Transcripts For CSPAN2 U.S. Investment In Developing Countries 20171211

Political will to apply this tool, and i think its a very valid and useful tool for toolkit in the United States, and so we have examples for tunisia and egypt that well talk about, so well talk a little bit about the history of what are these things, how they come about, what can we learn from the past, how are some more recent ones operating, and finally, the most important thing is about the future because i think in some ways this was certainly ahead of its time and theres a lot of learning from the past, but i think there are plenty of countries where we ought to be applying this in new additional countries, but also may be in different ways given the fact that the world is changed from 25 years ago. The instrument needs to adapt the time. We have a very experienced group of panelists. Im excited to have all the smart folks on the panel. I wont go into detailed bios for each of them but i will ask my friend whos the executive director of European Cooperative for Rural Development and the system administrator. Thanks for flying in from brussels to be here. Lets give us a little context here. Sure. I see some of the people in the audience. Ill just give you a brief perspective of what i have coming in a 1993 and seeing what it was like through the 90s and early 2000 and then have colleagues seeing what they were like when they started up again in 2012. I think it was truly designed for solutions to a problem in a very specific context. Kim will be able to talk more about that because what we had as we were looking at a dual mandate of how does the u. S. Mandate get involved in these countries in a quick ways we can get quick results, they were the ones going to shock therapy, president bush want to announce something, these were designed in a vacuum, the u. S. Government does not have the Technical Expertise to look at private equities in venture capital, this is not what we do. We can hire private boards to come in and set up these in a price times. I dont think and there are probably other congressional staffers here who can attest to the fact that no one thought these were going to be financially viable or sustainable. Theres not a lot of thought into what happens after liquidation. Then we spent most of 2010 onward trying to figure out what to do about the sedation, legacy funds, things that we could do to leave behind. Backing up the Enterprise Fund at this point, the creation happened so quickly and the dual mandate of you need to transition these countries from a market economy, yet at the same time you need to make money, and then the mandate of development which was sort of left to each individual board, as to how much of it would be truly developmental four. Sake or was it going to be we will set up an airport in albania, will set up a Banking Center in bulgaria, we will work with mortgage lending in the baltics, these things were decided amongst the private sector board so usa d oversight became somewhat tenuous as congress continued to ask question, what are you doing, how quickly can they react, and so we went through a growth. Over 25 years, and i believe a report will be coming out soon as to what these Enterprise Funds in a legacy have left behind 25 years later. I think other members from the remaining. [inaudible] there are a number of people who are still part of this and actively involved, but what can we do in enterprise version 2. 0. They have to deal with very effective and educated people who just and have institutions in place. Those are things where those funds were able to jumpstart. Usaids continued oversight of that has gone from just being involved to having 1001 questions asked of you and when the Enterprise Fund started in 2011 and 2012 after the arab spring, no one really knew what their relationship was going to be. Ill let jim talk more about that. I think the unique challenge is usa d has credit authority, they have power africa and a lot of innovated tools that ive actually moved overseas and im working on partnerships with the dutch government to look at other innovative ways to bring private sector in so its not just the public funding that has to go into jumpstart some of these economies. I would say that on a whole, theyve been successful, there are a couple that were unfortunately had returns at the end of the day, but when you look at the actual fact of one point to billion in financing going to ten Enterprise Funds covering 19, or 14 countries, 6. 9 billion in private capital being leveraged on that one point to, and then 225 being returned to treasury at the end of it, thats a Successful Development program. Its wonderful they were able to do that at the time and the question is, what can we do to expand on that and do something new in some of the newer countries. Great, thank you. I want to skip over bo and jim and i want to ask him davis to make some remarks. She is the chair of the American Freedom foundation, also managing director and cochair of the capital partners, but more importantly, you shared the baltic Enterprise Fund as well as the acting ceo of the czechoslovakian enterprise earlier in your career. How did you end up getting those jobs. Those are paid jobs. You had have a day job but you are doing this, how did you end up getting that phone call and why did you say yes . The first phone call was to join the baltic american Enterprise Fund and i thought it would be an interesting way to observe the transition of postsoviet countries. That was an easy yes. They needed people with private equity experience and ive done that. The other experience arose because one of our other directors was appointed by the white house as the acting board when the first board had iran into some trouble. That director asked me too step in as the acting director which i did in 1996 and moved everything down to slovakia which was the only business decision that was available to us at that time. I had a very funny meeting with the investor in the Czech Republic who said im glad to meet you and i hope i never see you again after you leave the Czech Republic in the fund is out. That was not particularly successful. In general, anyone who thanks that Enterprise Funds will have a distric different distribution curve are missing the point. There will be some good deals and bad deals and some good funds and bad funds. We have to simply accept that as a matter of course. Then, if i might, we had a challenge that was very, very different than the one that jim and bo does but i think a much more receptive environment, but just to give you a sense, i think the baltic Enterprise Fund was a successful fun. We started with 59. 3 countries. We made three specific decisions. We were going to focus on the credit markets, we were not going to adopt a quota system but we are going to respond to Market Opportunities and invest a lot in building our staff is a real legacy of what were going to leave behind. We ended up with two businesses, a Mortgage Business and a Mezzanine Capital business but i think one of the mistakes people make is they think Enterprise Fund means being a private Equity Investor. I dont think thats true. Private equity in emerging markets with fragile legal structures is really difficult whereas i think the credit markets are more open to innovation and Development Tool tools. Our 50 million turned into 820 million of invested capital both with three flows and capital we leveraged. We originated 20000 mortgages and accomplished the first securitization of a Mortgage Backed security in eastern europe. For us, we ended up with 60 million, and you could say g, 60 million over ten years is not a particularly great internal rate of return but given three countries and given the 1998 russia crisis and given our development objectives, our view was that if we focused on preservation of capital and modest returns, investing in the quality of our staff and leaving a legacy behind of a more developed Capital Market that we would have done our job. We are still at it now as a Legacy Foundation so while i dont think what we did is necessarily replicable in the same way in tunisia and egypt because the political environments are so different, i would like to think that the Enterprise Fund is an example of why the concept should have a second life, perhaps with some different rules in different environments, but it is definitely a worthwhile endeavor and the ability to Leverage Private sector volunteers which we all are as Board Members with usaid and state department folks as well as local governments and local citizens i think is a wonderful model of public diplomacy. So kim, how important is it to have the right board. It is the number one and only thing. We were very lucky. We have six Board Members, weve never met each other, we have the same six Board Members from 1994 to 2007. We had a great initial chair who had been assistant secretary of state under president reagan. The two most famous people in the baltics were Pope John Paul ii and Ronald Reagan. We actually came in to a pretty receptive environment. Roz was a great leader to have. The board is everything. The board has to exercise real oversight. We had active committees, we didnt micromanage management, but we absolutely knew what they were doing all the time. I think that allowed us to change course we had to redirect resources when we had to, and innovate when we have to. What about when you started making money, what happened, did the government say what i do with this money . What was that conversation like . We sold all of our business in 2007. In 2007 we liquidated and sold our capital business to a hedge fund and we sold our mortgage bank, which by that time was 140 from servicing to an irish bank. My friend paige and i had spirited conversations about what to do with all of our money and ultimately we sent 25 million back to the treasury and we kept 35 million for our Legacy Foundation which is part of work as we speak. Can you just spend a minute more on czechoslovakia . How they find you and what did they want you to do and what did you do. So the acting board act asked us to step in and i was between moves in my career and i had six months available so i took the job and flew to prague. I think thats a story of a board that came in that in 1993 and decided that their job was to invest in anything and everything in minority equity positions in a country where there was just no Legal Framework or cultural understanding of what a private Equity Investment was. It was a mess. They lost about 75 of their capital in the first two years. Again, ive been in this business my entire life. You do lose money but they lost it at a rate beyond normal. Does this have a happy outcome . We close down the check activity, moved everything to slovakia and they had a second go at it. I think they did some very good things, there is a Legacy Foundation there, its unfortunate that we lost our ability to continue in the checkeCzech Republic but there is no additional funding available given the history. So its fair to say it was somewhat turned around. Yes, it was turned around with a much smaller footprint. Okay, thats the point i want people to come away with. There are some hiccups and some interventions made and then i had