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U.S. Department of State

Diplomacy in Action

Review of Economic Statecraft in the Middle East and North Africa

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

Washington, DC
September 27, 2013




State Dept Image/Sep 27, 2013/Washington, DC
Date: 09/27/2013 Location: Washington, DC Description: 9/27: Jose W. Fernandez, Assistant Secretary of State for Economic and Business Affairs, briefs at a Washington FPC Roundtable on ''Economic Statecraft in the Middle East and North Africa.'' - State Dept Image

10:00 A.M. EDT

NATIONAL PRESS BUILDING, WASHINGTON D.C.

MODERATOR: Welcome to our briefing today at the Foreign Press Center. Assistant Secretary Fernandez is going to talk about Economic Statecraft in the Middle East and North Africa. Appreciate you both for coming out and I really appreciate your time and that you came over here today, Assistant Secretary Fernandez.

ASSISTANT SECRETARY FERNANDEZ: Thank you.

MODERATOR: Thank you very much. So please, you can --

ASSISTANT SECRETARY FERNANDEZ: I’m not going to speak for long. I’d rather hear your questions. But first of all, thank you for coming. I’m glad that you came because we – I am resigning effective Wednesday. It’s my last day.

QUESTION: Oh, okay. Where are you going?

ASSISTANT SECRETARY FERNANDEZ: I’m going back to New York, going to – back to my family after I’ve been in office for almost four years.

QUESTION: Oh, so you’re leaving the government altogether?

ASSISTANT SECRETARY FERNANDEZ: Yeah. I had never been in government before and this was my first time. And I --

QUESTION: You like it so much to agree that you’re going to leave soon? (Laughter.)

ASSISTANT SECRETARY FERNANDEZ: It’s that big smile on my face, right? (Laughter.) But no, it’s been great. It’s been fabulous. It’s something I had always wanted to do. And I’ll be leaving on Wednesday. I have been in this job since December of 2009, and half of my time probably has been spent on issues in the Middle East and in North Africa.

What we have tried to do in this job is a couple of items. One is to find ways to help companies and help countries in development and so to try and mine that intersection of business and development, which is countries that are looking to develop are also looking for infrastructure or looking for agriculture or looking for entrepreneurs. And we’ve been working to try and promote that as part of our policies, not just because it’s a good opportunity for U.S. companies to benefit and create jobs here, but also because it was a strategic imperative for the U.S. to participate in the growth of companies.

And we’ve also been focusing on a number of countries in the Middle East that we felt could act as multipliers, as validators for our policy, so you’ll see that early on we started working in North Africa even before the Arab Spring. We were – my first trip to North Africa, to Libya, to Algeria, Morocco, Tunisia was in the middle of 2010. And I remember coming back and saying in a number of these countries – Tunisia and Libya – we’ve got an explosive mix, a combustible mix of youth unemployment and lack of opportunity.

So we’ve been working in those countries. Basically because, again, we felt that U.S. companies could bring the jobs, could bring technology, could bring through entrepreneurship, which has been a big emphasis of ours, in that part of the world we could create people-to-people linkages so that – everyone loves Silicon Valley, everybody wants to create and be the next Northern California, they want the next Apple, the next Facebook. And so we worked a lot with young people in the technology field and people who were looking to create their own opportunities, and then to work with them to have some – have the ability to do that. And in a place like Tunisia before the revolution, you had an asphyxiating government, a government that controlled just about everything, and entrepreneurs needed to find a way to create their own future.

So we started our Global Entrepreneurship Program, which has been heavily focused in the Middle East and in North Africa. That has been a way of bringing private partners, universities, companies, NGOs to look for ways to work with local businesses and local entrepreneurs to create a common future. So the Global Entrepreneurship Program, which arises from President Obama’s speech in 2009, the first meeting was here in 2010 in Washington. We had entrepreneurs from 15 Muslim-majority countries.

QUESTION: Right. Yeah, I remember. That’s at the Reagan Center when you had the conference.

ASSISTANT SECRETARY FERNANDEZ: At the Reagan Center, and it went on for a day. It was opened by President Obama and closed by Secretary Clinton.

