[Senate Report 111-353]
[From the U.S. Government Publishing Office]


                                                       Calendar No. 652
111th Congress                                                   Report
                                 SENATE
 2d Session                                                     111-353

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



 
                 PAKISTANI-AMERICAN ENTERPRISE FUND ACT

                                _______
                                

               November 19, 2010.--Ordered to be printed

                                _______
                                

          Mr. Kerry, from the Committee on Foreign Relations,
                        submitted the following

                                 REPORT

                         [To accompany S. 3665]

    The Committee on Foreign Relations, having had under 
consideration the bill S. 3665, to promote the strengthening of 
the private sector in Pakistan, reports favorably thereon and 
recommends that the bill do pass.

                                CONTENTS

                                                                   Page

  I. Purpose..........................................................1
 II. Committee Action.................................................1
III. Discussion.......................................................1
 IV. Cost Estimate....................................................3
  V. Evaluation of Regulatory Impact..................................4
 VI. Changes in Existing Law..........................................4

                               I. PURPOSE

    The purpose of S. 3665 is to authorize the establishment of 
a fund to provide loans, equity investments and other forms of 
support to small- and medium-sized private enterprises to 
create jobs and counter militant extremism in Pakistan.

                          II. COMMITTEE ACTION

    S. 3665 was introduced by Senators Lugar and Kerry on July 
29, 2010. On September 21, 2010, the committee ordered S. 3665 
reported favorably by voice vote.

                            III. DISCUSSION

    S. 3665, the Pakistani-American Enterprise Fund Act 
authorizes the establishment a fund to provide loans, equity 
investments and other forms of support to small- and medium-
sized private enterprises to create jobs and counter militant 
extremism in Pakistan. The legislation provides five purposes 
for the establishment of the Fund, including:

      1. Promote the development of Pakistan's private sector, 
        particularly small- and medium-sized enterprises;

      2. Promote policies and practices to strengthen 
        Pakistan's private sector;

      3. Advance good governance and transparency in Pakistan;

      4. Create jobs and expand Pakistan's middle class; and

      5. Foster greater adherence to Pakistan's tax code.

    The Pakistani-American Enterprise Fund (the Fund) is 
modeled after similar funds established through the Support for 
East European Democracy (SEED) Act of 1989 (P.L. 101-179; 22 
U.S.C. 5421) to assist the economic development of Eastern 
Europe. Funds authorized under the SEED Act were invested in 
over 500 enterprises in 19 countries, leveraged an additional 
$5 billion in private investment capital from outside the U.S. 
Government, provided substantial development capital where 
supply was limited, and created or sustained over 260,000 jobs 
through investment and development activities.
    The legislation provides for the Fund to be administered by 
a non-profit entity under the supervision of a board of 
directors consisting of four private citizens from the United 
States and three private citizens from Pakistan, appointed by 
the President of the United States. The committee recognizes 
the important leadership role the board of directors must play 
and expects the Fund's board members to be individuals who have 
led successful business careers and demonstrated experience and 
expertise in international and particularly emerging markets. 
The bill requires that any firm, association, or entity in 
which a board member of the Fund serves as partner, director, 
officer, or employee cannot receive financing from the Fund. 
Board members shall not benefit from the Fund except through 
salary or reasonable compensation for service.
    The legislation addresses the need for effective 
administrative oversight of the fund. It requires a grant 
agreement between USAID and the Fund establishing the rules and 
procedures--as specified by the Secretary of State--to ensure 
that the Fund is not used to finance money laundering or 
terrorist activities. The legislation states that the President 
is to appoint a USAID official or employee as non-voting board 
member. The legislation also states that the President may 
appoint two additional non-voting board members--one from a 
non-government organization with experience in Pakistan, and 
the other with technical expertise--of which, only one can be a 
non-citizen of the United States
    The legislation would make applicable to the Pakistan 
Enterprise Fund a number of administrative provisions contained 
in the SEED Act of 1989 that governed the operation of 
enterprise funds in Eastern Europe. These include requirements 
that the Fund take into account additional factors including, 
environmental impact, United States economic and employment 
effects, and the livelihood of commercial viability of the 
activity receiving assistance. The Fund may conduct public 
offerings or private placements for the purpose of soliciting 
and accepting United States venture capital. The Fund's 
accounts must be audited annually by a U.S. licensed public 
accountant and recipients of support from the Fund will keep 
independent records of their use of Fund assistance. The Fund 
must produce an annual report of its activities, available to 
the public on the Internet, providing a description of each 
investment or project supported by the Fund, the amount of 
support provided to each project--including any private 
support--and the profits or losses associated with each 
project. The legislation also requires the Fund to provide an 
annual report to the Senate Committee on Foreign Relations, the 
Senate Committee on Appropriations, the House Committee on 
Foreign Affairs, and the House Committee on Appropriations 
detailing its administrative expenses. The legislation directs 
the Government Accountability Office (GAO) to conduct an 
assessment of the Fund's activities every three years and 
provide a report to the above-mentioned congressional 
committees.
    The legislation directs the Fund to dissolve not later than 
December 31, 2020, unless USAID determines--after consultation 
with the above-mentioned congressional committees--that the 
Fund should be extended. The legislation directs the assets of 
the Fund at the time of its dissolution to be returned to the 
General Fund of the U.S. Treasury, unless otherwise specified 
by the above-mentioned congressional committees. The committee 
directs that the capital to establish the fund and cover its 
administrative expenses shall be drawn from funds already 
authorized through the Enhanced Partnership with Pakistan Act 
of 2009.
    The Enhanced Partnership with Pakistan Act of 2009 seeks to 
transform the relationship between the United States and 
Pakistan from a transactional, tactically-driven set of short-
term exercises in crisis-management, into a deeper, broader, 
long-term strategic engagement. The legislation aims to 
properly balance the relationship between United States and 
Pakistan by acknowledging and supporting the national security 
interests of the United States as well as our economic and 
geopolitical interests. United States economic and military 
assistance for Pakistan enhances our mutual security while 
helping to build economic and political stability in a country 
important in a regional and strategic sense. Economic 
assistance is as critical an element as strengthening the 
capacity of the Pakistan military to counter terrorism, 
especially for projects that provide direct and concrete 
benefit to Pakistani citizens as a whole.

