Transcripts For CSPAN3 U.S. Investment In Developing Countries 20171214

American Enterprise Fund bowman cutter. They support Economic Development and generating financial returns. This is nearly two hours. Okay. Lets get started. Im dan runde. Were going to have a conversation about whether or not we need to revisit the concept of u. S. Enterprise funds. U. S. Enterprise funds were launched in the early 1990s by george h. B. Bush, were country focussed where u. S. Government dollars funded investments 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. Some that had some hiccups. But most were broadly very successful. But you would ask yourself, well, why hasnt there is any number of Different Countries where you would say we ought to be applying this. Thankfully, in the obama administration, there were a number of countries where there was political will to apply this tool. And i think its a very valid and useful tool for our tool kit in the United States. And so we have examples from tunisia and egypt that were going to talk about as well. Were going to 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 of the more recent ones operating. And then finally, i think the most important thing is about the future. Because i think there is in some ways, it was certainly ahead of its time. And there is a lot of learns from the past. But i think there are plenty of countries where we ought to be applying this in new additional countries. But also maybe in different ways, given the fact that the world has changed from, say, 25 years ago. And so the instrument needs to adapt with the times. So weve got a very experienced group of panelists. Im really pleased to have all these smart folks on the panel. Im not going to go into bios, into detailed bios for each of them. But im going ask my friend page alexander, who is the executive director of European Cooperative for world development, but he is more importantly a assistant administrator and somebody who was one of the point people on Enterprise Funds at several points in her career, but most recently during the obama administration. Paige, thanks for flying in from brussels to be here. And then ill introduce each of the panels before they speak. Paige, why dont you give us a little context here on enterprise. Sure, sure. Thanks, dan. I see so many people in the audience that know more about Enterprise Funds than i do, having spent numerous years working on them. Ill just give you a sort of perspective that i have, having come in 1993 and sort of seen what it was like through the 90s, the early 2000s. And then have the colleagues with bow and jim seeing what they were like when they started up again in 2012. So i think Enterprise Funds were truly designed for a solution to a problem in a very specific context. And kim will be able to talk more about that. Because what we had in the 90s, in the early 2000s, as we were looking at the dual mandate of how does the u. S. Government get involved in these countries in a quick way that we can get quick results, poland and hungary were the ones that were going through shock therapy. President bush wanted to announce something. These were designed in a vacuum of, okay, the u. S. Government does not have the Technical Expertise to look at private equity, venture capital. This is not what we do. We can hire private board who can go in and set up these Enterprise Funds. I dont think there, 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. So there was not a lot of thought done to what happens after liquidation. So then we spent most of 2010 on merge trying to figure out what to do about liquidation, legacy funds, things that we could do to leave behind. But backing up to the Enterprise Fund, at this point, the creation happened so quickly and with the dual mandate of you need to transition these countries to a market economy, yet at the same time you need to make money. And then the mandate of development was sort of left to the court of each individual board as to how much of it would be truly development for development purists sake, or was it going to be well set up an airport in albanian. Well set up Banking Sector in bulgaria. Well work with mortgage lending in the baltics. These things were decide aid moncks t amongst the private sector boards. It became tenuous as contreras congress continued to ask questions, what is it youre doing . How quickly are they going to be able to react. We went through a growth period over 25 years. And i believe a report will be coming out soon as to what these Enterprise Funds and the legacies have left behind 25 years later. And i see other members from legacy fund. Im actually a member of the romanian american legacy fund. I see the russian one. There are a number of people who are still part of this and are actively involved. But dans question is truly what can we do in an enterprise version 2. 0. The specific context of the nis left news the position to deal with very effective and educated people who just didnt have Financial Institutions in place and Banking Sectors in place. Those were things that fortunately cam and a number of people who were on the boards of those funds were able to jumpstart. And usaids continued oversight of that has gone from just the ambassador being involved to having a thousand and one questions asked of you. And when the Enterprise Funds started in 2011 and 12 after the arab spring, no one really knew what the relationship was going to be. And ill let jim and bow talk more about that. But i think the unique challenges that we have in Enterprise Fund as a new innovative tool have grown over time. We have usaid has feed the future. Its got Development Credit authority there is power africa. There are a lot of innovative tools. Ive actually moved overseas and im working on Public Partnerships with the dutch government to look at other innovative ways to bring private sector in so its not just a public set of funding that has to go in to jumpstart some of these economies. So i would say that on a whole, these theyve been blissfully successful. There are a couple that were unfortunately had de minimis returns at the end of the day. But when you look at the actual facts of 1. 2 billion in financing going to ten Enterprise Funds covering 14 countries, 6. 9 billion in private capital being leveraged from that 1. 2, and then 225 million being returned to treasury at the end of it, thats a Successful Development program. And its wonderful that 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 bow and jim, and i want to ask kim davis to make some remarks. He is the chair of the baltic American Freedom foundation. He is also managing director and cochair of the charles mann capital partners. But more importantly, you chaired the baltic Enterprise Fund as well as you were the acting ceo of the check czechian. Why did you say yes . The first phone call was to join the baltic american Enterprise Fund. I thought it would be a really interesting way to observe the transition of postsoviet countries. So that was an easy yes. They needed people who had private equity experience. And i did that. The czechslovak experience was appointed as an acting board when the first board had ran into some trouble. And that director asked me to step in as the acting ceo for six months, which i did in 1996, and essentially shut down the czech operation and moved everything down to slovakia, which was the only really business decision that was available to us at that time. I had a very funny meeting with the ambassador 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 and the fund is out. So that was not a particularly successful one. But i would say in general, anybody who thinks that Enterprise Funds will have a different distribute curve, is missing the point. There will be some good deals and bad deals, good funds, and bad funds. We have to simply accept that as a matter of course. Dan, if i might, we had a challenge that was very, very different than the one that jim and bow does. And a much more receptive environment. But just to give you a sense, i think the baltic american Enterprise Fund was a successful Enterprise Fund. We started with 50 million in three countries. We made three very specific decisions. We were going to focus on the credit markets. We were not going to adopt a quota system. We were going to respond to market opportunities. And we were going to invest a lot in building our staff as a real legacy of what we were going to leave behind. We ended up with two businesses, a Mortgage Business and Mezzanine Capital business. 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 to some development tools. Our 50 million turned into 820 million in invested capital, both with reflows and capital we leveraged. We originated 20,000 mortgages and accomplished the first securitization of a mortgagebacked security in eastern europe. So for us, and we ended up with 60 million. And you could say geez, 60 million from 50 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 sort of development objectives, our view was that if we focused on preservation of capital in 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. And were still at it now as a Legacy Foundation. So while i dont think that what we did is necessarily replica replicatable in the same way in tunisia and egypt because the geopolitical environments are so different, i like to think that the baltic american Enterprise Fund is at least an example of why the concept should have a second life. Perhaps some different rules and 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 the 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 had six Board Members. We never met each other. We had the same six Board Members from 1994 to 2007. We had a great initial chair, roz ridgway who had been assistant secretary of state under president reagan. As an aside the two most famous people in the baltics when we got there were Pope John Paul ii and Ronald Reagan. We came into a pretty receptive environment. Roz was a great leader to have in that. 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. And i think that allowed us to change course when we had to, redirect resources when we had to, and innovate when we had to. Okay. 