AUSPC 2012: View from Washington – Jose Fernandez
21st Annual Arab-US Policymakers Conference – AUSPC 2012
Friday, October 26, 2012
Mr. Danny E. Sebright - President, U.S.-U.A.E. Business Council.
“Egyptian-U.S. Relations: A View from Cairo”
H.E. Ambassador Mohamed M. Tawfik – Ambassador of Egypt to the United States.
“Arab-U.S. Economic Relations: A View from Washington”
The Honorable Jose W. Fernandez – Assistant Secretary, Economic and Business Affairs, U.S. Department of State.
[Remarks as delivered]
[Danny Sebright] Distinguished guests, my name is Danny Sebright, and on behalf of the U.S.-U.A.E. Business Council I would like to welcome you to today’s luncheon program. On behalf of our Board of Directors, the U.A.E. Ambassador to Washington, D.C., Yousef Al Otaiba, and the U.S. Ambassador in Abu Dhabi, Michael Corbin, I want to underscore how important is the work being done by the National Council on U.S.-Arab Relations. The United Arab Emirates believes that the best way to lead is by example. Dr. Anthony and his team are setting a marvelous example at the National Council with all of the important work that they do, but especially for providing all of us here today and yesterday with this wonderful, wonderful opportunity to take a breath, sit back, and to consider some of the important points of views and perspectives being shared at the conference.
Ladies and gentlemen, the National Council’s fall conference has become a “must attend” event for anyone here in our nation’s capital who wants to gain better understanding of the change that is unfolding across the Middle East and the Arab world today. Consider if you will the array of prominent speakers we have heard in the last day and a half, and the key networking opportunities this conference provides.
I travel to the Middle East once a month if not – sometimes twice or three times a month, which will be the case in November – and the change that is underway in this region is breathtaking. Change in this region is first and foremost about the people of the Middle East, and their hopes, and their aspirations for the future, and that’s something here in Washington that in my view we forget a lot, and we have to remember every day.
However, critical to me as an American it is what should be the proper U.S. role in the midst of these transformative developments. What are the interests and values of the people of the Middle East and America aligned for the future, and where are these interests not aligned?
Ladies and gentlemen, our two organizations share a commitment to promoting and facilitating increased U.S.-Arab understanding, and help in answering these questions in an effort to broaden economic, cultural, and social ties between key stakeholders in the evolving relationship between our two important global communities.
The work of the National Council is unparalleled in Washington, and indeed around the U.S., in helping create a solid foundation for better, mutual understanding. At this time, please join me in a round of applause in congratulating Dr. Anthony and his entire team for all that they do in this regard. [Applause]
Thank you, Dr. Anthony.
Ladies and gentlemen, in that spirit we are honored to have his Excellency Mohamed Tawfik, Egypt’s Ambassador to the United States, and the Honorable Jose Fernandez, U.S. Assistant Secretary of State, as our special guest luncheon speakers this afternoon. Jose, I almost gave you a promotion there, almost.
As Egypt’s newest Ambassador to the U.S., his Excellency Ambassador Tawfik comes to Washington at perhaps the most critical moment ever in the U.S.-Egyptian bilateral relationship. We all wish him well in his new job, and we will listen intently, Mr. Ambassador, to your remarks today to try to gain a better understanding of the new Egyptian government’s road forward.
As many of you know, the U.S.-Egyptian relationship is a strategic partnership for the region and the West, and both governments are placing renewed effort on forming new bonds of trust and confidence. As events in the region unfold, so too does the world await the outcome of the great drama playing out here in the U.S. with regard to our elections and the effects this will have on our relationships on the Arab world and across the broader Middle East.
As we have all heard at this conference, the region holds vast potential for investment, for trade, and for commercial partnership for the future. For its part, the U.S. government has placed a renewed focused on economic diplomacy with the region to support American jobs at home and abroad.
