‘U.S. Commitment to Africa: AGOA and Beyond’ Closing Remarks for MCC CEO Daniel Yohannes at the Ninth Annual AGOA Forum
Distinguished Ministers and Ambassadors,
Good evening, all, and thank you, Deputy Assistant Secretary Fitzgerald, for that kind introduction.
On behalf of President Obama and Secretary of State Clinton, I thank you for participating in the ninth annual AGOA forum. I appreciate so many African participants and governments making the time to be here.
African participation in AGOA is especially meaningful for the Obama administration. As the president said when he made his historic visit to Ghana last year, global prosperity is tied to Africa’s prosperity.
- That’s why we continue to elevate Africa’s strategic position in U.S. foreign policy and on the international stage.
- That’s why we are committed to working with African countries through partnerships grounded in mutual respect, responsibility, and accountability to tackle the continent’s many challenges and opportunities, and those we face internationally.
- And, that’s why we realize that our collective success depends largely on Africa’s initiative and leadership, with the United States playing a supporting role.
US commitment to Africa
Let there be no mistake about this: The United States is committed to Africa.
U.S. policies in sub-Saharan Africa seek to promote the development of stable and democratic partners:
- partners that are committed to the rule of law, human rights, transparent governance, and the welfare of their citizens;
- partners that are committed to contribute to, and benefit from, global economic prosperity and security.
Now more than ever, America’s prosperity and security are linked with that of developing countries, including in Africa.
To play our part in promoting responsible development in Africa, the Obama administration is focusing policies and programs in five key areas:
- democracy and governance;
- conflict mitigation;
- economic growth and development;
- health; and
- transnational issues such as terrorism, illicit drug trafficking, and climate change.
AGOA as a sign of that commitment
AGOA is a critical component of our focus on economic growth and development in Africa. It has the potential to stimulate African commercial activity through trade. And, it facilitates stronger U.S.-African dialogue through events like this. The insights and ideas we generate together can promote better policies and behaviors in our respective nations and institutions.
I’d like to share a few thoughts on AGOA, and what we can do to support greater trade, commercial activity, and investment opportunities in and with Africa.
Thoughts on AGOA
When it was originally signed in 2000, AGOA marked a turning point in U.S. efforts to foster economic growth and development in Africa. Up to that point, efforts had taken the form of grants, loans, infrastructure projects, and programs that were not always led by Africans. Programs tended to be government-centric. They failed to recognize trade as a major catalyst for growth.
By eliminating import duties for nearly 6,500 products, AGOA created new possibilities for private sector African businesses and entrepreneurs. And, it also created new opportunities for U.S. companies as Africans looked to buy equipment and technical expertise. During the beginning years, AGOA led to a huge increase in African exports to the United States.
In today’s rapidly changing economic environment, AGOA has achieved some results but, sadly, not enough. We need to work even harder to reach AGOA’s full potential. While we can point to some macro-economic progress, Africa is still underperforming in the international marketplace.
- Africa accounts for only about 2 percent of global trade and only 8 percent of intra-African trade.
- Last year, Africa’s share of global GDP was only about 1.6 percent.
- Investment, outside of the extractive industries and telecommunications, remains below global standards. For example, foreign direct investment in Kenya in 2008 was about 96 million dollars and 109 million dollars in Ethiopia. These are amounts an individual trader on Wall Street likely handles in a given day.
African successes need to become more widespread.
- Some parts of the continent have broken out of a downward economic spiral through deregulation, privatization, and the elimination of subsidies and excessive tariffs.
- High rates of return on some local and regional stock markets have attracted foreign investment and raised Africa’s image as a place to make money.
- Though sub-Saharan Africa experienced a 6 percent growth rate between 2002 and 2008, and growth rates are projected to be 3.8 percent this year and 4.5 percent in 2011—higher than what is expected for Latin America, Central Asia, and Europe—the continent still remains poorly positioned to compete globally.
It is our hope that—at this AGOA forum here in Washington and, for the first time, in Kansas City—participants will propose fresh innovations for improving Africa’s ability to compete in the global market and increase its share of regional and world trade. The only sector in which AGOA trade has increased over the past decade is agriculture, and we believe there is potential for even greater trade in this area.
That is why we are linking Africa’s agriculture and transportation entrepreneurs with their U.S counterparts in Kansas City, in America’s agricultural heartland. The move to Kansas City is both symbolic and practical. We need to generate new ideas and facilitate deeper links between African and U.S. commercial sectors.
The Kansas City part of the forum is just the beginning of a longer process that we hope will lead to a stronger and more dynamic AGOA in its second decade.
- We would like to demonstrate to our African participants that there is more to the United States than just Washington, D.C.
- We want to show our American participants that there are many more commercial opportunities in Africa beyond apparel and mineral extraction.
If the United States and its African partners are to make more progress on trade in this competitive global economy, we must think outside the box—and outside the Beltway.