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 like . So we sold all of our businesses in 2007. So in 2007, we liquidated. We sold our Mezzanine Capital business to a hedge fund. And we sold our mortgage bank, which by that time was a 140person soup to nuts from origination to servicing platform to an irish bank. And 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 hard at work as we speak. So can you just spend a minute more on czechoslovakia. How did they find you, and what did they want you to do, and what did you do . So the acting board asked me to step in as the ceo. I happened to have some time. I was between sort of moves in my career, and i had six months available. So i took the job and flew to prague. You know, i think thats a story of a board that came in 1993 when the countries were together, 1991, and decided that their job was to just 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. And it was just a mess. I mean, they lost i think they lost about 75 of their capital in the first two years. And, again, ive been in this business my entire life. Ive made a lot of bad deals. You lose money. But they lost it at a rate that was beyond normal. Kim, let me quickly jump in and say does visit a happy income . Well we closed down the czech taitt, moved everything into slovakia. They did. They had a second go at it. I think they did some very good things in slovakia there is a Legacy Foundation there. Its unfortunate that we lost our ability to continue in the Czech Republic, but there was no additional funding available given the history. So its fair to say it was somewhat turned around . Yeah, it was turned around with a much smaller footprint. So thats the point i want people to come away with. There were some hiccups. There were some interventions made. And then it had a pretty good turnaround outcome, right . Is that a fair way to describe it . Despite the fact we lost 75 of our capital, we did good things with the 25 remaining. To dans point, again, people are going to lose money. Youre going to make bad deals. Youre going to get your hiccups. And you just have to learn how to absorb them and move on. And thats what we did. Okay. All right. So i want to just spend one more minute on history, and then i want to turn to the present, to jim and bow and talk about the present. And then i want the four of the panel to talk about the future. But i want to dwell one more minute on the past with my friend paige. Okay, so, paige, i think there are dlsh there is a historic memory of the Enterprise Funds there is sort of a short list of complaints that some folks have. If someone was here and what about that fund or this fund that i was unhappy what happened here . What is your response to that . What would you say to some member of congress who said im unhappy about this fund or this fund and therefore we shouldnt do any more of these. What is your response to that . David coles will take all those questions. Thats my response. If thats my respond. If we were still at a. I. D. Yes, there were hiccups and there were a lot of fund, the way they were liquidated. Some had de minimus returns, and they just sort of morphed into either legacy funds to do something small. But the majority of them ended up making unbelievable returns. Bull garlia for example, although there were some concerns about it at the time the Bulgaria Fund ended up walking away with 200 no, 422 million at the end of the day for the legacy fund and they only had to return 27 million to the u. S. Government because the decision had been made at the time when congress thought these were funds that they were going to grant out. The question was do you return the liquidated assets, half of the liquidated assets to treasury or are you able to just return half of the initial grant . Regardless, the u. S. Government got more than 225 million back from a Development Grant program. Thats almost unheard of. That really is a broadly Successful Development program when you are returning money to the u. S. Government. I would say that each issue, as kim mentioned. Some was the board structure, they werent structured well. Each of the boards shouldnt have been there or were there for the wrong reasons or it just wasnt a friendly environment. I think jim and beau can talk about the environments they are facing now versus what Ronald Reagan and the pope what kim faced in the ballotics. It was a simpler time. A much simpler time. And the u. S. Was well loved. And it was helpful because you were able to do everything in conjunction with the ronreaco country government. Paige, let me and another leading question. We have there is like three or four hiccup funds. Right. But there were like 12 or 14 funds that were great. Right. Right . Thats the Bumper Sticker you should take away from this conversation, right. Absolutely. If people say a couple funds had Hillary Clinton ups, yeah, that was the small minority of funds. Most of these were smashing successes. The other thing i think paige its fair to say is that the u. S. Government and the fund boards themselves and the investment professionals had a lot of learning. As i said, it was ahead of its time. So there has been a lot of learning and improvement all along the way this the last 25 years, thats a fair statement. Absolutely. Right, too . Absolutely. Congressional oversight, executive branch oversight, these are things that also have had a lot of learning and growing to do. Because as we had talked about earlier, congress is coming at this from very different angles. Lou gored wanted one thing, part reason baltic monies with a held up. Its hard to react to congressional wants and interests at the same time of policy imperative to get things moving quickly and look at the market and recognizing these things werent meant to move quickly and we have a life line of ten to 15 years for investment and reinvestment. So so my one last point is paige while you were in the chair as assistant administrator you asked the aide staff to put together all the Lessons Learned which is sort of my view the must read document as to where we are in the Enterprise Fund. There are two must read documents. One is available now. It was done in 2013 with david coles and a ronreaco of people from the europe and your asia bureau. And there was another one that has been done recently. I think it hopefully will come out soon that is on the overall legacy of Enterprise Funds. Both those documents stand as lessans learned for this type of Innovative Private sector private capital activity. Okay. Thats enough about the past. But the point is, lots of learnings, lots of success, and learnings from the errors and improving upon the errors. Uhhuh. Thats the take away from the past on the Enterprise Funds. Lets move to the present. Let me start with my friend jim harmon first. Jim, you got a phone call from tom United States and mike fruman, two of the startest people in the obama administration, phenomenal people, and they seed we need you to stand up and help fund an Enterprise Fund in egypt. What was your reaction to that and why did you say yes to that . Thanks dan. First i want to congratulate you and the cisc for doing it. It is a subject that warranted a review. Et cetera a Good Opportunity to discuss it with you. Secondly you have invited some people who are good very ill administrations of talented people. I might even think they may be the best of a lot of the people who have run Enterprise Funds. So the audience is going to walk away, wow, this is a very talented group of people. You should know not everybody i have met who have 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 xm bank. I have to admit i didnt know what an Enterprise Fund was, and no one talked about Enterprise Funds anyway at the xm bank during those four years. Maybe that was my fault but i certainly heard very little about it. Obviously i said to michael and tom i didnt really know what it was, so i would have to think about it. I actually too three or four months. And i government in the United States does not present you with a kind of background summary that helps to you 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 u. S. A. I. D. Did an interesting study whether or not there should bea a Enterprise Fund in egypt. How could i have talked three months to people and nobody had given me that. And i was part of the Clinton Administration. This was not a change of party. Can you imagine how our government treats someone from another party . Any case, we did do the study. And ourselves, we did review and i did make the decision sometime in april or may four months later that i would go forward. So the call was just a usual call. I had been as you probably all know once you leave the United States if you have been confirmed its not uncommon to get a call from someone in government to ask you to tack assignments. I had already had four or five assignments, limited areas, to help the world bank on this or that. It didnt interfere much with my day job. I was investing in the developing world, some 30 cups. I had been following the frontier developing world successfully since i had left the government. Does that answer your question, dan . Yes, but jim, what prompted you to say this to this . I dont know. My wife asks me that question often when im stuck in a middle of traffic in cairo during some demonstrations i think to myself, what did prompt me to do that . Do you want me to give a little background . Yes. First you should know the egyptian Enterprise Fund was different than all other Enterprise Funds in few aspects which prompted most former chairs to tell me they didnt think i should do it. First, the Egyptian Government was not very good. That may be a bit of understatement at the time. Unlike europeans, where you were welcomed when you went to the country, on my first trip the Egyptian Government said that the 300 million that be that authorized for the egyptian Enterprise Fund is our money, you are taking our money. It came out of the camp david accords and so forth back in the 1970s. And what is is your explanation for that . And of course that was way above my pay scale and i had no answer because the white house hadnt briefed me this was going to come at me on a regular basis from more than a few people. The relationship between the two countries was strained. Secondly, there is a sophisticated market in egypt. They were trading in equities. We had been investing in marketable shares in egypt for quite a bit of time. Different are the european Enterprise Funds. Third, there was violence all around. You didnt have that much violence in europe at the time. I could go on and on on the difference. On my first trip i realized that this is 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, kim is right. The board has to be important. But your ceo is very significant because i was not going to sit in cairo and find investments without having devoted my life to it. So i knew i had to do two things. First, one was egyptianize the enterprise fun. What does that mean . That means the management, the ceo had to be egyptian, and the board had to be egyptian as much as we were allowed to. We were legislation calls for three egyptians and six american citizens. We modified it to six egyptian americans or three egyptian americans and three egyptians and three americans. Actually just two of us did not speak arabic. So we just started with the board and then i went about trying to find who should be the ceo. Thats long story which we dont have time to tell. But i think we got fortunate. We found a very capable man who had been trained in new york at Morgan Stanley years ago. He was running a boutique. Then we got lucky again because when i told him what i thought we could pay him to take on this assignment of finding 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. I said you should form a management company, we will be your first client. You will manage some of our money and we will