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[Senate Report 112-25]
[From the U.S. Government Publishing Office]

                                                        Calendar No. 79
112th Congress  }                                             {  Report
  1st Session   }             SENATE                          {  112-25
=======================================================================
 
A BILL TO PROMOTE THE STRENGTHENING OF THE PRIVATE SECTOR IN EGYPT AND 
                                TUNISIA 

                                _______
                                

                 June 22, 2011.--Ordered to be printed

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

                                 REPORT

                         [To accompany S. 618]

    The Committee on Foreign Relations, having had under 
consideration the bill (S. 618) to promote the strengthening of 
the private sector in Egypt and Tunisia, reports favorably 
thereon, with an amendment in the nature of a substitute, and 
recommends that the bill, as amended, do pass.

                                CONTENTS

                                                                   Page

  I. Purpose..........................................................1
 II. Committee Action.................................................1
III. Discussion.......................................................1
 IV. Cost Estimate....................................................4
  V. Evaluation of Regulatory Impact..................................5
 VI. Changes in Existing Law..........................................5

                               I. Purpose

    The purpose of S. 618 is to promote the strengthening of 
the private sector in Egypt and Tunisia.

                          II. Committee Action

    S. 618 was introduced by Senators Kerry, McCain and 
Lieberman on March 17, 2011. On May 17, 2011, the committee 
considered S. 618 with an amendment in the nature of a 
substitute. On May 17, 2011 the committee ordered S. 618, as 
amended, reported favorably by voice vote.

                            III. Discussion

    S. 618, the Egyptian-American and Tunisian-American 
Enterprise Fund Act, authorizes the establishment of two funds 
to provide loans, equity investments and other forms of support 
to promote the strengthening of the private sector in Egypt and 
Tunisia with a strong focus on small- and medium-sized private 
enterprises, in order to create economic opportunity and to 
create jobs for Egyptians and Tunisians. The legislation 
provides four purposes for the establishment of the Funds, 
including to:

 1. Promote the development of Egypt's and Tunisia's private 
        sector, particularly small- and medium-sized 
        enterprises;
 2. Promote policies and practices to strengthen Egypt's and 
        Tunisia's private sector;
 3. Advance good governance and transparency in Egypt and 
        Tunisia; and
 4. Promote security through job creation and expand Egypt's 
        and Tunisia's middle class.

    The Egyptian-American and Tunisian-American Enterprise 
Funds (``the Funds'') are 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 Funds to be administered 
by a non-profit entity under the supervision of a Board of 
Directors consisting of six private citizens from the United 
States and three private citizens from Egypt and Tunisia 
respectively for each Fund, appointed by the President of the 
United States. The committee recognizes the important 
leadership role the Board of Directors must play and expects 
the Funds' board members to be individuals who have led 
successful business careers and demonstrated experience and 
expertise in international and particularly emerging markets. 
While not giving the relevant government (Egypt or Tunisia) a 
veto over the appointment of Board members, the bill requires 
the President to consult appropriately with the government in 
connection with appointment of its citizens to the Boards. 
Consistent with the practice of past enterprise funds, the 
committee expects that any firm, association, or entity in 
which a board member of either Fund serves as partner, 
director, officer, or employee will not receive financing from 
that Fund. Board members shall not benefit from the Funds 
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 the U.S. Ambassador to each country (or his or 
her designee) as a liaison to the Board. The legislation also 
states that the President may appoint two additional liaisons 
to the Board--one from a non-government organization with 
experience in the country of operation, and the other with 
technical expertise--of which, only one can be a non-citizen of 
the United States. The committee expects that these liaisons 
could be a helpful resource for the Board as it executes its 
independent investment decision-making responsibility. At least 
15 days prior to designating an organization to operate either 
of the funds, the President must notify Congress of the 
organization's identity, the names and qualifications of the 
members of the board of directors, the procedures the funds 
will apply to curtail money-laundering and terrorist financing 
activities, and the amount of the grant intended to fund the 
Enterprise Funds.
    The legislation would make applicable to the Egyptian-
American and Tunisian-American Enterprise Funds 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 Funds 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 Funds may conduct public offerings or private 
placements for the purpose of soliciting and accepting 
additional capital.
    The Funds' accounts must be audited annually by a U.S. 
licensed public accountant and recipients of support from the 
Funds will keep independent records of their use of Fund 
assistance. The Funds must produce an annual report of their 
activities, available to the public on the Internet, providing 
a description of each investment or project supported by each 
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 Funds 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 administrative 
expenses of the Funds should not exceed 5 percent of total 
enterprise fund capital commitment, and while the committee 
recognizes the need for quality advice, legal services and 
accounting services to be available for the Funds, it is the 
intention that a competitive process be in put place for the 
Funds before hiring such outside companies to ensure 
administrative expenses are fair, reasonable, and not 
dissimilar to a comparable industry average for expenses of 
similar investment funds. The legislation directs the 
Government Accountability Office (GAO) to conduct an assessment 
of the Funds' activities every three years and provide a report 
to the above-mentioned congressional committees.
    The legislation directs the Funds to end their reinvestment 
cycles not later than December 31, 2021, unless the Secretary 
of State, in consultation with the Administrator of the USAID, 
and after consultation with the above-mentioned congressional 
committees, determines that the Funds should be extended. 
Following the cessation of the re-investment cycle, it is 
expected that, similar to the original Enterprise Funds created 
by the SEED Act, the Egyptian-American and Tunisian-American 
Enterprise Funds would be dissolved. The legislation directs 
the assets of the Funds at the time of its dissolution to be 
returned to the General Fund of the U.S. Treasury.
    The committee, noting the April 2011 constructive trip of 
previous Enterprise Fund Board Members to Haiti in advance of 
the creation of a Haitian-American Enterprise Fund, suggests 
that similar preparatory measures be taken for the Egyptian-
American Enterprise Fund and Tunisian-American Enterprise Fund.

