By Peter K. Semler.
Washington DC, 20 February 2013:
Tunisia, the Arab world’s first democracy, is under threat not because of a romp . . .[restrict]group of Salafists and other extremists, but well-meaning, but tragically misguided, economic policies originating from Washington, DC.
The current turmoil in a country that could easily become a new Portugal in terms of GDP in the next five years can be traced directly to a public-private policy initiated by Secretary of State Hillary Clinton.
While Secretary Clinton will be remembered for a legacy of important diplomatic achievements, her failure to understand the dynamics of private sector investment is responsible in part for Tunisia’s democracy now being at risk, especially in the aftermath of dozens of foreign workers being killed in Algeria and the murder of US Ambassador Chris Stevens and three other Americans in Benghazi.
The real failure can be traced to a decision on her part to mandate non-profits and non-government organizations to promote private sector investment in the region with the tragic consequence of “mixing the message” put forth by US Treasury Secretary Timothy Geithner at the London G-20 summit almost four years ago.
During the meeting in April 2009, Geithner successfully carried his visionary strategy of unblocking the economic impasse of developed economy through aggressive investment in emerging markets.
There are numerous dynamic private sector companies in Tunisia, Algeria and Libya such as Tunisia’s Coficab automotive parts supplier, Libya’s Al-Naseem dairy group and Algeria’s Juritex human resource group that can provide returns that have only been seen since the fall of the Soviet block and in a timeframe of less than five years.
However, the dynamic nature of these companies is sadly ignored as US and Western-sponsored NGO and non-profits, such as the PBN Napeo partnership between the State Department and the Aspen Institute business event group, Middle East Investment Initiative (MEII), the Western Union funded Irex and the Tunisian American Young Professionals, appear incapable of judging a good company from a mediocre one.
While these groups may seem well-meaning, they have inflicted enormous damage and put current investments by companies in the US, Europe and the gulf sovereign wealth funds in Abu Dhabi and Doha at risk.
PBN Napeo, which has set up groups within Morocco, Tunisia and Libya to promote investments to the area is rife with conflicts of interest between PBN Napeo country representatives, the Aspen Institute itself and State Department officials.
One example of this was Aspen Institute’s decision to block a request of having one of its board members and major funding sources, Duke Energy, help enable an important regional and international renewable energy conference in Tunis held last November.
Tunisia is positioning itself to become the new global center of renewable energy in the world as oil producers such as Algeria and Libya are set to become the largest consumers of renewable energy in the world. Africa’s largest country and Algerian oil and gas major, Sonatrach, is looking to produce 20% of the country’s future energy needs with renewables while Libya has targeted 6% over the near-to-medium term.
Duke Energy, as the United States’ largest utility following its takeover of Progress, is uniquely positioned in the renewable energy space thanks to the leadership of Duke Energy outgoing CEO Jim Rogers in forming a wide-ranging solar energy partnership with Chinese solar energy concern ENN.
In June, Tunisian Prime Minister Hamadi Jebali made an open request to US State Department Undersecretary of State and former Goldman Sachs Deputy Chairman Robert Hormats to bring US renewable companies to Tunisia.
Duke Energy has not yet invested in the North African renewable market but Chinese and Korean companies are now set to take over a lion’s share of this huge market.
Another request by Tunisian Transport Minister Abdelkarim Harouni and the African Development Bank US representative Walter Jones to have Federal Express take over the modern Enfidha Airport and make it its African hub fell on deaf ears by State and Fedex Washington representatives. In fact, the government request never reached the ear of Fedex chairman Fred Smith and instead languished in the in-tray of DC based government and public affairs “specialists.”
The government of Tunisia is planning a deep water port in Enfidha and has been working with the European Bank for Reconstruction and Development on the project.
The US Embassy in Tunis, through a mid-level staffer, dismissed the request by the minister stating: “Fedex already visited Tunisia and the government said it wasn’t interested.” The staffer failed to comprehend that it was the previous non-elected government that rejected Fedex’s overture and not the currently elected government, according to a participant at the meeting.
Another example of mixed messages is that of the non-profit Middle East Investment Initiative (MEII), whose board of directors include former Secretary of State and Albright Group founder, Madeleine K. Albright; Elizabeth A. Liechty, senior partner at the Charter Financial Group; William E. Mayer who is a senior partner of Park Avenue Equity Partners; former Undersecretary of State for Political Affairs and senior vice president for International Relations at Boeing Corporation, Amb. Thomas Pickering; DLA Piper partner and Aspen Institute general counsel, Jim Pickup.