a pretty good turnaround outcome. Is that fair. Yes. Once we accept the fact that we lost 35 of our capital, we did good things with what was remaining. But, people are going to lose money, you want to make bad deals, youre going to get your hiccups and you just have to learn how to absorb them and move on. Thats what we did. Okay. I want to spend one more moment on the history and then i wanted turned to the present and then i want the four of my panel to talk about the future. I just want to spend, i want to spend one minute on the past. Page, i think there are, theres a historic memory of the Enterprise Fund. Theres sort of a short list of complaints that some folks have. If someone was here and said what about that funder this fund that we were unhappy with, whats your response to that . What would you say to some member of congress who says were not happy. Whats your response to that. Refers to aig, i would say yes, there were hiccups in a lot of funds, the way they were liquidated at the end of the day some had diminished returns and they just sort of morphed into legacy funds to do something small, but the majority of them ended up making unbelievable returns and in bulgaria, for example, although there were some concerns about it, the Bulgaria Fund ended up walking away with 200, 422 million at the end of the day and they all had a return 27 million to the u. S. Government because the decision was made at a time when Congress Just thought they were funds that would grant out that the question was due return the liquidated assets to treasury or are you able to just return half of the initial grade up. Regardless the u. S. Government got 225 million back from a Development Grant program and thats almost unheard of. That is a broadly Successful Development program when you are returning money to the u. S. Government. I would say each issue, as kim mentioned, some of them were the board structure, they just werent structured well and there were incentives set in each of the boards that haven shouldnt have been there or were there for the wrong reasons or it just wasnt a friendly environment. I think jim can talk more about the different environments they are facing now versus what Ronald Reagan and the pope, what they faced in the baltics. The u. S. Was well loved and was helpful because you are able to do everything in conjunction with the government. Let me ask another leading question. We have three or four heads up funds to the ruler 12 or 14 funds that were great. Thats the Bumper Sticker you should take away from the. Absolutely. So when people say yes, there are a couple funds, yes, that was the small minority of funds. Most of these were smashing successes. The other thing i think its fair to say is that the u. S. Government and the fund aboard themselves and investment professionals have a lot of learning. This was ahead of its time. Theres been a lot of learning and improvement all along the way in the past 25 years productive her statement too. Absolutely. I think congressional oversight, executive branch oversight, these are things that also have a lot of learning and growing to do. As we talked about earlier, congress is coming out this from a very different angle. One party wanted one thing thats part of the reason the baltic money had been held up. Corker want Something Else, its very difficult to react to congressional wants and interests at the same time a policy imperative to get things moving quickly and looking at the market and recognizing these things werent meant to move quickly. My one last point, page, when you were in the chair of systems administrator, you asked the staff to put together all the Lessons Learned which is sort of my view as the must read document on where we are in the Enterprise Fund so if you could just spend a few minutes. I think there are probably two mustread documents. One is available now and then in 2013 with the people from the Eurasia Bureau and there was another one that was done recently and it hopefully will come out soon that is on the overall legacy of Enterprise Funds. Both those documents stand as Lessons Learned for this type of Innovative Private sector, private act there activity. Thank you. Thats enough about the past for the point is, lots of learning, lots of success and learnings from the errors and improving upon the heirs. Thats the take away from this. Okay. Lets move to the present. Let me start with my friend jim harmon. Jim, you got a phone call from tom. They said we need you to help set up an Enterprise Fund in egypt. What was your reaction and why did you say yes . Thank you dan. First time i congratulate you and see sis for doing this. Its a subject that wanted to review and its good to have the opportunity to discuss it with you. Secondly, youve invited some people who are very good illustrations of talented people, and they might even think they may be the best of a lot of the people who have run Enterprise Funds. You should know, not everybody i have met who has taken on this assignment has been quite as effective as the group in front of you now. Now, i got a call, i had served in the Clinton Administration from 97 to 2001. I was chair of the axiom bank. I didnt know what an Enterprise Fund was and no one talked about Enterprise Funds at the bank during those four years. Maybe that was my fault, but i certainly heard very little about it. So obviously i said to michael and tom, i didnt really know what it was so i would have to think about it. I actually took three or four months and the government of the United States does not present you with the background summary that helps you to make a decision and so, it was, i dont mean to be critical of anybody now, but it was three months later that i found that usaid did a very interesting and valuable study of whether or not they should have an Enterprise Fund in egypt. How could i have worked three months and talk to everybody i know and give me that. Thats an illustration. I was part of the clinton ministrations of this was not a change of party. Can you imagine how our government treats someone from another party in a case, we did do the study ourselves and we did review and i did make decisions in april or may, four months later that i would go forward. So, the call was just the usual call. As you probably all know, once you leave the United States government if you been confirmed, its not uncommon to get a call from someone in government to ask you to take assignment so i had already had four or five assignments for limited areas to help with the world bank on this or that, and it didnt interfere too much with my day job, but my day job was running a fund that was investing in the frontier developing world. I had been following the frontier developing world very closely since i left the government. Does that answer your question. Yes. But jim, what prompted you to say yes to this . I dont know. My wife asked me that question often. What im stuck in the middle of traffic in cairo during some demonstrations, i think to myself what did prompt me too do that. , do you want me too give a little background. Yes please. First of all, you should all know come the egyptian Enterprise Fund was different than all the other Enterprise Funds in a few aspects which prompted most former chairs to tell me they didnt think i should do it. First, the relationship with the United States government was not very good. That may have been an understatement. Unlike the european where you are welcome when you went to the country, on my first trip the Egyptian Government said the 300 million that has been authorized for the egyptian Enterprise Fund is our money. You are taking our money. It came out of the camp david accord and so forth and what is your explanation. Of course that was way above my pay scale and i had no answer for that because the white house had briefed me on the fact that this would come at me on a regular basis from certain people. So the relationship of the two countries restrained. Secondly, there was a sophisticated market in egypt. They were trading inequities, a lot of talent and experience spread we had been investing in our day job in marketable shares in egypt for quite some time. Thats quite a bit different than the european Enterprise Fund. The third clearly was there was silence all around, he didnt have that much violence in europe at the time, and i could go on and on the differences. On my first trip trip i realize this was the first decision i made, maybe the best, Enterprise Funds are like a business. It depends on the quality of the people. You have to have, yes, the board is important, but your see ceo is very significant. I was to sit in cairo and find investments so i knew i had to do two things. First was egyptian eyes the Enterprise Fund. What does that mean . That means the management and the ceo had to be egyptian and the board had to be a egyptian as much as we are allowed to. Legislation calls for three egyptians and six american citizens. We modified it to six egyptian americans or three egyptian americans and three egyptians, two of us did not speak arabic so we started with the board and then i went about trying to find who should be the ceo and thats a long story which we dont have time to tell, but i think we got fortunate. We found a very capable man who was trained in new york years ago. He was running a boutique and then we got lucky again because when i told him what i thought we could pay him to take on this assignment of finding the investments he said i make more than that now, why would i do that. Then a light went off in my head and i said i have an idea, you should form a management company. We will be her first client. You will manage our money or some of our money and we will pay you a fee. When the Enterprise Fund liquidates out you have a very major asset manager that will be very successful and he liked that idea if we helped him do it and we did do it. Today it is a very successful Asset Management company in five years from now it will be a very low risk factor. They have drawn in the best talent in my opinion that ive met in cairo were running it now. That was the First Business and that was literally early on decision to create employment because all those people went to work for that. The most important decision i said already was hiring the ceo. I talked to him almost every sunday. Sunday is a workday there so for the first two years we talked over time. He has built a terrific business, totally trustworthy. If i were allowed to invest in the injunction Enterprise Fund, i would do it. Ive been saying it over and over, under the rules right now im not allowed to do it, but i would have done that directly and that would have demonstrated the commitment that i have personally had of course i cannot do that. My first surprise, no one wanted to have the u. S. Government on a piece of their business. No one wanted to even sell ten or 20 to any agency in the United States government. I hadnt realized the extent of the animosity or the fear of that. How do we overcome that . That was a trick. Thats why we had to egyptian eyes it. We would have meeting after meeting and we were buying equity but this is a country that needs equity more than debt. Interest rates are 18 or so so equity was extremely