pay you a fee. When the Enterprise Fund liquidates out, you are going to 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 emt and today it is a very successful Asset Management company. And five years from now, it will be a very large factor because they have the best talent. They have drawn in the best talent in my opinion that i have met in cairo who are running it now. That was the First Business and that was an early on decision to create employment because all those people went to work for that. My most important decision i have said already was hiring the ceo. I talk to him almost every sunday. As you all know, sunday is a workday there. For the first two years we talked all the time. He built a terrific business, totally trustworthy. If i were allowed to invest in the egyptian Enterprise Fund i would do it. I have been saying this over and over again. They should 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 i had personally. Of course i could not do that. My first surprise, no one wanted to have the u. S. Government own a piece of their business. No one wanted to even sell 10 or 20 to i dont mean to pick on u. S. A. I. D. , to any u. S. Government. Irealized the animosity or the fear of that. How do we overcome that . That was a trick. Thats why we had to egyptianize it. We had meeting after meeting. We were buying equity. This is a country that needs equity more than debt. Interest rates at this time, 18 . Equity was extremely important. We had to overcome that. The first mistake, we wanted to buy a bank. We knew that financial inclus e inclusiveness was absolutely critical. No small or middle size enterprise without capital can grow. And our task was to grow the economy. If you grow the economy you are going to create jobs and thats very important n most of the countries, as you know, certainly in egypt. You have maybe a 30 unemployment fact neuro 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. And i if the by buying a bank we would able to make loans to maul and middle size Companies Directly and i could get the u. S. Xm bank to provide a joint venture to provide funding. I was so confident we would be successful that we talked to kfw in germany and a number of other countries to join with the xm bank model. So we had a consortium of what could have been 400 or 500 million. Then my big surprise, the governor of the central bank rejected the idea of a u. S. Private equity, he used to call it, Going Forward. That is that was a lost year. Thats the kind of problem kim refers to and others, takes long time. We spent a year trying to did that deal. Couldnt get it done. We then acted quickly. If we are not going to get a bank we are going to get a Consumer Finance business. We found the leader and we bought that. And that has led us to provide a very significant number of loans to smes and to hire a lot of new people. Thats another long story. Our First Investment couldnt have been more successful in my judgment. We bought what is the leading Electronic Payment Service company. Most of you probably know or if you dont, less than 10 of the people in a country like egypt have a bank account. So if you want to pay your bills you have to wait in long line outside the utility to pay your bills. A paypaltype business n this case, run by a very bright man, could be very successful and it has been very successful. So today, 25 million egyptians, 25 million egyptians use the Payment Service. And it is on its way to half of the countrys population. So if you talk about making a difference and making a difference quickly and making a difference on the development side, if half of the country, if 40 or 45 Million People are using this pay service, then that means they can their life, the quality of life is better. Not to mention the fact that this company is growing like this and is go to 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 there is time, and i want beau to have his share of time. So i could only say that so far my experience in egypt has been challenging, but i think United States will clearly get back very significant amount of money. And there will be profits that were shared. How we share it, we havent yet decide upon. But clearly, it indicates to me the future of Enterprise Funds. But i think 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 in my experience. You really have to have it localized in that sense. You need to buy you need to be somewhat of an ambassador yourself. You have to be making friends and building relationships. A week does not come by that egyptians dont come into my work. I have two talented egyptians working in my office. Everybody associated in this business are egyptians and they are very capable. Without that capacity we could never achieve what we are going do. Ill stop. Just take a minute recognize if you would your two colleagues who are here in the audience. Go ahead. Emil, you should stand up. Ill tell a brief story about emil, if i way. We have a talented egyptian american who runs a senior partner in a private equity firm in boston. And he and i were talking about it and he Hayes Harvard has three or four egyptians graduating every year. You ought to interview them. I did interviewed them. She worked with the jit government of finance. She knew the government and the u. S. Having come out of harvard. That was a no brainer. For three years, more people will say i couldnt have gotten anything di could really not have gotten anything significant done without her help. If she leaves me, auto im leaving too. [ laughter ] unfortunately she just got married to her egyptian fiancee, and they were gone for i dont know two or three weeks on a honey moon and i had to go back to doing everything all over again, which made me extremely happy. Yas mean is there. If you want to stand. Yas mean has come in only three or four months ago. Also very capable. This is what i mean by the human talent in egypt i can build an Investment Bank around it. Next to her is an intern for us from egypt. We have had very good experience. I could go on but there are others who want to talk. Thanks a lot jim. Beau thanks for being here. You are the chair of the tunisian american Enterprise Fund. How did you you got a phone call to do this. Who called you and why did you say yes to taking on the challenge of running the tunisian american Enterprise Fund . Same two people. I had known tommy nides forever, and mike froman worked for me in the earlier part of the clinton era. So i knew and trusted both of them. It wasnt a terribly hard decision. I had spent a fair part of my life dealing in a combination of both development and finance. The finance part in the private sector, the Development Part in a whole wearing a variety of hats. And so the possibility of combining these in the kind of environment, under the kind of context that an Enterprise Fund meant was a very, very attractive challenge. So i it to me wasnt a it wasnt much of a struggle. Okay. So tell me about what your experience has been to date. Was it did you have the same kind of challenges that jim had . Did you have different sets of challenges . What was it like standing up the fun . Whats the makeup of your board . What are the kinds of investments you have been making . Starting it up, investments and deals or board, investment, and deals. All right. Our context is completely different than egypt. And jim has had in an immediate sense a much, much harder problem. Tunisia, as opposed to egypt at the time, has been is predominantly favorably inclined to the United States, regards the United States as important. So i never have faced any of the kinds of difficulties that jim faced. And admire what jim has had to do in the course of getting through that. Mine is a little bit different. Is that tunisia, this was right after a revolution in which the dictator had been a clepto accurate for a generation clepto karat for a generation so that the structure of the tunisian economy is exactly what you would expect. It was vast crony capitalism. At the time as i took on the role about the amount of money that the departed dictator who had been run out of the country had taken from the tunisian government. Crony capitalism was an expected event. One of the things you find this was a learning experience for me. One of the things that you find is the tentacles of that extend everywhere and they affect vastly the regulatory system and affect the structure of the economy. So tunisia, was while much more much, much more friendly environment, was also at the same time a much less developed economy in the sense of egypt. Did other kind of difficulty of tunisia is that it is, as a friend of mine said and i hope i wont offend anybody in the audience, he said one of the things you are going to discover is the dead hand of french bureaucracy. It funks under the napoleonic code. Opposed to the u. S. Where the basic underlying rule is if it doesnt says you cant do it then you can figure out how to do it. Under french and tunisian regulatory law, if it doesnt say you can do it you cant do it. So we had real problems in the setup. We have set ourselves up as an unbanked financial business. We meet all of the tunisian regulatory requirements. But getting to that point, if you really looked at the details of our structure you would find some fairly squirrely elements. And the reason for that is with the quiet assistance of tunisian regulatory authorities and tunisian ministers of finance and i think the enormous creativity of our board and the phenomenal person i found to be our chief operating officer we found our way around all the rules. But thou one else in tunisia has. 