Short title

This Act may be cited as the

Pakistani-American Enterprise Fund Act

Findings

Congress makes the following findings: (1)Pakistan currently enjoys a strong private sector and entrepreneurial spirit. The country is working to consolidate macroeconomic stability and initiate structural reforms with support from the International Monetary Fund's (IMF) Stand-By Agreement. A more stable economy in Pakistan will help support Pakistan's robust private sector. Enterprise Funds established in partnership with United States partners like Poland, Hungary, Albania, Russia, and other European countries have proven beneficial to their economies. Creating a similar fund in close partnership with the people of Pakistan could help sustain and expand their reform efforts as well as empower entrepreneurs in Pakistan with the resources required to create desperately needed employment opportunities. (2)A 2009 assessment released by the IMF noted, Economic growth in Pakistan is starting to recover; large-scale manufacturing output has started to increase, the improvement in the global economy has helped manufacturing exports, and the private sector credit growth has picked up somewhat as businesses rebuild their working capital. Looking ahead, a resumption of higher growth is needed to raise living standards and will require improvements in the business climate to stimulate higher investment by local and foreign investors. (3)Pakistan has seen a dramatic fall in foreign direct investment (FDI) in recent years. According to Pakistan’s Board of Investment (BOI), foreign direct investment dropped by 40.7 percent from the July 2008–June 2009 time period to the July 2009–June 2010 time period. Pakistan secured $5,139,600,000 in FDI in 2006–2007 and $5,152,800,000 in 2007–2008, but the amount dropped to $2,205,000,000 in 2009–2010. (4)According to the Asian Development Bank’s 2008 report on Pakistan’s private sector, Pakistan's private sector is by far the biggest contributor to GDP and is the biggest employer in the country. According to Pakistan’s Small and Medium Sized Development Authority (SMEDA), small and medium sized enterprises (SMEs) constitute nearly 90 percent of all enterprises in Pakistan, employ 80 percent of the non-agricultural labor force, and constitute an approximately 40 percent share of annual GDP. Pakistan’s SMEs are particularly constrained by lack of access to financial and other resources. Accelerating the growth of existing SMEs and providing innovative entrepreneurs with resources to set up new ventures has the potential to significantly contribute to stability through job creation and support overall economic success in Pakistan. (5)The shortage of risk capital in Pakistan stems from the effects of the global economic crisis but has been greatly exacerbated by both political and security challenges plaguing the country. Establishing an enterprise fund could help reinforce financial institutions within the country, provide debt and equity investment for commercially viable SMEs, provide debt and equity investment in private sector entities and initiatives in the energy sector, and make the investment environment more attractive to domestic and international investors. (6)Creation of an enterprise fund could promote the growth of the private sector in Pakistan while simultaneously incentivize companies to operate within the formal economy. Estimates by the IMF and World Bank suggest that the informal or underground economy in Pakistan far exceeds the fiscal activity government institutions are able to systematically measure. Any company or business supported by the enterprise fund would be required to operate within specific legal and accounting standards and comply with applicable tax codes. In a country with extremely low levels of tax collection—less than 2 percent of the population is believed to pay personal taxes—leadership by the private sector could set an invaluable example within the country. (7)To help foster and support the fledgling private sector after the fall of the Berlin Wall, Congress, through enactment of the Support for East European Democracy (SEED) Act of 1989 (22 U.S.C. 5401 et seq.) and the FREEDOM Support Act (22 U.S.C. 5801 et seq.), authorized nearly $1,200,000,000 for the United States Agency for International Development (USAID) to establish 10 new investment funds, collectively known as the Enterprise Funds, throughout Central and Eastern Europe and the former Soviet Union. These funds channeled funding into over 500 enterprises in 19 countries, leveraged an additional $5,000,000,000 in private investment capital from outside the United States Government, provided substantial development capital where supply was limited, created or sustained over 260,000 jobs through investment and development activities, funded $74,000,000 in technical assistance to strengthen the private sector, and is expected to recoup 137 percent of the original USAID funding.