important. We had to overcome that. The first mistake, we wanted to buy a bank. We knew financial inclusiveness was absolutely critical. No smaller middle size enterprise without capital can grow in our task was to grow the economy. To grow the economy you have to create jobs. That is very important. In most countries, as you know, certainly in egypt, you have maybe a 30 unemployment factor in the youth, thats a dangerous factor Going Forward. You have to solve that problem, you have to find a way to create jobs so you have to grow that. I felt by buying a bank we would be able to make loans to smaller middle size Enterprise Companies directly and i can get my former agency to enter into a joint venture to provide funding to businesses wanting to buy something in the United States, and i was so confident we would be successful that we talk to cap w in germany and a number of other countries to join with the xm bank model and we had a consortium and then my big surprise, the governor of the central bank rejected the idea of a u. S. Private equity used Going Forward. That was a lost year. Thats the kind of problem, it takes a long time to buil build a business but we tried it for a year to build that deal and it didnt happen. Then we act quickly. We set up for not coming to the bank we will get a Consumer Finance business. Without a leading Consumer Finance is nuts and we bought that. That has allowed us to provide a significant amount of loans and hire a lot of new people. That is another long story. Our First Investment couldnt have been more successful in my judgment. We bought a leading Electronic Payment Service company. Most of you probably know, less than 10 of people in a country like egypt have a bank account. So if you want to pay your bills coming up to wait in line outside the utility to pay your bill. A paypal type business, in this case run by a very bright man could be very successful and it has been very successful. Today, 25 million egyptians use the Payment Service and its on its way to half of the countrys population. If you talk about making a difference in making a difference quickly and making a difference on the development side, if half of the country, 40 or 45 Million People are using a service, that means her quality of life is better, not to mention the fact that if the company is growing like this will become a publicly traded company in a year or two or three and we will get all of our money back , but that is making a very significant difference. I dont think theres time and i want bo to have his share of time so i can only say so far my experience in egypt has been challenging, but i think the United States will get back a significant amount of money and there will be profits that will be shared. How we share it, we havent yet decided upon that but it clearly indicates to me the future of Enterprise Funds. In each country, things are a little different so you have to analyze it. You must be careful, you cannot put americans on the ground in most of these countries. You really have to have it localized in that sense. You need to buy and you need to be something of an ambassador yourself. You have to constantly be making friends and building relationships. A week does not go by where an egyptian does not come to my office in new york and i have two very talented egyptians working my office, i would introduce them because theyre here in the audience but i just dont have enough time to do all that for everyone associated in this business are egyptians and they are very capable. Without that capacity, we could never achieve what were going to do. Just recognize your two colleagues were here in the audience. First, emil, where are you . You should be and up. I will tell a brief story if i may. We have a very talented egyptian american who is a very senior partner in boston and he and i have been talking about it and he said Harvard Business school has three or four egyptians graduating every year. You should interview them. I did interview them and he was obviously coming out of the business school, very talented wor worker. It was a nobrainer. For three years, people will say i couldnt of gotten anything, i really couldnt have gotten anything significantly done without her help. So if you lose me, im leaving too. Fortunately she just got married to her egyptian fiance and they were gone for two or three weeks on a honeymoon and i had a go back and do everything all over again. It made it extremely happy. Jasmine is there and she has come in only three or four months ago but also very capable. This is what i mean by the human talent in egypt. I could build an Investment Bank around it. We also have sarah who was an intern with us from egypt. We have had very good expense. I could go on but theres others who wants talk. Thank you so much. Bo, thank you for being here, you are the chair of the tunisian american Enterprise Fund. You got a call phone call to do this, who called you and why did you say yes to taking on the challenge of running the tunisian enterprise. I had known tommy forever and mike had worked for me in the earlier part of the clinton years so i knew and trusted both of them. It wasnt a terribly hard decision. I have spent a fair part of my life in a combination of both development and finance, the finance part in the private sector, the development in a whole variety of hats so the possibility of combining these in the kind of environment, in the kind of context that an Enterprise Fund meant was a very attractive challenge. To me it wasnt much of a struggle. Okay. So tell me about what your expense has been to date. Did you have the same kind of challenges that jim had or did you have different sets of challenges . What was like standing up the fund and whats the makeup of your board and what kind of investments have you been making . Starting it up, investments and deals or Board Investments and deals, alternate, our context is completely different than egypt. Jim has had, in an immediate sense, a much much harder problem. Tanisha, as opposed to egypt had the time, is predominantly favorably inclined to the United States in regards the United States is important so ive never faced any of the kinds of difficulties that jim faced. I admire what jim has had to do in the course of getting through that. Mine is a little bit different, tunisia, this is right after a revolution in which the dictator had been a kleptocratic for a generation. The structure of the economy was exactly what you would expect. There was vast crony capitalism. There was a World Bank Report at the time about the amount of money that the departed head, the departed dictator who had been run out of the country had taken from the tunisian economy. There was crony capitalism was kind of an expected event, but one of the things you find, it was a learning experience, you find that the tentacles of that extent everywhere. They affect vastly the whole regulatory system and the affect the structure of the economy. So tunisia was, while much more friendly environment, was also a much less developed economy in the sense of egypt. The other kind of difficulty of tunisia is that as a friend of mine said, i hope i wont offend anyone in the audience, he said one of the things you will discover is the dead hand of french bureaucracy. It functions under the napoleon night code. Opposed to the u. S. Where the basic underlying rule is if it doesnt say you cant do it then you can try to figure out how too do it. Under french law and tunisian regulatory law, if it doesnt say you can do it you cant do it so we had real problems in the set up. We have set ourselves up as a nonbank financial business. We made all of the tunisian regulatory requirements, but getting to that point, and if you really looked at the details of our structure, you would find some fairly swirly elements and the reason for that is with the quiet assistance of tunisian regulatory authorities and the ministers of finance and enormous creativity of our board and the absolutely phenomenal person that i found to be our chief operating officer, we found a way around all the rule rules, but no one else in asia ever has. Were the only person, we are the only institution that exists in tunisia that can invest the way we do which is kind of across the full gamut of equity. Theres a point there to underline which is that these are a kin to startups in every conceivable respect except that you dont have to raise the basic money. Having been involved in lots of startups in which i was the investor, actually, raising the money is not the hard part of the startup. Its sort of figuring out what the businesses in setting up the structure and finding the people, all of which we do, and there were two complications that hit me constantly, one is that one way in which the world is different now than what was way back is that we have to meet every single one of the new u. S. Financial regulatory regulations so we are hit by todd frank and were hit hard by a legislation like that. Once, when you begin to talk to those authorities, theyve never heard of Enterprise Funds for the never heard of a id period that we are a financial entity and that we have to meet those rules. Similarly, indonesia, were not some favored entity. We have to meet all of the regulatory structures of tunisia or we cannot function. So, the time it took, it took an immense amount of time to figure out what was that we could do and then learned that most of what we wanted to do we couldnt do, and then figure out how you would do it despite the fact. It took a year end a half to do that. There is an issue there, and one of the things i was going to talk to and ill mention some of these problems, it requires immense patience on the part of the u. S. Government. I had enormous good fortune in dealing with a id to deal with an organization that had the patients. The person with whom we did most of our negotiating is right in front of us. Page was one of the others. I have to say, in general, patients is not a recognized virtue of the United States government. And so, as soon as yo your two Close Friends that invited you to do this leave, there is no one in the u. S. Government who has ever heard of you or ever cares about you for one second. And so you are the one whos doing the integrating, youre the one who has to go and talk to the white house but by the way theres no one in the white house whoever remembered you setting this thing up. Enterprise funds . Whats that. So i would not use this mechanism, and i love this mechanism and being asked to do it is a gift, and i have found it to be a tremendously important to me in addition to what i hope we accomplish, but i would not do this for a wider purpose if we did not figure out a way to have the u. S. Government see these as somehow Something Different than a one off beyond a id period thats kinda why. You say what we do . Weve set up as a nonbank financial business. There arent the Financial Institutions to buy or to invest into indonesia. I started with the same view. I was going to buy bank. I discovered it was bankrupt, that the tunisian government nevertheless wanted to be paid a substantial amount for this bank and we would have to fire a large number of people. That struck me as three bad reasons to do a deal so we didnt