    [House Hearing, 115 Congress]
    [From the U.S. Government Publishing Office]

               GRADING THE EGYPTIAN AND TUNISIAN ENTERPRISE FUNDS

    =======================================================================

                                    HEARING

                                   BEFORE THE

                                SUBCOMMITTEE ON
                        THE MIDDLE EAST AND NORTH AFRICA

                                     OF THE

                          COMMITTEE ON FOREIGN AFFAIRS
                            HOUSE OF REPRESENTATIVES

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JUNE 21, 2017

                                   __________

                               Serial No. 115-50

                                   __________

            Printed for the use of the Committee on Foreign Affairs

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                          COMMITTEE ON FOREIGN AFFAIRS

                     EDWARD R. ROYCE, California, Chairman
    CHRISTOPHER H. SMITH, New Jersey     ELIOT L. ENGEL, New York
    ILEANA ROS-LEHTINEN, Florida         BRAD SHERMAN, California
    DANA ROHRABACHER, California         GREGORY W. MEEKS, New York
    STEVE CHABOT, Ohio                   ALBIO SIRES, New Jersey
    JOE WILSON, South Carolina           GERALD E. CONNOLLY, Virginia
    MICHAEL T. McCAUL, Texas             THEODORE E. DEUTCH, Florida
    TED POE, Texas                       KAREN BASS, California
    DARRELL E. ISSA, California          WILLIAM R. KEATING, Massachusetts
    TOM MARINO, Pennsylvania             DAVID N. CICILLINE, Rhode Island
    JEFF DUNCAN, South Carolina          AMI BERA, California
    MO BROOKS, Alabama                   LOIS FRANKEL, Florida
    PAUL COOK, California                TULSI GABBARD, Hawaii
    SCOTT PERRY, Pennsylvania            JOAQUIN CASTRO, Texas
    RON DeSANTIS, Florida                ROBIN L. KELLY, Illinois
    MARK MEADOWS, North Carolina         BRENDAN F. BOYLE, Pennsylvania
    TED S. YOHO, Florida                 DINA TITUS, Nevada
    ADAM KINZINGER, Illinois             NORMA J. TORRES, California
    LEE M. ZELDIN, New York              BRADLEY SCOTT SCHNEIDER, Illinois
    DANIEL M. DONOVAN, Jr., New York     THOMAS R. SUOZZI, New York
    F. JAMES SENSENBRENNER, Jr.,         ADRIANO ESPAILLAT, New York
        Wisconsin                        TED LIEU, California
    ANN WAGNER, Missouri
    BRIAN J. MAST, Florida
    FRANCIS ROONEY, Florida
    BRIAN K. FITZPATRICK, Pennsylvania
    THOMAS A. GARRETT, Jr., Virginia

         Amy Porter, Chief of Staff      Thomas Sheehy, Staff Director

                   Jason Steinbaum, Democratic Staff Director
                                     ------

                Subcommittee on the Middle East and North Africa

                     ILEANA ROS-LEHTINEN, Florida, Chairman
    STEVE CHABOT, Ohio                   THEODORE E. DEUTCH, Florida
    DARRELL E. ISSA, California          GERALD E. CONNOLLY, Virginia
    RON DeSANTIS, Florida                DAVID N. CICILLINE, Rhode Island
    MARK MEADOWS, North Carolina         LOIS FRANKEL, Florida
    PAUL COOK, California                BRENDAN F. BOYLE, Pennsylvania
    ADAM KINZINGER, Illinois             TULSI GABBARD, Hawaii
    LEE M. ZELDIN, New York              BRADLEY SCOTT SCHNEIDER, Illinois
    DANIEL M. DONOVAN, Jr., New York     THOMAS R. SUOZZI, New York
    ANN WAGNER, Missouri                 TED LIEU, California
    BRIAN J. MAST, Florida
    BRIAN K. FITZPATRICK, Pennsylvania

                                C O N T E N T S

                                  ----------
                                                                       Page

                                   WITNESSES

    The Honorable James Harmon, chairman, Egyptian-American
      Enterprise Fund................................................     6
    Mr. Bowman Cutter, chairman, Tunisian-American Enterprise Fund...    16

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    The Honorable James Harmon: Prepared statement...................     9
    Mr. Bowman Cutter: Prepared statement............................    19

                                    APPENDIX

    Hearing notice...................................................    40
    Hearing minutes..................................................    41
    The Honorable Gerald E. Connolly, a Representative in Congress
      from the Commonwealth of Virginia: Prepared statement..........    42

               GRADING THE EGYPTIAN AND TUNISIAN ENTERPRISE FUNDS

                                  ----------

                            WEDNESDAY, JUNE 21, 2017

                         House of Representatives,

               Subcommittee on the Middle East and North Africa,

                         Committee on Foreign Affairs,

                                Washington, DC.