                           IV. COST ESTIMATE

    In accordance with rule XXVI, paragraph 11(a) of the 
Standing Rules of the Senate, the committee provides this 
estimate of the costs of this legislation prepared by the 
Congressional Budget Office.

                            United States Congress,
                               Congressional Budget Office,
                                 Washington, DC, November 16, 2010.

Hon. John F. Kerry,
Chairman, Committee on Foreign Relations,
U.S. Senate, Washington, DC.

    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 3665, the Pakistani-
American Enterprise Fund Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Sunita 
D'Monte.
          Sincerely,
                                      Douglas W. Elmendorf.
Enclosure


cc: Hon. Richard G. Lugar, Ranking Minority Member.
                                ------                                


               Congressional Budget Office Cost Estimate

                                                 November 16, 2010.

                                S. 3665


                 Pakistani-American Enterprise Fund Act


  AS ORDERED REPORTED BY THE SENATE COMMITTEE ON FOREIGN RELATIONS ON 
                           SEPTEMBER 21, 2010

SUMMARY

    S. 3665 would authorize the President to establish a 
Pakistani-American Enterprise Fund to stimulate private-sector 
development in that country. The fund would be similar to 
enterprise funds established in the 1990s for several countries 
and would provide technical and financial assistance to the 
private sector. Under current law, the President already has 
authority to establish such a fund and plans to do so in 2011. 
As a result, CBO estimates that implementing the bill would not 
increase spending subject to appropriation. Enacting S. 3665 
would not affect direct spending or revenues; therefore, pay-
as-you-go procedures do not apply to this legislation.
    S. 3665 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would impose no costs on state, local, or tribal governments.
    The CBO staff contact for this estimate is Sunita D'Monte. 
The estimate was approved by Theresa Gullo, Deputy Assistant 
Director for Budget Analysis.

                   V. EVALUATION OF REGULATORY IMPACT

    Pursuant to rule XXVI, paragraph 11(b) of the Standing 
Rules of the Senate, the committee has determined that there is 
no regulatory impact as a result of this legislation.

                      VI. CHANGES IN EXISTING LAW

    In compliance with rule XXVI, paragraph 12 of the Standing 
Rules of the Senate, the committee has determined that there 
are no changes to existing law as a result of this legislation.