do the deal. So what weve done is set up a Non Bank Financial business and we invest across the whole sector of the small Medium Enterprise sector. Our investments are psalm, each one of them is quite small, they some about the same amount that jim has invested and we are expecting a decent rate of return. If your interested in the rate of return we underrat underwrite about a 15 rate of return after you take out cost and deals that break were looking at somewhere between 8 10 rate of return on our ongoing activities and im assuming well get lucky and they will in the end be somewhat better than that. Actually think we will make our real money and have the Real Development affect by backing into owning a Financial Institution either because the institution that weve set up, and much of the same way that jim did is itself going to be a leading Financial Institution in tunisia or because as of beginning to happen, a couple places that would busted and need more funds and are going to have have our equity. So, thats kind of what weve done. The basic how weve done it, and our board, we meet the u. S. Rules that it six american citizens and three tunisians but there are a few crossovers in the and if i could be a little bit more flexible on that i would. Every single one of my Board Members is a working professional in the financial field. Four of them are chief executive officers and something. I know how good jims board is, i will stack our board up against anybody. Theres nobody in the financial world who hav has a board better than we do. We know this field. Its hard to get people who are ceos in their fields to come do something for nothing, but it is a real working board. The point that jim made, in his case he had to egyptian eyes it holds for me too. With the exception of me and luis crawford was right there and who has helped me, who has been more than critical in doing all of the unbelievable amount of work that you actually have to do here and in the United States to get one of these things and keep one of these things going, everybody else in the task is tunisian. Our chief operating officer is a woman named kayla who is absolutely phenomenal and who has been the life spirit behind this work and i have a similar nightmare as jim did, that every night i just hope to god that something didnt happen that gets her to think what she ought to do is go cash in and make four times as much somewhere else. But at the moment, she seemed dedicated to the work. I will make one or two more points. Jim made a point about equity. I will make a point that on money, its actually considerably more than the amount. In theory, i have 100 million, it comes in trenches, its another aspect of the problem that i would solve, that the whole rest of the u. S. Government, because of the fact that there is no real level of patients regards that money as money to be taken away. Theyve done it once, theyre trying to do it again so no one can comfortably say they have x amount of money because that has been committed to it. You dont have it until you get it. That is a view i would express strongly to the congress and irony have. But, lets assume i have 100 million. That is one third of 1 if i use Exchange Value gdp of the tunisian gdp. You would think how can you have much of an effect if your total value is one third of 1 . Well, in the following way. First of all, these countries are critically, critically investment scarce. My basic numbers are for a country like tunisia to have a decent growth rate needs to invest 24 2424 of gdp. It probably has about a 12 Percentage Rate currently. The government is investing nearly zero because they are invested in funding the deficit and salaries. If you look at the private sector investment, my judgment is almost all of it comes out, comes from the big Family Companies almost nothing goes into the sme sector. I represent with my dollars, basically all the Equity Capital that there is in the country for what we want to invest in. I want to invest in the core of the small and Medium Enterprise because i fundamentally believe there is not a country on earth that doesnt fundamentally depends for its growth rate and employment on a healthy sme sector. We are all the equity. In that respect you can magnify a little bit and the second is, because no one really focuses on sme sector, i would say, as a general rule that small businessmen get royally screwed by every country on earth. There is no country, every country says how much they care about the small and Medium Enterprise sector, no country actually does much about it. Almost all the small Medium Enterprise banks in the world are bankrupt. So, if one of the things we can do is show that a vibrant sector matters to growth and development and at the same time show you can actually make money with sensible investments in it, we can have a substantial effec effect. Great. Okay. I want to start with kim and go down the road. I want you to each talk about, if you had, if you were going to create an Enterprise Fund 2. 0, for example the u. S. Congress is talking about some legislation about establishing one for jordan which i think is great. Lets assume there are a dozen countries or two dozen countries where this could work in some way shape or form, what kind of adjustments, based on this conversation, and from the lessons youve learned, what would you say if you were going to create an Enterprise Fund 2. 0 . for usaid, and that should, i think it should still state usaid. The relationship with the funds. With our funds were set up, basically the white house appointed a aboard and then its selfperpetuating. The board i think that approval rights but never exercised them as people came up. I think there were times when theres a lot of frustration at usaid with relationship of the boards i would probably spend more time, its great when have a board as jim has and i think our board was equally very strong. There has to be some more formal ongoing mechanism for the relationship between the Enterprise Fund and usaid. But to be clear, which you cannot do is have usaid micromanagement at any level with respect to deal approval, and you have to keep a clear sense that although were on the same team essentially we are different teams. Were doing Different Things with different timelines. That would be my one overriding comment is more formality with respect to usaid board relationship but no more, but nothing beyond that in terms of involvement. Maybe just a couple of reasons why we should be considering Something Like this. I always tell the story about my last year at exim bank, the chinese came to see me, wanted i thought they might want one or two people but they said 55 people, 55 people pick exim bank is only 450 people. But. But i didnt know then that china had its export, its exim bank was providing funding for Something Like to 43 billion a year. Axiom in the United States was doing about 1518 billion at that time. Today the chinese have three export credit agencies and provide more funding for their private sector exports than all the other 83 export credit agencies in the world by three. They do more than 500 billion. Its a staggering amount. Why did i tell you the story . China hasnt figured out yet that they are sort of a variation of an Enterprise Fund. They are encouraging their own private sector to do well and make investment and so forth, but if theres anything that would convince the members of congress is to take a look at china is heading towards a giant Enterprise Fund for all the developing world. They might do it different. Thats one factor. The other factor something which i give dan and the credit to csis for observing the growth of the Development Agencies in the last ten, 12 years. Sevenfold in their level of activity. They are surpassed today for assistance programs and thats where were we are heading in t five years. Very significant growth. It supporting investment in the private sector. An Enterprise Fund, in my judgment, i have discussed this with others, but its variation of Development Finance institution. Both are transactional focused. Both want to invest money into Small Businesses or large. Both support the private sector, and both frankly make the same impact on job creation and Economic Growth. And in the of us were looking at what could the United States, what should the United States do to help Economic Development . Lets face it, if you have unemployment at the rate we have in some of these countries and we have the kind of violence we have all over, weve got to work and Economic Development to create jobs. If we were to focus on that we would conclude that Enterprise Funds in its current structure, there could be modifications made. The could be improvements made but the concept of supporting private sector growth, that is whats important. The imf is responsible for stability and they came into egypt and the cribs to build in egypt now. But they cannot in my judgment, i have seen evidence help create Economic Growth in egypt. Economic growth comes from private Sector Development. Private Sector Development will come from Something Like Enterprise Fund, multiply to much larger extent. The other, it is that you dont need as much money. I wouldnt want to make the statement too many times publicly to my friends on the hill, but once the u. S. Puts in an amount of money with the private sector looking to make investments now in a country like egypt it would be different in tunisia and it was different in kims david today private equity firms all of the United States are looking to make investments and we took in an offer still because of our two kooky proved to egypt we can bring in other investors. That was part of our mission. When we bought our it was 190 transaction. We took into private equity firms for 80 million. They never invested in egypt before. So we could be all, Enterprise Funds when you get to egypt size, could be the catalyst for a lot of private sector. If i were asked in the next x number of years the 300 million that we have now in the Enterprise Fund in egypt will be 1 billion, part of of it will be coming from the profits weve enjoyed but most of it will come from us bring in other investors to join on investments weve made. It will be 1 billion will end up investing in egypt, maybe larger. The message in that, u. S. Doesnt have to put up that much money. If the u. S. Puts its quote name and support, people want to be involved. It can be done with your support, so i think the argument to congress, you have to budget that much. And u. S. Its like the Development Finance institutions will get all of its money back. All money comes back and we achieve a goal of helping the private sector to grow and help development. We have created, with count as best were able to, 500 jobs. Its going to be a much larger number because the expansion. We have a little easy task because its a larger country and we have obviously a lot more private sectors to invest in, but i think that my conclusion is thursday clear the enterpris a very good concept. We have to figure out a way to do what were doing today, countless stories of use, can think about it. I happen to be cautiously optimistic what im about to say because it has a comment about this administration. This administration for