        The subcommittee met, pursuant to notice, at 10:08 a.m., in
    room 2172, Rayburn House Office Building, Hon. Ileana Ros-
    Lehtinen (chairman of the subcommittee) presiding.
        Ms. Ros-Lehtinen. The subcommittee will come to order.
        After recognizing myself and Ranking Member Deutch for 5
    minutes each for our opening statements, I will then recognize
    other members seeking recognition for 1 minute or so. We will
    then hear from our witnesses. And, without objection, the
    witnesses' prepared statements will be made a part of the
    record, and members may have 5 days to insert statements and
    questions for the record, subject to the length limitation in
    the rules.
        The Chair now recognizes herself for 5 minutes.
        When the Obama administration proposed establishing
    enterprise funds in Egypt and Tunisia in 2011, I admit that I
    was skeptical. Previous versions of these U.S.-funded entities,
    first established by the George H.W. Bush administration,
    following the breakup of the Soviet Union, had a mixed track
    record. Establishing new funds in Tunisia, and especially in
    Egypt, where the Muslim Brotherhood had just taken power,
    seemed like a risky proposition.
        So, despite a rocky start, I am happy to say that these
    funds have made some positive progress. And one thing we
    learned from the previous reviews and hearings on enterprise
    funds is that the capabilities of each fund's chairman and
    board of directors may be the single most determining factor of
    that success.
        So I commend both Jim and Bow for their tremendous work
    over the past few years. We are grateful to each of you
    gentlemen for your time and for your leadership.
        And, as Jim and Bow lay out in their written testimony, the
    road getting here was not easy, especially working in two
    countries with rapidly changing political conditions, difficult
    regulatory environments, and in need of serious economic
    reforms.
        Although both funds are still in the relatively early
    stages, it is an opportune time to provide congressional
    oversight and take a look at how each fund is fulfilling its
    dual mandate, making a profit, and developing their respective
    private sectors.
        In Egypt, we are finally seeing some positive economic
    signs after years of being on what seemed to be the edge of a
    crisis. Foreign direct investment is increasing. Investors are
    buying Egyptian bonds, and the foreign currency shortage has
    abated. With difficult austerity measures already in place, it
    is critical that President Sisi continue to make the hard
    decisions necessary for long-term growth.
        In Tunisia, the government is also taking important steps
    to reform the economy, including raising interest rates and
    launching an initiative to tackle corruption. In addition to
    corruption, however, there are still many other concerns,
    including underemployment of educated Tunisians, an extremely
    high unemployment rate among working age youth, and a tourist
    sector that still has not recovered from several devastating
    terrorist attacks.
        Reforming the economy in both Egypt and Tunisian is no easy
    task, and it is going to take an extraordinary amount of
    political will from each of their governments, in addition to
    international assistance, to make the necessary changes. That
    is one reason why so many people are excited about the prospect
    of these enterprise funds and the economic assistance
    opportunities that they can provide.
        In Egypt's case, the Sisi government continues to prevent
    programming of regular U.S. economic assistance through both
    international and domestic NGOs, and we still have a backlog of
    hundreds of millions of economic support fund dollars.
        And in the case of Tunisia, I am concerned that we are not
    providing the level of assistance that is required to meet U.S.
    stability and security goals in the region.
        The President's proposed cuts to both the FMF and ESF
    accounts for Tunisia would unnecessarily hinder our ability to
    assist with our partner's crucial democratic transition. As
    important U.S. allies, both Egypt and Tunisia's economic well-
    being are critical to U.S. interests, and it is important that
    we find ways to support them any way we can.
        Last month, I was proud to introduce, alongside Ranking
    Member Deutch and a number of our colleagues, a bill that would
    authorize a new enterprise fund for another U.S. ally, Jordan.
    With the chairman of the Egyptian-American and Tunisian-
    American Enterprise Funds here with us today, I am hoping that,
    in addition to answering questions about their funds and
    addressing any concerns members may have, they also will
    provide recommendations for setting up a fund in Jordan.
        While enterprise funds should not be looked upon as a
    panacea, it is clear that they can be powerful drivers of
    economic growth and spur the necessary development of
    sustainable private sectors and turn a profit at the same time.
    I look forward to hearing our witnesses' thoughts about
    enterprise funds as a foreign policy tool, as well as any
    lessons that they may have learned along the way.
        And now I am honored to turn to my ranking member, Mr.
    Deutch of Florida.
        Mr. Deutch. Thank you, Madam Chairman, for holding this
    hearing today to highlight the work that these two American
    programs are doing, through USAID and in partnership with local
    leaders and governments.
        I am grateful to you both, Mr. Harmon and Mr. Cutter, for
    taking the time to come here and shine a light on the role
    these funds are playing in advancing American interests and
    fostering prosperity abroad.
        I just want to say that, as the chairman and I and our
    staffs prepared for this hearing, one thing was abundantly
    clear, and that is that it is because of the leadership of both
    of you that these funds have been successful. And you do this
    all pro bono, so we are especially grateful for your service.
        Even as we consider the challenges that you face, operating
    in countries where bureaucracy moves slowly and corruption is
    still rampant, the successes of the Egyptian- and Tunisian-
    American Enterprise Funds deserve to be acknowledged, not only
    as standalone programs, but as examples of innovative U.S.
    policy.
        While USAID serves many roles through many different
    approaches, the structure and approach of the EAEF and TAEF are
    indicative of the new direction that the United States
    development assistance has taken, under the leadership of
    Congress and previous administrations.
        Congress established the Egyptian- and Tunisian-American
    Enterprise Funds in order to back local innovation, support
    local entrepreneurs, and strengthen local institutions. This
    focus on in-country capacity reflects the new emphasis of U.S.
    foreign assistance laid out under the USAID Forward Initiative,
    which was begun in 2010. By spending our money through
    carefully vetted local banks and businesses, as the EAEF and
    TAEF are doing, we multiply the impact of the dollars spent by
    achieving the goal of economic growth, while also building
    enduring institutions.
        The funds rely on the knowledge of experts from the private
    sector who are working to strengthen small and medium
    enterprises in Tunisia and key sectors in Egypt. Both TAEF and
    EAEF have worked hard to build their boards of directors and
    learn about the investment climate in each country. And while
    some have questioned the slow pace of investments, it seems as
    if both of you learned lessons from the European funds in the
    1990s and worked to correct many of the mistakes that were made
    in the past.
