isolation from the global economy. It is important to remember that many Asian nations have had twenty to thirty years of strong growth, lifting millions from poverty. They accomplished this in part by opening to trade and investment with the world. Countries like the Phillippines, Korea, Thailand, Malaysia, and Singapore -- and the list goes on -- are far better off today than they were before the process of integration began, even taking into account the effects of the financial crisis. Their creation of an environment to attract private sector capital has been -- and will continue to be -- absolutely essential to fostering long term economic growth.

While the situation in Africa obviously differs from country to country, let me mention five challenges for creating an environment to attract private sector capital, challenges that I focused on during my trip.

First is political, social and economic stability. While many countries in Africa have become more stable in recent years, it is still a challenge facing many others. And all three aspects of stability -- political, social, and economic -- are key with respect with external private sector investment.

Second is openness to trade and investment. Many African countries have begun to make significant progress in this regard by lowering tariffs, simplifying investment regulations, and privatizing state enterprises. A very important factor here are Africa's regional economic arrangements. I visited representatives from three regional organizations on my trip. It was striking that perhaps the deepest international monetary union in the world is not found in Europe, but among the francophone West African states. We believe regional arrangements can be very useful to achieve economies of scale, larger markets, and more efficient use of resources, and even to promote policy stability. Regionalism, however, must be part of a larger strategy of global integration, and not an instrument for erecting new trade and investment barriers toward the global economy.

Third is a well supervised, regulated, and competitive financial system. One reason that South Africa's financial system has weathered the global crisis as well as it has is sound regulation and management practices. However, along with these merits, South Africa's financial system also highlights a pressing problem in African financial systems generally: Inadequate service to the many groups of society that have been underserved historically. I met small scale entrepreneurs in Soweto who could not get access to credit in the formal banking system. Some were able to turn instead to micro finance institutions, which I think offer a lot of promise in Africa and elsewhere. I visited a day-care facility in Soweto whose owner received small loans from a USAID-sponsored micro-enterprise organization after being denied credit from a bank. She now has a business that is profitable, creates jobs, and provides useful services.

Fourth is investment in people. I visited a number of schools during my trip, and they manifested the commitment, in the face of a terrible paucity of resources, to providing the education requisite to promoting growth and opportunity. In the village of Assinie in Cote d'Ivoire I visited a newly built school, the first with electric lighting in that community, clearly the best constructed building in the village. The residents of the village were enormously excited about the opportunities this school presented. It was also significant to me because the village named it after a Treasury colleague, working at the African Development Bank, who tragically died nearby two years earlier.

Fifth is a focus on good governance. That means courts that can resolve justice, decide disputes efficiently and fairly, legal systems with transparency, and public servants that implement laws impartially and honestly. In Kenya, I gave a speech arguing that corruption is a major cost that developing countries can ill afford and a major impediment to attracting outside investment. The CEO of a major American company told me just the other day about a large, boldly needed project in a developing country that has been held up for over three years because of substantively meaningless approaches that wont be granted without pay-off that his company will not pay. While most of the audience agreed, in discussion afterwards, they were clearly struggling with how to deal with this most difficult, but most important issue. Corruption was an impolite subject for discussion until recent years, but it is rightly front and center in the focus of reformers in developing nations and of the international financial institutions.

The burden for meeting all these challenges lies with the African nations themselves. But the United States is committed to helping African nations, specifically Africa's boldest reformers, achieve these goals. Our efforts focus on three areas.

First, we are working to mobilize the international financial institutions such as the African Development Bank and the International Monetary Fund to make better use of their resources. We have worked to sharpen their focus internally, to focus more on Africa's reformers, and to be more effective by emphasizing activities that take advantage of each institution's special strengths. I am pleased to note that the, budget which was passed last week includes full funding of our $800 million request for IDA, the World Bank's concessional lending window, which now provides roughly forty percent of its loans to Africa, plus $128 million for the African Development Fund.

Second, we are working to reduce the indebtedness of Africa's poorest and heavily indebted reformers to sustainable levels. As I was told at a recent meeting with SADC finance ministers, debt relief is critically important for these countries, both to free up resources to invest in people and to improve the credit environment. Although not widely known, the international community has reduced debt among African nations by more than $35 billion in the last decade, with another $40 billion expected under current programs and we will continue to focus on appropriate adjustments in this area.

Finally, we are promoting Africa's development and integration with the world through the President's Partnership for Growth and Opportunity. Much of this program -- increased dialogue, USAID assistance, and debt relief for the strongest reformers; OPIC and Export-Import Bank coverage for more African nations; and technical assistance to help Africans implement reform -- is now underway, and while it is most unfortunate that Congress failed to pass the Africa trade bill this year, the Administration will push for its passage next year and I think there is a good chance for success.

Let me conclude with this thought. Far too many Americans perceive Africa only as a continent beset by serious problems, such as war, famine and environmental devastation. As you well know, these problems do exist, and are very serious, but there is another part of Africa. It is the Africa I saw on my trip: nations that are in the midst of transformations, nations with enormous potential.

We in this Administration will continue working on all fronts to promote economic growth, political stability, and improved social conditions in Africa. We will further advance these efforts in December, when I and several of my cabinet colleagues will be meeting with our counterparts from 17 African nations in the first U.S.-Africa Economic forum. As a group with a keen understanding of the importance of Africa, Africare will play an especially important role in maintaining focus on Africa and moving forward on a constructive path for Africa. And success in meeting these challenges is important not only to the future of the nation of Africa, but to our own future as well. Thank you very much.