FOR IMMEDIATE RELEASE January 17, 2000
It is a pleasure to speak to such a distinguished group about our common interest in expanding trade between the United States and Africa. As beneficiaries of the world's greatest economy--we have a vested interest in expanding international trade. We are living in extraordinary times here in the United States. Our GDP accounts for almost 30% of the world's total GDP, while our population accounts for only 4% of the world's total. The accumulation of wealth in this country is unparalleled in any other country or region of the world. As the last 50 years have shown, the future of the U.S. and the world's improving prosperity lies in the ongoing further integration of trade, investment and capital flows. Since the Bretton Woods Agreement in 1944, global GDP has increased more than 7 fold to $30 trillion and global trade more than 14 fold to $5.5 trillion today, in large part due to the steady decline of trade barriers.
Clearly, increasing foreign trade is one important means of maintaining growth in the US economy. And it is just as clear that through foreign trade the world economy will grow, global wealth will increase, and lesser developed regions of the world will be able to raise their standard of living and improve their quality of life.
Nowhere in the world better demonstrates this confluence of U.S. and international interests than Africa; and no U.S. government agency better illustrates the effective commitment to these goals than the Export-Import Bank.
For those of you who do not know us, the Export-Import Bank (Ex-Im Bank) is the United States government's official export credit agency. In 1999, we supported $16.7 billion of U.S. exports worldwide by providing loans, guarantees and insurance to creditworthy buyers in emerging markets. Since the Bank was established in 1934, over $400 billion in exports to the developing world were supported, and $100 billion of that occurred in the last seven years.
The growing importance of export credit agencies reflects the increased demand for financing exports to the developing markets. In the past 7 years, the G-7 ECA's have supported more than $300 billion in exports to the developing world - slightly greater than the funding from the multilateral development banks. While this in no way diminishes the important developmental role played by these Banks, it does illustrate the increased appetite for capital worldwide - especially in the developing markets. These figures also reflect a trend that emerged in the past decade for Ex-Im Bank and for many other ECA's.
Throughout the 1990's, Ex-Im Bank's transactions moved from the public sector to theprivate sector. Our portfolio of approximately $60 billion, has shifted from more than 80% sovereign to less than 50% sovereign. This trend was driven by the transformation of many former Communist and developing economies toward privatization. For Ex-Im Bank this meant increased attention and increased challenges to work effectively with the nascent private sector in these emerging markets. It was and is important to find the right balance to both provide access to capital and encourage appropriate attention to the formation of basic legal and corporate infrastructures that are necessary for stable and lasting growth in these markets.
In recent years - with a good push from Congress - Ex-Im Bank has focused increasingly to provide the mechanism for small business in the U.S. to join the global economy. And differing from our competitor ECA's in the G-7 we are also focusing to reach small and medium sized companies in the developing market to support purchase of goods and services from the U.S. In Latin America, for example, Ex-Im Bank has supported 50,000 buyers of American goods. No other credit agency does that kind of volume.
But until recently, the level of Export-Import Bank activity in Africa was very modest, too modest when compared to European export credit agencies, and especially when compared to the population of the continent. But we have begun to change that. In sub-Saharan Africa last year we provided loans and guarantees of $600 million, more than ten times the amount of business we did the previous year. In the current year, we expect to exceed $1 billion. In 1998, when President Clinton went to Africa, the Ex-Im Bank was open for business in only 18 of the 48 sub-Saharan African countries. We are now open in 32 for traditional financing and are open in all countries, except one, for project finance.
Credit goes to President Clinton and the First Lady for focusing the attention of the Administration on the vast and important potential of U.S. economic and commercial relations with Africa. The President's trip to Africa and his call for the United States government to become more involved in the region inspired missions by Commerce Secretary Daley, Transportation Secretary Slater, Secretary of State Albright, Energy Secretary Richardson, and Labor Secretary Herman. In addition, the Trade and Development Agency, the Overseas Private Investment Corporation and Ex-Im Bank increased and expanded their efforts in Africa in response to the President's call to action. The President also deserves credit for appointing so many senior officials-like the late Commerce Secretary Ron Brown--who were already committed to improving U.S. relations in Africa, or were willing to become leaders of the endeavor.
I was proud to be the first Export-Import Bank President ever to visit southern Africa and to lead the Export-Import Bank's efforts to improve and greatly expand our programs there. I was surprised by what I found. American exporters lag far behind the Europeans in market share. Currently only six percent of African imports come from the United States. To a certain extent this in understandable, given the geographic proximity of Europe and the legacy of colonization. But even in South Africa, where I thought our sanctions policy during Apartheid would now benefit American businesses returning to that market, I found U.S. firms at a great disadvantage. European firms had simply used the sanctions period to cement their own positions in the South African economy. So our increased efforts come none too soon. Ex-ImBank was too narrowly focused and conservative to see the full potential of the region. In many cases, we were closed in countries, not for political reasons, but because we thought the commercial risk was too great. But we are now committed to taking more risk and developing more innovative programs for the region. We know we can do more business there; and we know there is more good business to be done.