Our second speaker today at lunch, Assistant Secretary of State Jose Fernandez, has been instrumental in driving U.S. economic and business policy towards the Arab world in line with this effort. He has traveled on countless trips to the region, and has been instrumental in helping drive new U.S. investment and commercial partnerships with new, young, fledgling governments like Libya, like in Egypt, and Tunisia.
In the context of the commercial relationship between the U.S and the U.A.E., America’s largest export destination in the Middle East and North Africa, Assistant Secretary Fernandez and his team at State have worked tirelessly with their counterparts in the U.A.E.’s Ministry of Foreign Affairs to stand up and implement the first senior level U.S. Economic Dialogue with an Arab country, the U.S.-U.A.E. Economic Policy Dialogue, or as we call it the “EPD” in Washington-speak. The U.S.-U.A.E. EPD and other efforts to follow are promising indications of current trends and America’s confidence in the future potential for U.S. relationships in this region.
Please, please, please pay close attention to what Assistant Secretary Fernandez has to say in his remarks today. He is always – he always is helping point the way for American business to new opportunities. With that ladies and gentlemen, I’m going to ask you to please enjoy your lunch. Dr. Anthony will be back up a few minutes before dessert to officially introduce each of our speakers and allow them the floor to make some remarks.
[Patrick Mancino] Ladies and gentlemen, Danny, let’s give a big round of applause to the U.S.-U.A.E. Business Council. Thank you, Danny. Ladies and gentlemen, we hope you’re enjoying your lunch.
[ Break ]
[Ambassaador Tawfik's remarks provided in a separate AUSPC 2012 item]
[Secretary Jose Fernandez] Good afternoon, and thank you, Dr. Anthony, for that kind introduction, thank you for your advice whenever I have asked for it, and thank you for all that you do to improve U.S.-Arab relations.
Let me also thank the National Council on U.S.-Arab Relations for hosting this very prestigious conference and for inviting me to speak here about the work of the State Department in the Middle East and North Africa region. And thanks also to Danny Sebright and the U.S.-UAE Business Council for sponsoring this luncheon.
Finally, to my Muslim friends – Eid Mubarak.
I’d like to start this afternoon by doing something that diplomats typically do not like to do, and that’s to highlight some of the problems that we all face together in the Middle East and North Africa. Now, I do this not because I am a pessimist, but rather because I believe that while these obstacles are daunting and they’re great, they’re are not insurmountable. In fact, what we have is an economic array of tools, both with governments and with the private sector, that we can employ to address these challenges, and that I’d like to talk to you about in the next few minutes.
So let’s start with the problem. Over the past few decades, challenges and opportunities that were previously isolated to a single country have in fact been increasingly shared by entire regions now, and the Middle East and North Africa is no exception.
In the MENA region, we have witnessed changing attitudes that have swept across borders. And underlying this change is a demand for economic opportunity, a demand for freedom, a demand for individual dignity, and a call for more inclusive prosperity. These demands are in fact daunting and they are redefining the landscape around the region, but they also provide enormous opportunities if the current turmoil can be channeled into creating successful democracies that bring about fiscal stabilization, jobs, and skills training. To do so, governments, not just the U.S. governments, but governments all around the world will need to support the development of the private sector, which previously languished in many of countries due to cronyism, corruption, and state-centric economies.
The fruits of the old policies are familiar to you, a combustible mixture of a demographic bulge and stagnant economies. In almost every country in the region, individuals younger than 25 years of age make up 40 and some cases 60 percent of the population, and youth unemployment is expected to remain at more than 25 percent in many countries and above this number in the foreseeable future.
Young people are coming into the work force faster than jobs can in fact be created for them, and in some countries, as I learned in one of my trips to Tunisia, the more educated a person is, in fact the harder it was for them to find a job. Creating jobs – creating enough jobs – will require high growth rates that have to be sustained year after year, and as we’ve learned in this country, that’s a tall order.