QUESTION: Right.

ASSISTANT SECRETARY FERNANDEZ: And then the second one was in Turkey where we had over a thousand of entrepreneurs – a wonderful mix of people from all over the world – and U.S. entrepreneurs. And the third was in the UAE, and then the fourth will be in Malaysia. And that’s in --

QUESTION: (Inaudible.)

ASSISTANT SECRETARY FERNANDEZ: -- I want to say October. No, but that can’t be. Do you know?

QUESTION: Too soon.

ASSISTANT SECRETARY FERNANDEZ: No, it’s soon. It’s in the next few months. It’s in Malaysia. But it’s –

STAFF: October?

ASSISTANT SECRETARY FERNANDEZ: What’s that?

STAFF: Middle of October?

STAFF: After APEC Leaders Meeting.

ASSISTANT SECRETARY FERNANDEZ: So it would be late October?

STAFF: And we can confirm --

ASSISTANT SECRETARY FERNANDEZ: Yeah. So – and that’s – what we’re trying to do is – the hard part of this job is to create linkages with young people and with small businesses. Because one of – it’s easy in some ways for governments to speak, for governments to interact. It’s somewhat easy for companies – big companies to have relations. But where it gets hard, and – but it’s very useful if you can do it – is to create linkages with small companies, with medium companies, so that they can interact in an informal way with their peers in the U.S. And so that bottoms-up, people-to-people set of context is something we’ve been trying to do through business.

The other entrepreneurship program that we started also in 2009 is called NAPEO, N-A-P-E-O: North African Partnership for Economic Opportunity. And again, it’s an entrepreneurship program that was designed to do two things: put entrepreneurs together; and secondly, in North Africa, the need for regional integration is, as you know, is quite important.

North Africa is the region of the world that has the least amount of commercial integration. You’ve got closed borders between Morocco and Algeria to cite just one. And the World Bank studies and others have concluded that if they were to become more integrated, the annual GDP of these countries would increase by anywhere from 1 percent to 4 percent.

So we created NAPEO. NAPEO was designed to bring together – and the wonderful thing about NAPEO was – is that you put an Algerian entrepreneur together with a Moroccan entrepreneur, they start exchanging cards, pretty soon you have a couple of deals that come out of that little meetings, and borders become meaningless. And that’s important. That’s something we have been trying to do.

Others – we’ve taken steps to improve our trade with regional partners. We have five bilateral investment treaties in the region. We have five free trade agreements. We have 12 what we call TIFAs, Trade and Investment Framework Agreements.

QUESTION: Five new free trade --

ASSISTANT SECRETARY FERNANDEZ: No. No. No, no, no. We have five in total.

QUESTION: Oh. Anything new happen since you --

ASSISTANT SECRETARY FERNANDEZ: No, no. These have been in place. What we have been – where we have been quite successful, I think, is in intensifying our commercial relations with the GCC countries.

QUESTION: Yeah.

ASSISTANT SECRETARY FERNANDEZ: Our trade now with the GCC is $120 billion. It’s our 6th largest export market. With the UAE alone we export – we trade as much with the UAE as we do with India.

QUESTION: Wow.

QUESTION: Wow.

ASSISTANT SECRETARY FERNANDEZ: And our commercial relations with the UAE and the GCC have improved substantially last year.

QUESTION: By how much, if you can --

ASSISTANT SECRETARY FERNANDEZ: I will know this on Monday, because I will have a meeting on Tuesday. I believe it’s doubled – but we will get you that information – in the last 10 years. And frankly, I might have it here.

MODERATOR: As we ask questions, can you make sure you identify yourself, because this briefing’s going to be transcribed.

QUESTION: Oh, okay.

MODERATOR: So say your name and your outlet.

ASSISTANT SECRETARY FERNANDEZ: Too late now, right? (Laughter.)

MODERATOR: Thank you. Sorry.

ASSISTANT SECRETARY FERNANDEZ: Okay. It’s one or the other. You have a 50-50 chance.

