By Witney Schneidman, Deputy Assistant Secretary of State for African Affairs
African countries can benefit from the Partnership Initiative by taking steps to integrate themselves into the global financial system, open up to trade and investment, stick with macroeconomic reforms, and implement anti-corruption strategies, Schniedman says.
President Clinton's two-year-old Partnership for Economic Growth and Opportunity in Africa is working to expand U.S.-African trade and investment and assist African leaders in making needed economic reforms, says Witney Schneidman, Deputy Assistant Secretary of State for African Affairs.
The United States seeks a stable, economically dynamic, and democratic Africa with which we can work to promote trade and investment to advance our mutual interests. The Clinton administration has made it a priority of its foreign policy to support increased economic growth in Africa in order to accelerate the region's integration into the global economy. We believe that trade and investment are critical to Africa's long-term sustained development and thus are key to our bilateral prosperity and security in the next century.
Increasing Africa's commercial links with the rest of the world can help eradicate endemic poverty -- and the civil unrest that often accompanies it. At the same time, the United States' engagement with Africa's economies is growing by leaps and bounds. Africa is the source of over 16 percent of our nation's imported crude oil, almost as much as from the Middle East. U.S. exports to Africa increased 8 percent last year, the fourth year of consecutive export growth with Africa. In 1998, our exports to Africa were 45 percent more than to all the newly independent states of the former Soviet Union combined.
THE PARTNERSHIP FOR ECONOMIC GROWTH AND OPPORTUNITY
Two years ago, in an effort to structure our commercial relations in Africa, President Clinton launched his Partnership for Economic Growth and Opportunity in Africa. The program is intended to catalyze and complement the work of other industrialized countries, international institutions, and the people of Africa to ensure that the region can compete in the next century. Under the plan, as part of U.S. government policy, we are encouraging greater two-way trade and private sector investment throughout Africa, in part by making available more than $750 million in investment financing from the Overseas Private Investment Corporation (OPIC). We also continue to press for swift passage by Congress of the African Growth and Opportunity Act (AGOA). The AGOA utilizes trade as a long-term stimulus to economic development and will spur greater trade and investment in Africa.
Debt relief is essential if African governments are to accelerate the process of economic reform and development. Debt relief is a pre-condition for African countries to become vibrant members of the global economy. Thus, in mid-June at the Group of Seven (G-7) major industrialized nations summit in Cologne, the leaders announced a $90 billion debt reduction initiative. This initiative will be an expansion of the existing World Bank/International Monetary Fund-administered Heavily Indebted Poor Countries (HIPC) program. Once implemented, relief will be significantly deeper, faster, and broader for countries taking the necessary steps to help themselves, allowing them to target saved funds on such social needs as education, health, and human development. The number of countries expected to qualify for the enhanced HIPC program would rise from 26 to 33, affecting over 430 million people, the majority of them Africans.
Under the partnership, we have begun a dialogue with Africa's leaders on the most significant issues of the 21st century. In March, President Clinton, eight members of his cabinet, and the heads of the U.S. Agency for International Development, the Trade and Development Agency, OPIC, and the Export-Import Bank invited the foreign, commerce, and finance ministers from 46 sub-Saharan countries to Washington to the first-ever U.S.-Africa ministerial -- the largest group of U.S. and African officials ever to meet anywhere. In April, a 100-member U.S. delegation traveled to Botswana for the first U.S.-Southern African Development Community (SADC) forum, to increase our ties with this critical economic bloc. There, we considered a regional trade and investment framework agreement and agreed to work together to counter trafficking in drugs and firearms, as well as to coordinate efforts to combat HIV/AIDS. Clearly this level of engagement between Africans and Americans signals a new era of regional and bilateral cooperation and interest.
Africans themselves already have made significant strides in opening their economies to international traders and investors. A majority of African nations continue to implement economic reform measures, including liberalizing trade and investment regimes, reducing tariffs, rationalizing exchange rates, ending subsidies, and stabilizing their currencies. Eleven African nations have adopted principles that we hope one day will form the basis of an African Anti-Corruption Convention, and organizations such as SADC, the East African Community, and the Common Market for Eastern and Southern Africa are becoming serious regional economic engines for growth. Regional integration is one of the most important steps toward integrating many more nations into the global economy, allowing smaller countries to test the waters locally before being exposed to competition from abroad. We will support the efforts of African nations to band together to form strong, connected, and promising markets.
