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U.S. Department of State

Diplomacy in Action

Economic Development: Entrepreneurship, Business Opportunities, and Mobilizing In-Country Resources

Jose W. Fernandez
Assistant Secretary, Bureau of Economic, Energy and Business Affairs

New York, NY
September 23, 2011

10:00 A.M., EDT


MODERATOR: As you all know, we’re really pleased to have Assistant Secretary Fernandez with us this morning from the Economic, Energy, and Business Affairs. It’s such a diverse group of journalists this morning. (Laughter.)

ASSISTANT SECRETARY FERNANDEZ: Actually, I should ask you questions, all of you. (Laughter.) But I am familiar with all the publications, so thank you very much for doing this.

It’s really in the half hour or so that I think we’ve allotted to this, what I thought I would do – you tell me – is give you a little bit of a sense for what we’re doing in the areas of what we call domestic finance for development, which is – this is Washington, so everything has acronyms – (in Spanish) and we’re calling it D, like David, F4D, Domestic Finance for Development. And then talk a little bit more generally about what this Administration, what the Obama Administration, has been trying to do in the field of development, and then open it up for questions. Does that make sense to you?


ASSISTANT SECRETARY FERNANDEZ: Fine. So one of the things that – one of the priorities for the Administration, for Secretary Clinton and President Obama, and really to our economic diplomacy has been the concept of accountability, country ownership, and good governance. One of my favorite statements by Secretary Clinton is when she said we cannot support policies that reduce poverty and spread prosperity if the wealthiest among us do not do their part. Nor can we support governments that allow corruption to flourish and do not guarantee the effectiveness of the institutions or of leaders who treat the state as their private resource to benefit themselves and their supporters.

And what does this mean? And I think one of the things that the Arab Spring, to cite one movement, has shown us is the importance of these words to the international community. Even before the Arab Spring, one of the things that we were working on is trying to partner with developing countries on three reforms that are interrelated and that we are calling the three legs of a stool, three legs of a chair.

One is to empower developing countries to own their own development, to fund their own development; secondly, to be more accountable to the citizens that they serve – the concept of transparency; and thirdly, to ensure the integrity of their markets for business and investment. So it’s a three-legged stool made up of domestic finance mobilization; transparency, secondly; and thirdly, anticorruption.

And for a long time the U.S. has been working with developing countries to build stronger institutions and anticorruption initiatives. You’ve got the State Department, USAID, the Treasury Department, all of whom have supported countries in their efforts to broaden their tax base, to strengthen enforcement of taxes, to simplify the payment of taxes, and improve the management of public funds. This is something that for a long time – political scientists have talked about developing countries being unable to fund schools, education, whatever they need in order to improve their social condition, and you also have very good examples around the world of countries that have been able to, in some way or other, fund their own development. The latest one is Brazil, where they have, as you know, programs such as Zero – (in Spanish), Zero Hunger, which they’ve been able to do by increasing, by broadening their tax base.

There’s a number of institutions that are working on the same concept, on the three-legged stool concept – the OECD, the G-20 Development Working Group. We are, in the U.S., participating in the G-20 Anticorruption Working Group and the OECD’s Working Group on Bribery in International Business, on the UN Convention Against Corruption. So there’s a lot of programs, and what we’re trying to do from a policy point of view is to bring those together, to make them coherent, to not be working on one subject in one country at the expense of the other two, to try to bring them in a coherent fashion.

All right. So why are interested in this? Why does the U.S. get involved? Well, Secretary Clinton has called this a virtuous cycle. Taxpayers are more likely to pay their taxes if they can see the fruit of their labor, if they can see that the money has been well spent, if they know that the funds are being used for their intended purposes. There’s actually an example of a mayor managing Colombia who, when asked how he was able to turn Medellin around by getting business to pay taxes, he said, something to the effect of, it’s amazing what you can do – you can get businesses to pay their taxes if they see that it’s being well spent and it’s not being used for corrupt purposes. So it’s that concept of that virtuous cycle which Secretary Clinton has talked about.

So essentially good governance is not just good for people, but it’s also good for business, and that’s why our bureau, the Economic, Energy, and Business Bureau, is involved.