Three ways we can support Africa in the greater realization of commercial/investment/trade opportunities
Looking ahead, I believe we can make considerable progress toward greater economic growth and development if we focus our efforts in three key areas:
First, we should cultivate a culture of good governance and sound policies throughout Africa. American businesses want to do business with nations in Africa that respect the rule of law, enforce contracts, protect investors, fight corruption, and operate with transparency and predictability. Corruption and the inability to enforce contracts turn away investors and trading partners.
Domestic and foreign firms looking to do business in Africa face burdensome procedures—and, too often, a demand for bribes—that drive up start-up costs and increase risks—and I’d mention, paying bribes are illegal for U.S. companies. An environment like this limits the range of companies willing to invest. And, it forces African countries to accept less favorable terms with companies that have little concern for the environment, employees, and social responsibility.
As Secretary Clinton said, true economic progress depends on responsible governments working to reject corruption, enforce the rule of law, and deliver results for their people. According to the World Bank, about two-thirds of sub-Saharan African countries passed reforms to improve their business climates. Liberia, Mauritius, and Rwanda are ranked among the world’s best reformers.
And, the U.S. Government wants to help African economies in their reform efforts. The U.S. Government’s Millennium Challenge Corporation—which I have the privilege to lead—is investing nearly 4 billion dollars in 10 sub-Saharan African countries. Our grants fund African-designed and implemented reforms, programs, and projects in a wide range of sectors, including agriculture, transportation, education, power, finance, and land management. Given our performance-based approach to development assistance, MCC uses 17 policy indicators to determine which countries would make our best partners. We look at such pro-business and pro-growth factors as days and cost to start a business, inflation, trade and fiscal policies, and regulatory quality.
- As part of their plan to become MCC-eligible, Cape Verde, to cite just one example, reduced the number of days it takes to start a business. Businesses can now be registered in less than an hour, when it used to take 60 days.
MCC incentivizes the types of reforms that facilitate trade and attract investment.
Second, we should support Africa’s efforts to build greater capacity for trade and investment. Protectionist tariffs, corrupt customs and border controls, and poor transportation within and between countries are crippling Africa’s competiveness. African countries need to remove these internal barriers to trade, build institutional capacity in customs and national standards, and develop trade-related skills. They need reliable infrastructure—roads, ports, airports, bridges—to move products to markets. Yet, only about 30 percent of sub-Saharan African roads are paved. And, the price of exports from landlocked countries increases by as much as 70 percent because of transportation costs. It’s no wonder that most of MCC’s partner countries have chosen to invest in infrastructure for their economic development and growth.
Improved infrastructure and unrestricted trade between countries could help
- increase economies of scale to make global exports more competitive,
- create internal markets large enough to attract greater investment in local manufacturing, and
- allow potentially cheaper inputs from neighboring countries—rather than exports from outside Africa—to supply the production chain.
We can help build Africa’s capacity to do more. Last year, for example, the United States Agency for International Development launched the African Global Competitiveness Initiative, a 200 million dollar program which aims to boost competitiveness by helping African countries overcome roadblocks to regional trade. Also, MCC has been the largest source of aid-for-trade within the U.S. Government’s foreign assistance program over the past three years. In addition, nine other U.S. Government agencies are also working to build Africa’s trade capacity.
Third, we should help African economies and entrepreneurs tap into the power of partnerships with the private sector. By motivating the right policies, building greater capacity, and building infrastructure for trade and investment, Africa will become a magnet for the private sector—from homegrown entrepreneurs to international firms.
If we are serious about realizing greater economic growth and development for Africa, we need to engage the private sector. This fulfills President Obama’s call to “broaden prosperity through public-private partnerships.” The private sector, after all, brings innovative financing and technical expertise that can dramatically increase the sustainability of our efforts to promote economic growth and development.
For these reasons, one of my top priorities at MCC is to involve the private sector in all stages of our operations in Africa, and around the world.
We are working on building relationships with the private sector to:
- analyze constraints to commercial activity, including trade and investment;
- identify commercial opportunities that MCC’s support can help bring about;
- solicit advice on program design, including new solutions to inefficiencies in trade and investment;
- seek co-investment or parallel investment; and
- secure practical advice on designing innovative financing models for specific commercial needs.
We also encourage bidding on MCC procurements, which amount to 3 billion dollars through 2011;
As the AGOA forum continues in Kansas City, we look to you—African and U.S. companies—to forge partnerships that expand trade and deepen the commercial and investment ties between us. Open trade and international investment remain the fastest ways for Africa to boost economic growth, reduce poverty, and promote development.
Ladies and gentlemen:
The United States recognizes Africa’s strategic importance and enormous economic potential. AGOA is the tip of the iceberg. Although AGOA has benefited many countries over the years, AGOA must adapt to our rapidly changing global economy if it is going to succeed in the future. We are counting on you for your expertise and engagement going forward.
By creating stronger economies in Africa—through
- sound policies,
- expanding trade capacity,
- building infrastructure, and
- engaging the private sector for the long-term—
we create stronger partners for trade, business, and investment.
It is in our own national interests to work together with Africa to realize our shared vision for global prosperity and growth that will benefit all of us.
Thank you again for participating in this AGOA forum.