QUESTION: I feel bad for whoever is transcribing this, I just feel bad for -- (laughter).

ASSISTANT SECRETARY FERNANDEZ: Let me see if I can find this for you. The – we’ll get you that number. The --

QUESTION: Okay.

ASSISTANT SECRETARY FERNANDEZ: So we have our – upcoming on Tuesday, we have our fourth U.S.-UAE Economic Policy Dialogue, which is something we started in this job.

QUESTION: So your last days --

ASSISTANT SECRETARY FERNANDEZ: I’m staying so late, too, so that I could attend and lead our delegation to that. I really wanted to do that. I’m very proud of that, because the UAE has been a very good commercial partner. It’s a good ally, and I think it’s important to maintain commercial relations. And so I wanted to stay for that.

I could go on. One of the things that we’re doing with the UAE in their policy dialogue is discussing improvements in the legal environment for businesses, for small and medium enterprises, entrepreneurship. And we are going to try – no – and we’re going to explore a new area, which is to try and see if we can create linkages between our businesses, between UAE businesses and U.S. businesses, to invest in third countries in Africa, to use the UAE as a platform for joint businesses in Africa.

So I think – look, I think we’ve accomplished a lot in a challenging four years. I am very proud of what we’ve done. I think one thing that I have learned is that the region wants more U.S. engagement, more – I mean, more commercial engagement. I’ve never seen an easier thing to sell than entrepreneurship. Everyone wants to meet with U.S. entrepreneurs. And so I think our engagement is on the right track, and that it will pay dividends for the people in the region, and then also for the American people as well.

QUESTION: All right. So I guess we have a few questions. (Laughter.) I --

ASSISTANT SECRETARY FERNANDEZ: Identify yourself, otherwise --

QUESTION: Oh, yes. Of course.

ASSISTANT SECRETARY FERNANDEZ: -- a 50-50 chance of being wrong. (Laughter.)

QUESTION: Nadia Bilbassy with Al Arabiya Television. You mentioned something about that you really focus on small businesses and young people. And often, from years back, the obstacles that many people face in the Middle East is trying to set up the business in terms of bureaucracy. So you have to start it – in the U.S., apparently you just need, like, $60 or something and you can have a license to start a business. Well, in the Middle East, you have so many layers of bureaucracy that you cannot do it. So how do you go around this to help these young people? Like, I remember in Lebanon in particular, that it’s very, very hard, and you have to know somebody in the ministry to be able --

ASSISTANT SECRETARY FERNANDEZ: Yeah.

QUESTION: -- because governments want to control the economy, obviously. So just one of the – my first question is: How do you – are trying to help these people who live in an environment that’s really anti-business to start with?

ASSISTANT SECRETARY FERNANDEZ: Well, I think you start out by working with – you start out by realizing that both countries in the region and the U.S. are pursuing the same objective, which is to attract business, and oftentimes what we can bring to the table is some help on how to create the conditions to ease new businesses. You – we have – for example, in our UAE dialogue, we are working with the government on finding ways to streamline their legislation so that they can make it easier for businesses to be created, finding ways to – that will not just enhance the creation of new businesses, but that will bring the kinds of businesses into those countries that will promote jobs, will promote technical assistance, and will promote relationships between small and medium businesses.

That’s something that every country wants. I mean, no country will ever say, “We don’t – we’re not looking for small businesses.” But what I think – some of it is just technical. It’s not necessarily an ideological debate; it’s a debate about how you do some things. And the World Bank has been quite active, for example, and as you know, in the ease of doing business indicators.

But entrepreneurs tend to show that if you can attract businesses, you can bring more innovation, more technology, competitive business practices to those countries. So it’s not difficult once you get into the technical aspects of it.

QUESTION: Right, but I – so you work through the governments, not – I mean, who identified these small businesses? That’s my question.

ASSISTANT SECRETARY FERNANDEZ: Well, oftentimes, no, we work through the private sector many times.

QUESTION: Okay.

ASSISTANT SECRETARY FERNANDEZ: We will go to the government because the government has to be a partner, obviously.

QUESTION: Of course.

