On his return to the US after two weeks in Africa Treasury Secretary Paul O'Neill delivered a speech on 'producing results in Africa'.

'Caring Greatly and Succeeding Greatly: Producing Results in Africa'

Remarks to the Carnegie Endowment for Peace by US Treasury Secretary Paul O'Neill.

Washington, DC

Good morning. Thank you, Jack (DeGioia, President of Georgetown University), for that kind introduction. I also want to thank the Carnegie Endowment for International Peace for arranging this opportunity to discuss my tour of Africa. And thanks to Georgetown University for accommodating this crowd! It's encouraging to see so much interest in this important subject.

I went to Africa last month to listen and learn; to meet African leaders in and out of government, to meet doctors, farmers, teachers, students, and entrepreneurs. I went to hear their insights into the obstacles to Africa's prosperity.

I also went to find a real-world basis for recommendations to the President on how to allocate funds from the new Millennium Challenge Account. But most of all, I went with an open mind, and one pivotal question: How can the people of the United States and the developed world best help Africans and their elected leaders achieve prosperity at last?

It is too soon to announce policy recommendations from the trip, but I certainly learned a great deal, and I want to share some of my experience with you.

Some would say my trip was a little out of the ordinary. The Treasury Secretary traveling with the rock star. The "odd couple." Bono even had tee-shirts made portraying Jack Lemmon and Walter Matthau. But we really weren't so odd. In fact, I think Bono and I found a lot in common. We both desperately want to see the people of Africa - in fact, the people of the world - living to their full potential.

I did try on the famous blue shades during the trip. And Bono sang the occasional song. Between these lighter moments, though, I have to say this was the most intense twelve days I've ever experienced. I met people like Sister Benedicta, who runs a hospital and orphanage in Ethiopia. She maintained an incredible radiance, even as she told us how many people die in her hospital every day - how many children die in her hospital every day. To witness that strength of spirit is a truly profound experience.

I can't begin to describe all the emotional moments during this trip. They confirmed three things for me. First, a truth we've always known: All people everywhere can do great things when they are given the tools and incentives for success. Second, that with leadership - honest, accountable, and committed to progres - everything is possible. Without leadership, nothing is possible. And finally, that in the right environment focused on growth, enterprise and human development, aid works. Knowing that it can work, we have a moral imperative to demand as much. Assistance should make a real difference in people's lives.

We in the developed world must support African leaders who are creating the conditions for success - ruling justly, encouraging economic freedom, and investing in their people. And we must ourselves take a leadership role in demanding results.

The impoverished people of Africa - and in poor nations everywhere - require a new kind of help, that goes beyond the well-intentioned but disappointing results of the past fifty years.

If our assistance is not making a difference, or if we cannot measure our results to know what difference we have made, then we have to change our approach. We owe that to the people of Africa.

In Africa, I saw signs of progress everywhere. Programs are working, aid is helping, and standards of living are improving.

But there is a long way to go. The progress I saw deserves praise, but it just isn't enough.

Let me highlight the areas in which we witnessed progress. In particular, I saw three kinds of investments in people that are vital to realizing Africa's potential: clean water, primary education, and fighting HIV/AIDS.

Clean water is, surely, one of the most essential elements of a dignified, civilized life. No aspect of infrastructure is more basic. Yet 45% of sub-Saharan Africans lack access to clean, safe water. That's about 300 million people - more than the total population of the United States. In Ethiopia, that figure is 78%, or 50 million people in that country alone.

One insight from my Africa tour is that local leaders, with some engineering and financial support, could develop clean water sources for their towns and villages fairly quickly. For example, in one Ugandan village I saw a concrete basin installed to protect a natural spring. The women of the village could collect the water directly from the basin instead of collecting it after it spilled across the muddy ground. The concrete basin cost a thousand dollars to install.

But the local chairman for the project told me that the greatest hindrance to installing the system had been local fears that a snake was protecting the spring, and that the snake would become enraged by any tampering and would take away the water. He had to spend considerable time persuading his fellow villagers to go ahead with the project. It took his leadership to get the project finished.

Or consider another village, where women were trekking to a muddy river to obtain water, even after a well was dug in the village. After the well was built, the women wouldn't use it. It turns out that they valued their social time down by the river, and so they chose to continue collecting dirty water from the river, rather than clean water from the well. When the water tap was relocated further from the village, providing an opportunity to socialize, they started to use it.

In these and other cases, only local leadership could tailor development projects to suit local cultures and customs. And it was sometimes shocking to see the disconnect between the aid bureaucracies with their 15-year plans and the availability of more immediate solutions.

You cannot airdrop solutions to local problems. You can only offer air support. Local leadership must implement the solutions on the ground and be accountable for success.

