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This is an archived USAID document retained on this web site as a matter of public record.
Speech by USAID Administrator Andrew S. Natsios
at the 12th Annual Energy Efficiency Forum
Sponsored by the U.S. Energy Association and Johnson Controls, Inc.
National Press Club, Washington, D.C.
June 13, 2001
It is a pleasure to be here today to represent the U.S. Agency for International Development. I am also pleased for another reason. I was once Executive Director of Northeast Public Power Association, a trade association and service group in New England for municipal utilities and rural electric cooperatives. I served for two years and learned a great deal about the utility industry.
Now when I travel to developing countries one of the first things I look at are the transmission and distribution lines. And I ask, "Where are the generating plants and the dams?" People are a little mystified and ask, "What are you looking at up there?" I say that I am looking at the condition of the power lines to determine the level of technological progress in the country, and whether or not the power system functions so that there can be economic growth.
Sometimes I go to a country and see that half of the electric lines have been damaged or looted, which I watched happen tragically in Somalia during the civil war in 1991 and 1992. The first time we saw this going on in Somalia, we thought they were putting up the electric utility lines. Since there was no government in the country, I thought that it was amazing that these rebel leaders were reconstituting the electrical transmission system of Somalia. Then, as we watched very carefully, we realized that we had made a mistake. They were taking down the utility lines to sell them to traders for money to support the war.
That brings me to some of the essential issues before the world economy. There are two trends going on at the same time -- one is "globalization", which is tying the whole international economy together and the other is a huge increase in the number of "failed states", that is, the basic collapse of whole governments, social structures and economies. Examples are Bosnia, Somalia, Angola and Afghanistan.
We have these two trends going on -- one toward growth and integration and the other toward dissolution. They are both happening at the same time. The question is what do we do about them.
I have argued for some time that you are not going to make any poor country wealthy just by doing programming. Because programs without economic growth that produces jobs are not enough -- even if they are good programs, charitable programs. People are still going to be poor.
You have to increase family income. Basically, the only way to do that in developing countries, for the most part, is through economic growth and that means in many of these countries through agriculture and development of the rural economy. Three quarters of the poor people in the world -- the poorest people in the world -- live in rural areas. You may not see them on TV, because TV cameras do not go to places where there are no roads, no hotels and no electricity. I spent 10 years in these countries all over the world.
Some of these countries do quite well on their own. But, many of them experience civil unrest and bad, predatory governments.
Two thirds of the USAID field missions (we have missions in 75 countries) are in countries that have had some kind of conflict or civil war in the last five years. There has been a dramatic increase in the amount of internal conflict in many of these countries around the world.
The way to deal with this situation is to have economic growth. Because once people are invested in an economy that is growing, there is far less likelihood they will destroy that economy. Most complex emergencies that occur in failed states happen where the economy is slipping into chaos. In contrast, where we find economies that are growing five or ten percent a year, almost none of them slip into complex emergencies or failed state status.
If we do not deal with the failed and failing states, we are going to see increasing gaps between the rich and the poor, rising levels of violence, and accelerating global health problems (like HIV/AIDS and other infectious diseases -- which are spreading in areas where there the health services are inadequate -- and tragically killing more and more people).
This is especially true in the energy sector. The bottom line is that we cannot attack poverty, improve food security, and build economic opportunity in poor countries without more energy. You cannot have economic growth without energy, including in the rural areas.
I go to the rural areas of the world all the time. I ask, "What do you want here? What would change life in this village more than anything else?" And they say, "We need energy to light our homes and classrooms, to pump water, to make bread, to power our small workshops, to listen to radios, to learn on computers and gain access to the Internet, to refrigerate medicines and vaccines in our hospitals, and, of course, for transportation."
Also, one of the principal ways that energy can help transform rural economies is through the use of energy for irrigation. Countries in Asia that went through the Green Revolution did it with irrigation, improved rice, seed and fertilizer. Electricity makes irrigation possible in many countries, where gravity-fed irrigation is not feasible.
There are studies that show you can increase rural incomes by 400 percent if you use electricity to pump water for irrigation. It makes a profound difference. And, it means that these people are far less vulnerable to famines and drought, because there is a guarantee that there will be some water available for growing crops.
There is this perception that the developed world is moving ahead and that the developing world is not. This is not an accurate reflection of reality. Let me give some examples
In the 1990s, Uganda had 12-13% economic growth rates. Unfortunately, growth has slowed recently, because it is bordered by nations experiencing wars and instability. Ugandan President Museveni is asked constantly what is it that made the economy grow so rapidly in the 1990s. He replies, "Inflation, inflation, inflation." He cut the inflation rate down to dramatically through very tight monetary and economic policies. And, as a result, the country grew, more jobs were created, and internal stability in the country was maintained. We are now seeing sound growth rates in the energy sector of many developing countries of 10% per year.