Purposes

The purposes of this Act are— (1)to promote the private sector in Pakistan, while considering the development impact of investments and profitability of those investments, particularly in small- and medium-sized enterprises, the energy and electricity sector, and joint ventures with participants from the United States and Pakistan; (2)to promote policies and practices conducive to strengthening the private sector in Pakistan through measures including loans, microloans, equity investments, insurance, guarantees, grants, feasibility studies, technical assistance, training for businesses receiving investment capital, and other measures; (3)to promote good corporate governance and transparency in Pakistan, foster competition, catalyze productivity improvements in existing businesses, and strengthen local capital markets; (4)to promote security through job creation in the private sector in Pakistan and to further the creation of a middle class in Pakistan; and (5)to promote private sector adherence to tax codes in Pakistan and, where appropriate, foster improvements in the tax code and regulatory environment in Pakistan in order to support economic development.

Pakistani-American Enterprise Fund

(a)

Designation

The President is authorized to designate a private, nonprofit organization based in Pakistan (to be known as the Pakistani-American Enterprise Fund) to receive funds and support made available under this Act after determining that such organization has been established for the purposes specified in section 3. The President should make such designation only after consultation with the leadership of each House of Congress. (b)

Board of directors

(1)

Appointment

The Pakistani-American Enterprise Fund shall be governed by a Board of Directors, which shall be comprised of 4 private citizens of the United States and 3 private citizens of Pakistan, appointed by the President of the United States in consultation with the Government of Pakistan. (2)

Qualifications

Members of the Board of Directors shall be selected from among people who have had successful business careers and demonstrated experience and expertise in international and particularly emerging markets, such as private equity or venture capital investment, banking, finance, strategic business consulting, or entrepreneurial business creation, and backgrounds in priority business sectors of the Fund, such as the energy sector. (3)

Additional USAID non-voting board member

The President shall appoint one official or employee of USAID as an additional non-voting member of the Board. (4)

Additional non-government non-voting board members

(A)

Authority to appoint

Upon the recommendation of the Board of Directors, the President may appoint up to 2 additional non-voting members to the Board in addition to the members specified in paragraphs (1) and (3), of which not more than one may be a non-citizen of the United States. (B)

NGO community

One of the additional non-voting Board members shall represent the nongovernmental organization community, with significant prior experience in development and an understanding of development policy priorities for Pakistan. (C)

Technical expertise

One of the additional non-voting Board members shall have extensive demonstrated industry, sector, or technical experience and expertise in a priority investment sector for the Fund. (c)

Grants

(1)

In general

The President may use funds appropriated pursuant to section 102 of the Enhanced Partnership with Pakistan Act of 2009 (22 U.S.C. 8412) to carry out the purposes specified in section 3 through the Pakistani-American Enterprise Fund and to cover administrative expenses of the Fund. (2)

Eligible programs and projects

Grants awarded under this section may only be used for programs and projects that support the purposes set forth in section 3. (3)

Compliance requirements

(A)

In general

Grants may not be awarded to the Pakistani-American Enterprise Fund under this section unless the Fund agrees to comply with the requirements under this section. (B)

Grant agreement

The grant agreement between the United States Agency for International Development and the Pakistani-American Enterprise Fund shall state that the Fund shall liquidate its assets and dissolve not later than December 31, 2020, unless the Administrator of the United States Agency for International Development determines, after consultation with the appropriate congressional committees, that the Fund should be extended. (C)

Prevention of money laundering and terrorist financing

The grant agreement between the United States Agency for International Development and the Pakistani-American Enterprise Fund shall state that the Fund shall comply with procedures specified by the Secretary of State to ensure that grant funds are not provided by the Fund to or through any individual, private or government entity, or educational institution that advocates, plans, sponsors, engages in, or has engaged in, money laundering or terrorist activity or, with respect to a private entity or educational institution, that has as a principal officer of the entity’s governing board or governing board of trustees any individual that has been determined to be involved in or advocating money laundering or terrorist activity or determined to be a member of a designated foreign terrorist organization. (D)