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 debt and equity. There is a point there to underline, which is that these are akin 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 the raising of the money is not the hard part of the startup. Its sort of figuring out what the business is and setting up the structure and finding the people, all of which we do. And there were two complications that hit me constantly. One is one way in which the world is different now than it was way back is that we have to meet every single one of the new u. S. Financial regulations. We are hit by dodd frank. And we are hit hard by a legislation like that. And once when you begin to talk to those authorities, they have never heard of Enterprise Funds and they have never heard of a. I. D. , that we are a financial entity and we have meet those rules. Its not only in tunisia. We are not some favored entity. We have to meet all of the reg laer to structures of tunisia or we cannot function. The time it took an immense amount of time to figure out kinds of what it was we could do and then learn that most of what we wanted to do we couldnt do. And then figure out how you would do it despite that fact. And it took a year and a half to do that. There is an issue there. And one of the things that i was going to talk to, and ill just mention one of them now is what are some of the problems is that doing these things requires immense patience on the part of the u. S. Government. I had the enormous good fortune, jim and i did, in dealing with a. I. D. To deal with an organization that had the patience. The person with whom we did most of our negotiation is right in front of us. Bill. And page was one of the others. In general, patience is not a recognized virtue of the United States government. And so the as soon as your two Close Friends who invited to you do this leave there is no one in the u. S. Government who ever heard of you or ever cares about you for one second. And so you you are the one who is doing the integrating. You are the one who has to go and talk to the white house. Oh, but by the way there is no one in the white house left who each remembered setting this thing up. Bow cutter . Who is that. Thats right. And Enterprise Fund . Whats that . I would not use this mechanism. And i love this mechanism. And being asked to do it is a get. And i have found it to be just tremendously important the me in addition to what i hope i accomplish. But i would not do this as a wider purpose if you did not figure out a way to have the u. S. Government see these somehow as Something Different than a oneoff beyond a. I. D. You said what do we do . We set up as nonbank financial business. There arent the Financial Institutions to buy or to invest into in tunisia. I started with the same view. I was going to buy a bank. I zhaufrd t i discovered that the bank was bankrupt. That the tunisian government nevertheless wanted to be paid a substantial amount for this bank and we were going to have to fire a substantial number of people. Three bad reasons not to do the deal so we didnt do the deal. What we have done is set up a nonfinancial Bank Business and across the sector. Our ventures each one of them is quite small. They sum probably to about the same amount that squim has invested and we are expecting a good rate of return. We write our numbers to 15 rate of return. After you take out costs and the fact we are going to have deals that break we are looking at somewhere between an 8 to 10 rate of return on our ongoing activities and i am assuming we will get lucky and that our rates of return will be somewhat better than that. I actually think we will make our real money and have the Real Development effect by backing into owning a Financial Institution either because the institution that we have set up in much the same way that jim did is itself going to be a leading Financial Institution in tunisia or because, as is beginning to happen, the couple of the places that we coinvests need more funds and are going to have to have our equity. So thats kind of what weve done. The basic how weve done and it the board, our board is we meet the u. S. Rules that it is six american citizens and three tunisian. But there are a few crossovers in that. And if i could be a little bit more flexible on that, i would. Every single one of my Board Members is working professional in the financial field for other chief executive officers in something. I know how good jims board schl ill stack our board up against ib in. There is nobody in the financial world who has a board any better than ours. And we know this field. Its a little hard to get people who are ceos in their fields to come and do something for nothing but theyve all it is a real working board. The point that jim made that in his case he had to egyptianize it holds for me, too is that with the exception of me and louise stona crawford who is right there and who has helped me, who has been more than critical in doing all the unbelievable amount of work that you actually have to do here in the United States to get up with of these things to keep one of these things going. Everybody else in the taf, the tunisian american Enterprise Fund is tunisian. One woman has been absolutely phenomenal, and the life spirit behind this work. I have a similar nightmare as jim did. Every night i just hope to god that something didnt happen that gets hala to think what she really ought to do is go cash in and kind of earn four times as much somewhere else. At the moment she seems dedicated to the work. Ill make one or two more points. Jim made a point about equity. And i want to make a point that our money i think this goes for jim, but i know it goes for me is actually considerably more than the amount. I in theory have 100 million. It comes in tranches. Its another aspect of the problem that i would solve is that the whole rest of the u. S. Government, because of the fact that there is no kind of real level of patience regards that money as money to be taken away. They have done it once. They are trying to do it again. So no one can comfortably say they have x amount of money because thats what in fact has been committed to it. You dont have it until you get it. Its a view that i would express strongly to the congress and i already have. But lets assume i have 100 million. Thats one third of 1 of the if i use rather than purchasing price parity i use Exchange Value gdp of the tunisian gdp. You would think jesus that cant very 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 it needs to invest 24 , 25 of gdp. My guess its 12 to 14 right now. It has a 10 age point gap. The tunisian government is currently investing approximately zero because most of its money is spent on salaries and subsidies and funding the deficit. There is virtually no Public Sector investment. If you look at the private Sector Investment my judgment is almost all of it comes from the big family companies, almost nothing goes into the sme sector. I represent with my paltry 100 million basically all the Capital Equity there is. In the country . In the country. For what we want to invest in. And i want to invest in the core of the small and Medium Enterprise sector because i fundamentally believe there is not a country on earth that doesnt fundally depend for its growth rate and its employment on a healthy sme sector. So we are all the equity. In that respect you can magnify a little bit. And the second is that because no one really the second point about that is because no one really focuses on the sme sector id say as a general rule that Small Businessmen get royally screwed by every country on earth. There is no country that cares every country says how much it cares about the small and Medium Enterprise sector. No country actually does much about it. Almost all of the small and Medium Enterprise public banks in the world are bankrupt. So if one of the things we can do is show that a vibrant sme sector matters to growth and development and at the same time show that you can actually make money with sensible investments in it, we can by that alone have a substantial effect. Great. Okay. So ive got i want to start with kim, and i want to go down the row here. I want you to each talk about if you had a if you were going to create an enterprise fun 2. 0. For example, the u. S. Congress is talking about, has some legislation now thats talking 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 that you have learned, what would you say if were going to create an Enterprise Fund 2. 0 . Kim im going to start with you . I think im much less qualified to answer that question than jim and bow. Their experiences are obviously much more recent. For me, i do think there has to be some better mechanism for u. S. A. I. D. And i think it should still say stay at u. S. A i. D. The relationship with the funds. When your funds were set up in the original seed act basically the white house appointed a board and it was self perpetuating. The board i think had approval rights but never really exercised them as people came up. And i think there were times when there was a lot of frustration at u. S. A. I. D. With the relationship with the board. I would probably spend a little bit more time, its great when you have a board as jim has and bow 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 u. S. A. I. D. But to be clear, what you cannot do is have u. S. A. I. D. Micro management at any level with respect to deal approval. And you have to keep a clear sense that although we are on the same team essentially because its usg funds we are different teams and we are doing different thing with different timelines. So that would be my one overriding comment is more formality with respect to the u. S. A. I. D. Board relationship 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 in my last year at xm bank chinese came to see me and wanted to succumb some people to xm bank. I thought they might want one or two people. But they said, no, 55 people. 55 people. Xm bank is only 450 people. What i didnt know then that china had its export creditor, its xm bank was providing fundsing for Something Like 2 or 3 billion a year. Xm in the United States was doing 15 or 18 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. Now why did i tell you this story . Chinas hasnt figured out yet that they are a sort of variation of an Enterprise Fund. They are encouraging their own private sector to go out and make investments and so forth. But if there is anything that would convince the members of congress its just to take a look at chinas heading towards a giant Enterprise Fund for all the developing world. They might do it slightly different. Thats one factor. And the other factor is something which i give dan and the credit at csis of observing the growth of the development fast agencies in the last ten, 12 years has been very great. Sevenfold in their level of activity. They far surface today foreign assistance programs and thats where we are heading in the next five years. Very significant growth. If supporting investment in the private sector. Now, an Enterprise Fund, in my judgment is i havent discussed this with others, but is a variation of a Development Finance institution. Both are transaction focused. Both want to invest money. Small businesses or large. Both support the private sector. And both frankly make the same impact on job creation and Economic Growth. So if any of us were looking at what could the United States do to help Economic Development . Lets face it, if you have unemployment at the kind of rate we have in some of these countries and we have the kinds of violence we have all over we have got to work on Economic Development and create jobs. If we were focus on that we would conclude that Enterprise Funds in its current structure, there could be dan alludes to, there could be modifications made, there could be improvements made. But the concept of supporting private sector growth, that is what is important. The imf is responsible for stability. And they came into egypt and they have created stability in egypt now. But they cannot, in my judgment i havent seen the evidence, help create Economic Growth in egypt. Economic growth comes from private Sector Development, private Sector Development will come from Something Like Enterprise Funds, multiplied to a much larger extent. The other comment is that you dont need as much money. I wouldnt want to make this 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, clearly, and it was different during kims day. But today private