whatever critical, you have, and i aplenty, however, does respect the private sector. And the private sector is i. T. We have been the United States the greatest private sector ever created a mankind by far. Thats why we end up with the kind of economy we have. To take the talent we have in our private sector and match them up with a limited amount of funds to go into those countries to help develop their private sector is doable. Maybe it will take focus of a particular group and the government but this administration might understand it, that would be my conclusion. Thanks. Okay, bo . Ill talk briefly to three topics. The first is to agree emphatically with what jim just that but at a little piece to it. The second is to talk about the context, that future efforts like this should be set in. And the third is to talk to it seemed to me to be the critical elements. First, i cant improve on jims thoughts about the way which the world is turning and why these matter. But i had some hesitation about using these numbers because they do say a a little bit about how old i am but its probably apparent anyway so i wont, ill do it anyway. I was leaving a confirmed role in the Carter Administration when jimmy carter asked me, this is toward the end of the presidency, to kind of take a look at international flows and to talk to little bit about development. And thinking back now more than, about 40 years later, at that time, approximately 80 of the international flows to the developing world, and this may be true for the whole world, were official flows. [inaudible] oda and other official flows, and about 20 pure private sector. In other words, i mean, the entire International Financial markets grew up in the 80s and 90s. And those of us, all of us, its kind of like speaking prose by your life and not knowing it is that we all together grew up in that era. And now its flipped. And Something Like 90 of all the flows in the world are commercial and 10 are official flows, oda flows. And that says the nature of the world in which you take carry out development has fundamentally changed. Im not so certain that they kind of deep gut realization of that has sunk in and all of the Development Institutions around the world are in the u. S. But what it really means is, i think part of this is, i think all of it is, but extremely healthy, which is the way growth is going to happen and it world of chaos exists, happens if growth doesnt happen. And if its not an inclusive and equitable form of growth, which is by the way the reason i went to focus on small and Medium Enterprise. But it has to be three Healthy Development of the private sectors. That means that governments, and the only government i really care about is the one we are income is this one come has to focus, has to think about what are the tools that let us develop, but the sponsor development that way. This is not an ideological opposition to kind of oldfashioned development. I was a member of the care board for 19 years and i was its chair for eight. So i i think about and care abt that kind of development, but did absolutely honest honest that kind of development is in the way to thinks is diminishing. And what were doing here is increasing. So we have to have institutions that deal with and know how to deal with private sector all over the world. And those are inherently going to be kind of financial. I could extend that, i would just note the points to say that what that means is that often equity is incredibly important. One of the many groups, i feel sometimes like a vietnamese peasant. Im out there holding the field and about gets fought over me. I hope the field and a ballot gets fought over me. This is true of all the devices had been a hair to evaluate jim and me. But in one of them, 18 that came were listened and rapt attention as i explained something completely new to them, which was the was a difference between debt and equity and that difference mattered. This is in a group that came to evaluate me. So if i sometimes look like apple bit of a chip on my shoulder you understand it. So what jim basically said was right and that the way the world has turned makes what jim said essential. Point number two. It really does matter, just as i ran only be a long, long time ago, and you come out of that thinking no else else in the entire u. S. Government cares much about budgets and then no one certainly cares anything about management. And it does matter that the in part of the really matters and if youre going to expand this tool you had to think in terms of where, whats the setting for it. I dont mean the place. I think disaster awaits if you dont keep it at a. I. D. Important is ive been quite happy with the nature of the relationship, but i but i thins set up to do this. But just to underline some points come one come as ive always had a level of patience is required by the entire government that is simply not natural to the u. S. Government. The second is that these kinds of things are inherently outsiders. Think about it. That you create this pot of money and you provided into the south side person that some key people in use government know not everybody, those people need and the nobody knows them. Its not really a program that is owned by anybody, and so in the end its kind of the redheaded stepchild. And so you spend a great deal of your life trying to integrate the u. S. Government, but more than that trying, actually, i am, were running something that is a program that you guys approved. And the something about the outsiders status of the has to be altered. And the final point i already made this is the money. Particularly if you look at whats happened to budgets and you look at whats happening to discretion budgets come looking out over the next five years, any amount of money set out there that isnt hard committed is going to be ripped off by somebody else. So if you want them to have the money, then you figure out a ay to let them have the money. And so patients, the insider status, and the money. Finally is the elements. They all are going to differ. Jims focus and might have very similar, have lots of parallels of the specifics quite different and their different, a little bit because jim and i are different but there also to be because the context are really different. This has been true of all of them. And so you have to allow for that, and as you alter the circumstances of where you put them, if you try to put them in really, really difficult places, by that i mean fasting more difficult than tunisia or egypt or jordan, which would be a wonderful place to start. I know jordan pretty well. It would be a great place. I think what is authorized. Its the actual creation of one, thats the issue. But there are more difficult places than that and there are more difficult problems you could set them to. Here are the elements. There has to be a recognition that you are basically going to be using outsiders it because if you really going to focus on the real problems and issues which is how do private sectors were, thats that will governments know. The second is that youre going to have to record the outsiders a very considerable amount of independence. I wouldnt have done this work if in the end we had not been given this independence, but if you step back and think about it, it is remarkable how much independence we actually have. But its necessary, it is absolutely essential. I mean, every single decision that ive made is one that could have legitimately been contested by 44 other people and taken me a year or used to get done. And i dont mean to personalize it. Its my board, but these are not easy decisions. Im quite willing to bear the brunt we are willing to be accountable for what results but its going to hold us accountable youve got to give us the responsibility to make the right decision. Finally to come back to a dull subject, the money has actually be committed. Every single time that doesnt happen for me, im the one who has to take the rounds and explain to all the people who work for me, all the businesses who all know since there are no secrets on earth, noticed instantly anybody in the affected government, why does this really mean they are pulling out the rug, that a certain unfortunate results. So committed 90, he has to do with outsiders and you have to understand that youre going to provide the with a fair amount of independence. What is your take on this . First, old habits die hard. One thing bo said,. [inaudible] made a difference between debt and equity was not from usaid. I did mean to imply that imply that. I know. Regular order to make sure Enterprise Fund actually exist. They might have im sorry. Sorry, old habits die hard. So i would say to what kim said, the relationship is important usaid state the white house and its Enterprise Funds have to understand where theres oversight, where there is management, making sure theres appropriate levels of oversight without micromanagement. That goes to both gm and bo point about outsider status. Its incredibly important Something Like private board that actually can make these decisions without having to get things checked off of use government, just government has a handsoff relationship so if an investment is made is not a use government. I think both those things are important or i would say the publicprivate nature of this and to their point about private sector banks such a large part about assistance is done, i think its important to look at the other Development Programs that have run with the Gates Foundation and with the rockefeller foundation, where a. I. D. And state that partnered a number of other agencies within use government have partnered to leverage each others money to make these more affected Development Programs. The private sector is a Perfect Place for this to be done. I work now in heineken despot of our funding with the dutch government because it increases both their ability to resource local Raw Materials and that the public also trying to get african things they can soak up not to so which are growing. These things truly leverage each other and to be done in the private equity and the private sector capacity in a way that Enterprise Fund 2. 