U.S. Treasury Secretary Paul O'Neill Statement in Ghana

Good afternoon.
Thank you for welcoming me to Ghana, and thanks to the American Chamber of Commerce for hosting today's lunch.

This tour marks my first visit to Africa since becoming Secretary of the United States Treasury. In my previous visits I traveled as a businessperson. I am eager to make the most of my time, to witness first hand the efforts underway to engage all the people of Africa in creating a brighter future.

I come here to learn. To hear from entrepreneurs, investors, farmers, artisans and vendors in the market. I want to hear their hopes and dreams and I hope they share with me their insights into how best to eliminate the obstacles to Africa's prosperity.

I come here with an open mind, convinced of only one thing -- that human beings everywhere have the potential to succeed.

The question for us, and for our time, is how to finally realize that vision. How can the people of the African nations and their elected leaders create prosperity -- and how can the people of the United States and the other industrialized countries best support their efforts?

If I had the answer, I would have sent a prescription. It's not so easy. For some 50 years, thoughtful, compassionate people have struggled to solve poverty here. As Bono, my friend and travelling companion, might say we "still haven't found what we're looking for." The results of official development assistance have been disappointing, and many poor countries here have stayed that way, even as others have excelled.

So I have come to Africa. Not to preach, but to listen, and share. I want to see what has worked here, and what has failed. I want to ask how we can do better. I want to learn from Ghana's political and economic success, so I can share the best of your experience with your neighbors and the world. At the same time, I want to share what we have learned from other successful developing countries around the world, and show our commitment to promoting those practices in Africa.

And I want to take our combined experience and put it to work, to produce results for Africans. Not in the next generation, but right now.

Here is what we know: all people are created equal. Given the tools and incentives for success, they will succeed, no matter who they are or where they live. Of course this is self-evident. But I have also seen this truth first-hand, as a leader in the private sector. As Chairman and CEO of Alcoa, I helped grow the company from 55,000 employees in 13 countries when I joined in 1987, to 140,000 people in 36 countries -- including several African countries -- when I retired in 2000.

During that time I learned about job creation, and about the ways of life and work around the globe. In my travels, I saw that human beings everywhere, with the proper education, good health, and a stable environment, could perform meaningful, value-adding work at world-competitive levels. I saw that in the Americas, I saw it in Europe, I saw it in Asia, and I saw it in Africa.

We also know that in every nation, economic growth and higher living standards come from increasing productivity -- that is, increasing the value that each worker produces each day. When productivity is rising, workers earn more for their work and their quality of life improves, year after year.

Moreover, we know that it is a competitive private sector that drives productivity gains. As companies compete with each other for business, they seek better ways to satisfy their customers. They try to provide more and more value for each dollar. As opportunities to add value emerge, entrepreneurs enter the market. To stay competitive, leaders must constantly invest in new ideas and better methods for production.

So what can a country do to unleash its private sector and increase productivity? What have successful leaders done?

* They rule justly, by fairly enforcing law and contracts, respecting human rights and property rights, and fighting corruption.

* They encourage economic freedom, by removing barriers to trade - both internal and external - and by opening their economies to investment, allowing companies and entrepreneurs to compete without excessive interference, and pursuing sound fiscal and monetary policies, including government divestment of business operations.

* And they invest in their people, by providing the best possible systems for education and health care. In particular, we must work to fight the spread of AIDS, which threatens to cripple the economic potential of many African nations and peoples.

All three of these elements -- ruling justly, encouraging economic freedom, and investing in people -- are essential for successful development.

Ghana is a leader in Africa, and nothing better demonstrates that leadership than last year's peaceful transfer of power following a democratic election.

Respect for democracy is one aspect of ruling justly. But that peaceful transition was not only a political achievement, it was an economic achievement.

Here is why: capital is a coward. Investors know there are great opportunities for growth in Africa. The very fact that development in Africa has lagged compared to many parts of the world means that there is enormous potential for high returns as you catch up to the leaders.

Investors are slow to put their capital into Africa because they are afraid that the buildings and machines and businesses their capital will help build could be confiscated through corruption, or through a violent change in power. They fear their contracts will not be respected.

I am not only talking about foreign investors. I am talking about Africans investing in Africa. When savings and investments are not perceived as safe, people hide their cash where it cannot work for the economy, or they send it to countries where they know it will be safe. According to one study, 40% of Africa's private wealth is held abroad. Local entrepreneurs cannot flourish when they fear that corrupt officials may appropriate their success.

With its growing history of democracy and stability, Ghana is showing that it can offer continuous rule of law, even with a change in power. At the same time, Ghana has been opening its economy to international trade and investment, and continuing with the economic reform process started under previous governments.

Already, investors and entrepreneurs are responding to Ghana's improved stability and economic reforms. For example, this morning I visited a successful investment in Ghana, called Affiliated Computer Services, Inc.-Business Process Solutions (ACS-BPS). ACS sells data processing services to insurance companies in the U.S. It opened its office here in 2000, and already it employs over 800 Ghanaians, paying an average of three times the average wage in Ghana. The company now plans to expand its operations to four new sites in Ghana and to increase its workforce to over 1000 people.

The employees start with a high school diploma and typing skills. The training they receive creates a new knowledge base on which future employers can build. As foreign investments like ACS/BPS show success, others are bound to follow, and I am optimistic that increasingly advanced services, such as software development, will thrive in Ghana.