Another major economic challenge, especially in North Africa, is the virtual absence in the MENA region of regional integration. Intra-regional trade in the Maghreb accounts for less than four percent of total trade, making that region the least economically integrated region anywhere in the world. The closing of the Algerian-Moroccan border in 1994 has effectively split the region, but that is in fact not the only obstacle to integration. It’s been estimated in fact that the lack of integration in the Maghreb bears an economic cost of somewhere between two to three percent every year. That’s a cost that the Maghreb cannot afford, and that’s why it’s critical to build economic bridges than can span any political divide.
But again, the situation is far from hopeless – it is daunting – but it is far from hopeless. Ties between Tunisia and Libya have shown signs of strengthening as evidenced by Tunisia welcoming over one million Libyan refugees during its own crisis, and entrepreneurs in Morocco and Algeria are working together to find ways to develop their economies. In a number of the conferences that we have held inviting Moroccan and Algerian entrepreneurs, the borders are seamless. They meet, they exchange cards, and I can guarantee you that by the end of their meetings there are a couple of deals that have been made.
So what can the government do? As Assistant Secretary, it’s been my honor, my privilege, to work with great partners in nearly every country in the region to strengthen our bilateral relationships. We have done so because it’s critical to our own interests, to American interests, that the region succeeds both politically and economically. Now, we know full well that we’re not going to be able to dictate the success of what’s happening in the region, but if we can help it along, if we can help it along we can contribute to the creation of societies that are not only stable, but are also democratic.
So we’re working actively with governments, both bilaterally and multilaterally, to create environments in which economies can grow and businesses can flourish, because one way we can help democratic transitions all over the region is to help prevent an economic crisis from undermining political progress.
For instance, next week the United States will chair the Deauville Partnership with Arab Countries to promote small and medium enterprises in Egypt, Jordan, Libya, Morocco, Tunisia, and Yemen. Multilateral institutions and partners will work together to provide functional expertise and technical assistance to foster SME growth, improve job creation, and improve and create economic development. OPIC, the Overseas Private Investment Corporation, has committed or approved more than $433 million in financing and insurance in critical sectors that include transportation, finance, ICT, and franchising, as well as support for small and medium enterprises.
Now, well before the Arab Spring, of course as many of you know, the United States was engaged in economic development in the region. In 2007, for example, the Millennium Challenge Corporation signed a five-year, $700 million compact with Morocco to stimulate economic growth through investments in projects that range from small-scale fisheries to financial services and enterprise support. And the MCC remains an active player in MENA region with a recent $275 million compact with Jordan and a planned program with Tunisia to address the main constraints to Tunisia’s economic growth.
I could go on and I could talk about the Tunisian enterprise fund that’s being created and the Egyptian enterprise funds, but in fact our efforts, our recent efforts, have not been limited to funding. In recent months, we have hosted a number of strategic and economic dialogues with the governments of the United Arab Emirates, Morocco, and Algeria that covered a range of topics essential to the strong economic partnership between our two countries. In fact, Danny Sebright and his organization – and this is getting to be a habit of mine – now they keep hosting lunches where I speak. They were kind enough to host the UAE delegation and in fact did more than just host the UAE delegation, but provided essential input, and a number of you in the room participated, essential private sector input into our discussions. It’s in fact amazing to me that until about a year ago, in fact a little bit less than a year ago, we didn’t even have an economic dialogue with our second largest trading partner in the Middle East, the UAE. We do now.
In the interests of promoting trade and investment between the U.S. and countries in the region, we’ve also signed five Free Trade Agreements and another five Bilateral Investment Treaties, and we also hacked out Trade and Investment Framework Agreements with 12 countries in the region. Just last month Ron Kirk, our U.S. Trade Representative, announced a Framework Agreement between the U.S. and the Gulf Cooperation Council (GCC) for Trade, Economic, Investment and Technical Cooperation. As it stands today, our trade between the U.S. and the GCC last year totaled almost $100 billion. In fact, the GCC countries, if you take them together, ranked tenth as an export market for the U.S. last year, which is more than Japan and France put together, and the GCC was the sixth largest supplier of imports to the United States, mostly oil. With this new agreement that was signed by Ambassador Kirk recently, we hope to go well beyond these recent numbers.