If we can figure out a way to support African leaders in bringing clean water to their nations - and I think we can do that much faster and cheaper than the endless studies say we can - we can liberate hundreds of millions of people, especially women and children, from preventable, debilitating illness and meaningless, wearisome labor. They would be free to pursue their dreams for a better life.

The second important investment I saw was in raising primary education enrollment. I believe that in Africa, in the United States, and in every part of the world, children by the age of about ten years old should and can have the tools to be life-long self-learners. But that requires that we get them into schools at an early age, and keep them there, with adequate materials.

In Uganda, they've had tremendous success increasing primary school enrollment. Primary school enrollment has increased from about half (55%) of the children in 1994 to nearly all of them (94%) in 1999, and nearly half the students are girls. Education quality is improving as well. But there is still a long way to go. I visited schools where they have gone from a ratio of 16 students per book down to six per book. That's progress, but it's not good enough. We must set our expectations higher. Surely, we can get every student his or her own book.

Similarly, one study in Uganda found that only 2% of non-wage spending for education was actually reaching schools in 1991. The rest was lost to corruption and bureaucracy. Following reforms enhancing transparency and accountability for government spending, over 90% of school spending now gets to the schools. That's a huge improvement. But again, we can do better.

The third, perhaps most crucial area for investment in people is health care. Nowhere is this more urgent, and more heartbreaking, than in the struggle against AIDS. In South Africa I saw mothers with AIDS caring for babies with AIDS, even when proven, inexpensive drugs are available to stop transmission between mother and child. I saw the dedication of nurses and doctors treating people with AIDS, and their patients' struggle to survive.

Certainly, prevention of further HIV contagion is the utmost priority, especially to keep the next generation of newborns free from disease. Uganda, in particular, thanks to President Museveni's leadership on this issue, is one of the few to reduce the portion of the population afflicted with AIDS. But among the challenges facing those who fight AIDS in Africa is that in many countries, there is a social stigma attached to even testing for the disease. They need more leaders to tackle this issue head-on.

This is our challenge: to focus the attention of the world on getting results. Caring greatly is not enough. We must also succeed greatly. Starting today.

I'm glad to see progress, but we should not confuse progress with success. We must challenge ourselves to aim higher and concentrate our efforts so that international assistance advances the progress taking place on the ground.

Providing the framework for basic health and education is fundamental for enabling people to realize their potential. When governments are investing in their people, providing clean water, education, and health care, and when the other aspects of good governance are present - just rule and economic freedom - prosperity can blossom.

In fact, the private sector is already growing in parts of Africa. I visited entrepreneurs who are grabbing the opportunities that good governance has made possible. They are creating jobs in industries from coffee and cut flowers to athletic wear and data processing. By doing so they are spreading knowledge and inspiring others to reach for their dreams.

As private enterprise expands in an economy, trade and investment grow to dwarf official aid. Countries that won political independence years ago finally win their economic independence as well. Government provides the conditions for growth, but it is not the source of prosperity. Private citizens create prosperity through enterprise.

And in Africa, where the conditions are right, citizens are doing just that.

For example, in Ghana I visited a successful U.S. investment, called Affiliated Computer Services, Inc. ACS sells data processing services to insurance companies in the U.S. It opened its office there in 2000, and already it employs over 800 Ghanaians, paying an average of three times the average wage in Ghana. 80% of the employees are women. The company now plans to expand its operations to four new sites in Ghana and to increase its workforce to over 1,000 people.

ACS 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 show success, others are bound to follow, and I am optimistic that increasingly advanced services, such as software development, will thrive in Ghana and elsewhere in Africa.

In Uganda, I met a woman, Lukia Ssemonobe, who opened a restaurant with micro-loan funding and a lot of hard work. This woman lost her husband a dozen years ago, and had to feed four children without income. Indomitable, she borrowed $50 from the local branch of a micro-finance NGO, and used that and subsequent loans to build two businesses - a restaurant and then a tailoring shop. Now she employs about a dozen of her neighbors, supports her family, owns a home, and has become a leader in the community. Lukia shows the kind of success that is possible.

I also visited a cut-flower factory, where local entrepreneurs are diversifying Ugandan exports by growing beautiful flowers and air-shipping them the same day to European markets.

In Ethiopia, an entrepreneur from Chicago invested in building a garment factory that makes sports clothes and ships them to the U.S. under the Africa Growth and Opportunity Act. The company now employs about 200 workers, each earning between three and 21 times the average Ethiopian income.

Jobs that deliver prosperity are created one at a time, by people like Lukia, or the investors in ACS. They see opportunities and choose to take the risks, confident they will reap the rewards of success.