While foreign direct investment creates notice, building a new office and creating a lot of new jobs at one time, it isn't the silver bullet or magic solution for creating self-sustaining economic growth. Local entrepreneurs -- not foreigners -- are the backbone of every economy. That is true in the United States and around the world. Individuals with roots in the community are willing to take risks to improve the lives of their families and communities, and they pass on their skills and spark the imaginations of future entrepreneurs.

Later today, I will meet with several small businesses that are performing value-added processing for agricultural products, such as making cashew butter. Tomorrow, I'll travel to the northern region of Tamale, where I will visit Wamali, a village which produces, among other crops, Shea nut butter. The processing of shea nuts holds great potential for small and large scale agri-business, as shea nut is a good moisturizer used in cosemetics.

Small and medium-sized agricultural and business ventures like these can make a big difference for Ghanaian communities and the overall economy. With the right kind of support, such as investments in rural roads and reform of the land tenure system, the government could encourage further innovation, and help producers get their goods to the market.

As a framework for these economic development policies, I believe Ghana should pursue investment grade rating for its sovereign debt. The transparency and policy environment needed for an investment grade rating, and the rating itself, disciplines government. Achieving investment grade sovereign debt would allow Ghana to grow on its many merits, as investors could more easily differentiate Ghana's risks from those of less progressive nations.

When the sovereign leader is working to improve conditions for investment and entrepreneurship, outside assistance can speed progress.

In February of this year, with U.S. support, the World Bank and the IMF approved Ghana for debt relief under the enhanced Heavily Indebted Poor Countries, or "HIPC," initiative. Ghana now benefits from debt service relief from official creditors. As Ghana's debt burden is reduced, it will have greater resources to invest in health, education and fiscal stability.

As we forgive debt, we must also take steps to avoid recreating the debt burdens that stifled so many nations. President Bush has proposed that up to 50% of the World Bank and other development bank funds for the poorest countries be provided as grants rather than as loans. This proposal makes a lot of sense. It acknowledges the long-term development challenges facing these countries, their vulnerability to economic shocks, and the reality that investments in crucial social sectors such as education and health care -- investments in people - while critically important, may not generate the revenue needed to service new debt. Grants, rather than loans, will eliminate the need for governments to tax their people in order to repay the principal and interest - and thereby eliminate the next generation of debt servicing problems for the poorest nations.

We in the US have also taken steps to bolster economic growth in Africa. In the year 2000, we adopted the Africa Growth and Opportunity Act, or "AGOA," to open markets in the United States to exports from sub-Saharan Africa.

Later today, I will be meeting with some apparel and handicraft producers that are eager to export to the U.S. under AGOA. I would encourage Ghanaian companies to take advantage of AGOA to enter the U.S. market and build their businesses. I would also encourage the nations of Africa to explore opportunities to reduce trade barriers between neighboring nations.

In our meeting this morning, I committed to President Kufuor that the Treasury Department will provide an advisor on domestic debt management in 2002. We are pleased to provide technical assistance whenever we can to support national leaders seeking to improve their internal budgeting and financial systems.

Technical assistance is also a crucial means through which our official development assistance adds support to burgeoning private sector growth. While in Ghana, we will be visiting several small businesses which have received technical assistance through USAID to market their goods, better organize their books and improve their manufacturing processes.

Official development assistance, through USAID, through the World Bank, the African Development Bank or bilaterally, stands a better chance of success when local leaders are already improving the economic framework of the nation.

That is the premise of the President's Millennium Challenge Accounts and the New Compact for Development. The President has proposed $5 billion in additional US bilateral aid annually, channeled to those countries that can use the money effectively. To access the Millennium Challenge Account, developing countries must demonstrate a strong commitment to ruling justly, encouraging economic freedom, and investing in people.

We are in the process of developing the criteria for measuring countries' policies in this area, so we can begin to disburse funds. As part of the process, President Bush has asked us to reach out to the world community, and that is one reason for this tour of Africa.

The plan the President outlined echos the objectives of the New Partnership for African Development (NEPAD), an initiative created by African leaders to promote, among other things, "sound economic management and people-centered development."

We have to be hard-headed and demand results - that is our responsibility to the impoverished people of Africa. If we don't insist on results for the dollars provided by compassionate people all over the developed world, then we are not meeting our responsibility as world leaders to improve the lives of people everywhere.

Since I became Treasury Secretary, I have been determined to reform the way in which the World Bank and the other multilateral development banks do business. They must improve the effectiveness of their assistance.

Rather than focusing on inputs, I want them to focus on results. For example, don't tell me how many children you've enrolled in school, or how much you've spent on enrollment programs -- tell me how many of the children can read, write and compute at their grade level after six years of schooling. That's what matters - it's the only thing that matters to those children and their future.

President Bush has created new incentives in our development assistance programs to encourage a greater focus on results. He has committed to an 18% increase in funding for the African Development Bank and an 18% increase in funding for IDA, the World Bank's lending program for the poorest nations, so long as those programs can show they are achieving measurable improvements in development.

I believe strongly in development assistance that makes a difference in people's lives. I am optimistic that our efforts together will produce results in Ghana, and throughout Africa. This is an exciting time for those of us who relish the challenge of unleashing human potential around the world, especially in Africa. We are making progress on many fronts.

With the right government policies, we can accelerate the spread of private sector production around the world. We can create vibrant, self-sustaining local economies and a rising standard of living for people everywhere. We can unleash the human potential -- and we will not be satisfied with anything less.

Thank you.