0 could be much more effective if it were not just use government going it alone. I would say that would probably be, lastly post liquidation plan here it would be really nice if once this is legally determined how it Enterprise Fund would look, the liquidation plans for when that ends, which passed all of our times, will not be leading other People Holding the bag, especially 159 that is still sitting in congress to liquidate the russia fund, for example, which is money that could be used and is just a political football since the first in 2008 in 2011 so for ten years . Yes. So with 150 million which could be put to good use somewhere somehow someway. And it just cant be determined. So the liquidation plans have to be determined in advance before you start something. Because i think again this will be well past all of our time in 2027, but were going to leave this bag was supposed to clean up and that should be legislated appropriately. Youve all been motivation. Theres a lot of smart people in this audience. I want to see a chopin spent on what what color some, otherwise on happy to call on folks who i know know a lot about this. I see my friend Michael Leavitt is here. Yep, good, okay. So lets start, lets get david and michael to surfers and the market some other folks here. And i will get to you, too. We will get to a lot of folks. David with a. I. D. Like two more on the boards particularly from both carter and jim harmon how you balance the impact First Financial returns . How do you incentivize your staff to be looking hard at the Development Impact, and when you bring copeland is on board is it difficult to explain to the that youre not only out about maximizing returns whichever social or Development Impact you look at as well . Were going to do this world bank still, bunch them altogether. We will hear from Michael Leavitt and then from jim holmes. Michael leavitt took some of this story actually comes from money from polson. Years ago i was involved with supplying a large number of experts that due to diligence for a large number of Enterprise Funds. So or meet its what difference between them as part of the Lessons Learned. And the conflict between development and return was overwhelming in some of them where it was just totally confused. And i would point out that if you gave a report on development. You all talked about return, which is fine but this is my tax dollars. I want development. I realize that jobs are important but theres more to it. So what if this is if there is Lessons Learned one of them is, is it clear . And if its not development, how are you going to measure the . So thats one thing. Second, staff. Between the funds, the staff disparity in quality was unbelievable, unbelievable. And it isnt just where they were bad. Third other cos, some of them thought they were wall Street Investors and some of them thought they were main Street Investors. That would be great if the new which countries they had been assigned to. Again, im a big fan of the Enterprise Funds but it seems to be one of the ways of looking at Lessons Learned is look at those 17 notches to four that failed and why were some of them really good . Im sorry, just one more thing. The easiest, shortest story. We were asked to supply an expert on for a big investment. We took a ceo from that industry, stayed three weeks, came back to the big meeting and said they dont need your money. We costed out the production lines and we can say them two, 3 million a month, not a problem. We were never called back by that fund because we thought we were there for development, and they wanted a good deal. Jim holmes. Im not jim holmes, but my name is great. My name is don and i was a former general counsel at opec, overseas private investment corporation. I have one comment, one, is debt and equity is in the eye of the beholder often. That comment on is it dead or is it equity, i know it opec we went off to legally defensible extremes to make a debt instrument into an equity like instrument. Second point, in terms of the Development Impact i know that one of the big issues that was confronted at opic and International Finance corporation involves the intermediary Financial Institutions and the bsg standard environmental social government standards and curious how as in some ways intermediaries here between the u. S. Government and down to the smes how you deal with that issue. And if there. I suppose is generally within the u. S. Government, i think of the Enterprise Funds as oftentimes spoke types of institutions that come up from time to time, responsive to the foreignpolicy objectives most of the United States combined with development, and how there might be a more systematic approach with either Enterprise Funds or combine it with the Development Finance strategy for the United States. Will the real jim holmes standup, please . If you want to handle those first three of them come back, thats fine. I apologize, i like to make a comment or to read that the question. Jim holmes. I was the Deputy Director of policy planning at the time the Enterprise Funds were set up at a very large role in the establishment and then i was three years as coordinator. Point number one, Enterprise Funds were never set up as a political tool. There were set up as a policy tool. And reflection of that is my memory that the first submission from the white house with respect to the establishment of the a funny was for proposal that was called 1000 points of light fund. Use an idea and state department pushed back on that and said this is not reflective of the policy approach. This is reflective of the political agenda of the white house. They yielded. They yielded at the time because the was a cadre of people who are focused upon private sector as a value and a value which could be exported to eastern europe. And, therefore, the Enterprise Funds were set up to train, to educate, and to develop. The first item on the box was not whole grain. The first item on the box was not make money. The first item on the box was to train, to educate, and to develop. No one expected, frankly, there is going to be a return. And there was, we negotiated okay, then we will deal with that then, but is not going to be very great point number two, i think both you understated the importance of the boards. The best example is the check fun which was totally dysfunctional. I had to go to board meetings in order to keep side support, in order to take a message from the board to the chairman. It was a blessing when that thing was folded up and put to bed. So i commiserate with kim with respect to picking up the pieces, but there was nothing, there was no second, no mulligan as far as check fund was concerned. It failed, and in the point. And thirdly, lastly, no blueprints pick the Enterprise Funds were set up without any expectation, without any requirements as far as the board is concerned. Usaid, state department, white house said okay, these are the people in whom we have registered faith and confidence for you to do the job, and there was minimal oversight. And i tell you there was minimal oversight from congress as well. Sonny callahan, i used to go to the hilt and talk to Sonny Callahan just to make sure he felt plugged into what was going on. But they would did not ride herd on the Enterprise Funds. When you got to the point where the polish Enterprise Fund was ready to do Something Else besides make money, there was no blueprint for doing it and it requires a considerable, actually about years of negotiation in order to come up with a solution, which ultimately divide this thing up in a roughly 5050 . [inaudible] first i had to thank jim was my interlocutor went ahead that job for six months and also our ambassador to estonia. And david who is currently our liaison with the baltic fund. I want to go to the question differently. Theres a false premise which is her difference between sort of profit and development. Im reminded of the comet that bill gates may have done more for the world by inventing microsoft system than he ever did or will do with the Gates Foundation. I just completely reject the notion that there is this internal conflict. I would argue that, in fact, having discipline around profit was what allowed us to train two to 300 people and how capitalism works. Which perhaps is our greatest legacy. And that also provide a sense of discipline within the organization. And moreover, that 20,000 mortgages, 20,000 homeowners leveraging 50 million to 800 billion of financing has huge Development Impact. I think there is sort of this desperate desire checkboxes, development boxes and proper boxes and a think the world divide itself included. Im completely confident if they find is run well, that you can achieve both goals. I do think that as i said we focus on the credit markets because we had very, very immature equity markets and we were focused on preservation of capital and modest returns. I can be accused of ambiguity but that was the ambiguity we chose to live in as a way of balancing sort of profit and development. Im uncomfortable with the decin uncomfortable with the results. Im comfortable with the decision and im comfortable with the result. The development, agree with what kim is saying. I also think you need look at the fact that 1. 3 billion has been left behind to find nine different Legacy Foundations in these countries. That is truly what were seeing a Development Impact at this point. I appreciate as jim said this was set up to train, educate and develop but i think the private sector was crucial at the time and remains crucial in the middle east fund as well. There is a development, theres a democracy component at it is not all just private sector for the purpose of private sector. Why private sector happens when fdi can come in because theres a law, democratic principles that exist. So i think actually the language has been tweaked to allow for Development Impact, although it looks like a private sector. [inaudible] well, i know, and i started by saying that it would determine a Different Department and pass. [inaudible] my first comment about a strategic objectives with training our staff. I do want to start by a green with kim on what he said about the confusion between development or if you have growing businesses, theres no better illustration in the first visit we made which was talked about which is in the Payment Service business. The fact that 25 million egyptians that were able to pay the bills without waiting online three or four hours, that they can borrow a little bit of money. This change the quality of life of a lot of egyptians. So to me thats development. It happens we will make money on it so its both body dont think you exclude one from the other. Having said that, i myself now have begun in the last year to focus a little more into government than it did at the beginning because i see the profits that were going to have. So were going to return very significant profits. What does that mean . If we can get return of two or 3 , no other private Equity Investor would take that. We will do it is that something good here my favorite subject is one my staffers hafford bissett wondered at times, its because im involved with a think Tank Committee within five and sustainability. I determined to find a way to help modify the traffic problem in cairo. [laughing] that would change the quality of life of everybody, and the world bank did a study in 2010. They found that it cost egyptian economy 8 billion a year, about 4 of of that the economy to have this problem. This morning out of curiosity i tracked down a person to did some work on it at the world bank and is and what is it today . He said today, 20 billion. 