        Over the past decade, United States assistance has
    emphasized accountability and returns on investment. The
    American Enterprise Funds in Tunisia and Egypt are good
    examples of this principle in action. They seek tangible
    returns to be reinvested into local businesses; and they open
    their books to regular audits, in the interest of transparency.
        In 2015, the GAO issued recommendations for USAID to
    increase its oversight of these funds, all of the
    recommendations which have now been implemented. We look
    forward to hearing more from both of you how the vetting and
    oversight process works.
        AID dollars are a finite resource, and the United States
    has redoubled its efforts to spend them in areas where they
    will best advance our national interest. Security and stability
    in these countries is critical, and economic turmoil feeds
    instability. Tunisia was the birthplace of the Arab Spring, and
    its young democracy can be a model for other nations seeking to
    move from authoritarianism and oppression to democracy and
    freedom, but we must address the root causes of the uprising;
    namely, an overeducated, underemployed youth population, which
    is a focus of the enterprise fund, as I understand it. I look
    forward to hearing from you about that.
        I am deeply concerned about the proposed cuts to security
    assistance to Tunisia that might undermine progress being made
    in building democratic institutions and strengthening the
    economy. In Egypt, the relationship with the United States is
    longstanding, and it is of major strategic importance, but it
    can be fraught with tension, particularly when it comes to
    spending USAID dollars.
        Support for these funds demonstrates the increasingly
    bipartisan support that international development has enjoyed
    in Congress. The TAEF and EAEF are examples of the broad
    support for the important work of international development
    that I hope will continue in Congress, even as this White House
    attempts to dramatically reduce American engagement abroad.
        There has been a clear effort to make America's development
    work more efficient and more focused, and at a time when
    agencies like USAID and OPEC are finding their very existence
    being threatened by President Trump it, is good for us to
    remember that fact. In many ways, the Egyptian and Tunisian-
    American Enterprise Funds reflect this new direction, and I am
    eager to discuss their individual successes as well as their
    work as part of a broader conversation reaffirming the
    longstanding American commitment to a fully engaged foreign
    policy.
        Again, welcome to the witnesses.
        And thank you, Madam Chairman.
        Ms. Ros-Lehtinen. Thank you very much. Excellent opening
    statement, Mr. Deutch, as always.
        And now I am pleased to recognize members for any opening
    statements they might have. And we will start with Mr. Issa of
    California.
        Mr. Issa. Thank you, Madam Chair.
        I am really looking forward to this for a reason that
    perhaps hasn't yet been explained. Our use of NGOs in these
    countries, Tunisia, and particularly Egypt, has been
    problematic on the political side. There can be little doubt
    but that our NGOs, operating in the best interest of democracy,
    were actually part of putting the Muslim Brotherhood into the
    role they had, by developing naive, liberal political
    organizations that thought that the problem in Egypt was the
    WTO; that, in fact, the problem in Egypt was corruption alone.
    Rather than looking at the narrow band of water that makes up
    the historic economy of Egypt, they simply looked and blamed
    outside forces.
        An NGO that works on enterprise can help solve that, and I
    am looking forward to the continued progress. But, as I close,
    I think it is important that we understand, unlike the Marshall
    Plan at the end of World War II, which took historic industries
    and helped restore them, and historic skills and helped put
    them back to work, we cannot, in fact, put Tunisians and
    Egyptians back to work in cotton and in other areas that have
    historically been part of their economy. They will not support
    the workforce, in the case of Egypt, of over 87 million people.
    We have to be part of those new enterprises, being the
    enterprises of the 21st century and not the 19th or 20th.
        And, Madam Chair, thank you very much for your indulgence.
        Ms. Ros-Lehtinen. Good point. Thank you, Mr. Issa.
        Mr. Chabot is recognized.
        Mr. Chabot. Thank you very much, Madam Chair.
        The Egyptian and Tunisian economies have been pretty
    abysmal for the past several years. In Egypt, we have watched
    the public debt and unemployment rates rise significantly in
    recent years, while Tunisia has faced a litany of obstacles,
    including terrorist threats to their tourism sector, among
    other things.
        Unfortunately, the economic strife has discouraged young
    Egyptians and Tunisians from participating in the economy. And,
    as many of my colleagues know, the young and unemployed are
    ripe for conversion by ideological extremists. This is just one
    of the reasons why I believe it is imperative that we continue
    to encourage these countries to take the necessary steps to
    attract further investment and stimulate the economy.
        Enterprise funds are one of the tools at their disposal. By
    leveraging the private sector, providing technical assistance
    to entrepreneurs and offering equity investments, enterprise
    funds can help facilitate real economic improvements in both
    Egypt and Tunisian and, in fact, other countries as well.
        And I would just note, Madam Chair, I apologize, we have a
    markup in Judiciary, then I have to chair the Small Business
    Committee at 11. So I will review the testimony.
        Ms. Ros-Lehtinen. Thank you so much, Mr. Chabot. Don't
    worry about it. And I am going to introduce Ambassador Wagner,
    who will soon take over for me while I go to the Intelligence
    Committee open hearing on Russia.
        So I am now proud to recognize Ambassador Wagner for her
    opening statement.
        Mrs. Wagner. Well, I thank you, Madam Chairman. And I will
    tell you that I will waive my opening statement because I have
    a good deal of questions. And just to move the process along, I
    will yield back to the chair.
        Ms. Ros-Lehtinen. Thank you so much, Mrs. Wagner. And I am
    going to introduce the witnesses, and then if you could take
    over for me, that would be great.
        First, we are delighted to welcome Mr. James Harmon,
    chairman of the Egyptian-American Enterprise Fund. Mr. Harmon
    is also chairman and chief investment officer of Caravel
    Management. Prior to working for Caravel Management, he served
    as chairman, president, and CEO of the Export-Import Bank of
    the United States from 1997 to 2001.
        Mr. Harmon, thank you for coming. We all look forward to
    your testimony.
        And next, we want to welcome Mr. Bowman Cutter, the
    chairman of the Tunisian-American Enterprise Fund. He is also a
    senior fellow and director of the Economic Policy Initiative at
    the Roosevelt Institute. Mr. Cutter served with distinction
    during two Democratic Presidencies at the National Economic
    Council, and at the Office of Management and Budget.
        Mr. Cutter, thank you for coming. We look forward to your
    testimony as well.
        Your prepared statements will be made a part of the record.
    And I have read them, so don't think I am skipping out on that.
    And I hope to come back in time for some questions.
        Thank you, Mrs. Wagner, for stepping in for me.
        Hold on 1 second.
        Mrs. Wagner [presiding]. Mr. Harmon, you are recognized.

