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Diplomacy in Action

Diplomacy in an Age of Austerity: Partnering With the Private Sector on MENA


Remarks
Jose W. Fernandez
Assistant Secretary, Bureau of Economic and Business Affairs
Washington, DC
April 9, 2013

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Introduction

Thank you, Laura, for that kind introduction and also to Ambassador LeBaron for his words. I remember Ambassador LeBaron was one of my first calls when we were in the beginning stages of devising economic statecraft. I would also like to thank the Middle East and North Africa Consultants Association for inviting me to speak here today.

I have spent a lot of time in recent months on MENA issues, and we have seen some amazing results. U.S. trade with the countries of the MENA region accounts for a full 5% of total U.S. trade. The MENA countries, taken together, would rank 4th as an export market to the United States and 5th as a supplier of imports. The countries of the GCC alone would rank tenth as an export market and are the sixth largest supplier of imports to the United States. The MENA region’s imports from the United States in 2011 totaled over $70 billion, or 8 percent of the region’s imports. The UAE alone receives more U.S. goods than India. This is particularly striking when you note that the UAE is a country of only 8 million people, while India has over a billion.

Despite these impressive figures, we could be doing more. A lot more. By way of comparison, MENA’s imports from China in 2011 were estimated at $150 billion, twice those from the United States. There are great opportunities throughout the region, especially in infrastructure development. However, in all of my travels in the region, I have noticed one recurring theme: U.S. companies are simply not present in the way they could and should be. I urge those of you in the audience representing or working with our companies to encourage them to get involved. I saw this last year when I traveled to Libya with a delegation of U.S. companies looking to invest in the newly freed country. There were construction and infrastructure projects going up everywhere I looked, all of them led by non-U.S. companies. It was clear that we could do more.

Getting the public and private sectors to work together to create solutions has been a recurring theme for me since I entered the State Department over three years ago. My very first trip to North Africa was to test out an idea I had to create a public private partnership that would bring together business, entrepreneurs, and academics from the U.S. and North Africa, with a number of North African business leaders and educators. No government. The project has since become known as the Partnership for a New Beginning North Africa Partnership for Economic Opportunity, or PNB-NAPEO. Back then I wasn’t sure what the reaction would be to my proposal so I met with a small group of Algerians and Tunisians to discuss the idea. After outlining the proposal, I asked for their comments. They said nothing for about 20 seconds. That was the longest 20 seconds in my career at the State Department. Finally, one gentleman got up, took me by the hand, and said, “Mr. Fernandez, this is the America we believe in.” Well, this is the America we believe in too. One where business, academia, and government can come together, discuss problems and opportunities in the region, and create solutions that benefit all sides in the face of economic uncertainty and political instability.

What’s at stake here?

So what’s at stake in all of this? Why am I encouraging you to get involved or stay involved? Why have many of you already done so? The reason is simple: this is an investment.

We know from long experience that when we create economic partnerships with other countries, our relationship becomes much stronger and we help create an environment that increases social stability. We realize that when we partner with the private sector both to create good investment opportunities overseas and then to invest, we get much more bang for our buck. This idea is what I call diplomacy in an age of austerity.

While general development assistance from the United States to countries around the world in the last few years has actually gone up, and while we have no intention of retreating, there is a growing need for the technical expertise that often exists only in the private sector to help countries fund their own economic development. In Libya, for example, U.S. companies have provided invaluable expertise in improving the telecom sector.

As Secretary Kerry has outlined, this relatively small investment in development advances peace, security, and stability around the world, helps American companies compete abroad, and creates jobs here at home by opening new markets to American goods.

What are we doing now?

As I said, there is a growing need for technical assistance around the world, and the U.S. government believes that enhancing the ability of other countries to mobilize their own internal resources is critical for sustainable development. From all these needs and demands, Domestic Finance for Development, or DF4D as we fondly call it, was born.

DF4D revolves around three critical themes: 1) tax administration, 2) fiscal transparency, and 3) anti-corruption. While nobody likes to pay taxes, individuals and businesses are willing to put their faith in a system if they believe that the process is fair and transparent and the funds will be put to good use. Confidence in government can improve when tax systems and administration are well understood. Likewise, no country should ask its citizens to pay taxes without having an honest and open conversation about how these funds will be spent. They need to create a partnership between the government and its citizens. Finally, governments around the world who ask their citizens to pay more must convince them that those funds won’t be siphoned off into private bank accounts or for personal gain.