Another example is Mozambique, which came out of one of the worst civil wars in Africa in the late 20th century. They now have six or seven very competent ministers who are setting the policy agenda and reforming their public institutions to allow private growth to rebuild their economy.
Many countries in the developing world chose socialism and autocracy as their political-economic system -- a disastrous choice. In contrast, the nations that moved toward market-based democracies and democratic capitalism are now growing at very rapid rates. During the decade of the 1990s, Ghana, Mozambique, and Uganda were showing what you can do if you have the right policies in place and when you have strong national leadership.
As you know, the President's National Energy Policy makes clear that we need a balanced approach toward dealing with energy. We need to recognize the need for both increased supply and enhanced energy efficiency. Within USAID, we have already been implementing this approach for some time.
At USAID, we are working in two key areas to improve the energy sector in developing countries. First, we are insisting that developing countries put in place market-oriented policies and effective institutions to support private energy and environmental initiatives. We are going to continue to do this. Second, we are arranging cooperative relationships -- in which some of the companies at this Energy Efficiency Forum participate -- to promote the transfer of clean, innovative energy efficiency and environmental technologies.
Not only does this provide developing countries with access to world-class commercial technologies and management practices, it also helps U.S. industry to become more competitive in the international marketplace. I always get annoyed when I travel to developing countries and see us getting beaten by other industrialized countries. I think we should be out front. And, we can do that through some of these USAID technology transfer programs that help to give American businesses an edge in these countries.
If you talk to people in the developing world, they prefer dealing with American businesses. They tell me this all the time. The problem is that our companies are not always present in these countries. In my view, this is very tragic since we are often the country of choice.
I asked one of my friends from a developing country about this. And, he said that his nation prefers dealing with the U.S., "Because you are the world. You have got every single ethnic group living in the United States. And, you have learned how to get along with each other. We feel much more at home dealing with a nation than embraces almost every single ethnic group in the world."
Improvements in energy efficiency generate positive effects in a developing country's economy. One megawatt of power saved through energy efficiency can release enough energy to provide daily electric service to 5,000 thousand rural customers. This helps the typical crop farmer in a developing country who spends over 1,000 hours year hauling water for irrigation.
Ten years ago when I started my international career, cell phones were not what they are now. I had said that we would never, in some of these remote areas, be able to put in telephone and transmission lines - it is just going to be too expensive to provide service.
Guess what happened, we developed cell phones - the technology changed. Now, you can go anywhere in these rural areas and can find communication towers somewhere.
In fact in Bangladesh, USAID helped establish a very extensive network of microfinance loan institutions that provide small loans of $1,500 to local entrepreneurs. Women all over Bangladesh are using the program to buy cell phones, because a system of cellular towers exists throughout the country. They then rent the phone every night to other people who line up to use the service. These women, who are among the poorest, can become the most prosperous very rapidly. They become real entrepreneurs who also create jobs.
I am convinced that even in the energy sector we are going to see a similar transformation. There is talk about new types of power generators that are small and extraordinarily efficient. As you know, we lose a lot of power when we send it over transmission and distribution lines. If we could generate power locally without having to send it through these large transmission lines, there could be a much more efficient use of energy.
I am told that the private sector is making substantial contributions toward developing this new technology. There is this false notion that technological progress only takes place in the United States if its publicly funded by the federal government. I must tell you that this notion is counter to what happened in the last century in American life. In fact, Peter Drucker once remarked in his book "The Age of Discontinuity" that 90% of innovation in American industry has come entirely privately, only 10% is the result of public sector involvement. While some public sector participation in research and development is very useful and important, we ought not to assume that it is the only way change takes place in an economy. The federal government seldom keeps up with the private sector.
I would also like to mention one of the profound changes that will take place in the developing world when they get energy, particularly electrical energy. It is something that happened in the United States a hundred years ago. I commend to you an article written in the Atlantic Monthly a few years ago called "An Explosion of Green".
It is a reflection on what happened when we moved from wood-based heating systems to an oil, coal and electricity-based heating system in the United States. Earlier, we had cut down most of the forests on the east coast for commercial uses and fuel.
I come from a small town in Massachusetts, Holliston, 40 miles west of Boston. Our town now is heavily wooded. However, I remember a picture of my hometown taken in1900. There were no trees in the town except for the main street where they were protected. All of the areas of the town -- and I lived in several homes in the town where I grew up and when I married we moved to another area of the town -- had no trees left.