      STATEMENT OF THE HONORABLE JAMES HARMON, CHAIRMAN, EGYPTIAN-
                        AMERICAN ENTERPRISE FUND

        Mr. Harmon. Thank you very much. Madam Chair and Acting
    Chair, Ranking Member----
        Mrs. Wagner. Could you please hit the green button. There
    you go. Thank you.
        Mr. Harmon. Madam Chair and acting chair, ranking members
    and members of the subcommittee, thank you for holding this
    hearing and for inviting me to testify.
        In January 2012, the White House and the State Department
    called and asked me to take on this particular assignment. Some
    few months later, I started the process of visiting former
    chairs of enterprise funds. I visited six of them and, to the
    man, they said, why would you want to do this? The challenges
    you will have between the Egyptian Government and the U.S.
    Government will be great. We didn't have those challenges in
    the European enterprise funds back in the 1990s, and they
    pointed out all of the difficulties. It actually proved to be a
    good reason why I would take on this assignment, because we
    could do a lot better in building relationships between Egypt
    and the United States.
        In March 2013, we signed the Grant Agreement with USAID.
    That year, we made a critical decision not to place Americans
    in Cairo to seek and manage investments. We were fortunate,
    indeed, to meet a very talented Egyptian investment banker who
    would prove critical to the success we have had to date. He
    organized the management company, Lorax, to lead the search for
    and management of the Egyptian-American Enterprise Fund assets.
    In time, he would add five additional professionals. Only 3
    years later, it is on the way to becoming one of the leading
    private equity asset managers in Egypt.
        In 2013, we organized a board of directors, in compliance
    with the legislation. Credit to Congress for its guidelines and
    the terms of our Grant Agreement. Three Egyptians and six
    Americans, three of whom are Egyptian-American. This board has
    been highly engaged in our efforts. None of the board members
    receive compensation for their time. We are grateful to our
    directors for their service and dedication.
        And 3 years ago, we were fortunate to recruit an Egyptian
    woman who was graduating from the Harvard Business School and
    had prior experience at the Ministry of Finance in Egypt. She
    came in and has become our director in New York City, and is
    sitting behind me. I am grateful for the good work that she has
    done.
        Egypt's private sector remains underdeveloped. It suffers
    from a gap in financing, infrastructure, and talent. This curbs
    its ability to expand and grow the economy. An underdeveloped
    private sector results in underserved markets, high
    unemployment rates, and low financial inclusion.
        Egypt has the largest population in the Arab world, and the
    third largest in Africa. The youth accounts for 44 percent of
    the population, of which 31.3 percent are unemployed, leaving
    51 percent of the population living in poverty. Alarmingly-
    6high unemployment rates are a great loss of human talent, a
    growing burden on the economy, and a threat to social
    stability, all of which hinder the country from realizing its
    full potential.
        Furthermore, only 13.7 percent of the population owns a
    bank account, which represents one of the lowest financial
    inclusion rates in the Middle East and around the world. Small-
    to medium-size enterprises account for 99.6 percent of the
    companies in Egypt. However, they are greatly underserved,
    especially in the financial sector, limiting their ability to
    scale.
        It is rare for anyone to hit a home run in their first at
    bat, but I think we did it with our first investment for the
    fund--Fawry, Egypt's largest electronic bill payments platform.
    Fawry extends basic financial services to Egypt's unbanked
    population and promotes financial inclusion, a major part of
    our mission. Traditionally, Egyptians have had to wait hours in
    line to pay their bills in cash. Fawry's digital platform saves
    time for consumers by allowing them to not only make payments
    and pay bills, but also to add credit to their cell phone
    accounts, buy plane tickets, and other services. It does this
    via its online Web site and its more than 65,000 kiosks located
    across the country.
        In 5 years' time, this little company, which started with
    no Egyptian customers, now has 20 million Egyptians using the
    service. It is my prediction that within the next 5 years, half
    the population of Egypt will be using the Fawry service. So it
    is a good illustration where technology has played a critical
    role for the developing countries, and particularly for Egypt.
        In 2015, we also made a large investment in Sarwa Capital,
    a consumer finance company that extends financial services such
    as lending to SMEs and to Egypt's large unbanked population. In
    fact, since our investment, it has provided loans to 9,000 new
    clients, mainly to Egyptian youth, to help finance, for
    example, finishing and furnishing new homes, which would
    otherwise be unaffordable to this growing group. Half of the
    Sarwa clients did not have a bank account before receiving a
    loan from Sarwa. Sarwa also provides funding to several hundred
    SMEs, which help to meet our commitment to creating jobs and
    improving the lives of Egyptians by providing access to
    financing.
        Last but not least, we have seeded a venture capital fund,
    Tanmiya Capital Ventures, that invests in small- and medium-
    size enterprises and Egyptian entrepreneurs. By investing in
    this new venture and other VC firms, we are enabling new fund
    managers to seek our investments not only in Cairo, but across
    Egypt, even in more rural locations.
        We have invested today $100 million, and we have brought in
    an additional $100 million from two institutions that had
    heretofore not invested in Egypt. It is my expectation that we
    will invest an additional $100 million by the end of this year.
    We will have invested $200 million of the original 300 and
    another 110 that we have brought in.
        I would add that these investments come as the Egyptian
    Government has embarked on an ambitious economic reform agenda
    that has seen the phasing out of long overdue energy subsidies
    and a floating of the Egyptian pound, and to their credit, the
    signing of the agreement with the IMF, a $12 billion loan to
    Egypt.
        The Egyptian Government deserves additional credit for all
    these tough but necessary decisions. I think the fund will
    produce significant profits over its life. It is my opinion
    that, upon liquidation, proceeds should go first to return to
    the United States its original capital, and thereafter, profits
    should be divided between both countries.
        Finally, economic development is critical to the growth and
    prosperity of developing countries. Enterprise funds, with
    their development mission, can be an important weapon in the
    war on terror.
        Thank you.
        [The prepared statement of Mr. Harmon follows:]