Before I highlight for you some of our innovative programs and success stories, let me emphasize why it is so important for U.S. government agencies such as Ex-Im Bank to take the lead in building economic relations in Africa.
Sub-Saharan Africa has over 750 million people, tremendous natural resources and the potential to make a major marketplace for American business. Africa's largely commodity based economies have been going through a gradual industrial transformation demanding more capital goods and services in a desire to build more infrastructure and follow the path of other nations in creating viable and self-sustaining economies.
Africa's time has come. The World Bank is forecasting a 4.2 percent annual growth rate for Sub-Saharan Africa during the next 20 years. Government subsides and barriers to trade and investment are being reduced. Net foreign direct investment in the region has increased four fold from 1990 to 1997. Aircraft and aircraft parts, oil and gas equipment and machinery are leading the way, but there has been recent strong growth in sales of telecommunications equipment and motor vehicles.
The historic paradigm of economic development dictated that new emerging economies would move from agrarian economies to light manufacturing such as textiles, to medium industries such as tools and machinery, to heavy industries such as steel, and continue working up the value added chain of industry. This was the successful model of Japan, Korea and a number of other economies.
Technology may alter this paradigm. Now it may be possible for newly emerging nations to leapfrog certain stages of development. For example, wireless communication and new cost-effective telephonic and fiber-optic infrastructure will allow developing nations to join the information age in a more cost effective and immediate way, potentially accelerating productivity improvements and ultimately improving wealth creation. As the U.S. is a global market leader in technology, it is crucial that the US develop the next generation of customers who will define and expand upon the current information age in their nations and create global wealth and prosperity. In short we should encourage Africa dot com.
Three months ago on a visit to West Africa, I noted with interest the lines to enter cyber cafes on the streets of Accra, Ghana. Last week I was in Silicon Valley to make the case that Africa is a market worthy of the attention of U.S. technology companies and that Ex-Im Bank is willing and anxious to facilitate exports of technology to this market.
President Obasanjo of Nigeria has spoken of economic advancement as a democracy dividend. I like that term and I assured him that there is such a dividend. Where there iseconomic and political stability of the kind that promotes transparency and good corporate governance, the investment climate becomes attractive and the country prospers. In that sense, Ex-Im Bank programs may be considered a democracy dividend.
Now I would like to tell you about some of our new initiatives in Africa. Last year Ex-Im Bank opened short term programs in 13 additional African countries for public and/or private sector transactions involving U.S. exports of raw materials, spare parts, consumer goods and commodities. In October we added three more countries. In addition, we have expanded our foreign currency guarantee program to include the South African rand. We believe that U.S. exporters will find it easier to sell their products in southern Africa now that African companies can arrange rand-denominated loans guaranteed by Ex-Im Bank. We have also set up the sub-Saharan Advisory Committee of outside experts--some of whom have extensive business experience in Africa--to advise us on how we can most effectively expand our presence to the mutual benefit of our exporters and the markets we want to serve.
Our activities in Ghana are an excellent example of what we have begun to achieve in Africa. We approved 29 transactions, $145 million in financing last year, to businesses large and small. In one case, we supported the sale of $1.6 million in refrigerator trucks to enable a family fishing company, owned by three generations of women, to get their catch to the markets inland. Let me reiterate that while Ex-Im Bank may be most widely known for its support of large sales-articularly aircraft-most of our transactions are in support of small and medium-sized businesses. Nothing illustrates this point better than our transactions in Africa. For example, last year we provided insurance on the sale of new business books to Kenya and South Africa. Some of the shipments we have insured have been as small as $250.
We are also pursuing innovative financial structures in Africa. For example, last year we approved $10 million in export credit insurance to support the sale of Cessna Aircraft to Tanzania Air Services and Zambia Flying Doctor Service. Although Ex-Im Bank financing was technically unavailable in both countries, we worked out an arrangement where the regional Eastern Development and Trade Bank, based in Kenya where we are open for business, served as the guarantor on the transaction.
In sum, the Ex-Im Bank has seized the initiative and has begun to advance a real partnership between U.S. exporters and African customers; our goal is to continue to expand that partnership, and increase the number of partners involved on both sides, to everyone' benefit. As I noted earlier, Ex-Im Bank' activities are part of a broad Administration initiative on Africa. And it is an excellent example of how much the U.S. government can accomplish when everyone pulls together. As someone who spent most of his career in the private sector, I have sometimes been critical of how the U.S. government fails to maximize its efforts through a lack of coordination and cooperation. This has not been the case with Africa. We are all working together, coordinating our efforts, and it shows in the progress we have made. President Clinton hosted an Africa Ministerial in Washington last March, attended by groups of ministers from sub-Saharan African countries. Transportation Secretary Slater hosted a meeting with all transportation ministers in Atlanta last September; and Secretary Richardson hosted a meeting with all energy ministers in November.
Our efforts in Africa represent the first stage of a U.S. government success story---government working like a business to achieve maximum results for ourselves and the countries of Africa. We have established a relationship whose achievements and benefits will extend far beyond this Administration. Thanks to U.S. government initiatives and the great power of our private sector, we will seize the opportunity to make an important impact in Africa in the next decade.