ASSISTANT SECRETARY FERNANDEZ: But chambers of commerce, we dealt with – we went to universities, we’ve created excellent linkages with universities around the region. We’ve put our colleges, our universities together. We’ve brought entrepreneurs from North Africa and the Middle East to the U.S. as well. So it’s a bottoms-up, people-to-people type of relationship which is time-consuming. We will work very hard, for example, in a place like Egypt on entrepreneurship, and we will have helped a thousand entrepreneurs. But 1,000 entrepreneurs in Egypt is --

QUESTION: Is nothing in a country of 90 million people. (Laughter.)

ASSISTANT SECRETARY FERNANDEZ: -- will take a long time to – and so – but it’s the only way that we feel that we can help create those kinds of linkages. We have to go right to the entrepreneurs, although obviously, the government relations try to amend the legislation, try to find a way to encourage new businesses. It’s obviously quite important.

QUESTION: Joyce Karam, Al Hayat newspaper. You mentioned that you started before the Arab Spring.

ASSISTANT SECRETARY FERNANDEZ: Mm-hmm.

QUESTION: Did you at any point look at the economic indicators in Tunisia or Libya and Egypt and say to yourself this is not --

ASSISTANT SECRETARY FERNANDEZ: Well, you know what struck me? I spent a lot of time in Tunisia early on – beautiful country --

QUESTION: Yeah.

ASSISTANT SECRETARY FERNANDEZ: -- nice people, a very well-educated labor force. And it struck me that the rate of unemployment among young people was unsustainable. I remember that it was in the 30, 40 percent range. And what was also quite striking was that it wasn’t just unemployment; it was structural unemployment, meaning in some ways, it was harder for a college graduate to get a job than someone who hadn’t been to university. And the reason for that was that the schools weren’t teaching the kinds of --

STAFF: Skills that --

ASSISTANT SECRETARY FERNANDEZ: -- things that employers wanted to have.

STAFF: Yeah.

ASSISTANT SECRETARY FERNANDEZ: And so you’ve got that unemployment, and that’s a Tunisian-only problem in the region in a world where you have youth unemployment of 12 percent. In the meaner region, that number is 30 percent. And it’s – you’re talking about a labor force participation that is, in fact, lower than it should be, at – only 32 percent of young people are in the labor force. And you dig a little bit deeper and then you’re talking about 22 percent of women are only in the labor force.

So all of these – you put all of these together and then you put that together with the difficulty in creating new companies, a state that seems – in many places, seemed to encompass all economic activity, and you’ve got a problem. And it was not – it didn’t take a genius to figure it out. It was only a question of time, when you put together lack of opportunity and youth unemployment, that you were going to have a problem. And so we said to ourselves, let’s see what we can do to try and address some of those issues.

And you know what? The governments knew it too. Even when we would talk to governments even before the Arab Spring, they knew they had a problem.

QUESTION: Right.

MODERATOR: I think we have time for one more question.

QUESTION: Oh, one more?

QUESTION: One more? (Laughter.)

MODERATOR: Sorry.

QUESTION: We had prepared ourselves for --

ASSISTANT SECRETARY FERNANDEZ: Give them a couple more.

QUESTION: Yes, I’ll just go quickly and --

ASSISTANT SECRETARY FERNANDEZ: Yes, the others – yeah --

QUESTION: So I wanted to ask specifically about Egypt, and considering the insecurities that’s happening all over, actually – most of the countries that you’re covering, but Egypt in particular and in the last six month or even three month after the non-coup coup, that the way you want to describe it --

ASSISTANT SECRETARY FERNANDEZ: Yeah, mm-hmm.

QUESTION: -- but how does your – how does assistance to Egypt has changed in terms of just your, basically, domain of creating business and working with people there? Does – any of the programs has changed at all? Were you restricted by any congressional kind of --

ASSISTANT SECRETARY FERNANDEZ: Well, it’s a long answer, and I’ve got all sorts of numbers that I can give you, but I won’t. The bottom line is – it’s been our policy to engage with all sectors of Egyptian society. We still have entrepreneurship programs there. We are obviously working with Egypt in issues such as counterterrorism, regional security. It’s obviously – the kind of work that we’ve been trying to do has become more difficult. But we still believe that the long-term strategy of promoting entrepreneurship, of creating linkages between entrepreneurs, between – with the universities, with NGOs is in the long term something that we can bring to the table, and we feel that we – this is something that eventually will have to continue.