     [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                  ----------

        Mrs. Wagner. Thank you, Mr. Harmon, for your testimony and
    opening statement.
        Mr. Cutter, you are now recognized for 6 minutes. Thank
    you.

      STATEMENT OF MR. BOWMAN CUTTER, CHAIRMAN, TUNISIAN-AMERICAN
                            ENTERPRISE FUND

        Mr. Cutter. Madam Chairman, thank you. I will cough my way
    through the presentation.
        I want to thank----
        Ms. Ros-Lehtinen. Again, could I please ask you to hit the
    green button and move your mike a little bit closer to your
    mouth, sir.
        Mr. Cutter. Okay?
        Ms. Ros-Lehtinen. Perfect.
        Mr. Cutter. Thank you very much for holding this hearing
    and for taking the time to be part of it. It is an honor to be
    at the hearing, and I should say right at the onset that it is
    an honor to chair the Tunisian-American Enterprise Fund. I was
    delighted to have been asked, and I am delighted at serving
    over the last 5 years and at what we have accomplished.
        I probably should simply include, by reference, most or all
    of my friend, Mr. Harmon's presentation, since our experiences,
    in significant ways, parallels his, as you will find at the
    questioning session. So I will talk more about mission and
    strategy.
        Turning first to our mission, we are expected to function
    as a private sector institution, to invest our funds in the
    private sector of Tunisia and to be a partner in the
    revitalization of the Tunisian economy, to help focus on
    employment, on women entrepreneurs, on young people, and on
    geographic diversity, and earn a profit. We are an investment
    fund, not a grant-making program.
        Moving to strategy, in brief, our strategy has been an
    exclusive focus on Tunisia's small- and medium-enterprise
    sector. I should underline that I firmly believe that for all
    countries, a healthy SME sector is the magic bullet. It is the
    key to true and equitable economic growth in Tunisia, the U.S.,
    and everywhere else.
        My TAEF, Tunisian-American Enterprise Fund, colleagues and
    I have tried from the start to be both rigorous and innovative
    in finding ways to invest across the full spectrum of this
    sector. So let me say how we invest across the sector.
        To invest in the smallest of enterprises--and I have in
    mind here the pushcart businesses, the really tiny family
    enterprises--we have helped to finance Tunisia's quite new, I
    mean, brand new microfinance efforts. We have invested both
    debt and equity in these microfinance businesses. We have
    helped them to find their operations and think through how to
    deal with very small enterprises. Through our board, we bring
    enormous expertise in microfinance, and I think our Tunisian
    colleagues would say that we have been extremely helpful in
    helping shape that industry.
        Second, to invest in the whole middle range of the SME
    sector. And these would be businesses ranging from roughly
    $150,000 a year in annual revenue to perhaps $2 million a year
    in annual revenue. And as in Egypt, it is this core, which is
    probably close to 99 percent of the GDP of all of the
    businesses in Tunisia.
        We created our own investment vehicle, which is called
    TASME, the Tunisian-American Small and Medium Enterprise
    company. Through this vehicle, we are pioneering in Tunisia a
    new and innovative approach, which has been quite well-received
    and allows us to tailor investment to the precise needs of
    entrepreneurs.
        As one example, one of our investments is a very high-
    quality date processing business in the south of Tunisia, a
    region that has seen almost no real private sector activity and
    that badly needs economic growth. Another is in a porcelain
    manufacturing business. A third manufactures customized
    packaging. We have a long pipeline now and are investing at
    quite a high rate.
        And finally, to reach the top end of the SME sector,
    businesses with, say, $10 million in annual revenue, we have
    partnered with high-quality Tunisian businesspeople. We helped
    create a fund called Croissance, which is growth in French, and
    through it leveraged other money from other institutions. And
    we are now in the process of creating, with others, a follow-on
    fund that will also leverage equal amounts of money.
        We are--and I hope that Mr. Issa is able to see or read
    this part of my presentation--we are testing the opportunity
    for true startups in Tunisia. We have partnered with others in
    Tunisia and with an Egyptian firm to create the first full-
    scale incubation, acceleration, and financing effort for
    startups in Tunisia. Our first class of startup businesses and
    entrepreneurs begins in the first week of July. We narrowed
    down to eight people who will enter our class from 200
    proposals that we received in mid March. We plan to start a new
    class every quarter for the next several years. This is the
    first effort in Tunisia to create a kind of full-blown ecology
    for startups.
        None of this is without challenges, and I have thought
    about the challenges as falling into three baskets: First, what
    we are doing is essentially a complete from scratch startup of
    a financial business. This doesn't differ much operationally,
    in my experience, from any other start-up, including enormous
    time demands. And we are doing it in the area of finance, as is
    Mr. Harmon, which in both the U.S. and in Tunisia involves
    grappling with enormously complicated regulatory systems which
    we have to comply with at every step along the way.
        Second, within the U.S. Government system, enterprise funds
    are unfamiliar animals. The first set of them, the first
    tranche of them were negotiated and put together in the Bush
    one administration. Like Mr. Harmon, I know and have talked to
    almost all of the previous chairs, but there has been little
    institutional memory over the 25 years from then to now. So I
    think--and we can talk about this--that our principal
    difficulties at the start were really that, the absence of an
    institutional memory. And I hope now that has been codified.
        And finally, it is fair to say that the Tunisian
    administrative bureaucracy is particularly difficult. I have
    had the enormous good fortune of working with Tunisian
    Government officials who are extremely supportive of America,
    and who understand what we are trying to do, but it doesn't
    make the bureaucratics any easier. Basic Tunisian law works on
    different principles than American common law. And, more
    importantly, Tunisia endured for a generation a kleptocratic
    ruler, which ate the heart out of the center of the Tunisian
    economy. As a result, the Tunisian financial sector requires
    vast reform. They are embarking on that. I talk to government
    officials all of the time. I understand what it is they are
    trying to do, but in the meantime, we have to figure out how to
    operate within it.
        I will conclude by reflecting on enterprise funds,
    although, obviously, I really only understand just one. They
    are important economic development tools. They are valuable
    both for the host company and for America. And while I am not a
    scholar and I hate even to mention the word ``terror,'' I think
    that building economies that work for ordinary people, which is
    the heart of what we are trying to do, is one of the best ways
    to combat extremism. It is not trivial to emphasize that these
    funds can be supported by the American taxpayer because they
    can be run at a profit.
        I will underline the last point. We make our investments
    only after rigorous due diligence. We track our investees
    carefully. We know they will experience ups and downs. We
    haven't yet, but we know we will see failure, but we fully
    expect at the end of this to earn a modest profit when we are
    finished. And we expect, upon liquidation, that it will be
    dealt with in the same way that Jim Harmon proposed at the end.
    Thank you very much.
        [The prepared statement of Mr. Cutter follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                  ----------

