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Reform is Key to Doing Business

Randall L. Tobias, Director of U.S. Foreign Assistance and Administrator of USAID
Remarks to the World Bank and USAID "Reformer's Club"
Washington, DC
April 13, 2007

Thank you, Michael and thank you all for being here this morning.

It is a great pleasure to join President Paul Wolfowitz and our many colleagues from the World Bank to honor leaders who understand the importance of the private sector as the driver of economic growth. Those leaders being honored today, starting with—but certainly not limited to—Georgian Prime Minister Noghaideli, have shown tremendous vision and courage. They have taken on the difficult task of reforming micro-economic constraints to growth in order to unleash their countries’ economic potential.

Based on my own experience in government, I can appreciate both the challenges and the opportunities of reform. As some of you may know, a little more than a year ago, Secretary Rice outlined her vision of transformational diplomacy, the goal of which is “to help build and sustain democratic, well-governed states that respond to the needs of their people, reduce widespread poverty and conduct themselves responsibly in the international system.”

In outlining that goal, she announced the largest restructuring of U.S. foreign assistance in decades. Since then, we have worked hard to implement an aggressive reform agenda aimed at helping our host countries progress from a relationship defined by dependence on traditional foreign assistance to a relationship that is defined by full partnership.

Within the United States Government, we are doing our part by focusing U.S. foreign assistance on the areas that best advance individual country progress. As we help countries advance their development, we are asking ourselves whether we are achieving sustainable impact.

Are we helping societies gather the tools they need to sustain further progress on their own? Based on the new country-driven process, we have prioritized resources in the areas that we believe will promote and sustain long-term country progress.

Undoubtedly, reducing the barriers to doing business is one of those areas. This morning, we heard about the ways in which Georgia has sought to address the challenges to doing business on a micro-economic level. Later today, you will hear six more stories of leaders who have changed the direction of their countries and people in similar ways. That makes this a select group and reminds us of the extraordinary opportunity we have over the next decade to promote economic growth and reduce poverty through reform.

Each of you who are recognized today have found ways to dramatically reduce the barriers to business. Growing businesses—of all sizes, from small family-run businesses to large corporations—are the only sustainable source of new employment in any economy. Indeed, a robust business climate is the only way for economies to reduce widespread poverty in the long run. Surveys around the world show that people, no matter how poor, don’t want handouts—they want jobs. Businesses, large and small, are what produce them.

For most developing countries, micro-economic constraints are the largest barrier to business and a major impediment to reducing poverty. The extent of the problem has only become apparent during the last few years as new sources of data—the Doing Business surveys foremost among them—have revealed the nature and extent of the constraints.

The most dramatic illustration to me is the finding that businesses in developing countries—from small farmers to large corporations—face, on average, three times the regulatory burden that businesses in the developed world do! Regulation is important to assure competition, and to protect consumers and the environment.

But it must be done well and there is no reason why a small firm in a poor country should face three times the regulatory burden of a firm in the U.S., Japan or the EU. Not only is micro-economic reform - or business climate reform as many call it - the new frontier for promoting growth, it is also an inherently pro-poor agenda.

The people who benefit the most from improved property rights, fair and transparent ways to resolve economic disputes, easier and cheaper processes for business licenses and inspections, among many others, are the poor and marginalized.

As the first-ever Director of U.S. Foreign Assistance, the Administrator of USAID, and a member of the Board of the Millennium Challenge Corporation, I am proud of the support that the U.S. Government is providing to countries pursuing micro-economic reforms.

The brochure that you each have describes the extent of these activities. From the MCC—and the growing incentives provided by the “MCC Effect”—to the U.S. Treasury and Small Business Administration, nine departments or agencies including USAID are supporting business climate reforms in developing countries in one fashion or another.

USAID has worked in this field for over two decades. USAID and The World Bank’s Foreign Investment Advisory Service together invented the Investor Roadmap in Ghana in the mid-1990s.

The Roadmap—which some call an Administrative Barriers Analysis—maps all the steps and the time and cost of each for a foreign investor to establish a firm and begin operations in a country. It helps governments identify what needs to be done to increase foreign investment and it helped inspire the Doing Business survey. We are working in this area today in over 50 countries.

I am especially pleased that USAID and the World Bank are today working together to promote Doing Business in several ways. We helped fund expansion of the survey to additional countries. We worked together to prepare the case studies on “How to Reform” that are in the packages handed out today. And we are working together with leaders in a growing number of countries to apply the Doing Business survey at a local government level.

While the U.S. Government remains committed to Doing Business reform, when it comes to sustainable poverty reduction—as I told my colleagues from Norway, Sweden, Denmark, Finland, the Netherlands, Ireland, and the UK in a meeting less than an hour ago—donors can only go so far.

Indeed, as Secretary Marshall put it at the launch of his Marshall Plan, development is not about us. If we are to succeed, it must be about those in the developing world making change happen. Host country leadership matters more than all donor resources combined, which is why I am so pleased to co-host this Reformer’s Summit.

On behalf of the American people, I congratulate each of the reform award winners honored today for creating the opportunity for all your citizens, including the poor and marginalized, to build a better future for themselves. To those who we have assisted in making these changes, we’re pleased to have made a contribution.

To those contemplating change, the members of next year’s Reformers’ Club, let us know how we can help. Thank you very much.

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