Washington, D.C. Today, Ambassador John Danilovich participated in The Private Sector as an Engine for Growth plenary session at the 2006 African Growth and Opportunity Forum. He delivered the following remarks:
I would like to thank Deputy Secretary Sampson and Minister Mpahlwa for their remarks. I welcome my good friend, formerly with MCC, U.S. Treasury Assistant Secretary Clay Lowery. I also thank Arnold Harberger of USAID for moderating this panel. It’s an honor to be included in this important forum and to represent the Millennium Challenge Corporation with such an impressive line-up of participants and guests.
I was in Cape Town last week for the World Economic Forum on Africa, where we discussed the Private Sector as the engine for economic growth. One of the many positive outcomes of the forum was the announcement of the African Investment Climate Facility (ICF), an innovative public-private partnership aimed at making Africa a better place in which to do business.
As we become bolder in our fight against global poverty, economic growth must be at the very heart of Africa ‘s development strategy. This message is being echoed in African capitals, in Washington, and around the world. The genesis of this growth must come from within Africa, by Africans, and driven by the private sector.
While in Cape Town, I could sense the growing optimism and learned first hand of the encouraging trends throughout Africa. A recent World Bank survey found that 15 non-oil producing countries in sub-Saharan Africa have had a median growth rate of 5.3% since 1995, demonstrating potential for long-term economic growth. This rate of growth is projected to continue in 2006 and beyond. Much of this is the result of sound macro-economic policies, an improving investment climate, democratic reform, political stability, and reduced corruption.
President Bush has consistently demonstrated a strong commitment to partner with Africa to help stimulate growth with initiatives like AGOA, the Africa Growth and Competitiveness Initiative, and the Millennium Challenge Corporation.
With regards to MCC, I can assure you MCC is also committed to Africa. In fact, 13 of the 23 countries currently eligible for MCC funding come from Africa. I should point out that Board didn’t select these countries because they were from Africa, but because they qualified for the program on their merits. MCC is positive about Africa ‘s future, and is proud of our engagement with our African partners.
We look forward with optimism and enthusiasm to our future engagement with those nations demonstrating the political will to take the necessary steps to qualify for MCC grants.
I want to briefly outline MCC’s innovative model for development assistance. When President Bush first launched the idea for the Millennium Challenge Account, he laid out what would become our three core operating principles.
First, MCC is performance based. We believe that policies matter. We annually assemble profiles of the world’s poorest countries based on 16 indicators from independent, non-U.S. Government organizations to measure how these countries perform in three broad categories: ruling justly, investing in people, and economic freedom. Each November, our Board of Directors selects the best performing countries to be eligible for MCC funding.
The second core principle is country ownership. Taking an approach much like an investor rather than a donor MCC puts the onus on the country to come up with their own development program. It is the country, not MCC, which must identify their barriers to poverty reduction and economic growth. They are the ones that must create and develop their Compact proposal. And they are the ones responsible for implementing their program throughout the life of the Compact. At my swearing-in as CEO of MCC, President Bush remarked that Countries should have a stake in their own success. He’s right, if they don’t own it, it won’t work.
Third, MCC is results-oriented. From the outset, we insist that each country must outline what they believe our joint efforts should achieve. We integrate monitoring and evaluation plans into our efforts because we believe aid invested by the American taxpayer should yield results and if it doesn’t yield results it should be stopped. We call this aid with accountability.
Here are some examples of how our innovative model is at work in Africa :
In February of this year, MCC signed a $307 million Compact with Benin to address the poor investment climate and lack of dynamic private sector activity that the people of Benin identified as the key impediments to sustainable economic growth and poverty reduction. The MCC Compact with Benin is addressing these key constraints by: reducing the time and cost of securing land titles; improving access to financial services for small and medium sized enterprises; improving the ability of the judicial system to resolve claims; and finally, increasing access to markets by reducing delays at the Port of Cotonou and increasing the volume of exports.
We are also implementing compacts in Cape Verde and Madagascar.
In Cape Verde, MCA funds are being used to improve the country’s investment climate and reform the financial sector; improve infrastructure to support increased economic activity and provide access to markets, employment, and social services; and lastly, increase agricultural productivity and raise the income of the rural population. The Compact is consistent with Cape Verde ‘s overall national development goal of transforming its economy from aid-dependency to sustainable, private-sector led growth.
In Madagascar, MCA funds are supporting a program designed to raise incomes by bringing the rural population from subsistence agriculture to a market economy and will help rural Malagasy secure formal property rights to land; provide access to credit and protect savings; and provide training in agricultural production, management and marketing techniques.
In addition to our work with our Compact countries, MCC has signed threshold agreements with Burkina Faso, Malawi, Tanzania and Zambia. These programs are designed to assist them with specific indicator weaknesses so that they can qualify for the full program in the future provided they make the reforms necessary to improve their performance.
African countries can and are changing the way they do business. In part, this is because countries want to qualify for an MCC Compact. But more importantly, they recognize that the key to economic prosperity and escaping the cul-de-sac of donor aid is based on sound institutional structures that attract the investment that is essential for reducing poverty and stimulating sustainable economic growth.
The MCC model of foreign assistance can help create the conditions for growth whether for a farmer because he now has title to his land or a local or international investor because conditions are increasingly profitable on the continent. However, it is private sector investment and output that is essential to sustain this growth.
The ultimate success of MCC will not be measured by the number of dollars spent, but by the fundamental changes our investment can leverage in our partner countries to create the economic, political, and social environment necessary for entrepreneurship and investment.
MCC is optimistic about the investment prospects in Africa, and we are demonstrating our confidence through substantial grant funding. We have so far committed almost $600 million to Africa and, by April 2007, the number will likely more than triple to over $2.0 billion. We expect this figure to grow even further, as additional African countries are selected to participate in the MCA program.
Because we believe that beating poverty cannot be achieved through a strategy of perpetual foreign aid, MCC and other assistance must have an exit strategy. To be successful, aid must, at some point, transition and be replaced by economic activity and investment driven by the private sector.
We, at MCC, strongly encourage our partner countries to consult directly with the private sector, as well as use MCC support to enhance the environment for private investment, to remove the barriers to growth and to build new markets.
There is much to be encouraged about, but there is much work to be done. Africa must continue to generate this momentum towards stability and prosperity from within. Donors, cannot impose economic development and poverty reduction on other countries it must be championed from within, by the countries themselves.
In closing, let me again acknowledge the courage of those African leaders embracing good governance, democracy, open markets, and transparency. We have tremendous regard and respect for those nations demonstrating the political will and commitment to partner with MCC. We are proud of our existing MCC African partnerships and we look forward with enthusiasm to still further partnerships with even more African nations in the coming years.
Thank you very much.
Millennium Challenge Corporation (MCC), a U.S. government corporation designed to work with some of the poorest countries in the world, is based on the principle that aid is most effective when it reinforces good governance, economic freedom, and investments in people that promote economic growth and elimination of extreme poverty.