Deputy Treasury Secretary Stuart E. Eizenstat said that the two-year-old U.S. -North Africa Economic Partnership can serve as a role mode to integrate the region into the global economy, when he spoke at the International Relations Institute in Algiers on June 23.

"The purpose of the Partnership is to foster greater U.S.-Maghreb trade and investment, both between the Maghreb region and the United States and within the region," said Eizenstat and will foster economic growth and stability.

"Throughout the Maghreb the Partnership pursues these goals by encouraging the private sector to take greater advantage of both the trade and investment opportunities that exist in the region as a whole," he said.

Eizenstat announced that this fall the first of its kind Investment Conference for the Maghreb and it will be held in the U.S. Organizers will bring together U.S. businessmen and prospective partners and clients to discuss trade opportunities, joint ventures, and investments.

Following is the text of Eizenstat's as-prepared-for delivery remarks in Algiers:

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As Prepared For Delivery

DEPUTY TREASURY STUART E. EIZENSTAT
REMARKS TO THE INTERNATIONAL RELATIONS INSTITUTE
ALGIERS, ALGERIA
JUNE 23, 2000

I am very happy to be here in Algiers. It was most gracious of former Prime
Minister Hamdani to host this gathering, and invite leaders of your economy
and your government, as well as representatives of American companies
active in Algeria.

The United States and Algeria have many ties, but one is especially
symbolic. Just a few days from now, on the Fourth of July, we shall be
celebrating the anniversary of our independence. The next day you will be
celebrating yours. In 1962, three months after the independence of Algeria
was achieved, President Kennedy spoke of your "proud history as a people,
which goes back for thousands of years, and the great place Algeria can
play in North Africa and throughout the world." In that spirit, we welcome
the progress you are making toward domestic peace, stability and national
reconciliation. We look forward, as you do, to continued strengthening of
your relationships with other nations and with international institutions.
And we especially commend President Bouteflika for the role he played, as
chairman of the Organization of African Unity, in achieving a truce
agreement between Ethiopia and Eritrea.

The developed nations of the world, such as the United States, share with
you a commitment to economic progress. It is no longer a matter of big
power politics, as it was during the Cold War. It is a simple case of
demographics. The labor force in the U.S. and Western Europe is aging. In
the next twenty-five years, almost all of the world's population growth as
well as a great deal of the growth in productivity is going to take place
in countries such as yours. This is where the expanding markets and the
manpower are going to be. Huge amounts of private capital are coursing
around the world today, looking for attractive areas for investment.

The developing countries have a reciprocal desire for this capital to look
with favor upon them. Even those which are blessed with essential natural
resources want to diversify their economies. They want to train their
population for productive work in a globalized economy. They do not want
the benefits and opportunities of the information age to pass them by.
Those nations, from Central Europe to [those] in Asia, which have
successfully made the transition from central planning to a market economy
over the last twenty years have enjoyed impressive increases in their
standard of living. Those that join them will be in position to maximize
the benefits that come from globalization and minimize the risks.

Experience shows that investment capital flows to those countries that
offer a conducive investment climate-a predictable and transparent
regulatory system, a vibrant and independent private sector, an established
infrastructure to support new business ventures, an educated workforce, physical proximity to other buoyant markets, a vibrant and independent private sector, and an established infrastructure to support new business ventures.

A business-friendly environment is created by forward looking governments
that plan and then that enact the necessary reforms-sometimes painful and
politically unpopular ones-to lay the groundwork for sustained growth. This
involves reforming and reducing the role of the state in the economy,
liberalizing the trade regime by lowering tariff and other barriers through
tariff reduction and other measures, and investing in the country's human
capital through increased spending on education and health care. Only then
will private business activities take hold and prosper, and create
much-needed jobs.

Experience throughout the world shows the U.S. government believes that
market-based economic systems provide the best environment for creating
jobs, generating economic activity, and raising living standards, both in
our own country and around the world. But we also believe that markets by
themselves do not necessarily create the conditions needed for them to
function well. When it comes to investment-generating factors such as
developing a skilled work force, maintaining sound macroeconomic policies,
managing national debt, providing full and accurate information for private
investment decisions, and protecting intellectual property rights,
government action is needed for markets to produce the best results.

The Algerian economy has been making the transition from central planning,
which characterized it for so many years, to a market economy. American
investors have been steadily increasing their stake. U.S. investment in
Algeria is increasing at the rate of $500 million a year. We are the third
largest customer for your foreign trade. Our companies have signed
contracts, over the past year, to supply hundreds of millions of dollars of
products and services in areas from air traffic control to agriculture. One
of our largest financial institutions, Citibank, has begun operations here.
We are participating in your International Trade Fair for the first time
since 1993. The U.S. Government encourages American investment in Algeria
and we hope, over time, there will be increased access for products from
Algeria and other members of the U.S.-North Africa Economic Partnership to
U.S. markets.

Private capital, as well as international financial institutions, is taking
a fresh look at the benefits of investment here as conditions are becoming
more peaceful. They will be watching how the government implements its
announced policies. At the same time, increased revenue from the
petrochemical sector offers the wherewithal for public investments, in both
infrastructure and human capital, that will enhance your attractiveness to
private investment. Successful diversification, by the same token, will
reduce the economy's vulnerability to future swings in world oil prices.

You have taken impressive measures recently to restore macroeconomic
stability and move towards a more market-based economy. [You have] made impressive recent progress in several significant areas. You have successfully brought inflation under control and have pursued remarkably
responsible fiscal policies, leading to reductions in both the government
deficit and external debt. You have overhauled your housing policy, in the
face of pressing needs, and made a start in opening the banking sector to
new domestic and foreign entrants, reduced interest rates, and pursued
responsible fiscal policies that have both reduced the deficit and reduced
external debt as a percentage of GDP. You have enacted an investment code
and trade legislation designed to make Algeria more attractive to foreign
investors. And you have the beginnings of a securities market, which, as it
grows, will make it easier for venture capital to seek opportunities.