Now, to complement all of these efforts, we’ve started a number of initiatives – one that’s very dear to my heart is an initiative that we call Domestic Finance for Development, or DF4D in Washington, D.C.-speak. It’s an initiative to create an environment in which small businesses can thrive, and the basic principle behind DF4D is that when countries can fund their own development, they will in fact own it. By improving tax systems, reducing corruption, and increasing fiscal transparency, a country can harness real growth and create real economic opportunity.
As part of DF4D, we have been proud to announce a new partnership with a group in New York called the Financial Services Volunteer Corps to provide technical assistance to Tunisia and other transitioning democracies in the MENA region in the areas of tax administration and transparency, and we’ve contributed about a $1 million to seed this initiative, and the financial corps is contributing and volunteering almost $1.2 million. And of course what we’re hoping to do, this is seed money, we’re hoping that this will be our increase through the efforts of our G8 partners.
So that’s the government. And I’ll be the first to admit that all of the government initiatives that we can think about, that we can concoct will only have a limited effect. And that’s because the success of all of these agreements, all of these dialogues, all of these projects lies in the ability of the private sector, of those of you, many of you here in this room, to exploit the opportunities that all of these initiatives create.
And this is where I’d like to spend the next few minutes talking about: on our partnerships with the private sector in the MENA region. In an era of tightening budgets and reduced resources, we’ve got to look for new ways to achieve our goals, innovative ways. We need private partners and we need businesses to work with us, not just because of the budget issues, but because the level of expertise that’s in the private sector is invaluable to many of the economies in the MENA region. I can’t tell you how many government officials have said to me we don’t need your funding. We need your private sector expertise. For many countries at a critical time in their economic history, the private sector know-how is really what they want.
And one of the most effective ways that we work with the private sector is through the promotion of entrepreneurship. A key example of our efforts in this area is the Department’s Global Entrepreneurship Program, which we do with the help of over 100 private sector 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 communities, with local businesses not only to foster the idea of innovation, but also to provide tools, actual tools, for people to create new businesses, to try and build a new life for themselves in economies that for a long time did nothing to promote individual entrepreneurship.
For example, in our partnership with Egypt’s Competitiveness Program, we have created an increase in outreach activities that just recently involved over 1,200 students at public universities in Cairo. Additionally, this program has helped develop in a very short time 35 startups, 12 of which we have funded. In December – and this is something that I would encourage you to keep, to put attention to, in December we’ll be collaborating with the UAE to organize the third Global Entrepreneurship Summit in Dubai. The last two have attracted over one thousand entrepreneurs, and the one in Dubai will attract over.. ..we believe even more entrepreneurs, investors, and government representatives from the region to create a better environment in which entrepreneurship can flourish.
Another vehicle of entrepreneurship that we created to promote entrepreneurship is our PNB-NAPEO program, which is a Maghreb regional public-private partnership with leading companies and NGOs, which focuses on building cross-border ties from the bottom-up among Maghreb entrepreneurs, business leaders and youth innovators. We’ve had two large meetings, and we’ve had a number of small meetings with these entrepreneurs, the most recent one was in Marrakech where we had over 400 Maghrebi entrepreneurs, investors, and educators. And again you’d be amazed what you can do if you bring the private sector together, our private sector and the local private sector.
Just this past July, the Algeria-NAPEO local board sponsored an entrepreneurship training program that brought together students from Algeria, Morocco and Tunisia in an intra-regional exchange that was one of the first of its kind in this fragmented region, and in the recent – in the next few months we will host visits to the Maghreb by U.S. vocational schools – which is something that each of the countries has asked for – private equity entrepreneurs, and investors.
