[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:]
    
    
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    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:]
    
    
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    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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