MEII should be an excellent private equity firm for the new growth markets of North Africa and those of the Middle East, such as Iraq, but it hampers development because of its non-for-profit status and obscures successful business transactions such a DLA Piper’s great work in unfreezing Libyan assets in Europe and new sales by Boeing in these markets.
For example, an MEII representative was unaware that he managed to offend a group of leading Tunisian businessmen, the Tunisian Central Bank governor, Deputy Prime Minister for Economic Affairs, Ridha Saidi, by spending his time during a high level conference outlining private equity investment finance opportunities offered by the AfDB, IFC and EBRD, by chatting almost exclusively with a suit-less and tieless American representative of a the US media NGO IREX, which receives the bulk of its funding from Western Union.
Meanwhile, The Albright Group — an already highly successful and well-funded emerging market private equity group with some USD 700m in investments — is rendering both fund investors and North Africa a disservice by not entering the North African market directly as Albright Capital Management (ACM).
There are even GOP-backed NGOs, such as Koch Industries affiliated Friends of Libya, which are also attempting to use tax exempt status to subsidize business development costs of a proposed entrepreneur incubator.
Tunisia, Libya and Algeria want investment and not charity from the United States and the West. They want to see US, European and Asian companies come to their markets, be profitable and create jobs and opportunities for lasting prosperity and stability.
By stark contrast, Honeywell CEO Dave Cote took the leadership decision to go ahead with a planned visit to Tunis last October, notwithstanding the murder of Ambassador Stevens and the torching of the US Embassy in Tunis.
Cote’s visit to Tunis was the first by a Honeywell CEO and marked the successful operations of the company’s new corporate headquarters in the country serving the markets of North and West Africa.
GE too is making and continues to make important investment in the area and it is attracting the interest of major private equity groups such as Carlyle, APAX and Terra Firma as word filters through regarding the burgeoning deal flow in the region.
Comer Holding, the Southfield Michigan-based African-American owned auto-parts group and US trucking giant Penske have all expressed initial interest in examining Tunisia as a gateway to Europe, North Africa and West Africa.
One-Tech, a Tunisian automotive parts group which is set to double in size in the next few years, is looking to add a US private equity investor to its current minority investor IFC. Coficab, a dynamic USD 1.1bn North African multinational, which supplies 6% of Lear Corporation global sales and USD 700m in parts to Delphi Automotive, is interested in possibly acquiring a US parts group in the United States.
Algeria is now home to a burgeoning dynamic small- and medium- size business sector, many of which are lead and managed by women, such as the Juritex human resource group.
In the Libyan cities of Misurata and Zliten there are a number of SME companies, such as the Al Naseem dairy group, that can easily become the next multinationals of the region and an economic powerhouse similar to the Veneto region of Italy.
Microsoft founder Bill Gates has just made the greatest contribution to stability in the region by his very shrewd move to invest USD 1bn in the Sawiris family owned and Egypt-listed Orascom Construction through his Cascade Investment LLC, along with Southeastern Asset Management and Davis Selected Advisers.
Allen & Co, Barclays Plc, Citigroup Inc, Rabobank International acted as international advisers on Bill Gates’ investment while Cairo-based CI Capital Investment Banking was the exclusive local financial adviser, according to a report from Bloomberg.
Orascom is not only set to win a large part of the hundreds of billions of new infrastructure contracts of the new Libya and North Africa, but the tens of thousands of jobs that will be created could determine Egypt’s future as a viable stat
Ambassador Stevens took extraordinary risks because he believed in the Libyan revolution and was profoundly aware that only with cross border private sector investments can stability be secured.
The most powerful tool that US Secretary of State John Kerry has at hand is the telephone.
A few direct phone calls to US CEOs, the head of the major US investment banks and private equity groups can do much more to promote the United States as a friend in the Arab world than any summit, conference or bilateral.
All North Africa is asking for is investors who can join them on the road to shared prosperity. The Marshall Plan did this in war-ravaged Europe and we can do the same in North Africa.
Peter K. Semler is the Chief Executive Editor and founder of Capitol Intelligence Group.
This article first appeared on http://www.capitolintelgroup.com/news3.html [/restrict]