A good example of how we are leveraging technical assistance is through our partnership with the Financial Services Volunteer Corps, or FSVC. The effort, which falls under the umbrella of DF4D, also supports President Obama’s good governance agenda from the 2012 G-8 Leaders Summit at Camp David. FSVC consists of volunteer experts from the public and private sectors who will provide technical assistance to transition countries in the Middle East North Africa region to develop public financial management sectors that are strong, transparent, and accessible.

This volunteer corps will train public servants in two areas: First, to better protect public finances from fraud and tax evasion; and second, to equip reforming countries to better generate and channel domestic revenues towards public investments that facilitate enabling business environments.

One of the most effective ways in which we can create economic development and opportunity is through the promotion of entrepreneurship. Entrepreneurship is one of the constant discussion points as I travel the Middle East. Everybody wants me to put them in contact with the Silicon Valley, or to be the next Palo Alto. A key example of our efforts in this arena is the Department’s Global Entrepreneurship Program. With the help of over 75 private partners, the Global Entrepreneurship Program seeks to empower local people and businesses to become full participants in their economies through entrepreneurship. In many countries, the Global Entrepreneurship Program works with local business and communities not only to foster the ideal of innovation, but also to provide tools for people to create new businesses, to build a new life for themselves.

As I mentioned before, PNB-NAPEO is a Maghreb regional public-private partnership with leading U.S. companies and NGOs. It focuses on building cross-border ties from the bottom up among Maghreb entrepreneurs, business leaders, and youth innovators.

I could go on to describe a range of other programs and initiatives that help boost our partners overseas to become active economic players, but then I wouldn’t have any time left to talk about some of the good work we do right here at home to get U.S. companies into the game and working in overseas markets.

First of all, the President has made it a top priority to improve the conditions that directly affect the private sector’s ability to export. He’s working to remove trade barriers abroad, to help firms and farmers overcome hurdles to entering new markets, and to help them find financing. All of these efforts are helping to renew and revitalize the way we promote American exports abroad.

These efforts are paying off – and they’re helping to change the way America does business. Ninety-five percent of your customers live outside our borders. And now, more than at any time in our history, Americans are selling more U.S. goods and services abroad. In fact, as you may now, U.S. exports hit an all-time record last year – $2.2 trillion. And the significant growth we’ve seen in our exports since 2009 has contributed directly to the creation of over 6 million private sector American jobs over the past 3 years. President Obama’s National Export Initiative seeks to double exports in five years. The initiative recognizes that only 1% of American companies currently export their goods and services. Improving on that will create more American jobs and get people back to work.

In many states, the majority of companies exporting are small- and medium-sized enterprises. We know that it is not always easy for these companies to develop the know-how to break into overseas markets, especially to learn about opportunities abroad and how to take advantage of them. That is why about a year ago, we started a program called Direct Line. This program provides a unique opportunity for American businesses, particularly small- and medium-sized firms, to engage directly via teleconferences and webinars with U.S. ambassadors and foreign government officials overseas. There is always time to ask questions.

We recently held one on the healthcare sector in Oman that attracted over 60 participants. We held one two weeks ago on Kuwait’s travel and tourism sector with nearly 50 participants. And our posts throughout the region, including Jordan, Qatar, Libya, Yemen, the UAE, and several others, have all participated in the program. If you want to get involved too, please see my colleague, Tarek, and he can give you information on how to sign up.

We are also in the process of launching a new project called BIDS – the Business Information Database System. This new mechanism will provide the latest information on government procurement actions – including projects financed by multilateral development banks – so we can alert U.S. firms to these opportunities and orchestrate advocacy and support for your bids. We are still developing and testing the system, but hope to launch it on a limited basis in July this year, so stay tuned. In the long run, we see this linked into the Department of Commerce’s export.gov and into Business.USA.gov.

None of this work would be worthwhile if it weren’t for the invaluable contributions of the private sector. The relationship between the U.S. government and the business community is one of the most important ones in determining America’s strength both at home and around the world. As Secretary Kerry has said, foreign policy is economic policy. The world is competing for resources and global markets. We cannot afford to sit still or just assume the innovators and entrepreneurs or promising graduates will gravitate to our shores. If America hesitates to engage in that arena, or is unwilling to put our best foot forward to win new opportunities and jobs, or if we fail to demonstrate our resolve to lead – that doesn’t just weaken our businesses. It weakens our nation.

I encourage you to get to know the economic officers at the embassies and consulates where you do business, sign up and participate in Direct Line calls, and check out the resources available to U.S. companies at Export.gov. These resources are there to help U.S. companies, which in turn helps the State Department achieve its mission of creating “a more secure, democratic, and prosperous world.”

Congratulations and I hope to be back for the first anniversary of MENACA.

Thank you.



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