Washington, D.C. –Senate Foreign Relations Chairman John Kerry (D-MA) joined today with Senators John McCain (R-AZ) and Joe Lieberman (I-CT) in announcing plans to introduce legislation creating two new enterprise funds for Egypt and Tunisia. These funds support private entrepreneurs and businesses and help create jobs to further economic prosperity in both countries. This will in turn encourage the democracy movements in both countries by providing opportunity through financial investment and technical assistance to small and medium-sized enterprises.
“The United States has a historic opportunity to help the people of Egypt and Tunisia transform the Arab awakening into a lasting rebirth that brings prosperity and democracy to both countries,” said Chairman Kerry. “These new enterprise funds will allow us to do what Egypt and Tunisia are calling for – provide investment in their entrepreneurs and private businesses so their economies can stabilize, prosper and create the crucial jobs.”
Legislation creating the Egyptian-American Enterprise Fund and the Tunisian-American Enterprise Fund will be introduced in the coming days by the three senators. The investment of U.S. government money will fill a temporary gap in private financing and investment, which is hampered because of political uncertainties. The investment will target small and medium-sized businesses and support entrepreneurs. In addition to providing financial assistance, the enterprise funds will provide technical, strategic and financial advice to local business people.
The funds will be designed to improve the overall business environment in the two countries and strengthen local capital markets. By relying on U.S. financial managers and other private-sector experts, the funds will concentrate on making profitable investments that also promote better corporate governance and transparency. Each fund will be overseen by a board of directors from the U.S. private sector and representatives of the local country.
The two funds will not require appropriating new U.S. money in the beginning. The State Department will reprogram existing money to launch the funds, and talks with officials at the State Department are under way.
The new funds will be modeled on the highly successful enterprise funds established by the United States in Central and Eastern Europe after the fall of the Berlin Wall in 1989. The European funds, established under the Support for Eastern European Democracy Act, helped develop robust economies in many of those countries and promote democracy across a wide swath of former Soviet bloc countries.
Roughly $1.2 billion in U.S. assistance was channeled into more than 500 separate enterprises in 19 countries. The investment drew an additional $5 billion in private investment capital from outside the U.S. government, providing the financing to create more than 260,000 jobs. They also funded $74 million in technical assistance to strengthen the private sector.
The original U.S. investment in the 10 separate European funds was repaid allowing the government to recoup 137 percent of its original funding.
Investment, technical and financial assistance can play a critical role in the coming years in helping nascent entrepreneurs in Egypt and Tunisia create the kinds of small and medium-size operations that offer jobs to the tens of thousands of unemployed people. The need in both countries for this kind of assistance is clear.
In Egypt, for example, the World Bank reports that private credit has been shrinking, with most loans going to large and well-established enterprises. The Egyptian fund would direct loans and investments to small businesses that would generate jobs quickly and broadly across the economy. The existence of this capital, and the private money that would follow, would also mean that family-owned firms and other small-to-medium-size operations could avoid the need to resort to an informal credit market, where rates are often far higher and transparency is absent.
In Tunisia, the fund could play a vital role in stimulating an economy that is already in the midst of reform after decades of state domination. In the last decade, the country has shown moderate, but sustained economic growth, particularly in tourism, oil and agriculture products. The country ranks first in Africa in terms of economic competitiveness, according to the 2008-2009 Global Competitiveness Report.