        Mrs. Wagner. I thank you, Mr. Cutter, for your testimony
    and your opening statement. We will make sure that
    Representative Issa sees every word of it.
        Mr. Cutter. Thank you.
        Mrs. Wagner. I now recognize myself, in the capacity of the
    chair, for 5 minutes.
        Promoting financial stability and building the capacity of
    the private sector in the Middle East and North Africa are key
    concerns of the U.S. Government, and I appreciate Mr. Cutter
    and Mr. Harmon for their hard work in managing the enterprise
    fund.
        Mr. Cutter, unemployment in Tunisia may be as high as 37.6
    percent among working age youth, and there is a real lack of
    high-skilled jobs. To what extent is the enterprise fund
    focused on addressing those needs, and what steps can the
    Tunisian Government take to reduce the youth unemployment rate
    and create more high-skilled jobs?
        Mr. Cutter. I will try not to filibuster. I will be short,
    but I am happy to engage in this as long as you would like. It
    is a very, very important topic. May I say first that I would
    be suspicious of any Tunisian statistic that has a decimal
    point in it. I don't think----
        Mrs. Wagner. I will round up to 38.
        Mr. Cutter. I don't think anybody knows. But I accept--I
    certainly take your point that it is way, way too high.
        I don't think that the answer to this kind of unemployment
    problem stems from a magic bullet. I don't think there is going
    to be one giant investment that solves that. It is going to
    come because the SME sector works better.
        To be trivial about it, if there are 500,000 Tunisian small
    businesses, and every one of them hires 10 or 20 people, you
    have solved the problem. And that speaks to the guts of the
    problem, which is that the SME sector is heavily burdened. It
    has not been the focus of government effort, and for 30 years
    it was essentially the source of depredation by governments.
        There is far too much casual corruption, which this
    government today has made a big deal of. But corruption really
    is a tax particularly--on small businesses. Every step along
    the way of creating a business or running a business has some
    tiny amount of corruption attached to it.
        And one of the great benefits of an enterprise fund is we
    know this. We talk to the entrepreneurs all the time. They tell
    us this. So there is the problem that the SME sector is not
    going to focus, there is the corruption, and it is quite hard
    to do business in Tunisia.
        Mrs. Wagner. Thank you, Mr. Cutter. I have got several more
    questions.
        Mr. Harmon, I understand that half of all EAEF investment
    is in one company, Sarwa Capital. This company offers consumer
    credit services to finance auto loans, home furnishings,
    insurance, and, basically, general consumer spending. Are these
    services utilized by Egyptians from all social classes, or just
    by those who already are considered middle to upper middle
    class? And why has this particular company received such a
    substantial amount of funding?
        Mr. Harmon. We realized----
        Mrs. Wagner. Button, please.
        Mr. Harmon. Thank you. I think we realized very early, you
    cannot solve this problem by going out and trying to put small
    amounts of money into various different small businesses in
    Egypt, in our opinion. We needed to have a vehicle that could
    reach thousands and thousands of Egyptians. Thirty-one percent
    or so of the youth population is unemployed. So our first
    preference was to look for a bank, but we were not allowed to
    do that, so we bought a consumer finance business, which was in
    a position, through its auto activities, its leasing
    activities, to reach the small- and middle-size enterprises.
        So I would say, through Sarwa, we have now, most recently,
    reached some 9,000 SMEs, and we are reaching a very significant
    amount of SMEs. We could not do it any other way without using
    some kind of vehicle, but an active, growing consumer finance
    business can reach out.
        We had some of the same problems when I was at the Ex-Im
    Bank. We didn't know how to reach in sub-Saharan Africa the
    large number of smaller enterprises and the banks didn't want
    to make loans to them. So we had to find a vehicle. We lent
    money then to that vehicle. That vehicle onlent it to the many
    SMEs that were in all of the sub-Saharan Africa. But that is
    the approach we have taken in Egypt. I think over a period of
    time, we will reach a large number of the SMEs in Egypt, one
    way or the other, that will help them to provide the funding.
    SMEs do not have the funding, obviously, and the banks don't
    want to loan money to them.
        Mrs. Wagner. Thank you, Mr. Harmon. I will continue until
    our ranking member returns. Mr. Cutter, my home State is
    Missouri, and agriculture is very important to us. So I was
    interested in your insights on the Tunisian agriculture
    industry. As foreign investors in Tunisia cannot own
    agricultural land, how have agricultural restrictions impacted
    the fund's activity?
        Mr. Cutter. As I said in the prepared testimony, it
    precludes--this provision precludes some investment, because
    you simply cannot--some you simply can't manage around. And in
    others, it has required us, working through Tunisian regulatory
    authorities, to essentially structure a deal so that we are
    investing in the nonagricultural part, and we can show that we
    have no ownership of the land.
        Mrs. Wagner. Are you having success in dealing with the
    Tunisian Government in this regard?
        Mr. Cutter. Yes. But we haven't been able to change the
    basic law. And I think the basic law is a holdover from a long
    time ago when there were Colonial attitudes about buying and
    owning land, and I think they are an anachronism.
        Mrs. Wagner. Thank you. Mr. Harmon, what impact have
    terrorist incidents, the fear of terrorism, and political
    uncertainty, had on the operations of the enterprise funds in
    Egypt? And to what extent has the political environment
    discouraged other investors and sources of credit for the
    private sector?
        Mr. Harmon. Significantly. The tourist business was down,
    at one point, as much as 50 percent.
        Mrs. Wagner. Fifty? Five-O?
        Mr. Harmon. Five-O at one point. It is coming back a little
    bit now. The tourist business is still impacted, and a very
    important part of the Egyptian economy. We talk all the time
    about what we are going to do about that. We are exploring
    right now with a major hotel chain there creating a school for
    training young Egyptians on hotel activities as a way to create
    jobs, but also as a way to stimulate the growth of the hotel
    business. But there is no question that terror has frightened
    foreign direct investors and frightened visitors.
        We have come away, in the last 6 months, with an IMF
    agreement, which is a credit to the Egyptian Government, the
    decision to let the currency float, which meant a significant
    decline in its value. It's credit to our investments that they
    are still worth more than what we paid even after the
    devaluation. But the devaluation makes traveling to Egypt much
    cheaper. So people are looking, obviously closer at the
    opportunities to travel there.
        I suspect that if they can manage to keep terror from
    reappearing, that the tourist business will return to Egypt.
    But all of this had an impact on the Egyptian economy, and only
    now, with the program that President Sisi has done, which is
    not only the IMF agreement but the international loan that was
    done, which was very successfully received, and a number of
    other moves at the cabinet level. There is one particular
    minister, the Minister of International Cooperation, Minister
    Sahar Nasr, who has done a very good job. She understands what
    the enterprise fund is doing, and understands the issues that
    we are talking about now.
        So good people at the government level, and the kinds of
    reforms that the government have taken will lead to a recovery
    of the economy.
        Now, it is interesting that the enterprise fund is somewhat
    of a beneficiary. We invested at the low point. So it didn't
    take a genius to invest well when we did it. I think that we
    will show very significant profits as a result of that. But our
    goal is more than just showing profits. Our goal is how do we
    help, on the development side, to bring in more investors which
    is one of our major efforts by seeding of the funds that will
    do that. But there is no doubt that this, the terror activities
    there, had a major impact.
        Mrs. Wagner. To that point, Mr. Harmon, foreign direct
    investment in Egypt, it is no secret, has rebounded from a
    significant dip in late 2015. What developments have
    contributed most significantly to this increase in FDI, and how
    is the EAEF taking advantage of this?
        Mr. Harmon. Well, the most important thing is what I
    alluded to a moment ago, and that is the agreement with the
    IMF, which, concurrent with allowing the currency to float,
    that meant that the Egyptian pound is down very significantly,
    and that meant it was much more attractive to invest. It has
    slowed up the enterprise fund from investing. After our first
    two major investments and a few of the smaller ones, then
    management, knowing that there was a devaluation coming,
    paused. Now we are back into the market, which is why I think
    we will--we, as well as other investors, will invest more
    actively in Egypt. And we brought along two major institutions
    for $100 million invested. Many other institutions from around
    the world come and visit us now in New York or in Cairo and
    ask: Is this the right time to invest in Egypt? The answer is,
    yes, it is the right time, in my judgment, after the
    devaluation, because it is much cheaper to invest.
        So I would predict that you will see foreign direct
    investment recover more, significantly more, and by the way,
    the market in Egypt, the stock market has also done very well.