So we’re launching a new initiative. It’s an initiative that President Obama already announced when he was in El Salvador, the DF4D initiative. It’s one that Secretary Clinton also spoke about when she was at the OECD in May. And what we’re trying to do is to elevate the issues from the technical realm to the political realm and then to try and generate leadership, generate actions to see if we can work with governments to try and promote this concept. President Obama already mentioned – already launched the initiative, as I mentioned, in El Salvador, and we are excited, too, that El Salvador has agreed to be one of the partner countries for this program.

So DF4D takes an integrated and a comprehensive approach to tax administration, to transparency, and to fighting corruption. We’re trying to build on the extensive work that our agencies and multilateral partners already do in these areas. And we’re now in the process of identifying new partner countries. We probably will identify four or five countries that have the political will, the desire, and what we believe we can partner with them to participate in the new initiative.

I will continue to update you on that on how we go, and it’s something that I’m excited about. It’s something that I think has been a long time coming and it’s something that I believe fits in with the pattern of development that this Administration has been promoting.

Development has been the key pillar at the State Department. You – I’m sure by now you have read in President Obama’s Policy Directive on Global Development where he calls on the U.S. Government to work with other governments to promote economic growth as a primary objective of U.S. development effort. And one of the principal tenets of this policy directive is that development has to be country-led. It’s got to be owned by the countries; it cannot be imposed. It’s something that we partner with countries, if that’s something that are – they want to do. And the idea is to move from aid dependents to full participation in the global economy, and one of them is by using their own resources.

I could tell you about a number of other initiatives that our bureau gets involved in. Just by way of aside, our bureau is made up of over about 250 people in D.C. and about 1,000 economic offices around the world. We do – we go from transportation to telecommunications to energy, trade, commercial diplomacy, entrepreneurship. So there’s a big, broad sanctions – it’s big, broad – and we’re very involved in the development side of things.

We’re also very involved the food security initiative that you all have heard about. We’re very proud of what the United States has done on that. We’re working very much on something that is a scourge around the world, and that’s counterfeit medicines. The fact that because medicines are being counterfeited, people may think at times instead of – when they believe they’re taking an antibiotic, they really are taking an aspirin or worse. And as a result people die because of counterfeit medicines around the world. So we’re involved in that.

We’re working on – we’re very involved in the -- Latin America on the Pathways to Prosperity initiative, which is to foster best practices and economic growth around the world. We’re working much on entrepreneurship. That’s something that in Egypt we are trying to make a – we have had an entrepreneurship delegation that went to Egypt – U.S. entrepreneurs, U.S. investors -- to try and create and promote and incentivize industries, new industries, new businesses, businesses that will employ young people, and businesses that will really try and address one of the main causes of the Arab Spring throughout your region, which is lack of employment among youth.

So entrepreneurship is a big initiative on one of our major priorities. And I think I’ll stop there. In North Africa, we can talk a little bit more about what we’re doing through the NAPEO initiative, which is the North Africa Partnership for Economic Opportunity, N-A-P-E-O. That’s based – or it’s focused on the Maghreb. And it’s intended to promote entrepreneurship, to promote job creation, to support cross-Maghreb businesses. And obviously, it’s something that will be as Egypt continues to develop following the – in its current transition.

So I’ll stop there and I’ll throw it open to questions. And I just wanted to give you an overview of what we’re doing on the economic front, on the development front, and I’d be happy to take questions.

MODERATOR: For the benefit of our transcribers, if you could just state your name and your news organization, before asking a question.

QUESTION: Okay. Sorry. Ezzat Ibrahim, Al Ahram, Egyptian newspaper. First, I want to start with this – we have a negative attitude in Congress that’s, frankly speaking, about this funding such programs, especially creating jobs abroad. How can you find this balance between the U.S. foreign policy goals and the – this kind of trends or attitude in Congress?

ASSISTANT SECRETARY FERNANDEZ: Well, I believe that all sides in the U.S. political debate agree on the need for promoting economic growth abroad. It’s something that brings stability. It promotes our relations with other countries. So the concept of promoting entrepreneurship, of the concept of promoting U.S. investment at times in foreign countries, is not something that’s inimical to in the U.S. political debate. It’s part of a broader whole. Obviously, there’s a lot of emphasis on creating jobs. And in fact, it’s task number one – number one, number two, and number three of what we’re doing. That’s very much compatible with the need, and Secretary Clinton has been very vocal about this, that part of our foreign policy has to involve economic policy and economic development.

