II 

111TH CONGRESS 

2D SESSION S. 3665 

To promote the strengthening of the private sector in Pakistan. 

IN THE SENATE OF THE UNITED STATES 

JULY 29, 2010 

Mr. LUGAR (for himself and Mr. KERRY) introduced the following bill; which 

was read twice and referred to the Committee on Foreign Relations 

A BILL 

To promote the strengthening of the private sector in 

Pakistan. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Pakistani-American 

5 Enterprise Fund Act’’. 

6 SEC. 2. FINDINGS. 

7 Congress makes the following findings: 

8 (1) Pakistan currently enjoys a strong private 

9 sector and entrepreneurial spirit. The country is 

10 working to consolidate macroeconomic stability and 

11 initiate structural reforms with support from the 


tjames on DSKG8SOYB1PROD with BILLS
2 

•S 3665 IS

1 International Monetary Fund’s (IMF) Stand-By 

2 Agreement. A more stable economy in Pakistan will 

3 help support Pakistan’s robust private sector. Enter4 prise Funds established in partnership with United 

5 States partners like Poland, Hungary, Albania, Rus6 sia, and other European countries have proven bene7 ficial to their economies. Creating a similar fund in 

8 close partnership with the people of Pakistan could 

9 help sustain and expand their reform efforts as well 

10 as empower entrepreneurs in Pakistan with the re11 sources required to create desperately needed em12 ployment opportunities. 

13 (2) A 2009 assessment released by the IMF 

14 noted, ‘‘Economic growth in Pakistan is starting to 

15 recover; large-scale manufacturing output has start16 ed to increase, the improvement in the global econ17 omy has helped manufacturing exports, and the pri18 vate sector credit growth has picked up somewhat as 

19 businesses rebuild their working capital. Looking 

20 ahead, a resumption of higher growth is needed to 

21 raise living standards and will require improvements 

22 in the business climate to stimulate higher invest23 ment by local and foreign investors.’’ 

24 (3) Pakistan has seen a dramatic fall in foreign 

25 direct investment (FDI) in recent years. According 


tjames on DSKG8SOYB1PROD with BILLS
3 

•S 3665 IS

1 to Pakistan’s Board of Investment (BOI), foreign di2 rect investment dropped by 40.7 percent from the 

3 July 2008–June 2009 time period to the July 2009– 

4 June 2010 time period. Pakistan secured 

5 $5,139,600,000 in FDI in 2006–2007 and 

6 $5,152,800,000 in 2007–2008, but the amount 

7 dropped to $2,205,000,000 in 2009–2010. 

8 (4) According to the Asian Development Bank’s 

9 2008 report on Pakistan’s private sector, Pakistan’s 

10 private sector is by far the biggest contributor to 

11 GDP and is the biggest employer in the country. Ac12 cording to Pakistan’s Small and Medium Sized De13 velopment Authority (SMEDA), small and medium 

14 sized enterprises (SMEs) constitute nearly 90 per15 cent of all enterprises in Pakistan, employ 80 per16 cent of the non-agricultural labor force, and con17 stitute an approximately 40 percent share of annual 

18 GDP. Pakistan’s SMEs are particularly constrained 

19 by lack of access to financial and other resources. 

20 Accelerating the growth of existing SMEs and pro21 viding innovative entrepreneurs with resources to set 

22 up new ventures has the potential to significantly 

23 contribute to stability through job creation and sup24 port overall economic success in Pakistan. 


tjames on DSKG8SOYB1PROD with BILLS
4 

•S 3665 IS

1 (5) The shortage of risk capital in Pakistan 

2 stems from the effects of the global economic crisis 

3 but has been greatly exacerbated by both political 

4 and security challenges plaguing the country. Estab5 lishing an enterprise fund could help reinforce finan6 cial institutions within the country, provide debt and 

7 equity investment for commercially viable SMEs, 

8 provide debt and equity investment in private sector 

9 entities and initiatives in the energy sector, and 

10 make the investment environment more attractive to 

11 domestic and international investors. 

12 (6) Creation of an enterprise fund could pro13 mote the growth of the private sector in Pakistan 

14 while simultaneously incentivize companies to oper15 ate within the formal economy. Estimates by the 

16 IMF and World Bank suggest that the informal or 

17 underground economy in Pakistan far exceeds the 

18 fiscal activity government institutions are able to 

19 systematically measure. Any company or business 

20 supported by the enterprise fund would be required 

21 to operate within specific legal and accounting 

22 standards and comply with applicable tax codes. In 

23 a country with extremely low levels of tax collec24 tion—less than 2 percent of the population is be25 lieved to pay personal taxes—leadership by the priVerDate Mar 15 2010 02:28 Jul 30, 2010 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S3665.IS S3665

tjames on DSKG8SOYB1PROD with BILLS
5 

•S 3665 IS

1 vate sector could set an invaluable example within 

2 the country. 