equity firms all over the United States are looking to make investments. And we took in our first deal because we wanted to prove to egypt that we could bring in other investors. That was part of our mission. When we bought to youry, we took in two private equity firms for 80 million. They had never invested in egypt before. We could be all Enterprise Funds could be when you get to an egypt size could be a 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 it will be coming from the profits we have enjoyed but most of it will come from us bringing in other investors to join us on investments we made. So it will be a billion dollars that we will end up investing in egypt. Maybe larger. The message in that is that the u. S. Doesnt have to put up that much money. If the u. S. Puts its quote name and support, people will want to be involved. And so it can be done with u. S. Support. So i think it the argument to congress, you dont have to budget that much. And the u. S. Is just like the Development Finance institutions, will get all of its money back. All of the money comes back. And we achieve a goal of helping a private sector to grow and help development. We have created, we have counted as best we are able to, 500 jobs, lets say. Its going to be a much larger number because the expansion of the actors we had. We had a little easier task because it is obviously a larger country and we hava obviously a lot more private sectors to invest in. But i think that, my conclusion is clearly that the Enterprise Fund is very good concept. We have to figure out a way to do what we are doing today, tell the story so that the u. S. Government can think about it. I happen to be cautiously optimistic in what im about to say because it has a comment about this administration. This administration for whatever critical comment you have, and i have plenty, however, does respect the private sector. And the private sector is the key. We have in the United States the greatest private sector ever created by man couldnt by far. Thats why we ended up with the kind of economy that we have right now. So to take the talent we have in our private sector and match them up with a limited amount of funds to go into various countries to help develop their private sector is doable. Maybe it will take focus of a particular group in the government, but this administration might understand it. That would be my conclusion, dan. Thanks. Okay, bow . Ill talk briefly to three topic. The first is to agree emphatically with what jim just said but add a little piece to it. The second is to talk about context that they should that future efforts like this should be set in. And the third is to talk to what seem to me to be the critical elements. First, i cant improve on jims thoughts about the way in which the world is turning and why these matter. I had some hesitation about using these numbers because they do say a little bit about how old i am. But thats probably apparent anyway. [ no audio ] a confirmed role in the Carter Administration when jimmy carter asked me, this was toward the end of the presidency, to kind of take a look at international flows and to talk to him a little bit about development. And thinking back now more than about 40 years later, the 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. Owedier. Owedier and other official flows. And about 20 were private sector. The entire Financial Markets grew up in the 80s and 90s. Those of us, all of us its kinds of like speaking prose all your life and not knowing it is that we all together grew up in that era. And now its flipped and something slyke 90 of all of the flows in the world are commercial and 10 are official flows, oda flows. That says that the nature of the world in which you have to carry out Fund Development fundamentalsly changed. Im not so certain that a kinds of deep gut realization of that has sunk in and all of the Development Institutions in the world are in the u. S. But what it really means and i think part of this is i think all of it, is extremely healthy, which is the way growth is going to happen, and a world of chaos exists, or happens if growth doesnt happen, and if its not an inclusive and equitable form of growth, custom is, by the way, the reason i want to focus on small and Medium Enterprise. But the it has to be, through a Healthy Development of the private sectors. And that means that governments, and the only government i really care about is the one were in, is this one, has to focus, has to think about what are the tools that let us develop, let us Foster Development that way . This is not an idetiological opposition to kind of oldfashioned development. I was a member of the cair board for 19 years and i was its chair for eight. So i think about and care about that kind of development. But to be absolutely honest, that kind of development is in the weight of things is diminished. And what we are doing here is increasing. So we have to have institutions that deal with and know how to deal with private sectors all over the world and those are inhasntly going to be kind of financial. Inherently going to be kind of financial. I could extend that, and ill 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 hoeing the feel and the battle gets caught fought over me. Hoing the field and a battle gets fought over me. This has been true of all the devices used to evaluate jim and me. In one of them, a team that came were listened in wrapt attention as i explained something completely new to them. Which was that there was a difference between debt and egg and that difference mattered. This was in a group that dime evaluate me. So sometimes if i have a little bit of a chip on my shoulder about all of this you will understand it. What jim said is right and the way the world is turning, it makes jims point essential. Point number two. I ran oxb. You come out of that thinking that no one cares about budgets and no one certainly cares about management. It does matter. The m part of that really matters if you have going to expand this tool you have to think in terms of where are you going to whats the setting for . And i dont mean the place. I think disaster awaits if you dont keep it at a. I. D. And part of that is because i have been quite happy with the nature of the relationship. But i think its set up to do this. But just to unline some points. One, as ive already said, 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 its you create this pot of money, and you provide it then to this outside person that some, few people in the u. S. Government know, but not everybody, and those people leave and then nobody knows them. Its not really a program thats owned by anybody. And so in the end, its kind of the red headed stepchild. So you spend a great deal of your life trying to integrate the u. S. Government. But more than that, trying to keep say, no, actually i am we are running something thats a program that you guys approved. And the something about the outsider status of it, it has to be altered. And the final point, i already made this, is the money. It particularly, if you look at what happened to budgets and you look at what happened to discretionary budgets 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 have got to figure out a way to let them have the money. Patience, the outsider status, and the money. Now, finally is the elements. They all are going to differ. Jims focus and mine have very similar have lots of parallels but the specifics are quite different, and they are different a little bit because jim and i are different but they are also different because the contexts are really different. This has been true of all of them. 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 vastly more difficult than tunisia or vipt or egypt or jordan which would be a wonderful place to start. I know jordan well. I think it would be a great place to have a fund. I think one be that authorized. Its the actual creation of one thats the issue. But there are more difficult places thans that and more difficult problems you could set them to. Hear are the elements. There has to be a recognition that you are basically going to be using outsiders because if you are really going to focus on the real problems and issues, custom is how do private sectors work, thats not what governments know. The second is you are going to have to accord those outsiders a very considerable amount of independence. I wouldnt have done this work if in the end we hadnt been given this independence. But if you step back and think about it it is remarkable how much independence we actually have. So but its necessary. Its absolutely essential. I mean every single decision that i have made is one that could have legitimately been contested by 44 other people and taken me a year or years to get done. And i dont mean to personalize it. Its my board, and its hala. But these are not easy decisions. Im quite willing to bear the brunt. We are willing to be accountable for what results. But you have got to let us if you are going to hold us accountable you have got to give us the responsible and the right to make the decisions. And finally, to come back to a dull subject the money has to actually be committed. Every single time that doesnt happen for me im the one who has to take the round and explain to all the people who work for me, all the businesses who all know since there are no secrets on earth know this instantly, and everybody in the affected government, why this doesnt really mean that they are pulling out the rug for us, that its sort of an unfortunate result. So its committed money, you have to deal with outsiders, and you have to understand that you are going to provide them with a fair am of independence. Great. Jim, can i ask you to turn off your microphone . Me, or jim. Paige, whats your take on this . First, old habits die hard. Just to correct one thing that bow said. The group that came to talk to him and didnt know the difference from debt and equity was not from u. S. A. I. D. I didnt imply that. It was helpful congressional staffers who want to put things in regular order to make sure Enterprise Funds do exist. I really should have said that it absolutely was not a. I. D. Old habits die hard. I would say to what paul and what kim said. The formalities are important. The u. S. A. I. D. The state house and the u. S. Government has to understand where there is oversight, micro management, making sure there is appropriate levels of oversight without micro management. That goes to both jim and bows point about the outsider status. I think its incredibly important to have Something Like a private board that actually can make these decisions without having to get things checked off by the u. S. Government. And the u. S. Government also has a handsoff relationship in that way so if an investment is made and it goes south its not on the u. S. Government. I think both those things are important. I would say the public sbrsh private nature of this, the private sector being such a large part of how business is done now i think its important to look at other programs