[Congressional Record Volume 140, Number 142 (Tuesday, October 4, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: October 4, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                        HOW TO REALLY HELP RUSSIA

                                 ______


                           HON. NEWT GINGRICH

                               of georgia

                    in the house of representatives

                        Tuesday, October 4, 1994

  Mr. GINGRICH. Mr. Speaker, for the past 2 years, I have actively 
supported providing financial assistance to Russia and other former 
Soviet states because I believe that we have a historic opportunity to 
help make the world more stable and more secure for our children and 
grandchildren.
  However, I would ask that all of my colleagues take a look at the 
following article from the September 9, 1994, Wall Street Journal, by 
Robert Keatley which has some valuable lessons about how a truly 
effective assistance program should work. The Financial Services 
Volunteer Corps is not a Government-run bureaucracy but rather a very 
lean and extremely capable private group of experienced volunteers who 
are committed to helping bring a democracy and private enterprise to 
the people of the former Soviet Union. I believe this is the type of 
assistance which we should be supporting because it will be the 
exchange of ideas and the people-to-people contacts which will make the 
long-term difference in the United States' relationship with the former 
Soviet States.

             [From the Wall Street Journal, Sept. 9, 1994]

Wall Street Volunteers in Ex-Soviet Bloc Show How to Make Foreign Aid a 
                                Success

                          (By Robert Keatley)

       New York--Wall Street is well known for many things, but 
     running a free foreign aid program isn't among them.
       Yet it has one. It's managed by a small organization called 
     the Financial Services Volunteer Corps, founded four years 
     ago by a lawyer and former Secretary of State Cyrus Vance and 
     investment banker and former Deputy Secretary John C. 
     Whitehead. Its difficult mission is to help spread sound 
     financial systems across the former Soviet empire and speed 
     the countries' integration into the world economy.


                       $40 million worth of time

       The corps has achieved persistent if moderate success by 
     dispensing unpaid advice from normally high-priced people, 
     but only when asked. So far, it has persuaded about 400 
     bankers, lawyers and other well-paid specialists to donate 
     time--some $40 million worth in dollops of days or weeks--to 
     projects in Russia or other lands once dominated by Moscow.
       It stands apart from profit-seeking advisers who roam ruins 
     of the Soviet empire in search of hard-currency contracts 
     financed by foreign-aid programs. Although many of them do 
     excellent work, others produce indifferent advice of limited 
     usefulness at a high cost. No wonder officials in the former 
     Soviet Union sometimes compare them to swarms of locusts, 
     devouring limited resources and leaving little of worth 
     behind.
       The volunteer corps sends people only where invited, and 
     there isn't any charge to recipients. Moreover, its 
     specialists don't draft grandiose plans for revising whole 
     economies, but focus on narrow issues that have practical 
     solutions. If Slovenia's fledgling stock exchange wants to 
     promote initial public offerings, for example, the corps 
     sends Ljubljana a securities lawyer and an investment banker 
     to explain how IPOs are done.
       ``We deal only with financial services in all these 
     countries,'' says Mr. Vance, the group's co-chairman. ``One 
     thing holding them back is the lack of sound systems.''


                        teaching basic concepts

       That's no minor matter. None of these nations has a 
     particularly reliable way of mobilizing local or foreign 
     capital for investment, or a banking system, and none can 
     grow much without them. Shortfalls range from not 
     understanding basic concepts of Western finance (loans should 
     be repaid) to a lack of its basic tools (credit cards). But 
     unless investors trust the financial system and laws that 
     govern it, they won't risk much cash in Eastern Europe. 
     That's especially true when other regions, East Asia and 
     Latin America among them, are so attractive.
       Rudolf Filkus, finance minister of Slovakia, seems to 
     understand this. He gave creation of a competitive Slovak 
     capital market top priority and asked the FSVC for help. He 
     wants to begin privatizing 2,600 state-owned companies by 
     year's end.
       So, the volunteer corps has helped write a plan for 
     developing a capital market and reorganizing government 
     agencies to oversee it. The FSVC also sent him advisers with 
     clout, including a retired IBM chairman, an executive vice 
     president of the New York Fed and a securities lawyer from 
     the New York firm of Davis, Polk & Wardwell. Their advice: 
     Introduce more liquidity and transparency, or investors, even 
     local ones, won't take part.
       But they weren't vague about it. Their many recommendations 
     included how to upgrade accounting standards, make stock 
     transactions public in a timely fashion and avoid insider 
     trading. Without ``aggressive action,'' the team warned last 
     month, ``Slovakia will not be able to develop a viable 
     capital market.''
       Herbert Okun, a retired U.S. ambassador who directs the 
     program, finds that financial experts often welcome a chance 
     to play useful roles in emerging economies, and he has a long 
     list of would-be volunteers. ``It appeals to your sense of 
     wanting to do good,'' says Bradley Sabel of the law firm 
     Sherman & Sterling, who has helped draft Russian bank 
     legislation.
       There is an obvious U.S. interest in all this, so aid funds 
     cover most of the low running costs. The volunteers also have 
     reason for promoting Western financial practices: Contracts 
     made now could bring business later. But the FSVC has strict 
     conflict-of-interest rules, and won't let its experts treat 
     assignments like sales trips.
       The volunteer corps stays lean, keeps focused and is 
     realistic about what it can do. Big official programs have 
     more complex missions, but even so, there may be lessons here 
     for other aid providers.

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