The Algerian government understands that a comprehensive and determined
program of reforms is still necessary to put the economy on a path to
sustained growth. Private investors in Algeria and abroad will watch
implementation of announced intentions closely. The banking system not only
needs to be restructured to a sounder financial footing, but also needs to
achieve greater efficiency, with stronger management and supervision. The
privatization of state-owned industrial companies needs to be accelerated
and broadened. As Algeria emerges from a period of civil unrest, it can pay
renewed attention to the type of restructuring that, based on the
experience of other transition economies, is important to attracting
foreign investment. Banks need to be able to provide their indispensable
financial services in ways which measure up to world standards. The
telecommunications infrastructure needs to be updated and expanded so it
can operate with the efficiency that global business firms require. Public
utilities and other state-owned enterprises should be privatized to operate
more efficiently and to unlock their underlying value. In addition, an
improved institutional and legal framework is needed to protect property
rights. This will promote both foreign and domestic private investment. The
opening of the economy needs to continue and even accelerate. Allowing a
foreign role in energy, transportation, utilities and telecommunications
would be a good start. Algeria can also send a positive and valuable signal
by accelerating its work to become a member of the World Trade
Organization.

There is another role in the restructuring process that your government
understands and has stated its intention to perform. The deep-seated
reforms required of developing countries sometimes cause changes that
result, in the short term, in less rapid economic growth and temporary
increases in unemployment, even as their long-term benefits will be higher
sustained growth, more jobs and lower unemployment. If the people of a
country are to be expected to accept these, they must have some confidence
that a social safety net is in place to help them weather the transition
and manage the risks of a market economy. Social programs should be aimed
at developing human capital, so that people have the skills to change
occupations and make other adjustments, and at alleviating substandard
living conditions. Economic reform cannot just show up in statistics.
People must be able to see the change in their job opportunities and the
conditions of daily life. With the institution of mortgage guarantees and a
secondary market, Algeria has taken an important new initiative in dealing
with your prolonged and severe shortage of housing. But you need better
medical facilities, more classrooms and more teachers, as well as expanded
housing. These are needs that can and should be addressed with the
increased resources you now have at your disposal by better targeting
government resources and taking advantage of the recent lessening of
economic pressures due to the rise in oil prices.

I would like now to discuss the U.S.-North Africa Economic Partnership, and the role it can play in integrating this area of the world with the global economy. The purpose of the Partnership is to foster greater U.S.-Maghreb trade and investment, both between the Maghreb region and the United States and within the region, in the interests of more rapid economic growth and long term stability. Throughout the Maghreb the Partnership pursues these goals by encouraging the private sector to take greater advantage of both the trade and investment opportunities that exist in the region as a whole.

I first proposed this initiative, almost two years ago, because I was
struck by the desire of business people and government officials in this
region to broaden their range of economic relations and forge closer
commercial links with the United States. They wanted our know-how and,
where possible, our capital. We felt U.S. companies would be most interested
in trade and investment if they could operate on a regional basis. By
investing in one country and then exporting to the entire region, they
could reach a market of 70 or 80 million people.

The U.S. Government is very serious about this initiative, and I am proud
to have my name associated with it. We have taken some important initial
steps. There have been two Ministerial-level meetings with Tunisia, Morocco
and Algeria. We have formed a Steering Committee consisting of the
Ambassadors of the three nations resident in Washington to work with senior
officials of our government to monitor progress toward economic reform in
North Africa and on the range of investment promotion, technical
Assistance, and educational programs that are planned. A number of senior
government officials have visited the region and engaged in high level
policy dialogue aimed at promoting economic reform and liberalization. Last
April, 90 American businessmen heard ministers from the Maghreb speak in
Washington about economic developments and opportunities for investment in
their countries.

Currently, with funding support from our Congress, our Treasury Department
is providing a technical assistance team to advise your
government on debt management, commercial law development, and financial
reform. Our Department of Commerce is providing advice on commercial law and
privatization and will set up a training program for Algerian commercial
attaches. It is [also] advising your foreign commercial service and training
commercial attaches to work with American firms on trade and investment
issues.

We are now ready to bring the critical parties together. I am happy to be
able to announce today that the U.S. Government will sponsor the first ever
official Investment Conference to be held for the Maghreb region. It will
be held this fall in the United States. It will be funded by the Trade
and Development Agency of the U.S. Department of Commerce. It will be
specifically designed to bring U.S. businessmen together with prospective
partners and clients in seeking out trade opportunities, establishing joint
ventures and making investments.

The U.S. government can be helpful in these and other ways. But if the
Maghreb countries expect to reap the benefits of being treated as an
economic unit, they need to reduce internal barriers to trade and
investment. Tariffs are high, ranging from an average of 24 per cent in
Algeria to 34 per cent elsewhere in the region. Poor transportation, visa
requirements and a closed border also create barriers to trade. All of
these make it more difficult to invest in one country and export to the
others.

In conclusion, with continued progress toward domestic peace and a revived
world economy, Algeria has a significant opportunity to speed up its
desired transition to a market economy. I hope we can see an intensified
commitment here and in other Maghreb capitals to economic liberalization
and to intra-regional integration. A brighter economic future awaits those
countries whose leaders have the foresight, the determination and the
diplomatic skills to proceed in that direction. Thank you.

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(Distributed by the Office of International Information Programs, U.S. Department of State. )