Project memorandum : New Independent States -- enterprise fund (110-0011)

The Russian-American Enterprise Fund will begin in FY 1993, the Ukrainian in FY 1994 (provided the Congressional hold on the latter Fund is lifted). The Funds will be investment organizations incorporated in the United States as nonprofit organizations and having offices both in the United States and in host countries. Each Fund will have a Board of Directors composed of 7 U.S. businesspersons and regional experts and up to 6 host country counterparts; neither the U.S. nor the host country government will participate in decisionmaking related to Fund administration. Many of the usual restrictions and regulations placed on traditional forms of U.S. assistance will not apply to the Funds so they may retain flexibility needed to respond to market signals on a timely basis. The Funds will support the creation or expansion of a wide array of small and medium-scale enterprises in the two countries, as well as joint ventures with U.S. firms, thereby serving as a vehicle to attract foreign investment and introduce Western business practices into the NIS. Clients will generally be firms with 100-1,000 employees, and investments will be diversified across sectors, size of investment, and level of risk. Support will take the form either of a loan (possibly through the intermediation of local commercial banks), an equity/venture capital program, or some combination of the two (e.g., convertible debentures). As a rule, the Funds will take only a minority position in enterprises in which they invest, requiring a majority contribution from host country entrepreneurs and/or their joint partners. Profits generated by the Funds will be reinvested in new projects. The Funds will also provide TA in support of their investments. Amendment of 2/28/94 increases funding from $400 million to $741 million, to: (1) establish two new Funds: (a) the Central Asian-American Enterprise Fund (CAAEF), serving Kazakhstan and the Kyrgyz Republic initially, and possibly Tajikistan, Uzbekistan, and Turkmenistan as well; and (b) the Fund for Large Enterprises in Russia (FLER), which will be the principal bilateral component of the U.S. contribution to the G-7 nations" multilateral Special Privatization and Restructuring Program (SPRP), and will meet the needs of firms with 1,000-10,000 employees; (2) authorize a West NIS Enterprise Fund to supersede the Ukrainian-American Enterprise Fund and serve Ukraine, Moldova, and Belarus; and (3) support two multilateral funds to which the U.S. Government committed at the 7/93 Tokyo G-7 Summit -- the European Bank for Reconstruction and Development"s Russia Small Business Fund; and a G-7 multilateral equity fund to provide capital to recently privatized small and medium-sized enterprises. (PD-ABH-870)