International development. From the center for strategic and international studies, this is two hours. Okay. Lets get started. I daniel runde. I hold the chariot csis people can have a conversation about whether not we need to revisit the concept of use Enterprise Funds. Use Enterprise Funds were launched in the early 1990s by george h. W. Bush. The countries focus were u. S. Governmentnt dollars funded investment in developing countries. It was an idea that was ahead of its time, and there were several dozen of these Enterprise Funds that were launched. Many of them were very successful pick some that had some hiccups but most were broadly very successful but you ask yourself why, there is the number Different Countries would you say we ought to be applying this. Rightfully, in the Obama Administration there were a number of countries where there was political will to apply this think its a very valid and useful tool for our toolkit in the United States. So we have examples from tunisia and egypt that were going to talk about as well. The history oft what are these things, how they come about, what we learn from the past, howab are some more recent ones operating and then finally i think the important thing is about the future because i think in some ways it was ahead of its time and theres a lot of learnings from the past, but i think are plenty of countries what we ought to be applying this in new additional countries, but also maybe different ways given the fact that the world has changed from 25 years ago. The instrument needs to adapt with the times. Weve got a very experienced group of panelists and im really pleased to have all the smart folks on the panel. Im not going to go into bios, detailed files for each of them but im going to ask my friend Paige Alexander is executive director of European Cooperative for Rural Development but is more important former usaid System Administrator and was one of the point people on Enterprise Funds at several points in a crib of most weaselly during the Obama Administration. So thanks for flying in from brussels to be here. Then i will introduce each of the panels before they speak. Why dont you give us all a bit of context on Enterprise Funds. Sure. Thanks. I see so may t the audience who know more about Enterprise Funds that i do. Having spent numerous years, working on them, so i will just give you a brief prospective that i have had income in 1993 and seen what it look like to the 90s, early 2000s and then have colleagues saying what they would like when they were start up again in 2012. I think Enterprise Funds were truly designed for solution to problem in a specific context and kim willun talk more about that because what weut had in te 90s and v early 2000s as we were looking at the dual mandate about a does u. S. Government gs involved in these countries in a quick way so we can get quick results. Polling poland and hungary the s going through shock therapy. President bush wanted to announce something. These were designed inui the vacuum of, okra, u. S. Government does not have the Technical Expertise to look a private equity and venture capital. This is not what we do. We can hire private boards who can go in and set up these Enterprise Funds. I dont think, and are probably other congressional staffers here who can attest to the fact that no one thought itd going to be p financially viable or sustainable. So theres not a lot of thought down to what happens after liquidation. Then we spent most of 2010 onwards try to forget what to do with liquidation. Legacy legacy funds, think thate could do to leave behind. Backing up to the Enterprise Fund, the creation happen so quickly and the dual mandate you need to transition these countries to at market economy, yet at the same time need to make money, and then the mandate of development which is sort of left to each individual board as to how much other would be truly developmental for developmental purist peers sake, or was going to be we will set up an airport in albania, well set up a Banking Sector in bulgaria, we will work with mortgage lending in the baltics. These things were decided amongst the private sector board. So usaid oversight in the state Department Oversight became somewhat tenuous as congress continue to ask questions what is it you are doing, hypothetically to be able to react . And so we went to a growth time over 25 years and a believe a report will be coming out soon as to what these Enterprise Funds and legacies of left behind 25 years later. And as the other members from legacy fund. An actual member of the remaining american legacy fund. I see steve from the russian lines. Number of people who are still part of this were involved. But the question is truly what can we do an Enterprise Fund version a 2. 