with the gates foundation, Rockefeller Foundation where a. I. D. And state and a number of other agencies in the government partnered to leverage each others money. The private sector is a Perfect Place this can be done. I work now and behind ken does a lot our funneleding with the dutch government because it increases their ability to locally source Raw Materials and the Development Goals of trying to get African Growers to grow the things they can sell not just sell what they are growing. These things truly leverage each other. It can 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 werent just the u. S. Government going it alone. I would say that would probably be the best. And lastly, post liquidation plans. It would be really once once this is legally determined how an Enterprise Fund would look, the liquid aches plans of when the plan ends, i dont understand all of our time doesnt leave other People Holding the bag. There is 150 million sitting for russia. Its been sitting ten years . Oh, yeah. Yeah. Yeah. Its 150 million, which could be put to good use somewhere, somehow, some way. And its just cant be determined. Those post liquidation plans have to be determined in advance before you start something because i think you two, again this will be past our time in 2027, but we are going to leave this bag with someone else to clean up. That should be legislated appropriately. You have all been really patient. There is a lot of smart people in this audience. He want to see a show of hands. Otherwise im happy to call on some folks who i know know a lot about this. David coles is here, michael levity is here. Yep. Good. Lets start lets get david and michael to start first and then well get some other folks here. Yep, and ill get to you, too. We have got a lot of folks. David coles with a. I. D. Id like the hear a little bit more on the boards particularly from bow cutter and jim Harmon Development impact versus financial returns how you incentivize your staff to be looking hard at the Development Impact. And when you bring cofunders on board is it difficult to sometimes explain to them you are not only about maximizing returns but you also have a social impact. World bank style. Bunch them all together. I want to hear from michael levity and then i want to hear from jim holmes. Michael levity. Some of this story actually comes from money from coles. So years ago i was involved with supplying a large number of experts that do Due Diligence for a large number of Enterprise Funds. So for me its what was the 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, none of 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 one of this is if theres Lessons Learned, one of them is, is it clear . And if its not development its development, how are you going to measure that . Thats one thing. Second, staff. Between the funds, the staff disparity in quality was unbelievable. Unbelievable. And that isnt just where they were bad. Third, the ceost, some of them thought they were wall Street Investors and some of them thought they were main Street Investors. That would be great if they knew which countries they had been assigned. To again i am a big fan of the Enterprise Funds but it seems to me one of the ways of looking at Lessons Learned is look at those 17, not just the four that failed, and why were some of them really good. Im sorry. Just one more thing. The easiest, or shortest story we were asked to supply an expert for big investment. We took on for a big splech investment, we took a ceo from that industry, stayed three weeks, came back and said they dont need your money. We costed out prthe production lines and save them two, three Million Dollars a month. We were never called back by that fund because we thought we were there for development and they wanted the good deal. Okay. Jim holmes. Yeah there you go. Im not jim holmes but my names don great. Im don and i was a former general counsel at opec, the over seas private investment corporation. And i have one comment well, one comment is debt and equity is often in the eye of the beholder so that comment on is it debt or equity, at opick we went off into legally defensible extremes to make a debt instrument into an equitylike instrument. Second point, in terms of the Development Impact, i know that one of the big issues that was confronted at opick and at the International Finance corporation involves intermediary Financial Institutions and the usg standards, curious how as in some ways intermediaries here between the u. S. Goxt and the smes how you deal with that issue. And a third point i suppose is generally within the u. S. Government, i think of the Enterprise Funds as often times the spoke types of institutions that come up from time to time responsive to the Foreign Policy objectives mostly of the United States combined with development and how there might be a more systematic approach with either Enterprise Funds or combining it with the whole sort of Development Finance strategy for the United States. Okay. Will the real jim holmes stand up, please. There you go. If you if you want to handle those first three and then come back, thats fine. Go ahead. I apologize, id like to mike a comment or two rather than a question. Jim holmes, i was the Deputy Director for policy planning at the time that the Enterprise Funds were set up. Had a very large role in the establishment of it and then i was three years as c coordinator. Point one, Enterprise Funds were never set up as a political tool, they were set up as a policy tool. The reflection of that is my memory that the first submission of the white house with respect to the establishing of a funding was for a proposal that was called thousand points of light fund. And usid and state department pushed back and said this is not reflective of the policy approach, this is reflective of the political agenda of the white house. They yielded. And they yielded at that time because there was a cadre of people who were 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 that there was going to be a return. And if there was to be a return, we negotiated, okay, well deal with that then. But its not going to be very great. Point two. I think both you, daniel, and kim understated the importance of the boards. The best example is to check fund which was totally dysfunctional. I had to go to board meetings in order to keep sides apart, in order to in order to take a message from one part of the board to the chairman. It was a blessing when that thing was folded up and put to bed. So i comiser rate with kim with respect to picking up the pieces. But there was nothing there was no second, no mulligan as far as check fund is concerned. It failed. And end of point. And thirdly, lastly, no blueprints. 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 who in whom we have registered faith and confidence for you to do the job. And there was minimum oversight. And i tell you there was minimum oversight from the congress as well. Sonny callahan, i used to go up to the hill and talk to him on numerous occasions just to make sure he felt plugged in to what was going on there. But they really did not ride herd on the enterprise ones. So when you got to the point where the polish Enterprise Fund was ready do Something Else besides make money, there was no blueprint for doing and it required about three years of negotiation in order to come up with a solution which ultimately divided the thing up in a roughly 50 50 percent. Okay. Ill ask you to start and well just go down and react to the questions. First i have to thank jim who was my interlocktor when i had that job for six months and also ambassador it stoneya and we worked together for three years and david who is our liaison with the baltic fund. I want to go to the question development. I think theres a false premise which is that theres a difference between profit and development. Im often reminded of the comment that bill gates may have done more for the world by inventing microsoft system than will do with the gates foundation. So i just completely reject the notion that there is this eternal conflict. I would argue that, in fact, having clear discipline around profit was what allowed us to train two to 300 people in how capitalism works, which is perhaps our greatest egg gassy in that it also provided a sense of discipline within the organization. And moreover, that, you know, 20,000 mortgages, 20,000 homeowners leveraging 50 million into 800 million of financing has huge Development Impact. I think there is sort of this desperate desire to have development boxes, profit boxes. And i dont think the world divides itself that clearly. Im completely confident that if a fund is run well, that you can achieve both goals. Now, i do think that, as i said, we focused on the credit markets because we have very immature credit markets and we were focused on preservation of capital and modest return. I can be accused of ambiguity but thats what we chose to live in in a way of balancing things. And im comfortable with that decision and with the results. Im actually going to jump in because the only question i want to address is michaels about the development. I agree with what kims saying, i also think you need to look at the fact that 1. 3 billion has been left behind to fund nine different Legacy Foundation in these once the. Thats truly where we are seeing the Development Impact at that point. I appreciate, as jim said, this was initially set out to train, educate, and develop. But i think the private sector link and development was crucial at that time and it remains crucial in the middle east funds as well. There is a Development Component to it just like theres a democracy component and its not all for private sector. Private sector happens when fdi can come in because theres rule of law and democratic principles that exist. I think that the language has been tweaked to allow for Development Impact, although it looks like a private sector one. I disa degrgree with ill kwarl with that witoo. And i started by saying everyone developed a different impact. Our first comment about the training objective was training our staff. I do want to start by agreeing with kim on what he said about the confusion between development. If you have growing businesses, theres no better illustration than the First Investment we made, which i talked about, which is in Payment Service business. The fact that 25 million egyptians now are able to pay their bills without waiting in line three or four hours, that they can borrow a little bit of money, they can communicate, this changed the quality of life of a lot of egyptians. To me, thats development. Now, it happens to make money on it, so its both. But i dont think you exclude one from the other. Having said that, i, myself, now have begun in the last year to focus a little bit more in development than did i at the beginning because i see the floofts we profits that were going to have. Were going to return very significant profits. If we can get a return of 2 or 3 , no other private Equity Investor would take that, well do it if its something good. My favorite subject is one my staff has heard me say 100 times is sbabecause im involved with think tank with environment and sustainability. Im determined to find a way to help modify the traffic problem in cairo. Now, 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 the then economy to have this problem. So this morning out of cruisety i tracked down the person who did this work on the world bank. I said what is it today . He said today, 20 billion. 