3 (7) To help foster and support the fledgling pri4 vate sector after the fall of the Berlin Wall, Con5 gress, through enactment of the Support for East 

6 European Democracy (SEED) Act of 1989 (22 

7 U.S.C. 5401 et seq.) and the FREEDOM Support 

8 Act (22 U.S.C. 5801 et seq.), authorized nearly 

9 $1,200,000,000 for the United States Agency for 

10 International Development (USAID) to establish 10 

11 new investment funds, collectively known as the 

12 ‘‘Enterprise Funds’’, throughout Central and East13 ern Europe and the former Soviet Union. These 

14 funds channeled funding into over 500 enterprises in 

15 19 countries, leveraged an additional 

16 $5,000,000,000 in private investment capital from 

17 outside the United States Government, provided sub18 stantial development capital where supply was lim19 ited, created or sustained over 260,000 jobs through 

20 investment and development activities, funded 

21 $74,000,000 in technical assistance to strengthen 

22 the private sector, and is expected to recoup 137 

23 percent of the original USAID funding. 

24 SEC. 3. PURPOSES. 

25 The purposes of this Act are— 


tjames on DSKG8SOYB1PROD with BILLS
6 

•S 3665 IS

1 (1) to promote the private sector in Pakistan, 

2 while considering the development impact of invest3 ments and profitability of those investments, par4 ticularly in small- and medium-sized enterprises, the 

5 energy and electricity sector, and joint ventures with 

6 participants from the United States and Pakistan; 

7 (2) to promote policies and practices conducive 

8 to strengthening the private sector in Pakistan 

9 through measures including loans, microloans, equity 

10 investments, insurance, guarantees, grants, feasi11 bility studies, technical assistance, training for busi12 nesses receiving investment capital, and other meas13 ures; 

14 (3) to promote good corporate governance and 

15 transparency in Pakistan, foster competition, cata16 lyze productivity improvements in existing busi17 nesses, and strengthen local capital markets; 

18 (4) to promote security through job creation in 

19 the private sector in Pakistan and to further the cre20 ation of a middle class in Pakistan; and 

21 (5) to promote private sector adherence to tax 

22 codes in Pakistan and, where appropriate, foster im23 provements in the tax code and regulatory environ24 ment in Pakistan in order to support economic de25 velopment. 


tjames on DSKG8SOYB1PROD with BILLS
7 

•S 3665 IS

1 SEC. 4. PAKISTANI-AMERICAN ENTERPRISE FUND. 

2 (a) DESIGNATION.—The President is authorized to 

3 designate a private, nonprofit organization based in Paki4 stan (to be known as the ‘‘Pakistani-American Enterprise 

5 Fund’’) to receive funds and support made available under 

6 this Act after determining that such organization has been 

7 established for the purposes specified in section 3. The 

8 President should make such designation only after con9 sultation with the leadership of each House of Congress. 

10 (b) BOARD OF DIRECTORS.— 

11 (1) APPOINTMENT.—The Pakistani-American 

12 Enterprise Fund shall be governed by a Board of 

13 Directors, which shall be comprised of 4 private citi14 zens of the United States and 3 private citizens of 

15 Pakistan, appointed by the President of the United 

16 States in consultation with the Government of Paki17 stan. 

18 (2) QUALIFICATIONS.—Members of the Board 

19 of Directors shall be selected from among people 

20 who have had successful business careers and dem21 onstrated experience and expertise in international 

22 and particularly emerging markets, such as private 

23 equity or venture capital investment, banking, fi24 nance, strategic business consulting, or entrepre25 neurial business creation, and backgrounds in priVerDate Mar 15 2010 02:28 Jul 30, 2010 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S3665.IS S3665

tjames on DSKG8SOYB1PROD with BILLS
8 

•S 3665 IS

1 ority business sectors of the Fund, such as the en2 ergy sector. 

3 (3) ADDITIONAL USAID NON-VOTING BOARD

4 MEMBER.—The President shall appoint one official 

5 or employee of USAID as an additional non-voting 

6 member of the Board. 