Unfortunately, in too many cases, potential entrepreneurs and investors in Africa are deterred by arbitrary laws, corrupt bureaucracies and government favoritism. Africa is a continent of entrepreneurial enthusiasm - that's what I saw. But these individuals have no chance for success without governments that fairly enforce laws and contracts, respect human rights and property, and fight corruption. Governments also must remove barriers to trade - both internal and external - and open their economies to investment. They must allow companies and entrepreneurs to compete without excessive interference, including interference from government-owned enterprises.

That's no small order. But as private sector production takes hold in Africa, and incomes rise, African growth will become self-sustaining. Africa will be its own best market.

Coming back to my original question, what can we in the U.S. do to support African success? Here in Washington, we need to push ahead with President Bush's reform agenda, to improve the effectiveness of wealthy nations' support for African development and promote the best efforts of our African partners.

Many extol debt forgiveness as the path to African development. I would agree that debt forgiveness may help, but it alone is not the solution.

Debt forgiveness solves nothing if we allow new debt to create the next generation of heavily indebted poor countries a decade from now. President Bush has proposed that up to 50% of World Bank and other development bank funds for the poorest countries be provided as grants rather than as loans. This proposal acknowledges the long-term development challenges facing these countries, their vulnerability to economic shocks, and the reality that essential investments in social sectors, such as education and health care - investments in people - cannot directly generate the incremental revenue to service new debt.

Replacing loans with targeted grants will eliminate the need for governments to repay long-term investments in people. It will thereby eliminate the next generation of debt service problems. It is time to end the sad cycle of indebtedness for countries committed to success.

Second, it's a simple fact that is as true about an individual as it is about a nation - even without debt, it's impossible to prosper without income. Even if we forgave all debts, many of these countries still could not fund their own budgets, and they would not be much better off. In Uganda over half of the government budget comes from foreign aid. Think about that. It is not a self-sustaining situation. The only way out of that kind of shortfall is internal economic growth. Local leaders must create the conditions for self-sustaining prosperity, not further dependency.

That is a premise of President Bush's New Compact for Development. In March, the President said, "the advance of development is a central commitment of American foreign policy " and he outlined a "new compact for global development, defined by new accountability for both rich and poor nations alike."

The New Compact for Development creates the Millennium Challenge Account and proposes an additional $5 billion per year in official U.S. development aid - a 50% increase over current levels - specifically targeting poor countries that can use the money effectively. To access the Millennium Challenge Account, a developing country must have a government that shows a strong commitment to ruling justly, encouraging economic freedom, and investing in people, as I have described.

Because results are what count, President Bush has created new incentives in our development assistance programs to reward those that achieve real improvements in peoples' lives. He has committed that as a reward for proven results, the U.S. will increase funding for the African Development Bank by 18%, and will do the same for the International Development Association (IDA), the World Bank program for the poorest nations. To receive these additional funds, the programs need only show they are making a difference in people's lives - a challenge these development organizations, their supporters, and their beneficiaries should welcome.

In the long-term, domestic entrepreneurship as well as trade and foreign investment are far more important for economic growth than official aid. The United States has created the Africa Growth and Opportunity Act, or "AGOA," to open U.S. markets to exports from sub-Saharan Africa. As Uganda's President Museveni said "If somebody buys what Uganda produces, then he is rendering my country the best assistance possible."

I would also encourage all African nations to reduce trade barriers amongst themselves, so that all can benefit from their different comparative advantages, and relative proximity to each other. They should be their own best markets, not their worst.

The Africa I saw on my journey is already changing. We stand ready to help, eager and impatient to assist real improvement in the lives of the African people.

Consider this. Fifty-five years ago on this very date, U.S. Secretary of State George C. Marshall gave a speech outlining the European Recovery Program, later known as the Marshall Plan.

In it, he said: "I need not tell you that the world situation is very serious. That must be apparent to all intelligent people. I think one difficulty is that the problem is one of such enormous complexity. Furthermore, the people of this country are distant from the troubled areas of the earth and it is hard for them to comprehend the plight and consequent reactions of the long-suffering peoples, and the effect of those reactions on their governments in connection with our efforts to promote peace in the world."

He was talking about Europe in 1947. The words are just as true of Africa today.

I went to those troubled lands, and I believe this: with the right combination of aid and accountability - from both rich nations and poor ones - we can accelerate the spread of education, clean water and private enterprise throughout Africa. We can help the African people create vibrant, self-sustaining economies and a rising standard of living.

Development is complicated. I know that. I don't underestimate the challenge. I just don't think we should accept complexity as an excuse for delay.

As Marshall said, "With foresight, and a willingness on the part of our people to face up to the vast responsibility which history has placed upon our country, the difficulties I have outlined can and will be overcome."

Together, we can produce results for Africa. We will tear down the walls to prosperity. Not in the next generation, but right now. In this era of global opportunity, no continent, no country, and no person should be left behind. President Bush said it best - there are no second class citizens in the human race. We must make his vision into a worldwide reality.

Thank you.