20 billion of the egyptian economy is impacted because the the traffic problem has got to be so great. We have a way to solve that, because it happens Institution Goal of the world, Resources Institute working with world bank, we work on this in a number of cities. So someday were going to find a way. Thats true development. That would improve the quality of life, reduce the number of accidents, people would bet 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 whos not interested in returns but interested in not losing money, but interested in doing well. So i think it takes a little bit of push from the top, but were going to get there. But you have to focus on it. You cant just say growing businesses are going to get you there. I think its a very important question. We talk about this subject all the time because most times if you come my background is an Investment Banker we dont necessarily think about development that way. But we have a chance now with the profits were making to shift now and focus on development which could be very good. Our last acquisition was in the healthcare area. And this is another very significant area of course in the developing world where we can make a difference. I dont want to spend too much time on the subject but im glad the question was raised. Other comments or reactions to some of the questions that were put on the table. Bow, do you want to say anything . I want to come off too much of what my wife and staff accuse me of being it too much of a confrontationalist but i fundamentally disagree with the way you asked the question. And i kind of i relate myself totally to the points that have already been made. But ill come at it from the other questions youve asked. We have i dont know what the other what 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 governance in the board has been 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. I mean, our people are people who regard themselves as tunisian professionals who chose to do this. And so that we have to its important for to us invest in their futures as well as the as well as the deals. So for us, its been it really has been an obsession. And i dont know the degree to which its varied 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 a professional and having managed staffs for somewhere in the neighborhood of 45 years, ive 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 terribly good answer but its the way i approach this. But, much more importantly is this question of development. Im not where jim is yet. I mean, were going to do fine in terms of the quality of the deals. Tunisia doesnt offer yet the opportunity for the sort of big hit. So well 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 and i wish jim good luck at doing that. But, i dont really see a conflict. And where i really disagree completely, sir, with what you said, was the sense that people up here didnt talk about development. I thought the three, four of us actual that i was at the center of what we said. From my point of view, if you do not have a wellfunctioning, small and Medium Enterprise sector that produces equitable growth, do you not have development. You do not have anything close to development. I have lived with this problem for god knows how many years. As i said, i was on the board of care for close to 20 years and i chaired it for almost half that period of time. The Development Organizations around the world play what i think are these stupid games between theres some set of metrics that you have and then theres sort of the whole rest of the world called the economy. And no matter what happens, the economy can go to hell as long as you meet your metrics, i just dont believe that. I think that if we if we make a significant success in the creation of equitable growth, sustainable equitable growth through a small and Medium Enterprise sector, we have done an enormous amount for the economy of tunisia and other countries were involved in. We underwrite our deals at a particular rate of return, and we are going to and they then manage them. And we talk to our investees with respect to that, all of whom are entrepreneurs with respect to their own businesses. As we now can begin to talk to outsiders, to outside money, its that that we offer. Were not saying to them make some sort of compromise between kind of the rate of return you want and the rate of return we want and somehow or another that will work out. Its, heres the rate of return thats available. The tunisias at a different place. Its not a place where theres going to be oceans of pure private equity begin to flow in. 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 a sufficient return to come to the place. Okay. Bow, let me push a little bit on this issue. Are you optimistic about the future of tunisia . You said to me this is a country thats a dration, its a multiparty democracy in the arab world. If you said to me what i would really hope, you know, for a country in the arab world to go the right way, i really hope its tunisia. I hope the other ones do too but it would be so great if that country were to continue to have a democracy, are you concerned about tunisia . I am. You cant talk to anybody there who wont tell you that its fragile. One of the things i do every time i go, and im going tonight, i actually have held for me a dippnner party that includes almost all the heads of the political parties. Its a fragile place. And the degree to the kinds of negotiations that have to go that go on to make progress in a country like tunisia are excruciatingly difficult. Its it is its okay to sit kind of outside a country like that and say they ought do this and they should have did this. I would remind that you we have some difficulties here in the United States coming to kind of consensus on what are important Public Policy problems and they have them there too. But the theyre making it day by day by day. There arent going to be any kind of big startling break throughs. But its better now than 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 occurring when i was there. And you ask tunisians today as opposed to a18 months ago and theyll say its a lot better than it was before the revolution. They wouldnt have said that 18 months ago, but now theyre all beginning to say it. Am i optimistic . Yeah. You cant become a part of the country in the way that having the great good fortune to run an Enterprise Fund or to chair one gives you without becoming deeply attached to the country. Its a it is i think the leaders of that country have shown immense courage in what theyve tried to do and immense sort of resoluteness in trying to do it. Do i like everything theyve done some no, i dont. But its a tough job. Im cognizant of the time. I want to call on this gentleman. Get this gentleman a microphone. Thank you. Thank you. Im hugh ferris, i spent 32 years in chaseman bank and i was on the board of the baltic American Enterprise and the check slow bank 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 in the chaseman bank, i can assure you that we had very, very fine training in the array of finance. And because i was retired, i can assure you that there are a number of other retirees who are who have pensions, who enjoy their pensions, but 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 chase people who worked in Chase National bank of egypt and they retired and they live in new jersey and they talk about what it was like working in egypt and theyre available. The same thing with arabic speakers who worked all through the middle east for the chase bank and who are available. My friends in the citi bank, Morgan Stanley are available. And so i just ask you to think about that 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 development and finance. Weve written a lot over the last five years about splent finance. I do want to just come back to a comment that was made about the issue of Development Finance. I do think there is i agree, bow, with your assertion that development is private sector Led Development and 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. I think the issue of what taxpayers want, a little bit to some of the comments here, are i think theres expectations about how we tell those stories and the kinds of impacts that they have. Now, i think if were having a growing economy and we can reduce youth unemployment and make it attractive for investors, thats development. But i think there are other metrics as well. I think ifc for example and other bilateral guys, cdc for example or fmo, have spent a lot of time in investment trying to tell a larger story about what they use this funny term, addition the. A additional litty. I think wheres is it . Why do we need a tunisian Enterprise Fund or baltic American Enterprise nund as opposed to a citibank or hsbc. Thats a little bit one of the questions. I think theres i dont know if theres an answer to it, but i think theres a little bit of a tension in terms of saying what were why do we have a dfi or why do we have a why do we set up a dfi if we dont need it . I do think we do need them, but i think theres that i think is some of where the question comes from or questions like the 1 that michael was posing is that you have different kinds of investors, the whole blended finance or even Impact Investing Movement Comes a little bit at what michael was getting at at as well. I take your point, we need full growth in an economy. But i think theres this interesting tension in these institutions thats not resolvable but just sits there as a tension about issues of impact and issues of Economic Growth. I think we want to get both of those. Let me come back to that. I know we dont have a lot of time but lets first of all talk about blended finance and then lets second of all talk about the sort of why this high this ki why this kind of instrument and not city or hbc. The first is thanks in important part to hints and suggestions to a. I. Dwixt and in addition to my own reading and ceos 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 smallMedium Enterprise where the nature of the finance i mean, if my own view, most of the financial structures devised for small and Medium Enterprise follow the wrong model. They follow a capitals model where they think thats going to get your money back where 95 of all Small Business are never going public. How do you get your money back . You have to have some blend of a way of equity done in a way in which you can actually get paid back, debt in a way in which the investee can afford to take the debt. Lots of smes in most of the world are way over