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This is an archived USAID document retained on this web site as a matter of public record.
Andrew S. Natsios Administrator, U.S. Agency for International Development
Remarks at US Energy Association-Eurasian Energy Conference
September 9, 2002
Kent (Assistant USAID Administrator Hill) mentioned that I was in the energy business for two years after I left the House of Representatives in Boston. In 1987 and '88, I was Executive Director of the Northeast Public Power Association, a trade association that worked for municipally-owned utilities and rural electric cooperatives in New England.
I learned a lot from the people working for me about utility lines, substations, and pricing policy. We did a lot of work in the policy area and in services, technical services, the agencies that are part of this association.
Now whenever I go to Eastern countries or to the developing world, I always look at the condition of utility lines. When I get off the plane, that's the first thing I look at. If all the lines aren't connected, I begin to question whether or not the economy is working very well. You will go to countries where you see the lines hanging off; someone has cut them and sold them. Believe it or not, that happens in some countries.
I know in the former Soviet states, the NIS countries, that is not the case. In the NIS countries, of course, there's a much higher level of development. It's not a question of developing. It was a question of transforming the Socialist economies to free market economies. So it's a very different challenge and I recognize that.
But I've been to Russia many times and to Ukraine and to what is now Belarus. My first trip was in 1985, three weeks in December, and I can tell you this story. We went to Moscow, what was then Leningrad, now St. Petersburg, to Minsk and to Kiev. This was when Gorbachev had been in power for only six months, then, and none of the changes had been made yet, and the Cold War was still going on.
In every hotel we stayed in, it was about 90 degrees Fahrenheit in the middle of December, and I ask'd people in the hotel, Is there any way we can turn the heat down? They said, No, there's one giant central utility that provides the heat for the entire city, and we can't turn it off, and we can't turn it down, and we can't turn it up. It just functions. So if it's too hot, open the window. In half the hotel, the windows opened and closed, the other half they did not. It was like being in Sub-Saharan Africa in the middle of the Sahara Desert in the middle of December in the cities because of the way the heating system, which was very inefficient at the time, was functioning. And I always said, wouldn't it be nice if we could work in cooperation to bring a little bit of economic efficiency to these old plants, and now we have the opportunity to do that -- we have had over the last decade.
We know from work in AID for 40 years that countries do not make progress in terms of development without high rates of sustained, economic growth over a very long period of time. In fact, that's how countries with a lot of poor people become prosperous, where countries that are making transitions, as are the former eastern bloc countries, the only way to make progress is by high rates of economic growth.
We do know that in these societies that you come from, energy is a critical part of making that conversion. There are several requirements for success in this area. The first is free markets. I am a free market conservative. Let's be clear. I believe in the marketplace. It doesn't always work, but it works more often than not. And we know that when it's working properly, it can drive economic growth in a profound way. Sound fiscal, economic, commercial, and microeconomic policies are also essential, as are open, transparent legal and regulatory frameworks.
We also know that honesty in the administration of government is critically important, as the government, of course, plays a continuing role not just in NIS countries but also in the United States' energy sector. There needs to be a regulatory framework that's fair, open, honest, and democratic in regulating this sector of the economy.
Finally, what's very important in making progress is partnerships. We developed, when we took office last year, the Bush administration, what we call the Global Development Alliance. The Global Development Alliance is an effort to bring the public sector --the government, us, AID -- with the private sector in the United States and other countries, with the non-profit sector, universities, NGOs, and we found it to be very, very successful, if we do it properly.
We know in 1970 that the cash flows of the United States to the developing world, were 70 percent from AID. Of the money that went to the developing world from the United States, 70 percent came from AID. Now it's only 20 percent. Eighty percent of the money that goes to NIS countries and also to the developing world, 80 percent is private -- private sector investments, NGOs send in $3 or $4 billion a year, universities. Private universities in the United States give more money in private scholarships, not including the U.S. Government, than the aid budgets of most European countries, well over a billion dollars in private scholarships. That is a form of foreign assistance. It's a form of technical transfer of our knowledge base in the United States through our university system, through our degree programs, to NIS and Eastern European countries as well as the developing world.
Then there's also money that's going from the ethnic diasporas in the United States. For example, 12 percent of the gross national product of El Salvador consists of remittances from the United States. Twenty-five percent of the gross national product of Lebanon is money in remittances from immigrants to Europe and the United States from Lebanon. I don't know what the figures are for the NIS. It has some immigration, but it hasn't, of course, been on the same scale as it has been in other countries. But there are ten Latin American countries now that have large ethnic diasporas that have immigrated to the United States, and very huge transfers of money take place, $30 billion a year.