So what we’re trying to do, by bringing some of the best aspects of the American business sector – i.e. entrepreneurship, new ideas, innovation – to promote more economic growth. So we don’t see it as contradictory. We see it as part of our -- economic policy is part of foreign policy.

QUESTION: I have more questions but we can move around.

ASSISTANT SECRETARY FERNANDEZ: This is the most well-behaved set of journalists I’ve had in a long time. (Laughter.)

QUESTION: I am Ana Baron and I am from Clarin, Argentina.


QUESTION: And, as you know, United States has decided not to vote in favor, in fact to vote against all the Argentinean loans in the World Bank and IDB. So I wanted to know first of all a little bit of background of why so? And second, what will be the consequence on all these kind of programs? Would – Argentina will be out of these programs? What is the extension of this?

ASSISTANT SECRETARY FERNANDEZ: Sure. I don’t – Treasury is really the one that handles those situations. I’m not really privy to the reasons for that. We’re still in the process of identifying partner countries and talking to partner countries about the working together. We hope to – next week I’m meeting with a few – we’re still in the process of identifying them. I know we have El Salvador.

QUESTION: In Latin America?

ASSISTANT SECRETARY FERNANDEZ: In Latin – no, in Latin America we’re going to – I’d like to have one or two. One of the – for many years, people in – Latin Americans have focused on the need to create resources for development.

And that’s, in fact -- I mentioned Brazil before -- that one of the ways Brazil was able to fund its development and bring 40 million out of poverty in the last 10 years is by creating, having the funds to do so.

So I think our hope is to have identified and to have announced our first five partner countries in by – in the two months. We’ll be starting the discussions now. We’d like to have a couple in Latin America. We would like to have one or two in Africa, and a few in – one or two in Asia. So we will have five, but we don’t have yet – the one we have, because President Obama already announced it, is in El Salvador.


ASSISTANT SECRETARY FERNANDEZ: So we’ll have one more. But that’s simply going to be the five partner countries. It’s also going to be -- Secretary Clinton is going to make it one of the principal tenets of her diplomacy to talk about these things. And she has talked about the need, for example, in Pakistan, for elites to pay their share. She has talked about it at last year’s Pathways to Prosperity, -- (in Spanish) -- summit in San Jose, Costa Rica. So this is something that we’ll have five partner countries, but it’s more than that. It will be a principle part of our development policy as we go forward.

QUESTION: Hi. This is Mohammed Zaman from RedtimesBD, Bangladesh. I just got to know, like, from research, like, that U.S. has taken the highest loan from, like, China, like, 1 trillion or something like that, and European business community also weighing down. And in this position, like, how – what would be the business strategy for the U.S., how they can overcome this situation?

ASSISTANT SECRETARY FERNANDEZ: Well, we have a number of things that, despite the cacophony, the noise, are actually working very well. It might be – or for example, we’re very much involved – we’re one of the principle viewers involved in our National Export Initiative, which is one way that we see that the U.S. can grow and – can grow our economy. The National Export Initiative – are you familiar with it? I don't know --

QUESTION: (Off-mike.)

ASSISTANT SECRETARY FERNANDEZ: Okay. It’s – basically, about a year and a half ago, President Obama directed all of the agencies to work to double U.S. exports in the next five years and to do so by creating 2 million new jobs. So it’s double exports in five years; 2 million American jobs.

A couple of interesting statistics, which – only 1 percent of American companies export, 1 percent. Of that 1 percent, half of those companies export to either Mexico or to Canada. So, 0.5 export to one company – to one country, so it’s 0.5 really export to a number of other countries. We have to change that. Our companies are good companies. They can compete in – as long as they have an even playing field. And one of the things that we’ve done in the last two years is really work with U.S. companies to tell them about opportunities in other countries, to tell them to work with other countries to try and create a level playing field so that our companies can compete. In the last – and it’s been a success. So far, we are on target after two years to double American exports in five years. We – in order to do that, more or less, you have to have 17 percent export growth every year, year and year. And we’re achieving that target. So one way that we’re going to try and get out of these economic doldrums that we’re in is to promote exports.