leveraged because theres no equity involved. And then Something Else. So weve created a royaltybased kind of approach to investment. Theres only one other place in the world that does it and its a South African firm that we brought in as a matter of fact to help us set it up put so i think blended finance really matters a whole lot, that its not that i dont think any of us can do sort of plain vanilla you get a little debt and little equity kind of thing, you just cant do that. The answer, the gut answer to the question, ill just hand it over hsbc . Sure. Theres one of the more important Business Books ever written is called the innovators dilemma. And if you 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. Why is it virtually all of the job creation in developed countries comes from small companies, not Big Companies, for that reason. Why is it that the vast, vast majority of the past path breaking innovations have occurred are from small companies, not Big Companies . Because Big Companies, while they have their very valuable purpose and they and they are lots of noble prize winning economists who talked about the necessary mix of big and small, they are not where growth happens. And if you handed these things off they would kill every one of them off in a minute. Having worked at citi bank in argentina in the commercial Banking Sector, i agree with you actually. All right. Kim and paige, i want to give each uh a chance to make 30 or 45 seconds of just on a closing point and then ill give jim the last word. I was going to give you another example. Unwith of the big problems with sme financing is its not profitable for most large institutions which is why its underserved in every single economy including this one. One of the things we did was by demonstrating that you could underwrite a fiveyear commercial loan, monitor it and collect payments, we were able to demonstrate to the existing Banking System that they should, in fact, get into that business. Once they got into that business, we went to them and said now that youre going to do the fiveyear term loan, were going to do the noncash paid preferred below pu the so its not blended security, but it was bended on an adhoc basis to reflect the companies needs and the state of the capital markets. Going back to my point, which is that if theres one thing that i would leave with this, is flexibility in the exkution of the Business Plan is success because no one can predict an advance where the opportunities will be in any company in which an Enterprise Fund has stood up. I just want to make one other point. Kim area jim, bow, you arent in this for the bucks. You guys have gotten no money out of being the chairs of these things, right . Is that correct . Okay. This is public service. This is voluntary public service. Thank you. The one thing that gets in my craw, i bought into that when we did it. Theres an absolute rule in our piece of the legislation against a penny being spent on alcohol. Now you can understand that. But, tunisias a real place. Its businessmen and businesswomen have a glass of wine before dinner, that kind of thing. If i take them out . So guess who for five years has bought all the beer and all the alcohol . Thanks, bow. Thanks for your the baltics do not have that problem, i want to be clear. Okay, paige. Thats part of the Public Private partnership, right . I was going to make the same comment dan did. The fact that kim and bow and jim have done this and i would say the board chairs from most of the other funds really we are forever indebted as taxpayers to the fact that you stepped up and took this on. And i think that that is something that has to be recognized if theres to be an enterprise 2. 0, that people are willing to do it. As hugh said there are other people out there willing to do it, but its a role Public Private partnership so thank you for all that youve done. I can just ask [ applause ] okay, jim, you get the last word. So, jim, did you ever think that was there ever a moment where you said why the heck did i sign up for this assignment . I want to answer three questions. First ill 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 flag 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. And we did have security in the car, and they said when the tear gas comes you shouldnt get out of the car because dressed as we were we would not make it to the corner. So we sat for 2. 5 hours. And i can 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 me monday morning at 9 00 for a dental appointment. I thought, god, if i ever get there ill be so happy. So that the moment give me a root canal. Yeah. That the moment, i did think that lucky im in if for the big bucks. But we did get to the meeting with the leaders. Did you tell your wife . I didnt tell her she would have been furious. But we did get to the meeting. And the first hour i unloaded on then leadership saying if thats the way youre going treat potential Foreign Investors who are coming here. The funny thing about it, that evening the brotherhood made a proposal to us that they would like to coventure the Enterprise Fund. And they thought they had the knowledge and skill to do that. So we had a lengthy night. As you may know though meetings go into a long time. It was at that moment, i wanted to make just three brief comments on more serious matters, so to speak, since ive tried to forget about that moment. Additional litty we think about all the time, thats a very important issue and so thats i wouldnt make light of that. Directors, thank the gentleman who raised that question, well certainly keep that in mind. Its interesting that i never expected that to get to be a director of the egyptianamerican Enterprise Fund became a bit of a hot ticket. In other words, getting paid nothing, we have more people both who are egyptian citizens and u. S. Citizens who when they hear about it have volunteered do this. A very Important Message from anybody from this audience, dont pick the highest profile, bestknown television people, so to speak. Give you an illustration of a wonderful man who is very considered. We talked about it and i am he is so busy, he wouldnt have had the time to come to meetings but he cared what we were doing. So find people who really will work, are engaged. Our board is very much engaged. But i like the suggestion made and well certainly 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 have sent the right signal and i would have loved to put 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 the one incident that i had, i have answered dans question, always felt it was very worthwhile doing. Im fortunate to have been asked and im fortunate i made the decision to do it, and i dont regret that in any way. Thank you all for going by the way, if anybody in this audience has listened to this and thought we could did 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. Theres a gentleman in the back whos waving his hand. [ inaudible ]. I was managing the Robert Simmons former usaid Foreign Service. I was managing the Central Enterprise Investment Funds as well as sitting in on the board meetings and was involved with the south africa fund sadic. And a couple quick thoughts. One thing for paige is when Going Forward with investment number version number two, i think its important to bring in the Foreign Service people. And that early non that discussion because were on the field with we live there in these communities and we have a good pulse of whats happening inside the communities. And in terms of also investing in the economic communities. In terms of Lessons Learned, i notice that a lot of the investigate naents we investments that were made had multipurposes or functions. I know the board brought up the issues of social capital as well as financial imperative which is returns and present values. This is important to have the people in usaid understand this. Lots of people there dont understand this and it gets very complicated and i was managing five countries and its hard to communicate that to them in a way that makes sense. Nonetheless we get a lot of pressure from the embassy to provide some sort of results. So i would have to push back on the Investment Fund what you can give snus because if they dont give us anything it makes our job substantially more difficult. Finally, id like to say i think its important to have folks on the ground early on because i know that so many investments there was so much pressure to put out successes lost sight of some of the social needs and had to affect the communities because the Investment Funds when i was in central is they would look for the winners, of course, and they would invest those funds with the winners. For example, if they put in the bank that was having 18 return, they would do stuff like that. And then they would have returns of 18 . Which say bit misleading, i would argue, and im sure some of you folks would agree. So i think some of those thoughts if you could take that into consideration, that would be helpful. Thats very helpful. Thank you. Jim, any further comments . Okay. All right. Please join me in thanking the panel. Thank you. [ applause ] the federal Communication Committee meets thursday to discuss Net Neutrality rules. Theyre promowsing to give internet profrds control over how broad band content is distributed. Live coverage of that Public Meeting thursday at 10 00 a. M. Eastern on cspan 3. This weekend, cspan cities tour takes to you Saratoga Springs located in upstate new york with the help of our spectrum Cable Partners, well explore the history and lit rear life of this city known for its famous mineral springs. Saturday at noon eastern on book tv. This is the place where Ulysses Grant penned his memoirs in 1885. He was dying of throat cancer and his family was facing serious financial problems. At this point in his life he was a man trying to take care of his family. We get to tell a story here that most people dont know about. Then local author and former federal prosecutor Andrew Mckenna shares his book sheer madness. Growing up i thought the person who was addicted to heroin lived under a bridge somewhere, right, and was pushing a shopping cart around or Something Like that. But thats not the case. One of the most abused drugs right now on wall street among traders, you know, these are elite professionals, are opioids. Sunday at 2 00 p. M. Well take a trip to the Saratoga Race course. Here we go. And well visits the Saratoga National historic park. The New York Times magazine said that the battles of saratoga, the most important battles ever fought in the entire world in the last 1,000 years because they resulted in the surrender. It was the First Time Ever in World History that a british army surrendered. Watch the citys tour of Saratoga Springs saturday at noon eastern on cspan 2s book tv. And sunday at 2 00 p. M. On cspan 3. The cspan citys tour working with our Cable Partners as we explore america. The koungs sill on Foreign Relations hosted a symposium on cybersecurity threats on democracies, including voting security and foreign attempts t