Economic Rebalance: The Role of Infrastructure in the Success of the Arab Spring
Principal Deputy Assistant Secretary, Bureau of Economic and Business Affairs
Before I begin, I would like to thank Dr. John Duke Anthony and the National Council on U.S.-Arab Relations not only for organizing this event, but also for moderating the panel.
It is a pleasure to be with you today to look at the Arab Spring and North Africa through the lens of infrastructure. The Arab Spring was born in part from economic imbalance. Creating the critical infrastructure that facilitates investment, job creation, and entrepreneurial success is an essential part of providing new opportunities to correct this challenge, which countries across North Africa are facing.
Investment in infrastructure is an essential part of the economic shift now occurring across North Africa. Businesses and young entrepreneurs cannot be successful without roads to deliver goods to market, ports to access international clients and new equipment, information and communications technology to tap into high-tech industries, airports to facilitate travel within and outside of the region, and many of the other kinds of infrastructure our people and businesses use every day.
To support infrastructure investment and the transitions now occurring in North African countries, we are engaging resources from across the U.S. government to connect U.S. businesses to opportunities in the region and unlock private and public sources of financing to support infrastructure development.
From Washington and through our Embassy platforms, we help U.S. companies forge new relationships across the region. All Missions are using all available assets to support U.S. companies.
Assistant Secretary Fernandez participated in a delegation organized by the U.S.-Libya Business Association of more than 30 U.S. companies to Libya in late April for a conference on energy and infrastructure.
While in Libya, the delegation met with key ministers and planners to develop connections to Libya’s infrastructure construction plans in the post-Qadhafi era. There are tremendous business opportunities in Libya today. There is a great deal of interest in U.S. technology and skills, and we believe the United States should build a strong commercial relationship with Libya.
From September 8 – 11, the Department is organizing the largest-ever trade mission to Egypt. The delegation, which is being organized by the U.S. Chamber of Commerce through its U.S.-Egypt Business Council, is made up of over 100 senior executives representing nearly 50 companies.
Deputy Secretary of State Thomas Nides and Deputy National Security Advisor Michael Froman will lead the U.S. government delegation which includes Senior Advisor to the Secretary John Podesta, and representatives from the Department of Commerce, the United States Trade and Development Agency, and the Overseas Private Investment Corporation.
The purpose of the delegation is to identify new business opportunities and partnerships for U.S. companies, express U.S. business confidence in Egypt, and demonstrate a commitment to Egypt’s long-term economic development.
As an example of enhanced support for U.S. businesses, we pioneered in Libya a program called Direct Line. U.S. companies can now speak directly with U.S. Ambassadors on a regular basis to get their insights on the business environment. It was extremely useful in Libya and we expect the entire region to be following suit, with Egypt probably the next in line. I encourage you to find the Direct Line site from the State Department’s main website and sign up for automatic updates about future calls, which will include countries in North Africa.
Another key initiative, which demonstrates the potential in the region, is the North African Partnership for Economic Opportunity, or NAPEO. NAPEO is a public-private partnership that has set up boards across the region. A key activity of NAPEO is linking entrepreneurs in the region in new and innovative ways with entrepreneurs in the US bringing all the great mentoring networks that exist in the United States, to the region.
Improved connections between infrastructure companies and the region must be supported by access to credit to finance infrastructure. Global economic woes have compounded this challenge as European and U.S. banks have withdrawn from infrastructure finance. To counter this trend, we are working to open a variety of channels for governments to access new private funds.
In Egypt, OPIC has approved a new, innovative financing mechanism to support access to credit for small and medium sized business. OPIC’s $250 million loan guarantee facility can support up to $700 million in lending by local banks and non-financial institutions to small and medium sized enterprises. This facility will aim to support lending to women-owned or managed SMEs as well as SMEs in lower income regions in Egypt. USAID has provided a $10 million grant to cover operating costs associated with the program.
We are establishing two new Enterprise Funds, one in Egypt and one in Tunisia. In Egypt, the Egyptian-American Enterprise Fund will invest in promising small and medium enterprises (SMEs). The Fund will act as a catalyst, attracting others to invest with it. The fund will be a not-for-profit, privately-managed corporation governed by a mixed Egyptian-American board of directors. We will launch the Fund with an initial $60 million and seek to increase the capitalization in the coming years. A similar fund will be launched in Tunisia, with an initial capitalization of $20 million, which will foster stronger investment ties between Tunisia and America.
In Tunisia, a U.S. government team of economists led by the Millennium Challenge Corporation has partnered with the Government of Tunisia and the African Development Bank to identify Tunisia’s constraints to economic growth. Early next year, MCC and the Tunisian government will implement a threshold program to address these binding constraints, unlocking the potential in Tunisia for faster growth and greater investment.
OPIC is in the process of designing a $50 million facility to provide capital financing to Tunisian franchisees interested in working with American, European, and Tunisian franchisors and to SMEs in their supply chain. These franchises could ultimately create entrepreneurship opportunities and thousands of jobs for Tunisians, particularly youth.
The State Department is also working to improve access to public funds for infrastructure development to supplement and unlock private sources finance where the market cannot meet North Africa’s development needs on its own. Our goal is to prime the pump for increased private sector investment across North Africa. We see development as a business opportunity for American companies.
In 2011, with the strong backing of the U.S. government and State Department facilitation, shareholders of the European Bank for Reconstruction and Development began the process of amending its charter to allow for the expansion of operations into North Africa. The aim is to improve the availability of private sector financing, including for small and medium-sized enterprises, via direct investments in loans and equities, while providing support through policy dialogue, capacity building and technical assistance. The first projects in Jordan, Tunisia, and Morocco will be brought to the Bank’s Board of Governors on September 18.
We look to our partners at the African Development Bank to provide technical expertise and financing in these markets. As a result of their involvement, we see better projects that have passed higher environmental and social safeguard standards. Further, the bank’s involvement helps to spur additional private sector investment by reducing the outright risk.
Finally, we are closely engaged with our colleagues at ExIm, OPIC, and USTDA and overseas to ensure U.S. government mechanisms to support infrastructure development are ready to support U.S. investments in the region.
The Arab Spring has opened new kinds of political and economic opportunity across North Africa on an unprecedented scale. We see tremendous opportunities across the region and have enhanced our efforts to engage U.S. business and bring them to the region, including through diaspora networks.
Our efforts are keenly focused on the need for infrastructure to support growth of all businesses in the region.
I welcome your thoughts about how we can continue to work together to support economic growth in North Africa through infrastructure development and other means. New investments in the region and connections between the U.S. business community and North Africa’s people are already supporting this vision, and we look forward to the prosperity that will come with continued engagement and investment. Our economic officers in Washington and at embassies throughout the world are ready and eager to work with you.
I encourage you to help us improve our work. Partnership underlines all of our efforts, and your input is an essential part of the two way relationship that is so important to our joint success.
Thank you very much, and I look forward to hearing from my fellow panelists and the discussion to follow.