And also the other one that is more recent, but it’s something that – I’d say about a few months – has been the Commerce Department and the State Department have started working on is something that we called – we call Select USA, which is to attract investment, foreign investment into the U.S. One of the best kept secrets around the world is that the U.S. is either one – first or second in attracting foreign investment. We are a good country. We like foreign investment; the more, the better. It creates jobs, creates the – it creates exports as well. So we are – we’re focusing on attracting foreign investment as well.

QUESTION: Michelle Qiao from Xinhua News Agency, China. Just now, you didn’t mention the cooperation with China. Does your bureau – has any cooperation with China? And in, then, your background, I mean, the new international economic background, especially after the financial crisis, does – are there any changes considering the cooperation with China?

ASSISTANT SECRETARY FERNANDEZ: Well, we have very strong cooperation with China. Obviously, China is one of our major markets. We obviously – it’s also – we import a lot from China. We have – in our bureau, we have a number of dialogues with the Chinese where we talk about investment, the issues that U.S. investors have with China. We also talk – the Chinese bring issues that they have in the United States. And the idea is to try and resolve those issues in ways that benefit both countries. We have – I forget the names now, but one is the Joint Economic Commission dialogues, I believe, which happen every year with China where we deal with a lot of these issues.

So China is a growing market. It’s going to be – it is already a major force in the world economy. So we’re very much dealing with issues with the Chinese Government – intellectual property issues, investment issues, issues of how do we create what we call a level playing field so that all companies have the same chance. But some of our best successes in promoting exports recently have been with China. Our exports to China have grown tremendously in the last few years, and that’s something that’s driving our exports worldwide.


QUESTION: As part of your strategy, are you – do you consider starting free trade agreement talks with Egypt? And according to this new initiative, it mean that encouraging investment in Egypt is a part of a new direction for U.S. relationship with –

ASSISTANT SECRETARY FERNANDEZ: Yeah. It’s one of the things that’s been discussed. I know that we have – we will have some colleagues from the State Department and also the Department of Labor going to Egypt shortly. So it’s something that’s been discussed. I don’t know where it stands now.

But OPIC, the Overseas Private Investment Corporation, has announced that they have – I believe it’s a $2 billion facility to promote investment in the MENA region – Middle East and North Africa – and that obviously is – and Egypt would be a major part of that strategy. What’s critical as you look at the shifting situation in Egypt and the rest of North Africa is that we have to – we, the United States, can play a role in the economic growth in those countries. We can promote investment, we can promote technical assistance, we can promote U.S. entrepreneurs just going to Egypt and being part of the transition. And at the end of the day, I said it before, a lot of the Arab Spring was about gaining freedom, but it was also about economic opportunity. And I think we can play a role in promoting economic opportunity.

It’s – Egypt is a big country, Egypt has some big needs, and it’s going to be – the Egypt transition is going to be led and run by Egyptians, but we can partner on the economic front to try and do what we can to help Egypt to rebuild some of its infrastructure with U.S. infrastructure companies. That could be telecommunications, it could be – and the entrepreneurship initiative that I mentioned before, we have, for example, right now an entrepreneurship in residence in Cairo and another one in Alexandria where – and part of what these entrepreneurs are doing is working with Egyptians and young people who are looking to create companies, looking to create jobs, and putting them together with U.S. investors and U.S. entrepreneurs from Silicon Valley and places like that.

QUESTION: But how you evaluate the situation of the Egyptian economy right now?

ASSISTANT SECRETARY FERNANDEZ: How do I evaluate the situation of the Egyptian – I mean, I’m – I would – I wouldn’t want to hazard a guess. I think it’s an economy that, well, what can I say? It’s – the Egyptian economy has to grow in order to provide the opportunities that drove the Arab Spring in Egypt. And I believe that the United States can play a role. It’s not going to be the dominant role. The dominant role is going to be played by the Egyptians themselves. But we can – our companies, our entrepreneurs, our technology can play a role in the economic recovery in Egypt.

QUESTION: Coming back to Argentina, I know that it’s Treasury that took the decision, and they have stated that they decided to do that because Argentina is not paying the (inaudible) of the exceeding the World Bank and is not negotiating with the creditors, and several other things. Would these criteria – will be a problem for these programs? Because, I mean, if this – there is an interagency process always.