7 (4) ADDITIONAL NON-GOVERNMENT NON-VOT8 ING BOARD MEMBERS.— 

9 (A) AUTHORITY TO APPOINT.—Upon the 

10 recommendation of the Board of Directors, the 

11 President may appoint up to 2 additional non12 voting members to the Board in addition to the 

13 members specified in paragraphs (1) and (3), of 

14 which not more than one may be a non-citizen 

15 of the United States. 

16 (B) NGO COMMUNITY.—One of the addi17 tional non-voting Board members shall rep18 resent the nongovernmental organization com19 munity, with significant prior experience in de20 velopment and an understanding of develop21 ment policy priorities for Pakistan. 

22 (C) TECHNICAL EXPERTISE.—One of the 

23 additional non-voting Board members shall have 

24 extensive demonstrated industry, sector, or 


tjames on DSKG8SOYB1PROD with BILLS
9 

•S 3665 IS

1 technical experience and expertise in a priority 

2 investment sector for the Fund. 

3 (c) GRANTS.— 

4 (1) IN GENERAL.—The President may use 

5 funds appropriated pursuant to section 102 of the 

6 Enhanced Partnership with Pakistan Act of 2009 

7 (22 U.S.C. 8412) to carry out the purposes specified 

8 in section 3 through the Pakistani-American Enter9 prise Fund and to cover administrative expenses of 

10 the Fund. 

11 (2) ELIGIBLE PROGRAMS AND PROJECTS.— 

12 Grants awarded under this section may only be used 

13 for programs and projects that support the purposes 

14 set forth in section 3. 

15 (3) COMPLIANCE REQUIREMENTS.— 

16 (A) IN GENERAL.—Grants may not be 

17 awarded to the Pakistani-American Enterprise 

18 Fund under this section unless the Fund agrees 

19 to comply with the requirements under this sec20 tion. 

21 (B) GRANT AGREEMENT.—The grant 

22 agreement between the United States Agency 

23 for International Development and the Paki24 stani-American Enterprise Fund shall state 

25 that the Fund shall liquidate its assets and disVerDate Mar 15 2010 02:28 Jul 30, 2010 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S3665.IS S3665

tjames on DSKG8SOYB1PROD with BILLS
10 

•S 3665 IS

1 solve not later than December 31, 2020, unless 

2 the Administrator of the United States Agency 

3 for International Development determines, after 

4 consultation with the appropriate congressional 

5 committees, that the Fund should be extended. 

6 (C) PREVENTION OF MONEY LAUNDERING

7 AND TERRORIST FINANCING.—The grant agree8 ment between the United States Agency for 

9 International Development and the Pakistani10 American Enterprise Fund shall state that the 

11 Fund shall comply with procedures specified by 

12 the Secretary of State to ensure that grant 

13 funds are not provided by the Fund to or 

14 through any individual, private or government 

15 entity, or educational institution that advocates, 

16 plans, sponsors, engages in, or has engaged in, 

17 money laundering or terrorist activity or, with 

18 respect to a private entity or educational insti19 tution, that has as a principal officer of the en20 tity’s governing board or governing board of 

21 trustees any individual that has been deter22 mined to be involved in or advocating money 

23 laundering or terrorist activity or determined to 

24 be a member of a designated foreign terrorist 

25 organization. 


tjames on DSKG8SOYB1PROD with BILLS
11 

•S 3665 IS

1 (D) DISPOSITION OF ASSETS.—The assets 

2 of the Pakistani-American Enterprise Fund at 

3 the time the Fund is dissolved shall be returned 

4 to the General Fund of the United States 

5 Treasury and used to reduce the debt of the 

6 United States, unless otherwise specified by the 

7 appropriate congressional committees. 

8 (d) NOTIFICATION.— 

9 (1) IN GENERAL.—Not later than 15 days be10 fore designating an organization to operate as the 

11 Pakistani-American Enterprise Fund pursuant to 

12 subsection (a), the President shall provide the infor13 mation described in paragraph (2) to the Chairman 

14 and Ranking Member of the appropriate congres15 sional committees. 

16 (2) INFORMATION.—The information described 

17 in this paragraph is— 

18 (A) the identity of the organization to be 

19 designated to operate as the Pakistani-Amer20 ican Enterprise Fund pursuant to subsection 

21 (a); 

22 (B) the names and qualifications of the in23 dividuals who will comprise the initial Board of 

24 Directors; and 


tjames on DSKG8SOYB1PROD with BILLS
12 

•S 3665 IS

1 (C) the procedures referred to in sub2 section (c)(3)(C) that will apply to the Paki3 stani-American Enterprise Fund for purposes 

4 of curtailing money-laundering and terrorist fi5 nancing activities. 