0. Since context of the must have position to do with very effective and educated people who just didnt have Financial Institutions in place and Banking Sectors in place because with things thatna for julie kim at a number of on the board with the suns are able to jump start. Usaid continued oversight of that has gone from just being involved in having 1000 question asked of you. When Enterprise Fund started in 2011 and 112 after the arab spring, no one really knew what the relationship is going to be. Ill let2 jim and bow talk more about that but the unique challenges that we had an Enterprise Fund as new innovative tool have grown over time. We have usaid has the future, et cetera developing quite a authority. Theres power in africa, a lot of innovative tools and ive moved overseas and working on Public Partnerships with the dutch government to look at other innovative ways to bring private a sector in so its not just the public set of funding that has to go in to jumpstart some of these economies. I would say that on a whole theyve been blissfully successful. There are a couple that were unfortunately had to minnis returned at the end of the day. But when you look at the actual fact at one point to. And financing going to ten Enterprise Funds covering 19, 14 countries, 6. 9 billion in private capital being leveraged from the 1. 2, then 225 million being returned to treasury at the end of it, thats a Successful Development program. Its wonderful to able to do that at the time in the question is what we do to expand on that and dome something new in some f the newer countries . Great, thank you, to skip over bow and jim and want to ask kim davis to make some remarks to choose the chair of the balticamerican freedom foundation. Hes also managing director and culture of the Capital Partners but more importantly you chaired the baltic enterprise fun as well as you with the acting ceo of the czechoslovakian Enterprise Fund earlier in your career. How did you end up getting those jobs . Those are not paid job spirit you had a day job but you doing this, how did you getting that phone call and why did you say yes . The first phone call was to join the baltic American Enterprise fun and i thought it would be a really interesting way to observe the transition of postsoviet countries. That was an easy yes. A needy people that at privatey experience and i did that. The czechoslovak expense rose because whatever other directors was appointed by e the white hoe as acting board when the first board had ran into some trouble. That director asked me to step in as acting ceo for six months which it did in 1986 and essentially shut down and put everything down to slovakia which was the only business decision that d was available to us att that time. I hadec a funny meeting with ambassador in the Czech Republic who said im glad to meet you and hope i never see again after you leave the Czech Republic and the fund is out. That was not a particularly successful one. In general anybody who thinks that a Enterprise Funds will hae a different distribution curve of success than the private sector missing the point. It would be some good deals and bad deals in 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 bow does, and much more receptive apartment. I think the public about any price on was a successful enterprise fun. Weo started with 50 million in three countries and b3 specific decisions. Were going to focus on the credit markets. Were not going to adopt a quota system will respond to Market Opportunities and were going to invest in building our staff as real legacy what were going to leave behind. We ended up with two businesses, a Mortgage Business and a Mezzanine Capital business. 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 are fragile legal structures are really difficult whereas i think the credit markets are more open to innovation and to some development tools. Turned intoion 820 million of invested capital. We originated 20,000 mortgages and accomplish the firstst securitization of a Mortgage Backed security in eastern europe. So for us, and we ended up with 60 million and you could say 60 million from 50 10 years is not a particularly great internal rate of return, but given three countries and given the 1990 russia crisis and our development objectives, our view was that if we focus on preservation of capital and modest returns, investing in the quality of our staff in leaving a legacy behind of a more developed Capital Market and we would have done our job. We are still at it now as a Legacy Foundation. While i dont think what we did is necessarily replicable in the same weight in tunisia and egypt becomes the political and phimosis of different, i do think, i would like to think the baltic American Press on is at least an example of why the Enterprise Fund concept should have second life or perhaps with some different rules in some different environments but it is deathly a worthwhile endeavor. The abilityd to Leverage Private sector volunteers, which were all are as Board Members, with usaid and state department folks as well as the local governments and local citizens i think its a wonderful model of public diplomacy. So kim, how important is it to have the right board . It is the number one and only thinker we were very lucky. We had six Board Members. We had never met each other we had the same six Board Members in 19942007. A great initial share who invent assistant secretary of state under president reagan. As an aside of the two most famous people in the baltics when we got the paul ii and ronald reagan. We came into a pretty receptive apartment. Ross was a greatos leader to hae in that, but the board is everything because the boardrd s to exercise real oversight. With active committees. We didnt micromanagement management over as though he knew what doing all the time. I think that allowed us to change course whent we had to redirect resources when we had to come and innovate when we had to. So what about when you started making money and what