So linking all these resources in a coordinated way on common program objectives and what the Global Development Alliance is, and it has been remarkably successful where it's been tried.
We now have about 70 of these partnerships. One of them is the Clean Energy Initiative, which was launched at the World Summit on Sustainable Development last week, which is a new initiative that the Bush administration and that Secretary Powell announced. This will try to link the private sector of the United States. It's in some ways modeled after the program we've been running in NIS countries in the last ten years.
Eurasia's energy picture is quite complex, much more complex than any other area in the world. When the Soviet Union broke up in December of 1991, we saw a system that was highly centralized, as I mentioned in my story about the heating system in Moscow and Kiev, Minsk and St. Petersburg. The customs and practices were very different than they are in the West. There was a lack of a pricing and payment mechanism. Oil production in Russia and Azerbaijan was very old-fashioned, very inefficient. The pipelines that tied Central Asia to Russia did not extend to Eastern Europe or to South Asia. And there were a lot of NIS countries that were dependent on Russia's pipeline for supplies.
In graduate school, I took courses in the structure of the old Soviet economy, of course that was 30 years ago. And I was intrigued to see that there would be whole cities that would produce one product -- matches or radios or refrigerators or whatever it was, one city, and they produced nothing else, and everybody in this NIS system would have to get their matches or their cars or their tractors or buses from this particular city. Of course, that system has now collapsed and there's been a dramatic change in that.
When it is used correctly, wise policy, the energy sector can be, as I mentioned earlier, a great asset to economic and social development. But there are some remaining challenges, the first of which is reforming the pricing and reducing the structure of subsidies. That is an issue we've worked on together for the last decade.
The second is improving technology in managerial capacity; getting prices correct can have a profound effect on production anywhere in the world at any time. I just got back from the South Africa drought and we know that the pricing policies of the Zimbabwe Government in the food area, in the agricultural area, are making what is really a modest drought into the crisis which puts millions of people's lives at risk. They are risking famine because of bad pricing policies.
Cutting harmful emissions, reducing pollution, is a very serious challenge facing many NIS countries.
By refining the tax policy, creating the proper climate for investment of resources and private sector, as I mentioned earlier, is a very important part of what we do. Eliminating corruption is also an issue. I know all over the world that's an issue.
Some people believe that because the United States economy works well that somehow we're a more honest society than other countries. I would just like to tell you that is not true. There's no difference in the character of Americans versus people of other countries. All parts of the human personality are fallen, which is to say we have weaknesses. What we've done in the United States that's different than other countries is to create a complex set of very powerful institutions to restrain the tendency of a personality for corruption. And those institutions which have been developed over a couple hundred years have been remarkably effective, not always successful as you saw by some of our corporate scandals, but there are always ways to improve it, but remarkably successful over the longer term in restraining this part of the human personality. It's a matter of building strong institutions for accountability.
Nuclear safety is also an issue. I visited when Mrs. Quayle in 1991. We did an exchange visit with people from NIS countries. We took the national leaders of what is FEMA -- the Federal Emergency Management Agency -- from here with AID staff to the NIS countries, and one of the things we did, we visited Chernobyl.
AID has done some work with the Department of Energy in dealing with the safety issues at Chernobyl and other nuclear plants in NIS countries. Furthering the transition to private ownership is something we've also worked on together.
The role of energy managers is changing in Eurasia, and AID is changing as well. We are putting more decision-making in the hands of our field missions within AID to make decisions where the real expertise in energy or agriculture or democracy and governance exists. Fewer decisions are being made in Washington. More decisions are being made in our AID missions. That's not a way of refocusing your attention inappropriately, but the mission directors now have more and more authority in Kiev and in Moscow to make decisions on how AID money is spent.
We're also seeking more and more partners for these partnerships that we are running. And, finally, we are looking among our Eurasian partners toward a more aggressive view of private sector partnerships than we have in the past.
The purpose of this conference is to bring together a solid body of energy professionals, people who can share their experiences, the lessons they have learned, and what you have to say can be very helpful to us in the U.S. Government as we plan our future activities. So I hope all of you will be very candid and direct in your discussions. I look forward to reading the report that will come out of this conference, and I want to thank you all, both the Americans who are here and our friends from Eurasia who are here.
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Last Updated on: January 02, 2009 |