I asked an old timer, "Is this really a picture of Holliston?" And, he said to me, "Yes, we burned firewood to heat homes. Did you think we were going to leave them standing there? We weren't going to travel 50 miles away just to cut firewood."
The same thing is happening in the developing world, and we are all horrified by it. If you go to Holliston today, 50% of the town is wooded. Why? In part, because we changed our fuels for heating, most people do not use wood anymore. Much of the forests have regrown.
There is also similar evidence from the developing world. In tropical rain forests that have been destroyed, but not completely -- if you do it for too long it does permanently damage the areas -- we do notice in some areas that if they are left alone, the forests can reclaim the sections that have been cut down.
So, the article in the Atlantic Monthly notes that there has been a dramatic increase in the forest coverage of the Eastern half of the United States -- east of the Mississippi River. I argue that in the developing world if we can change the sources of energy and technology we will see a regreening of many areas that have had a serious degradation. It is all a function of the economy.
The developing world needs about $100 billion a year over the next decade to build up its electrical generating capacity if we are going to see the economic progress these countries want and need. And the United States can play a role in helping with this.
The key to USAID success in energy frankly is all of you who are participating in this Forum. You are our best technology partners. You are the best people to transfer these technologies to the developing world. And, they want our help. We have formed a number of partnerships over the years with industry in the United States with many of your companies.
We work on a bilateral basis, for example, with legislatures and utilities. And, we work on a regional basis, such as through the South Asia Regional Initiative where we are facilitating energy policy dialogue between India, Bangladesh, Nepal and Sri Lanka. In fact, the United States Chamber of Commerce just announced the establishment of the South Asia Regional Energy Coalition with USAID support. The Coalition will promote the development of an integrated regional energy market by working with the chambers of commerce and industry throughout South Asia.
In Ghana, USAID in cooperation with the Alliance to Save Energy -- I think Congressman Markey and Senator Bingaman sit on the Board of Directors of the Alliance -- has helped create the Ghana Energy Foundation. It is a government/private sector collaboration established to promote energy efficiency and renewable energy policies and programs to ensure the efficient and sustainable development and use of Ghana's energy resources.
In conjunction with USAID, the Alliance, Lawrence Berkeley National Laboratories, and this foundation in Ghana are working with the Ghana Standard's Board to develop energy efficiency codes, and labeling and testing procedures for household appliances. This will enable customers to buy electrical appliances that are more economical and could thereby save up to $62 million a year.
USAID also works with the U.S. Energy Association -- one of the sponsors of this Energy Efficiency Forum. With USAID support, USEA has established the Energy Partnership Program that promotes the efficient and environmentally sound supply and use of energy through direct person-to-person transfer of market-based approaches and "best practices" -- I am a very big advocate of market-based approaches. We use the best resources that we can think of - voluntary participation by energy executives from the U.S. private sector.
To date USEA has established over 80 utility and regulatory partnerships in 32 USAID-assisted countries. More than 8,000 utility and regulatory executives from 50 U.S. electric and gas utilities and 21 U.S. regulatory commissions have volunteered their time to this very important program.
For example, in Kazakhstan - a major oil producer -- USAID has been now working with USEA, Johnson Controls, Inc. and a major Kazakh city. They have a Stalinist-era district heating system in the city, as do most cities under the former Soviet system. Everybody gets energy from the same heating plant throughout the whole city. We sent experts over to help them to make their power plants, which are notoriously inefficient, much more energy efficient and reliable. We are also helping Kazakh officials with the question of energy sector restructuring and privatization, which is a much better way of assuring the reliability of their system.
These partnerships work. They support the President's National Energy Policy, they support USAID's development objectives, and they support U.S. private sector interests.
USAID wants more of this type of cooperation. We are looking forward to working with all of you.
We have also launched a new initiative called the "Global Development Alliance". USAID will use its 75 field missions, its technological and technical expertise, and its $7.7 billion budget to link up with American private capital markets and industry, private American foundations, the NGO community (Non-Governmental Organizations), as well as private and public American universities and colleges, to establish partnerships and programs that can multiply the resources that we are putting into the developing world.
We believe this is the wave of the future. The notion that "the government knows best" and "only the government does it right" is a thing of the past. Most of the capital flows in the developing world now are actually from private capital market investments. We want to link up USAID's program with that capital market flow in ways that can advance the development agenda in these countries.
So I really appreciate the alliances and the partnerships that we have with all of you. And, I want to tell you that we are in agreement on most of these issues that I believe are important to you. Thank you for inviting me this morning.
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Last Updated on: January 02, 2009 |