QUESTION: So, I mean, I don’t think that the Treasury took this measure alone. Generally, everybody takes part on the – so again, how much will this affect --

ASSISTANT SECRETARY FERNANDEZ: Well, no, it’s something that will be taken into account, clearly. You’re right; it’s an interagency decision, it’s led by Treasury, but they consult with the rest of our agencies. So yeah, it’s --

QUESTION: Is it serious? Is this a serious --


QUESTION: Yeah. Yes.

ASSISTANT SECRETARY FERNANDEZ: I mean, it’s serious enough that we’ve taken the decisions we’ve taken. No, it’s – we believe that this is something that needs to get resolved.

QUESTION: Also, the QIZ Agreement between Egypt, Israel, and the United States, there’s a lot of discussions or – of expanding or shrinking or – how do you evaluate from the political side and economic side?

ASSISTANT SECRETARY FERNANDEZ: Well, it’s something – one of the – there’s been a lot of discussion on things we can do in Egypt. One of them is – you mentioned the FTA. The other one is the QIZs. That’s one of the options that we are considering. We’re also considering what we can do on the infrastructure front and others.

QIZs would be – if we can get support domestically, it’s something that ought to be explored. It’s been successful. And so it’s one of the things that we would want to explore. And the Egyptian Government will have to tell us if that’s one of their priorities.

QUESTION: Did it have a specific demands from the Egyptians on how to rebuild the economy or how to --

ASSISTANT SECRETRY FERNANDEZ: No, no. We don’t have any demands on the Egyptians, no. We have – we want to be partners. We want to see – and if there’s anything that President Obama has insisted on is that development is country-led. It’s – the countries own their own development. And so we are working with the Egyptian Government to find ways to cooperate. And you’ve mentioned a few of them that are under discussion. And we will continue to do that. But no, we have no demands.

QUESTION: I was talking about the laws and declarations.

ASSISTANT SECRETARY FERNANDEZ: Well, I mean, if you – for example, if you want to attract entrepreneurship, you’ve got to make it easier to create companies, you’ve got to make it easier for people to invest, you’ve got to make it easier for companies who go bankrupt because entrepreneurs – some companies succeed; others fail. So yeah, there’s – on the telecommunications regulatory front, you can find ways to liberalize that. And we can provide technical assistance. We’ve got lots of experience in the U.S. Government in these type of initiatives. But at the end of the day, they have to be – it’s going to be the Egyptian Government that requests that kind of assistance.


QUESTION: Maybe a last one.

MODERATOR: Okay. Why not? (Laughter.) (Inaudible.)

ASSISTANT SECRETARY FERNANDEZ: I am fine. I love – I speak English, but you write in Arabic. (Laughter.) That’s a --

QUESTION: How a country like Egypt or the Arab Spring countries can benefit from this program in the short term?

ASSISTANT SECRETARY FERNANDEZ: Well, we have – this program, I believe, has the direct application to the Arab Spring. If you look at one of the complaints around the Arab Spring, it had to do with resources and corruption and transparency and poverty. And what we’re trying to do is to say you’ve got to fund your own development, but you’re not going to be able to fund it unless you are able to convince people that it’s not going to end up in a bank account in – here in New York somewhere, a private bank account, and you also – that – and you can convince the people that you are spending it on programs that the population supports.

The Tunisian Government, to give you an example, has been very interested in this kind of initiative. They’re making a big push to encourage transparency. So this has – this is tailor made for the Arab Spring because not only does it support growth but it also supports one of the complaints that you hear, not just in Egypt, but in the crony capitalism, those kinds of complaints. And that’s exactly what we’re trying to do. That’s exactly what we’re trying to help. And seeing countries that are interested in this, that actually have the political will to try and do this, then that’s exactly what we wanted.

And what we will do is we will work with them from the U.S. Government side but also try and bring some other organizations that are already working on this in other parts of the world and seeing what they can do in North Africa. One of them is the OECD. The OECD has programs on corruption, it has programs on transparency, it has programs on tax administration. The problem is you have a situation where in one country they do tax administration but not corruption and transparency. So what you want to say is, “Look, put it together. Let’s bring it together. And if you do that, then we, the U.S. Government, will support you.”

QUESTION: Thank you.


MODERATOR: Thank you very much.

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