But our support for the private sector goes beyond entrepreneurs and it goes beyond start-ups. In early September, less than six weeks ago, I traveled to Egypt with Deputy Secretary Nides and a trade delegation that included 95 business people from 48 companies including Fortune 500 companies like GE, Cisco, Coca-Cola, and Cargill. It was the biggest delegation of its kind in Egypt, and I’m told that it was the second largest delegation that had ever been taken anywhere by the U.S. Chamber of Commerce.
The purpose of this delegation was two-fold. It was to identify business opportunities for U.S. companies, but we also had another purpose. We were there for another very important reason, and that was to support Egypt’s transition and to support Egypt’s economic development. The trip gave American business leaders unprecedented access to the new Egyptian government, and in turn it offered the Egyptian government a unique opportunity to make a gesture, to signal its openness to trade and investment and its commitment to economic and political stability. And that the government did. In the words of one government official channeling Calvin Coolidge, we heard, “What’s good for U.S. business will be good for Egypt,” and they’re eager, they’re very eager to attract American investors.
For their part, our U.S business participants were not shy. They came prepared with their own menu of reforms that they urged the Egyptian government to undertake in order to promote growth in trade and investment. The bottom line is that the Egyptians welcomed the delegation as an important sign of interest in doing business in Egypt from global leaders in numerous key industry and trade sectors.
So in short, at the State Department we are going to continue to be a convening partner and to bring together foreign government and our private sector. We will work across the region with regional private partners to contribute to the economic development of the countries in which they operate. This is part of what we’re trying to do everyday. It’s part of the vision of our continuing diplomacy in the MENA region, and it’s part of Secretary Clinton’s economic statecraft agenda. For our own foreign policy goals, the bottom line is that we need to create more links between the new democracies and American industry. We don’t have enough of them.
So let me conclude by repeating what I said at the outset. There are daunting challenges throughout the region. We need no more proof of them than the attacks in September that took the lives of four of our own and left scars across our embassies in North Africa. But President Obama has made clear that no amount of violence will make America retreat from the region. We will bring justice to those who harm us and our friends, but we will not be deterred from siding with history. We will support our allies. We will partner with the new democracies to achieve the aspirations of all of our people. We will be partners.
In the last few weeks, I have been reminded of my first trip to North Africa. This was early in 2010. I had only been in this job for a few months, and it was before the advent of the Arab Spring. And I was there to talk to a number of North African business leaders and educators about PNB-NAPEO, which I mentioned earlier. I was here to test an idea about creating links with our entrepreneurs. And I wasn’t sure how they would react to a plan to bring entrepreneurs, bankers, and private sector investors, and business schools to their region.
So I met with a large group of educators and investors and businesspeople, no government officials. And again this is early in 2010, and I explained the project to them. And then I sat back and I asked them what they thought. I had only been on the job as I mentioned a few months. I sat back, I waited, and they said nothing for about 15-20 seconds, some of the longest time of my professional life here at the State Department. And then one of them got up, took me by the hand, looked me in the eye, and said, “Mr. Fernandez. This is the America we believe in.” I still remember those words. “This is the America we believe in.”
Well, that’s the America we believe in. That’s the America that we are going to try to promote in the Arab world, and going forward, I’m optimistic that our engagement in the region will strengthen in coordination with the private sector, and that we will continue to bear fruit.
Working together, with humility and perseverance, we believe that we can meet the daunting economic challenges of today, and create a prosperous tomorrow for us all.
[Anthony] It is a rare occasion that one meets a public servant who not only brings to her or his responsibilities a degree of erudition and academic accreditation and the empirical experience of working abroad. To someone whose not previously been exposed or identified with the Arab world we now see is quite well exposed and it has had an impact on him as in his closing remarks it was obvious he has had an impact on our Arab friends and partners.
I’ll bring this session to a close and ask the Chairperson Elizabeth Wossen and the speakers on the next panel to come forward but not until thanking both Ambassador Tawfik and Assistant Secretary Fernandez.