20 billion of egyptian economy is impacted because the traffic problem has got to be so great. We have a way to solve that because it happens that the institution called the World Resources institute working with world bank and we work on this in a number of cities. Someday well find a way. Thats true development. I would improve the quality of life can reduce the number of accidents. People get to work on time. And it can be done. What have i done . Im pushing my staff constantly to find the right person who could really focus on this in egypt is not interested in return for interest and not losing money. I think it takes a little bit of push from the top but we will get there. But you have to focus on it. You cant just a growing businesses will get you there. I think its a very important question. We talk about the subject all the time because most times if, my background is in Investment Banker or exim can we dont think about department that way but we have a chance with the profits were making to shift now a little bit into focus on development which could be very good. Our last acquisition was in the healthcare area, and this is an another very significant area of cores in the developing world we can make a difference. I dont want to spend too much on the subject but im glad the subject was raised. Other comets are reactions to some of the questions that were put on the table . I dont want to come off too much in what my wife and some of my staff accused me of being as too much of a confrontational list. But i just fundamentally disagree with the way you ask the question. And it is, i kind of, i relate myself totally to the points that are already been made. I will come at it from the other questions you asked. I dont know what the other come with the earlier Enterprise Funds did. In the course of taking this on i talked to most of the chairs. I know what jim has done, and i know that for us the quality of the board and how the board interacts and governments on the board has done an obsession. And the quality of our staff, how we choose them, how we evaluate them after theyve been chosen, how we help them build their own lives. Because these are not people who see themselves as aid workers. Our people are people who regard themselves as tunisian professionals who chose to do this. And so that it simple for us to invest in their futures as well as the deals. So for us its been, it really has been an obsession. I dont know the degree to which it is very in other places, but the chairs that i knew have all said to me that you live or die by the value of your board and the quality of your people. Having now been professional and having managed staffs for somewhere in the neighborhood of 45 years, i learned a long time ago you live or die by the quality of the people you work with and by the quality of the boards you choose. I dont know if thats a fairly good answer but its the way i approach this. But much more important is this question of development. Im not where jim is yet. We are going to do fine in terms of the quality of the deals. Tunisia doesnt offer you the opportunity for the sort of big hit so we will have a very large number of small hits. And our returns over the long run will be very good. So im not yet at the point where i can solve the traffic problems. I wish i could come and i wish jim good luck in doing that. But i dont really see a conflict. Where i wouldve disagreed completely with what you said was the sense that people appeared appeared up here tt delivered i thought the three, the four of us actually that was at the center of what we said. So my point of view, you do not have a well functioning small and Medium Enterprise sector that produces equitable growth. You do not have development. You do not have anything close to development. I have lived with this problem for god does how many years. As i said i was on the board of care for close to 20 years and i shared it for almost half that time. The Development Organizations around the world play what i think are the stupid games between their sunset of metrics that you have and then theyre e sort of the whole rest of the world called the economy. No matter what happens in the economy can go to hell as long as you meet your metrics. I just dont believe that. I think that if we make a significant success in the creation of equitable growth, sustainable, equitable growth through a healthy small and mediumsized inter intersecto in a no smell for the development of tunisia and other countries in which we are involved in. And it had to the leverage of additional capital, we underwrite our deals in a particular rate of return. And we did manage them, and we talked you are investing with respect to that, although our entrepreneurs with respect to the own businesses. As we know to begin to talk to outsiders, to outside money, its that that we offer. We are not saying to them make some sort of compromise between kind of the rate of return you want at the rate of return we want and somehow or another that will work out. Its heres the rate of return that is available. Tunisia is a different place. Its not a place where theres going to be oceans up your private equity begin to flow in. But, so what we can do is provide an example, and i think were beginning to do that, that shows that it is beginning to be possible for kind of real private money to make sufficient return to come to a place. [inaudible conversations] , let me push on this. Are you optimistic about the future of tunisia . You said this is this is a couy thats a democracy, a multiparty democracy in the arab world. You said to me like what i would really help the offer for a country in the inner world to go the right way. I would help its tunisia. I hope the other ones do, but boy, it would be so great if the country were to consider success. Are you optimistic . I. Tunisia is fragile and you cant talk to anybody there who wont tell you that. One of the things, editor of the time ago and im going tonight, is actually i have held for me e and in the party that includes all of the heads of almost all the political parties. Its a fragile place, and the degree to it, the kinds of negotiations that go on to make progress in a country like tunisia are excruciatingly difficult. It is, its okay to sit kind of outside a country like that ands a bit odd to do this and they should do this. I would remind you that with some difficulties here in the United States, kind of consensus of what a report on public policy. They have them there, too. They are making it day by day by day. There are not going to be any big startling breakthroughs. But its better now that was a year ago and its a hell of a lot better than it was say a year before, a year after the revolution when there were two political assassinations within six months. One of which occurred when i was there. And you asked tunisians today as opposed to say 18 months ago and to also say its a lot better than it was before the revolution. It would not have said that 18 months ago, but now theyre all beginning to say it. Am optimistic . Yeah. You cant become a part of the country in the way that they had the great good fortune to run Enterprise Fund or to chair one, gives you without becoming deeply attached to the country. It is i think the leaders of the content shown immense courage in what theyre trying to do and resoluteness and tried to do it. And why like everything theyve done . No, i dont, but its a tough job. On cognizant of the time. I want to call on this gentleman. Get this gentleman a microphone. Thank you. I spent 32 years in the Chase Manhattan Bank and i was on the board of the baltic american Enterprise Fund and also the checks low back fund. Id like to go directly to the question of getting good quality members of the board as well as good quality staff members. Because i spent 32 years and the Chase Manhattan Bank i can assure you that we had very, very fine training in the array of finance. Because i was retired i can assure you that there are a number of other retirees who have pensions, who enjoy their pensions would also look for challenges. And so they are available to you. Not only as members of the board but also as staff members. In the case of egypt for example, there are a number of case people who worked in Chase National bank of egypt, and they retired and to live in new jersey and they talk about what it was like working in egypt. And they are available. The same thing with arabic speakers who worked off of the middle east for the Chase Manhattan Bank and who are available. My friends in the citibank, Morgan Stanley are available, and so i just ask you to think about them as potential members of the board as well as potential staff members. I thank you very much for that. I want to make a comment about government financed or weve written over the last figures but Development Finance. I do want to come back to it, it was made about the issue about the velvet. I do think there is, i agree with your assertion that there is, develop is privatesector led the government and that we have to think about the economy and we need growth. I do think though there are different kinds of investors with different kinds of needs and were seeing a lot of things like blended finance. The issue what taxpayers want, a look at some the comments, i think theres expectations about how we tell the stories and the kaiser impacts they had. I think if i have a growing economy and we can reduce youth unemployment and make it attractive for investors, that is development but but i do thk there are other metrics as well. Some of the other bilateral will take somewhat but cdc, for example, has spent a lot of time and investment trying to tell a larger story about what they use this furniture, a euro term, additionality. It gets to my friend and colleague michaels, about with the development . The question is where is the additionality . Like why do we need a tunisian Enterprise Fund or an ejection Enterprise Fund or baltic american Enterprise Fund as opposed to citibank or an hsbc . Thats one of the questions i think and theres, i dont know if theres an answer to it but i think theres a little bit of attention in terms of saying why do we have dfi or why do we have come why do we set up a dfi if we dont need it . I think we do need it but i do think that i think is where the question comes from our questions like the one that michael was posing is giftgiving kinds of investors, the whole blended finance or even Impact Investing public terms of their what i think michael was getting at us will. I take your point. I agree with you that we need for growth in an economy but i do think theres this interesting tension in these institutions thats not resolvable but just sits there as attention about issues of impact and issues of Economic Growth. I think we want to get both of those. I know we dont lets principal talk about blended finance and then let secretary devos talk about the sort of why this kind of instrument and the city the first is thanks in important part to some hints and suggestions by a. I. D. And in addition to kind of my own reading and my cos reading, we created what is i think one of the only example in the Development World i know of of a true blended finance for small and Medium Enterprise. What the nature of the finance, in my own view, most of the financial structures device for small and Medium Enterprise follow the wrong model. They follow a Capital Markets model which i think some of thats going to get your money back where 99 of all Small Businesses are never going to go public. How do you get your money back . Shift at some blend of a way of equity done in a way in which you can get paid back. Debt in a way which the investor can afford to take the debt. Lots of smes and most of the world by way overleveraged because theres no equity involved. And then Something Else. We have created a royalty based kind of approach to investment. Theres only one of the place in