Disposition of assets

The assets of the Pakistani-American Enterprise Fund at the time the Fund is dissolved shall be returned to the General Fund of the United States Treasury and used to reduce the debt of the United States, unless otherwise specified by the appropriate congressional committees. (d)

Notification

(1)

In general

Not later than 15 days before designating an organization to operate as the Pakistani-American Enterprise Fund pursuant to subsection (a), the President shall provide the information described in paragraph (2) to the Chairman and Ranking Member of the appropriate congressional committees. (2)

Information

The information described in this paragraph is— (A)the identity of the organization to be designated to operate as the Pakistani-American Enterprise Fund pursuant to subsection (a); (B)the names and qualifications of the individuals who will comprise the initial Board of Directors; and (C)the procedures referred to in subsection (c)(3)(C) that will apply to the Pakistani-American Enterprise Fund for purposes of curtailing money-laundering and terrorist financing activities. (e)

Public disclosure

Not later than one year after the entry into force of the initial grant agreement under this section, and annually thereafter, the Fund shall prepare and make available to the public on an Internet website administered by the Fund a report on the Fund’s activities during the previous year, including— (1)a description of each investment or project supported by the Fund, including each type of assistance provided in accordance with section 3(2); (2)the amounts invested by the Fund in each company or project; (3)the amounts of additional private investments made in each company or project; and (4)the amounts of any profits or losses realized by the Fund in connection with each such company or project.

Reports

(a)

Administrative expenses

Not later than one year after the date of the enactment of this Act, and annually thereafter until the Fund is dissolved, the Fund shall submit to the appropriate congressional committees a report detailing the administrative expenses of the Fund. (b)

GAO report

Not later than 3 years after the date of the enactment of this Act, and every 3 years thereafter until the Fund is dissolved, the Comptroller General of the United States shall submit to the appropriate congressional committees a report assessing the activities of the Fund in achieving the stated goals of promoting private sector investment and employment in Pakistan and identifying those institutional or regulatory constraints that inhibit a more effective application of Fund resources.

Operation provisions

(a)

Applicable provisions

Subsections (d)(5), (g), (h), (i), (k), (l), (m), (n), (o), and (p) of section 201 of the Support for East European Democracy (SEED) Act of 1989 (22 U.S.C. 5421) shall apply with respect to the Pakistani-American Enterprise Fund in the same manner as such provisions apply to Enterprise Funds designated pursuant to subsection (d) of such section. (b)

Reinvestment

Returns on investments of the Pakistani-American Enterprise Fund and other payments to the Fund may be reinvested in projects carried out by the Fund without further appropriation by Congress.

Best practices and procedures

To the maximum extent practicable, the Board of Directors of the Pakistani-American Enterprise Fund should adopt the best practices and procedures used by Enterprise Funds, including those for which funding has been made available pursuant to section 201 of the Support for East European Democracy (SEED) Act of 1989 (22 U.S.C. 5421).

Experience of other enterprise funds

In implementing this Act, the President shall ensure that the Articles of Incorporation of the Pakistani-American Enterprise Fund (including provisions specifying the responsibilities of the Board of Directors of the Fund), the terms of United States Government grant agreements with the Fund, and United States Government oversight of the Fund are, to the maximum extent practicable, consistent with the Articles of Incorporation of, the terms of grant agreements with, and the oversight of the Enterprise Funds established pursuant to section 201 of the Support for East European Democracy (SEED) Act of 1989 (22 U.S.C. 5421) and comparable provisions of law.

Appropriate congressional committees defined

In this Act, the term appropriate congressional committees means— (1)the Committee on Foreign Relations of the Senate; (2)the Committee on Appropriations of the Senate; (3)the Committee on Foreign Affairs of the House of Representatives; and (4)the Committee on Appropriations of the House of Representatives.