6 (e) PUBLIC DISCLOSURE.—Not later than one year 

7 after the entry into force of the initial grant agreement 

8 under this section, and annually thereafter, the Fund shall 

9 prepare and make available to the public on an Internet 

10 website administered by the Fund a report on the Fund’s 

11 activities during the previous year, including— 

12 (1) a description of each investment or project 

13 supported by the Fund, including each type of as14 sistance provided in accordance with section 3(2); 

15 (2) the amounts invested by the Fund in each 

16 company or project; 

17 (3) the amounts of additional private invest18 ments made in each company or project; and 

19 (4) the amounts of any profits or losses realized 

20 by the Fund in connection with each such company 

21 or project. 

22 SEC. 5. REPORTS. 

23 (a) ADMINISTRATIVE EXPENSES.—Not later than 

24 one year after the date of the enactment of this Act, and 

25 annually thereafter until the Fund is dissolved, the Fund 


tjames on DSKG8SOYB1PROD with BILLS
13 

•S 3665 IS

1 shall submit to the appropriate congressional committees 

2 a report detailing the administrative expenses of the Fund. 

3 (b) GAO REPORT.—Not later than 3 years after the 

4 date of the enactment of this Act, and every 3 years there5 after until the Fund is dissolved, the Comptroller General 

6 of the United States shall submit to the appropriate con7 gressional committees a report assessing the activities of 

8 the Fund in achieving the stated goals of promoting pri9 vate sector investment and employment in Pakistan and 

10 identifying those institutional or regulatory constraints 

11 that inhibit a more effective application of Fund resources. 

12 SEC. 6. OPERATION PROVISIONS. 

13 (a) APPLICABLE PROVISIONS.—Subsections (d)(5), 

14 (g), (h), (i), (k), (l), (m), (n), (o), and (p) of section 201 

15 of the Support for East European Democracy (SEED) 

16 Act of 1989 (22 U.S.C. 5421) shall apply with respect 

17 to the Pakistani-American Enterprise Fund in the same 

18 manner as such provisions apply to Enterprise Funds des19 ignated pursuant to subsection (d) of such section. 

20 (b) REINVESTMENT.—Returns on investments of the 

21 Pakistani-American Enterprise Fund and other payments 

22 to the Fund may be reinvested in projects carried out by 

23 the Fund without further appropriation by Congress. 


tjames on DSKG8SOYB1PROD with BILLS
14 

•S 3665 IS

1 SEC. 7. BEST PRACTICES AND PROCEDURES. 

2 To the maximum extent practicable, the Board of Di3 rectors of the Pakistani-American Enterprise Fund should 

4 adopt the best practices and procedures used by Enter5 prise Funds, including those for which funding has been 

6 made available pursuant to section 201 of the Support for 

7 East European Democracy (SEED) Act of 1989 (22 

8 U.S.C. 5421). 

9 SEC. 8. EXPERIENCE OF OTHER ENTERPRISE FUNDS. 

10 In implementing this Act, the President shall ensure 

11 that the Articles of Incorporation of the Pakistani-Amer12 ican Enterprise Fund (including provisions specifying the 

13 responsibilities of the Board of Directors of the Fund), 

14 the terms of United States Government grant agreements 

15 with the Fund, and United States Government oversight 

16 of the Fund are, to the maximum extent practicable, con17 sistent with the Articles of Incorporation of, the terms of 

18 grant agreements with, and the oversight of the Enter19 prise Funds established pursuant to section 201 of the 

20 Support for East European Democracy (SEED) Act of 

21 1989 (22 U.S.C. 5421) and comparable provisions of law. 

22 SEC. 9. APPROPRIATE CONGRESSIONAL COMMITTEES DE23 FINED. 

24 In this Act, the term ‘‘appropriate congressional com25 mittees’’ means— 


tjames on DSKG8SOYB1PROD with BILLS
15 

•S 3665 IS

1 (1) the Committee on Foreign Relations of the 

2 Senate; 

3 (2) the Committee on Appropriations of the 

4 Senate; 

5 (3) the Committee on Foreign Affairs of the 

6 House of Representatives; and 

7 (4) the Committee on Appropriations of the 

8 House of Representatives. 

Æ 


tjames on DSKG8SOYB1PROD with BILLS