    All of this speaks well. Now, we have to do more, obviously, in
    order to help create jobs and help on the development side. But
    I am cautiously optimistic about the economy now.
        Mrs. Wagner. Thank you, Mr. Harmon. Final question here,
    Mr. Cutter. In your testimony, you wrote that flexible funding
    is important to the success of the enterprise fund. Are there
    additional ways to improve the fund to make it more flexible?
        Mr. Cutter. I hate to be Polyannaish, but from the point of
    view of what the U.S. could do, I feel as if I have all of the
    flexibility I need, and shame on me if I can't figure out how
    to engineer anything.
        It is the case that, like a lot of financial systems in
    many countries, the Tunisian financial system is out of date,
    and there are ways that it could allow more flexibility. And I
    have made this clear in my testimony, but also in Tunisia.
        Mrs. Wagner. Thank you very much. At this point, the chair
    would now recognize Mr. Connolly, the gentleman from Virginia,
    for 5 minutes.
        Mr. Connolly. I thank the chair and am delighted to be with
    you, and all of our colleagues.
        Mrs. Wagner. I have plenty more questions.
        Mr. Connolly. Okay, good. Let me see. Mr. Cutter--no,
    actually, I am sorry, Mr. Harmon. Congresswoman Ileana Ros-
    Lehtinen and I had requested a review of the whole Egyptian
    assistance program. Have you seen that report?
        Mr. Harmon. No.
        Mr. Connolly. What percentage of the--how much and what
    percentage of our bilateral assistance is in the form of cash
    grant transfer?
        Mr. Harmon. I don't know the answer to that question. I can
    only tell you that the amount that has been allocated, the
    Egyptian-American Enterprise Fund, we have received $212
    million. We expect to receive the full $300 million.
        The amount of financial aid to Egypt for economic
    assistance has been declining. So it has been cut back. I think
    military has been held even, but the amount--I remember some
    numbers, but I have to really see that. But it has definitely
    come down.
        Mr. Connolly. Well, I used to work on the Hill and I used
    to write the foreign aid bill on the Senate side when I was a
    committee staffer a number of years ago when we started sort of
    ratcheting up the percentage of the ESF fund that was provided
    as a cash grant transfer. And I always worried about that,
    because if we need to--if we are going to show a peace
    dividend, you know, for Camp David to the people of Egypt, it
    is never going to be in the form of a check written to the
    Egyptian treasury to, you know, stabilize their budget. I mean,
    maybe the controller of the treasury is happy, but the average
    Egyptian sees none of that. And that was the nature of my
    question, you know, where are we today. But that is not
    something you follow?
        Mr. Harmon. It is a very complicated question. On my first
    visit to Egypt, the Egyptian Government kept making the
    statement that the $300 million that was allocated to the
    enterprise fund was, in fact, really money that should be given
    to the Egyptian Government to be spent as they wished to do it.
    And I debated that point with them. We have since come to some
    understanding about that.
        Our investments have been able to reach millions of
    Egyptians. So on one investment alone, the Fawry investment,
    where it is a pace like PayPal, a pay service allows Egyptians
    to pay their bills, borrow a little bit of money on the
    telephone call, has changed the lives of 20 million Egyptians.
    It is growing at such a rate and it will reach, in my judgment,
    in the next 5 years, 40 million. So half of the population will
    use this financial service. That is a very important addition
    that we have been able to do, and we are going to get all of
    our money back, plus a profit on that investment.
        So we are trying to impact the so-called financial
    inclusion question. If you take the other investment we made,
    most of the loans that Sarwa has made were to people who do not
    have a bank account. Thirteen percent of Egyptians have a bank
    account. So it is the smallest number probably of any of the
    poorest countries in the world. So Egypt needs financial
    inclusion, and we have been addressing that. We are addressing
    it in a way which I think the United States is going to get all
    of its money back.
        Mr. Connolly. When you have 13 percent of the population
    with bank accounts, that tells me that the informal economy
    dominates most people's lives.
        Mr. Harmon. Yes, that is true. Certainly is true in Egypt.
    It also tells you that banks don't want to make loans, because
    they can buy treasury securities, which give them 12, 13, 14,
    15 percent return, why take a risk in making a small business
    loan which is why we sought to make this investment in the
    consumer finance business, where we now are positioned to take
    the risk needed to reach the poor and the number of unbanked
    clients.
        So we are going after that very market that you are
    referring to as a way to make a difference. When they write the
    history book on enterprise funds and on Egypt, I think that
    will be our most important contribution. It won't be because we
    made money. It won't be because the United States got its money
    back. It is because we made a difference in reaching the
    average Egyptian and changing the quality of life for the
    Egyptians, because we gave them the money needed for them to
    finish their home, or them to buy an auto, or for them to do a
    lot of basic things.
        Mr. Connolly. My time is almost running out, but I want
    to--presumably, you are involved in the tourism industry in
    some fashion. Can you tell us a little bit about what is
    happening to tourism in Egypt, because it is such a huge source
    of foreign exchange. And presumably the current climate has
    depressed tourism in Egypt.
        Mr. Harmon. The tourist business dropped 50 percent.
        Mr. Connolly. 50 percent.
        Mr. Harmon. Five-0. That is a huge drop in any country. The
    western world has never experienced anything of the magnitude
    of that kind of percentage decline. Now, you have to factor in,
    there were various different terror attacks specifically
    cutting back on Russian tourists, and cutting back on most
    western tourists. If I tell people of my very first trip to
    Egypt--I sometimes, in loose moment, explain to them I was
    there, oddly enough, to meet with the Muslim Brotherhood, and I
    had a meeting that night. And security took me in a car with
    two of the young people from the State Department. We went in
    front of the square. We were blocked immediately because of the
    protests.
        Security said to me when the tear gas comes, stay in the
    car, because you would not live to get to the corner. For 2\1/
    2\ hours, we stayed in that car. Tear gas was all around us. By
    the time I got out, needless to say, I was wondering what I had
    ever agreed to do to take on this assignment. I met with the
    head of the Muslim Brotherhood, and I leveled in saying, If you
    are now the leadership of this country, you are never going to
    attract foreign investment if you can't even drive, if you are
    frightened about it. I never even shared it with my family. It
    was such an experience.
        Now, recent trips are much better. People can go to Egypt
    and feel comfortable. They have come a long way. But if you
    lived through--I happened to say that was the day of the
    Benghazi attacks, so there was a lot of action going on in
    Cairo and all over. But that kind of experience and people who
    saw it and read about it, it will frighten people from going to
    a country like Egypt. That has changed very significantly,
    because, fortunately, people have a good memory, and because of
    the IMF agreement and new money coming in and investment
    pouring in, you can overcome that. But if you have terror, it
    will discourage almost anybody from going. And I think we have
    come a ways. We still have a further way to go.
        Mr. Connolly. Just to, if I may, Madam Chairman, just quick
    addition. And is it your observation that the Egyptian
    Government has beefed up security at obvious tourist sites?
        Mr. Harmon. Yes. I think the Egyptian Government doesn't
    get appropriate credit for a lot of good things they do. Of
    course, they get criticized for the NGO law. I, too, am
    saddened by it. But I think what they have done in the
    financial area, in terms of the IMF agreement, in terms of
    allowing the currency to float, in terms of reducing the
    subsidies, is to their credit. What they have done on security
    is also to their credit, but you don't read too much about that
    in the newspaper. Newspapers want to write about the worst part
    about it, and that is somewhat unfortunate. I hope, in due
    time, there will be further reforms in Egypt on the issues of
    the NGOs. But right now, they have done good work in security
    and good work in the financial area.
        Mr. Connolly. Thank you so much.
        Thank you, Madam Chairman.
        Mrs. Wagner. Thank you, Mr. Connolly.
        As was mentioned in the opening statement of our chairman,
    Ileana Ros-Lehtinen and the ranking member Deutch, they
    recently introduced a bill that would authorize a new
    enterprise fund in Jordan. Considering your experiences over
    the past 5 years, is Jordan a good candidate for the enterprise
    fund? I will let you decide who would like to answer.
        Mr. Cutter. I will start.
        Mrs. Wagner. Mr. Cutter.
        Mr. Cutter. I think it is almost an ideal type.
        Mrs. Wagner. An ideal type.
        Mr. Cutter. An ideal type. It is small enough so an
    enterprise fund can have enormous effect. It has the beginnings
    of the right institutions. It has a nascent but reasonably
    sophisticated, in the sense of being nascent, financial sector
    so you can actually function there. And it is receptive to
    innovation, all of the kinds of things that I have found in
    Tunisia. So I would have thought, looking across the Middle
    East after--obviously because I am biased, but after giving
