2018 national business conference dinner transition to high income status – the role of monetary policy and communication welcome remarks by moses d pelaelo governor, bank of botswana september 9, 2018 distinguished guests, ladies and gentlemen, good evening. it is my honour to welcome you to this dinner hosted by the bank of botswana on the eve of the national business conference here in the city of francistown. on behalf of the board, management and staff of the bank and on my own, i thank you all for honouring the invitation ; your presence here tonight is valued and highly appreciated. role of national business conference and theme the bank of botswana is privileged and accepts the honour to host this welcome dinner to the 15th national business conference, organised by business botswana, in collaboration with the government under the theme, “ breaking through to a high - income botswana - the role of the private sector in charting the path ”. this should provide an opportunity to evaluate prospects for botswana, with respect to structural transformation, policies, strategies and, especially, implementation frameworks that would enhance international competitiveness of local firms and support the transition to high - income status in line with vision 2036. i am reliably informed that, his excellency the president of the republic of botswana, mr mokgweetsi eric keabetswe masisi will, in addition to performing the official opening, actively participate in this conference and, in particular, share his thoughts on the growth of business in botswana in one of the sessions, tomorrow. background and broad structural issues distinguished guests, it is common cause that the economy of botswana has, over the last 52 years, recorded impressive growth and structural transformation, leading to the country attaining upper middle income status, currently with a per capita annual income of approximately usd 8 000. similarly, over the years, the country has enjoyed relatively sound and stable macroeconomic and financial conditions. despite episodes of terms - of - trade shocks and volatile commodity prices during this period, the economy has been largely characterised by relatively low and predictable levels of inflation ; balance of payments surpluses ; substantial foreign exchange reserves ; stable real effective exchange rate ; low public debt ; and continued pursuance of prudent fiscal policies. however, as we are well aware, in the last decade or so the country ’ s growth momentum seems to have lost steam. evidently, this is constrained by several factors including the narrow economic base, high levels of unemployment, insufficient innovation and private investment spending, infrastructure constraints, thin and

1 what i want to do in my remarks today is to focus on the economic consequences of removing crossborder barriers in banking to show that commissioner mcgreevy is correct : after the removal of barriers to the geographic expansion of banks, the united states experienced substantial gains in terms of banking efficiency, employment growth, and economic growth. before i begin, i want to emphasize that much of my speech is based on research i conducted with philip strahan, of boston college, before i joined the federal reserve board. 2 the views i express here today are my own and do not necessarily reflect those of my colleagues on the board. historically, banking in the united states has been subject to extensive government regulation covering the prices banks can charge, the activities they can engage in, the risks they can take, the capital they must hold, and the locations in which they can operate. but during the past thirty years, many restrictions on bank prices and activities in the united states have been lifted, including the restrictions on entry and geographic expansion. as barriers to banking expansion across borders have come down, the structure of the industry has changed dramatically. geographic deregulation has spawned a substantial reduction in the number of banking organizations in the united states with, on average, virtually no change in concentration at the local level. in addition, the average number of distinct banking organizations operating in local markets - - both urban and rural - - is little changed. the total number of banking offices in the united states has risen steadily since the mid - 1990s. moreover, consolidation has produced important charlie mccreevy, “ the development of the european capital market ( 943kb pdf ), ” speech at the london school of economics, march 9, 2006. a summary is in kroszner and strahan ( 2006 ). benefits for the banking industry, as many banks have become more diversified, less risky, and more efficient. a growing body of research provides evidence that geographic deregulation has provided substantial benefits to the broader economy as well ( levine, 2004 ). in the united states, economic performance improved after geographic deregulation, as evidenced by increases in the rate of state - level employment growth and the rate of new business formation. geographic deregulation may also be associated with improvements in state - level economic stability. volatility in the growth rates of employment declined, and the link between the health of local banks and growth in the local economy weakened. in my judgment, the u. s.