the world who does and its a south african from that we brought in as a manufacturer sent it out. So i think blended finance really matters a whole lot, that its not, that i dont think y of us can do the sort of plays and all you get debt and you get a little equity kind of thing. You just cant do that. The answer, they got answered the question of why, well, ill handed over hsbc. Sure. One of those support Business Books ever written is called the innovators dilemma by clayton christiansen. What that basically says is that foreign bodies in the middle of Large Companies are rejected and killed, and it answers the question for two things. What is it that virtually all of the job creation in developed countries come from small companies, not Big Companies . For that reason. Why is it that the vast vast majority of the past pathbreaking innovations that occurred in developed economies are from small companies, not Big Companies . Because they companies while they have their very found the purpose and they are in lots of very smart nobel prizewinning economist who have talked about the necessary mix of big and small, they are not were growth happens. If you handled these things off, they would kill and one of them off in a minute. I worked at citibank in argentina. I agree with you. Kim and page or to get each of you to make a closing point and then going to give jim the last word. I was going to another itself of the one of the big problems is its not profitable for most large institutions which is why the sme sector is underserved in every single economy including this one. So, therefore, one of the things we did was buy games that you get and write a five loan you could monitor and collect payments. We were able to demonstrate to the existing Banking System that they should affect get into that business. Once they got in we went and said now that you do the fiveyear term loan, we would do the noncash preferred below you to give growth capital. Its not planned in the sense of a plated security but it was blended on an ad hoc basis to reflect the companies needs in the state of the Capital Markets. Going back to my point, which is if theres one thing i would leave with this is flexibility in the execution of the Business Plan is the cynical not a success because because no one can predict in advance where the opportunities will be in any country in which an Enterprise Fund is stood up. Thank you. Just one of the point. So kim, jim and bo, inc. In this for the boxster im sure the salary is phenomenal. You guys have got no money out of being the chairs of these things, right . Thanks. [inaudible] this is Public Service. This is a voluntary Public Service so thank you. The one thing that gets in my craw, i i bought into that whee did it come is theres an absolute rule in our piece of the legislation against a penny being spent on alcohol. You can understand that. But tunisia is a real place. Its assessment and business women come have a glass wine before dinner and that kind of thing. If i take them out, so guess who for five years has bought all the beer and all the alcohol . [laughing] thanks, bo. Baltics do not have that problem, i wanted that to be clear. [laughing] part of the Publicprivate Partnership come right . I was going to make the same comment dan did. The fact that kim and bo and jim addend this, id say the board chairs for most of the other funds really, we are forever indebted as taxpayers the fact you step up and took this on. I think that is something that has to be recognized if there is to be an Enterprise Fund 2. 0. People are willing to do it and as you said there of the people wanting to do it, but its a role real Publicprivate Partnership. Thank you for that. Can i just add [inaudible] [applause] jim, you get the last word. So jim, did you ever think that every moment you said whitehead did i sign up for this assignment . I want to ask three questions are first of all, just answer that briefly. The first trip i made we had scheduled a meeting with the leadership of the muslim brotherhood. It was late at night and we were in a state Department Car but fortunately not a state Department Flag or u. S. Government like an otherwise i might not be here. But this car chose to go in front of the protest taking place in the square and we were stopped. We did have secured in the car and they said when the teargas calms, you shouldnt get out of the car because we would not make it to the corner. So we sat for two and half hours, and i could only look at then my blackberry, which i always try to make some humor out of the whole thing. The first message on my blackberry was that my dentist expected be monday morning 9 00 for dental appointment. I thought if i ever get there, i will be so happy. [laughing] at that moment [inaudible] yeah. That moment i did think that lucky i minute for the big bucks, but we did get to the meeting with the i didnt tell my wife actually. She would be furious. We did do then meeting, and te first hour i unloaded on been the leadership saying if thats what youre going to treat potential for investors come here. That eating the brother made a proposal to us that they would like to go venture the Enterprise Fund. And they thought that the knowledge and skill to do that. So we had a link in it as you may know those meetings go into a long time. Anyway, it was at that moment. I want to make three brief comments on more serious matters. Additionality we think about all the time pickets a very important issue and so i wouldnt make a life of that, directors thank the general who raised the question of will keep it in mind. Its interesting that he never expected that to get to be a direct of egyptianamerican Enterprise Fund became a bit of a hot ticket. In other words, getting paid nothing. We have more people both your egyptian citizens and u. S. Citizens who, when they hear about it, have volunteered to do this. And some very good people. A very Important Message for anybody in this audit is who will someday run an Enterprise Fund, dont pick the highest profile best known television people, so to speak. So give you an illustration of the wonderful man who is very considerate, mohammed. I talked about. He is a busy he would not have had the time to come to me but he carried what were doing. So try to find people who really wont what work, come to the meetings and are engaged to our board is very much engaged but i like the suggestion made and we will keep that in mind. I also would say if i had to change one thing, i wish they allowed me to be an investor in the Enterprise Fund. That would assent the right signal and i wouldve loved to fight my own personal funds into the Enterprise Fund. They dont allow that right now. Maybe both pluses and minuses to doing that in terms of conflicts, but thats another subject. In spite of what incident i had, i i always felt it was very worthwhile doing. Unfortunately to have been asked and i am fortunate i made the decision to do it. I dont regret that in any way. Thank you all for going for it by the way, if anybody in this audience has listen to this thought we could do Something Different, probably any of us and thought, i would welcome comments or suggestions or emails to that effect. We can all learn by other peoples experiences. So i would encourage you so theres a gentle in the back with waving his hand [inaudible] i was managing the enterprise Investment Funds as well as sitting in on the board meetings. I was involved with a south africa in a pricey veltman funds. Funds. A couple of quick thoughts. One thing for page is when Going Forward with investment version number two, i think its important to bring in Foreign Service people. This is important to have the people in usaid understand this. They dont understand this and it gets superior complicated. Was managing five countries and its hard to commune that to them in way that makes senses. Nonetheless were still getting pressure, gate lot of pressure from the embassy to provide some sort of results. So i would have to push back on the investment fund, give us something. What can you give us . Because if they dont give us anything, makes or job a bit more substantially more difficult. Finally id like to say, i think its important to have folks on the ground early on because i know so many investments so much pressure to put out successes and lost sight of the social needs that had to affect the communities, because the Investment Funds were when i was they would look for the winners, of course, and then they would invest the fund with the winners. For example, if they put in a bank that was having 18 return, they would do stuff like that. Then have round 18 . Which is a bit misleading, i would argue, and im sure some of you folks would agree. So i think some of the take that into consideration. Thaw, very helpful. Any further comments . Okay. Please join me in thanking the panel. Thank you. [applause] [inaudible discussion] [inaudible] conversation [inaudible conversations] [inaudible conversations] [inaudible conversations] this week on the communicators, two telecommunications talk about Net Neutrality and regulating the internet like a public utility. Number one, deregulates broadband. It basically takes broadband oversight out of the fcc entirely and gives to its the federal trade commission which doesnt have the strongest tools. Number two eliminates the rules against Internet Service provide u providers, like comcast and at t, throttling internet traffic, and allowing for what is called fast lanes. In other words, charging online providers to get to the consumer faster, better quality of service. Thirdly this is really important it preempts or prohibits the states from protecting consumers and protecting competition with similar rules. There are three acts, three at least three federal statutes that protect consumers and entrepreneurs and theyre very powerful and have teeth and theyre the sherman act, the clayton action and the federal trade Commission Act there are also state protections. Yes, the order says it preempts the states from being little sec, miniature secs and trying to regulate the economics of broadband, but it does not prevent state attorneys general, for instance, from suing Internet Service providers if they harm consumers. The Consumer Protection law at the state level. Watch the communicators tonight at 8 00 eastern on cspan 2. Alabama vote goes to polls tomorrow in a special election to fill the senate seat vacated by attorney general jeff sessions, Democrat Doug Jones and republican roy moore are the candidates. We have results. And you can follow the Election Night coverage on cspan. Org and on the cspan radio app. On wednesday, house and Senate Negotiators meet to discuss reconcile thing two g. O. P. Tax bills passed in each chamber in recent weeks. The plan is for a Conference Committee to combine the two proposals into a single bill, which would have for be approved in both the house and senate before it could go to the president for his signature. That is wednesday at 2 00 p. M. Eastern, live on cspan3, online at cspan. Org and on the cspan radio app. The council on Foreign Relations hosted a symposium Cyber Security threats to democratic elects, including vote infrastructure and attempts to shape public debate in online