                            V. 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, May 24, 2011.

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. 618, a bill to 
promote the strengthening of the private sector in Egypt and 
Tunisia.
    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.

                                ------                                

               Congressional Budget Office Cost Estimate

                                                      May 24, 2011.

                                 S. 618

A Bill To Promote the Strengthening of the Private Sector in Egypt and 
                                Tunisia

AS ORDERED REPORTED BY THE SENATE COMMITTEE ON FOREIGN RELATIONS ON MAY 
                                17, 2011

    S. 618 would authorize the President to establish 
enterprise funds for Egypt and Tunisia to stimulate private-
sector development in those countries. The funds would be 
similar to enterprise funds established in the 1990s for 
several countries and would provide technical and financial 
assistance to the private sector. CBO estimates that enacting 
the bill would increase direct spending by $80 million over the 
2012-2016 period; therefore, pay-as-you-go procedures apply.
    The bill would require the Government Accountability Office 
to assess the funds' activities and report to the Congress 
periodically. CBO estimates that the cost of implementing that 
requirement would be less than $500,000 over the 2012-2016 
period, assuming the availability of appropriated funds. 
Enacting the bill would not affect revenues.
    The Statutory Pay-As-You-Go Act of 2010 establishes budget 
reporting and enforcement procedures for legislation affecting 
direct spending or revenues. The net changes in outlays that 
are subject to those pay-as-you-go procedures are shown in the 
following table.

                                                        NET INCREASE IN THE DEFICIT DUE TO S. 618
                                                        [By fiscal year, in millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             2011    2012    2013    2014    2015    2016    2017    2018    2019    2020    2021   2011-2016  2011-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
Statutory Pay-As-You-Go Impact............      0      27      27      26       0       0       0       0       0       0       0        80         80
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The bill would authorize the President to use existing 
appropriations to establish the funds and pay for their 
administrative expenses. Based on information from the 
Department of State, CBO expects that the department would use 
existing amounts in the Economic Support Fund program to 
implement the bill and estimates that the department would 
spend $60 million to establish the Egyptian fund and $20 
million on the Tunisian fund. Because no new appropriations 
would be required, those costs would be considered direct 
spending. CBO further estimates that the enterprise funds would 
be capitalized over three years with separate installments of 
funding.
    The bill would require both funds to be terminated no later 
than December 31, 2021 (unless the Secretary of State 
determines they should be extended) and the assets of the funds 
at the time of dissolution to be returned to the Treasury. 
Other enterprise funds have generally had a life span of 10 to 
15 years. Some had assets that exceed the original funding 
while others have experienced losses. Because of the 
uncertainty surrounding the term and performance of the funds, 
CBO cannot provide an estimate of any potential receipts; 
furthermore, any such receipts would probably be received 
outside the 10-year budget period.
    S. 618 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

    Pursuant to Rule XXVI, paragraph 12 of the Standing Rules 
of the Senate, the committee has determined that there are no 
changes in existing law made by the bill, as reported.

                                  
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