QUESTION: Could this nothing change of the programs that you have started?

ASSISTANT SECRETARY FERNANDEZ: On the programs, we – I personally hadn’t done a lot on Egypt. That’s why --

QUESTION: I see.

ASSISTANT SECRETARY FERNANDEZ: We had a very strong – and we still do – entrepreneurship effort in Egypt to try and create more linkages between entrepreneurs. I don’t know exactly where that stands today.

QUESTION: Right. You said you want to work with the GCC to do more in Africa.

ASSISTANT SECRETARY FERNANDEZ: Mm-hmm.

QUESTION: If you can give us more details on that. And how much would you be competing with China in places like Sudan or others?

ASSISTANT SECRETARY FERNANDEZ: Well, there’s plenty of opportunities in Africa for not just China and the U.S. but for many other countries. And the GCC countries, GCC businesses have been looking at Sub-Saharan Africa as a place to do business, and they feel that they’re in a good geographical position to do so. Our companies in many cases have the technology, but don’t have the experience that businesses in the GCC have in dealing with Sub-Saharan Africa. So it’s a good combination of technology and local knowledge that we feel that we ought to be able to put together. And that’s why we’re going to be talking about it as part of the dialogue.

QUESTION: Of the dialogue.

ASSISTANT SECRETARY FERNANDEZ: And it’s something to explore as we try to look for new areas, for new things that we could be doing together.

QUESTION: Okay. Can I just quickly follow up on this – very quickly?

ASSISTANT SECRETARY FERNANDEZ: Yeah.

QUESTION: So the criticism often that you guys choose the easiest targets, which is the GCC. I mean, they have the highest GDP in the whole of the Arab world, and you go to help them more while you’re leaving the neglected areas. And that’s being with everybody else, actually, to be (inaudible) to make it fair criticism.

ASSISTANT SECRETARY FERNANDEZ: Uh-huh, yeah, mm-hmm.

QUESTION: (Inaudible) this new project, entrepreneurial, etcetera. So how do you respond to this criticism?

ASSISTANT SECRETARY FERNANDEZ: Well, I would disagree.

QUESTION: Okay.

ASSISTANT SECRETARY FERNANDEZ: You’re not surprised. And I would say that we – on August 14th, we just signed a loan guarantee agreement with Jordan where we will be guaranteeing $1.25 billion. It’s at the Gulf. It is, I suppose, a GCC. But that’s important to get. That’s – that will allow – will support Jordan’s ability to deliver essential services and enact reforms.

You look at what we’ve done in Morocco in terms of what the MCC has done, in terms of – which is over $700 million from the MCC, our FTA with Morocco as well. So I think we – it has been – clearly, it has been more difficult to work in the Arab Spring countries for obvious reasons, but it hasn’t been for lack of trying. And there are countries such as Jordan, such as Morocco, and I could cite a couple of others, that – where are quite involved and will continue to be involved.

QUESTION: (Inaudible.)

ASSISTANT SECRETARY FERNANDEZ: Now.

PARTICIPANT: You okay?

QUESTION: I just wanted to ask about the IMF loan to Egypt, if you’re at all involved in this, or if --

ASSISTANT SECRETARY FERNANDEZ: I haven’t been following it, no.

MODERATOR: And then we are going to have to wrap up, because he has another briefing after this.

QUESTION: Okay. We thought there’s only two of us. We have him like that.

MODERATOR: I know.

QUESTION: But anyway, thank you so much for your time, and thanks for doing this.

ASSISTANT SECRETARY FERNANDEZ: Thank you so much. I look forward to staying in touch.

QUESTION: Absolutely. And good luck with the --

ASSISTANT SECRETARY FERNANDEZ: Thank you.


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