Thank you, Daniel, for those kind words, for your leadership of the “Project on Prosperity and Development,” and for your many years of service on behalf of global development.
It is a pleasure to speak at CSIS, an organization that has been so influential in shaping the policies that help keep this country a force for good around the world. Together, the “Project on Prosperity and Development” and CSIS play a critical role in linking the private sector to the public sector.
This has also been one of my primary goals at MCC, and I know it is not easy. So, I for one certainly appreciate your efforts. Our meeting here to discuss global poverty and private-sector-led economic growth is extremely timely with next week’s G-8 Summit approaching.
This is especially the case for Africa, which is home to more poor countries than any other continent on Earth.
The G-8’s longstanding partnership with Africa has been reflected in a variety of promises over the years, including on cancelling debt, fighting disease, and training peacekeepers.
But the proof of genuine partnership is action and results, and expectations will be high for both next week.
Today, I want to speak with you about the critical role that partnership with the private sector will play in Africa’s development, and about the Millennium Challenge Corporation’s work and lessons learned in pursuing improved investment environments for the private sector in Africa.
Last September, President Obama signed a Presidential Policy Directive on Global Development—the first of its kind by a U.S. administration.
The President knows that development is a strategic, economic, and moral imperative for the United States, and an indispensable pillar in the forward defense of America’s interests in today’s increasingly interdependent world.
At the same time, in this era of budget constraints, we must be careful stewards of American tax dollars. We need to ensure that our development investments are as efficient and effective as possible, and that they deliver meaningful and sustainable results.
When we speak of strategic, cost effective development investment, we are speaking about MCC.
The Millennium Challenge Corporation was created in 2004, supported by Democrats and Republicans in Congress, with a specific mission to reduce poverty through long term economic growth.
We are very selective and our approach to development is like a business. We only invest in projects that are priorities for our partner countries – and those that are expected to have the best return. And when we talk about a good rate of return, we are talking about our investments’ ability to increase the incomes of poor people in our partner countries. That’s what makes us unique and different than any other development agency.
We have one major objective — to transition our partner countries from aid dependency to self sufficiency by replacing aid dollars with investments from the private sector.
Of MCC’s 8 billion dollar investment, approximately two-thirds is committed to the continent of Africa, centered in infrastructure, agriculture, and energy projects – key vital sectors to facilitate trade and investment related activities.
Helping African countries shore up their stability advances U.S. security interests. And helping them boost their prosperity also helps them become stronger trading partners for America.
This is a case where, in doing good, we are also doing well.
So that leads us to a critical question: How do we achieve our goal of raising incomes in a sustainable way?
The key is removing constraints to private sector-led growth.
We know from experience that the private sector is the most dynamic engine of development, job creation, innovation, and increased productivity.
So, in our investment decisions in Africa and throughout the world, engaging the private sector is our top priority.
And we try to accomplish that by partnering with the private sector at every level of our operations.
We are also helping our partner countries forge partnership and constructive engagement with the private sector, to enhance the impact of our investments and to sustain it after our funding ends.
The private sector has a clear interest in investing in Africa’s development, particularly in MCC partner countries.
The countries that we work with are poor but well-governed, and are poised to be the next emerging markets.
Consider: Between 2000 and 2008, GDP per capita in Sub-Saharan Africa grew by 54 percent. The number of African households with discretionary income is expected to rise by 50 percent in the next decade.
While we know that private sector investment is key, we must not deny that doing business in developing countries can be risky and difficult.
That is why a critical part of MCC’s work is helping overcome these barriers through education and training programs; support for business-friendly policy reform; and infrastructure improvements.
For example, landlocked African countries simply cannot trade if they do not have decent roads, bridges, or airports to move their goods.
For that reason, the majority of our African partner countries are investing their MCC grants in infrastructure and energy related activities, removing the constraints to growth, and making themselves more attractive places for private sector investments.
They can’t trade if they don’t have infrastructure.
At MCC, we are proud of what we have achieved so far in strengthening our partner countries for private investment. This work has not been easy, and has not been without some difficult times. But, we are learning important lessons along the way about how best to align the interests of government and those of the private sector.
Let me talk to you about a few of these lessons:
First, it is essential that both sides clearly understand the needs and priorities of the other.
For example, in countries like Liberia and Benin, MCC has facilitated the negotiation of reasonable tariff reform, reassuring business while helping governments see the value in simplified and harmonized regimes.
Second, in order to successfully engage the private sector and other stakeholders, all parties must be formally included early in program design and development, with their roles clearly defined.
Third, businesses are reassured by MCC’s ability tofully commit funds up front and secure government commitments to implementation. We have seen businesses more readily invest or participate in procurements because they have greater faith in the resources and follow-through of the projects.
Fourth, broad economic growth is best achieved if we can find ways to attract local investment in home-grown innovations that are geared to solve local problems. MCC actively encourages these domestic and regional investments.
And finally, fifth, policy reform, at both the macro and sectoral levels, is crucial in attracting sustainable private sector investment.
MCC’s principle of selectivity also creates a very powerful incentive for good governance both in countries we work with and for those interested in being our partners in the future.
And importantly, they need to reduce trade barriers inside Africa.
I am proud that President Obama has made effective global development a priority.
His development strategy builds on the principles that MCC has put into practice over the years. It also gives MCC a key role in pushing the boundaries of effective, innovative foreign aid.
However, long-term success is impossible without the private sector. As we look to the future, I want MCC to expand our range of private sector partnerships.
We will continue working closely with businesses to encourage productive investments alongside MCC investments. And we will continue to ensure that every U.S. taxpayer dollar we invest yields the most significant return.
MCC is helping Africans say to the world, “We are open for business,” by motivating the right policies, building infrastructure, and deepening capacity for trade and investment.
And MCC is doing this alongside Africans themselves.
The continent has made great strides in recent years. But there is much left to do.
Together, we must find innovative ways to leverage aid to reduce poverty, promote growth, and attract the private sector.
We must chase opportunity for the betterment of Africa’s citizens, and the best interests of the world that we share.
At the G-8, leaders will renew their commitment to a partnership with Africa.
Let us make that partnership real. That is our commitment every day at MCC.
And I look forward to continuing this important work with you.