happened, did the government say what do i do with this money . What was that conversation with . We sold all of our businesses in 2007. So in 2007 we liquidated and sold our Mezzanine Capital business to hedge fund and we sold our mortgage bank, which i that time was 140 person soup to nuts from origination to servicing platform to an irish bank. My friend paige and i have spirited conversations about what to do with all of our money. Ultimately we sent 25 going back to the treasury and the kept 35 million for our Legacy Foundation which is hard at work as a speak. Just spent a minute more on czechoslovakia. How did they find you and what did do they want you to do and what did you do . The acting board asked me to step in as a ceo. I happen to have some time. I was betweendo bruce and like r and that sixrd months availableo i i took the job and flew to prague. I think thats a story of a board the came in 1983 when the country were together, 1991, and decided that the job was to just investing anything and everything, in minority equity positions in a country with her is just no Legal Framework or cultural understanding of what a private Equity Investment was. It was just a mess. They lost about 75 of their capital in the first two years. And again, ive been in this business my entire75 life. Ive made a lot of bad deals. You lose money if they lost it at a a rate that was beyond normal. Kim, did it have a happy outcome . Well, we close down the activity can put everything to slovakia and the did, they had a second go at it. I think they did some very good things. Theres a Legacy Foundation there. Its unfortunate that we lost our ability to continue iner the Czech Republic but it there was just no additional funding available given the history. So its fair to say it was somewhat turned around . Yes, it was turned around without much smaller footprint. Thats the point of what people to come away with. There were some hiccups, some interventions made and then it had a pretty good turnaround outcome, right . It was. Once we accept the fact we loss 75 of her capital we did good things with a 25 remaining. Again, people are going to lose money. Youre going to makein bad deal. You are going to get your hiccups, and you just have to learn how to absorb them and move on. Thats what we did. I want to spend one more man on the history then want to turn to the present, to jim, to train what a talk about the present and then talk about the future i want to dwell a minute on the past with my friend paige. Paige, i think theres a historic memory of the Enterprise Fund. Theres sort of a short list of complaints that some folks have. Ifmo someone was here and said what about that fund or this fund that i was unhappy about what happened here, what is your response to that . What would you say to some member of congress on unhappy about this fund or this and so, therefore, we should not doing morgan what his response to that . David will take all those questions. Thats my response. Yes, there were hiccups and a lot of funds, theos way they wee liquidated at the end of the day somea. Had de minimus returns, e central asia fund, the slovak fund, the hungarian fun and the just sort of morphed into either legacy funds to do something small but the majority of them ended up making unbelievable returns. Bulgaria, for example, although there were some concerns about e it at the time the bulgaria fun ended up walking away with 200, 422 million at the end of the day for the legacy fun and they only had to return 27 made to the Us Government. Because the deceit have been made at the time when congress thought these were just fun at the going to grant out that question was to return the liquid assets, half of the liquidated assetsun to treasury, or are you able to just return half of initial grant. Regardless the Us Government that 225 million back from a a Development Grant program, and thats just unheard of. Thats a probably Successful Development program when you returning money to the u. S. Government. I would say each issue, some of the with the board structure. They just were not structured well and there were incentives setting each of the board that shouldnt have been there or were there for the wrong reason. Or it just wasnt from inviolate. I think jim and come when you talk more about the different environments. Theyree t facing avs what ronad reagan and the pope, what they faced. A simpler time. In the u. S. Was well loved and was helpful because you able to do everything in conjunction with the country government. Let me ask another leading question. We have like three or four pickup funds but they were like 12rn or 14 funds that were grea. Thats the bumperstickering you should take away from this conversation. People say theyre a couple hiccups. That was the small my door the funds most of these were smashing successes. The other thing i think its say is the u. S. Government and the fund boards themselves and investment professionals have a lot of learning as i said earlier. This was ahead of its time. Theres been ana lot of learning and improvement all along the way in the last 25 years. Thatst a statement, right . Absolutely. Congressional oversight, the branch oversight, these are things also have had a lot of learning and growing to do. Because as weiv had talked to earlier, congress is coming at the some very different angles. Senator lugar want one t