    preference to Tunisia and to my friend, Mr. Harmon, and to
    Egypt, I would have thought Jordan was where you ought to go
    next.
        Mrs. Wagner. Thank you. Mr. Harmon, any additional?
        Mr. Harmon. Were I to be in a position to decide where we
    go, I would be more aggressive. We can do enterprise funds so
    it doesn't cost the taxpayer anything. We are going to have
    profits in Egypt so the money will come back to the United
    States. That's one.
        Two, there is a lot of talent available in many of these
    countries, who are working together with someone like Mr.
    Cutter or myself, and could do a very good job running
    enterprise funds. So I would go bigger. I would look at Iraq. I
    would think a lot. I would have a team in the United States
    Government studying which countries we should do. Should we
    consider, some day that is a long time from now, but some day
    we will do it in Syria. Some day we will have it in
    Afghanistan. But I would have a planning stage right now for
    all of the failing States. And there is a lot of talent. We
    would love to participate in such a study group at any time at
    no cost to the United States Government, but there should be
    more plans for somewhat larger countries because this does not
    cost us anything to do. So it is almost a no-brainer.
        There is too much focus, in my judgment, at State or at the
    Council on Foreign Relations, on conflict resolution, and not
    enough focus on economic development. Economic development is
    successful and you create jobs, that is a major force for
    reducing conflict in the future. Enterprise funds are the model
    for that.
        Mrs. Wagner. Thank you, Mr. Harmon. I appreciate your
    optimism. Many observers have suggested that finding the right
    chairman and board of directors is the single most important
    element in achieving long-term development goals and financial
    profitability of an enterprise fund.
        What can you tell us about the composition of your boards
    and how the directors are chosen? Mr. Cutter?
        Mr. Cutter. I certainly think, thinking about my colleague,
    that finding the right chairman is extraordinarily important.
    Whether or not it applies to me or not, I will leave alone. But
    our board--I think our board is fantastic. By law, it is six
    American citizens and three Tunisian citizens. All of them come
    from diverse backgrounds. All of them are experienced in
    business. Some are quite senior players in the financial
    industry from the United States, and from Tunisia. They have
    all taken risks in their lives. They have all been
    entrepreneurs. They understand, and I think almost all of them
    have focused, in particular, on the small and medium enterprise
    sector. Some from the perspective in Tunisia of family
    businesses of their own, some as investment directions from the
    United States.
        So what I have found--and it is a little bit like the board
    membership of one of these is like the shortstop who can't hit,
    but on the other hand can't field--is that these are jobs that
    don't pay anything but, on the other hand, take an enormous
    amount of time. And what we have found----
        Mrs. Wagner. Thank you. Mr. Harmon, anything to add on the
    board and board members, chairman?
        Mr. Harmon. Yes. I would advise future chairs when you
    think of a board, try not to take high-profile people who are
    very busy, because you need people who can get engaged.
        Mrs. Wagner. Workhorses, not show horses.
        Mr. Harmon. You need people who are going to work on that.
    The first thing we look for is very big names, and I am so glad
    we didn't do it, because the people who really do the work are
    critical. And they have to have a real interest in the country.
    So we found that Egyptian-Americans were quite valuable. But
    the Americans that we had, some had real good private sector
    experience. A board is one of the most important parts of an
    enterprise fund, much more so than the private sector boards.
    They are important too, but boards here, if they are engaged,
    really can help you a lot.
        Mrs. Wagner. According to the Egyptian fund's 2015
    financial statement, approximately $56 million of its funds
    were being held in Mauritius. Is this still the case? And what
    is the rationale for holding funds in Mauritius rather than
    Egypt and the United States? Mr. Harmon?
        Mr. Harmon. I am sorry. I didn't hear the question. If you
    could say it again.
        Mrs. Wagner. According to the financial statements of the
    Egyptian's fund, their 2015 financial statements, they said
    approximately $56 million of the funds were being held in
    Mauritius. Is this still the case, and what is the rationale
    for doing so, for not holding it, I suppose, in Egypt or in the
    U.S.?
        Mr. Harmon. I think part of that might be reflective of the
    fact that in anticipation of a devaluation, there were funds
    being held outside the country, because if you were holding
    Egyptian pounds, you were about to suffer somewhat. There was a
    long pause in investing, and many companies, including some we
    know very well, kept dollars outside of the country in
    Mauritius, waiting for the devaluation to take place, which
    took place really only 6 months ago. Money is coming back into
    Egypt right now. So there was conservatism in keeping money in
    banks in Mauritius as an example as one of the explanations.
        Mrs. Wagner. Do either of your funds hold cash or own
    companies outside of your host countries or the U.S.? Mr.
    Cutter?
        Mr. Cutter. No.
        Mrs. Wagner. Mr. Harmon?
        Mr. Harmon. No.
        Mrs. Wagner. My last question, finally, it is my
    understanding that the Egyptian fund is still waiting on a
    delayed tranche of funding from USAID. What can you tell me
    about this?
        Mr. Harmon. I think you really have to ask State and AID
    about it rather than myself. We have a pipeline right now where
    we are ready to make investments, but it in fairness to them,
    that pipeline didn't exist until maybe last 4 or 5 months, as
    we maximized our efforts after the devaluation. There may have
    been some reason to feel that we weren't going to deploy it
    quickly enough. But right now, I hope that it will get
    disbursed to us so that we can accelerate our investment
    program now that we have the pipeline that we are having.
        If I may be allowed just to correct one thing I said
    earlier, I didn't want to imply to anyone that I wasn't
    supportive of the Jordan enterprise fund. I think it is very
    worthwhile to do. I just felt that we could also be reaching to
    an even larger size. And I also wanted to encourage a little
    bit more study of how many other countries we could do
    enterprise funds in. If I were running the program, I would
    be--I would expand the enterprise funds concept very
    significantly.
        Mrs. Wagner. Great. Thank you, very much.
        Mr. Connolly, anything else?
        Mr. Connolly. If I just could with Mr. Cutter, Madam
    Chairman?
        Mr. Cutter, you have been involved in Tunisia for how long?
    How long have you been involved in Tunisia?
        Mr. Cutter. Five years.
        Mr. Connolly. Five years. You go there a lot?
        Mr. Cutter. Yes.
        Mr. Connolly. You think it is an important relationship?
        Mr. Cutter. Absolutely.
        Mr. Connolly. So any comments on the proposed budget the
    President submitted that would cut aid to Tunisia by 62
    percent?
        Mr. Cutter. I try my best to stay out of politics with
    respect to the Fund, but I think it is short-sighted, that
    Tunisia is strategically important. The Tunisian Government, if
    you kind of run down a list of the kinds of things that you use
    as indicators of countries you ought to invest in: Two free
    elections; an open, liberal constitution; the most open society
    in the Arab world to women's rights; all of the economic
    indicators turning up; a recent IMF agreement; a real
    anticorruption direction; and financial reform, this is a
    country we should invest in.
        Mr. Connolly. And that litany you just read--and I am sure
    we could add to it--all of that is after the Arab Spring?
        Mr. Cutter. Yes, sir.
        Mr. Connolly. And it is the only country emerging from
    that, you know, big, hopeful turmoil----
        Mr. Cutter. I think Egypt has a pretty good--but you are
    right.
        Mr. Connolly. It is the only--yeah. But it is the only one
    that kind of had a happy ending from a democratic point of
    view?
        Mr. Cutter. Absolutely. And if you talk to people in
    Tunisia now, the mood, from the top levels of the government,
    all the way down to the entrepreneurs that we deal with--some
    of whom are street entrepreneurs--the mood is up in a way that
    was really quite different 2 years ago.
        Mr. Connolly. Sounds like a country we ought to be
    supporting, not cutting back in. Thank you.
        Mr. Cutter. May I say one other thing?
        Mr. Connolly. You certainly can.
        Mr. Cutter. I forgot to mention that--but particularly
    given your background--I am an eighth generation Virginian from
    Augusta County, Virginia.
        Mr. Connolly. Good for you.
        Mrs. Wagner. A kissing cousin, Mr. Connolly.
        Mr. Connolly. Lord Almighty, Madam Chairman. I should have
    come earlier.
        Mrs. Wagner. Thank you very much, Mr. Connolly.
        And I thank our witnesses very, very much for their
    testimony. I know that the ranking member--I just received a
    note--has been held up in the judiciary markup. We have a
    number of markups going on this morning. I am running to one in
    Financial Services myself. Do know that we are grateful for the
    work that you are doing; we are grateful for your testimony
    here today, and I know that other members will be submitting
    questions in writing.
        So, with that, the subcommittee on Middle East and North
    Africa stands in adjournment.
        Mr. Cutter. Thank you very much.
        [Whereupon, at 11:11 a.m., the subcommittee was adjourned.]

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