CREATING INVESTOR-FRIENDLY ENVIRONMENTS
There are many additional ways in which African nations can take full advantage of what the President's Partnership for Economic Growth and Opportunity has to offer. The first is to continue to have faith in the global financial system. The Bretton Woods institutions are still, and will continue to be, vital to the global economy. Yet the United States and African nations must work together to strengthen the capacity of these institutions to deal with change, inevitable risk, and the potential shocks of this 21st-century economy and its rapidly increasing flow of ideas, capital, technology, and goods and services. As President Clinton noted very recently: "Every single day a half million airline passengers, 1.4 billion e-mail messages, and $1.5 trillion cross national borders." Today, billions of dollars worth of goods and services can be bought and sold, traded and bartered across oceans in a few seconds, and often with just a push of a button. This environment requires additional safeguards from both developed and developing nations to ensure stability and help mitigate the boom or bust cycles we have witnessed in many important emerging markets recently.
The Clinton administration is working to develop a new global architecture that involves important refinements of the Bretton Woods institutions, relying more on accepted codes of conduct to improve overall financial transparency and bank supervision. These improvements will benefit the economies of both developed and developing countries. At the G-7 meeting in June, for example, world leaders recommended strengthening financial regulation in industrialized countries to encourage creditors to act with greater discipline, as well as prudent assessment of risks associated with lending.
Second, we need to encourage developing countries to invest more effectively in their people. An educated and trained work force is necessary to harness the technologies of the 21st century. Investments need to be made in universal and primary education. Moreover, there needs to be a greater effort to encourage the more than 30,000 Africans with doctorates now living outside the continent to return home. The development of Africa's capacity is an urgent priority, especially as it concerns economic and financial matters. We must also take urgent steps to combat the pandemic of HIV/AIDS, especially in those countries where the life expectancy has begun to drop precipitously.
Third, it is apparent that over the last decade, many developing countries have made progress in liberalizing their markets with considerable success. While this is essential to becoming a full member of the global economy, the last two years have also underscored the need for all countries to put into place microeconomic measures, such as sound prudential supervisory mechanisms, appropriate capital adequacy formulas, effective shareholder rights, and transparent financial disclosure practices. With these institutional improvements, both foreign direct investment and privatization can have their full catalytic impact on economic growth and capacity building. At the same time, developing countries' leaders must pay more attention to developing these financial regulatory mechanisms in order to clarify and enforce the "rules of the game" to attract significant volumes of investment.
Fourth, governments must stay the course of macroeconomic reform. The United States will try to lead by example and keep its markets open. Through the African Growth and Opportunity Act, Africans will be able to export many more products to the United States duty-free. But African nations must do their share by continuing to liberalize, privatize, and nurture the growth of the private sector in their economies, seek foreign investment, and remove barriers to intra- and international trade. Privatization, for example, can lead to the introduction of new technologies, new management techniques, and new investment capital in formerly state-run enterprises. Reforms of this kind can also contribute to more investor-friendly environments and provide important linkages between African economies and other trading nations.
The United States faces hurdles in its bilateral economic relationship with Africa -- as we do with all of our trading partners. Many African countries continue to have tariff rates that are among the highest in the world. The United States will continue to advocate vigorously for a reduction of tariff and nontariff barriers and for compliance with World Trade Organization obligations. This includes protection of intellectual property rights and adherence to other standards critical to expanding exports, attracting investment, and raising growth rates.
IMPORTANCE OF ANTI-CORRUPTION STRATEGIES
Finally, together, the United States and Africa need to launch a global campaign for good governance and anti-corruption.
The Organization for Economic Cooperation and Development's anti-corruption convention, which is aimed at the supply side of the bribery equation, came into effect in February of this year. Twelve OECD states have ratified the convention, and more are expected to do so in the coming months. States that have ratified and implemented the convention are criminalizing the provision of bribes. The goal of the United States, which banned bribery by its firms more than 20 years ago, and now the OECD is to make price and quality the determining factors in public procurement decisions.
Both the OECD and Organization of American States have begun to deal with the demand side of bribery and are exploring means to curb the solicitation of bribes.
In Africa, many countries are beginning to deal with corruption head on because, increasingly, it is seen as the most serious impediment to economic and social development and the creation of an investor-friendly environment.
In this context, we applaud the steps by the World Bank to make anti-corruption practices central to its global activities, including in Africa. We also applaud the numerous steps that African governments are taking to implement national anti-corruption strategies. Effective anti-corruption strategies are vital to Africa's full engagement in the global economy.
President Clinton said it best when he announced the Partnership for Economic Growth and Opportunity in June 1997: "As Africa's nations join the global march toward freedom and open markets, our nation has a deep interest in helping to ensure that these efforts pay off. An Africa that is gaining vitality while technology, trade, communications, and travel are bringing millions into the global economy is a continent of greater stability, growing markets, stronger partners." A partnership is a give and take, a union formed to achieve a shared goal or aspiration. We stand with Africans as they take the necessary steps to join the community of world nations and become more prosperous economic allies in the next century.
Economic Perspectives
USIA Electronic Journal, Vol. 4, No. 3 August 1999