 Ladies and gentlemen, good morning and welcome to the Center for Strategic and International Studies. If I could encourage you those in the back to please take their seats, we'll get started. Thank you for joining us this morning. My name is Scott Miller. I'm the Sholl Chair in International Business. We're on the International Business Program here at CSIS and we're delighted to have you here this morning to discuss APEC and the infrastructure investment opportunities and challenges. As I begin I'd like to thank the two other organizations who are co-sponsors of this program. The National Association of Manufacturers and the National Center for APEC. We've been pleased to work with them as partners. You'll see their representatives throughout the morning and we'd be delighted to have this working relationship with them. Also, I want to acknowledge that today's event has been made possible by a grant from Chevron. Economic growth and job creation rely on long-term investment in critical infrastructure in energy and transport and water communications in particular. The McKinsey Global Institute estimates that between now and the year 2030, which is 18 years from now, just to keep pace with population growth and GDP growth, the world will need to invest 57 trillion with a T dollars in critical infrastructure. Now to put that in perspective, the past 18 years the world has invested about 30 trillion so it's a 60% increase over the next 18 years versus the previous rate in order just to keep up with the growth of population and GDP. In infrastructure, as in most kinds of investment, demand typically exceeds supply. That's especially true since the 2007-2009 global financial crisis and the consequence, slow growth in developed economies and fiscal deleveraging that takes place in the United States and elsewhere. The Asia Pacific Economic Cooperation Group has focused on investment in the Asia Pacific for nearly 20 years. It was 1994 that APEC began its investment experts group. An APEC Business Advisory Council, the business component of APEC, has intensified work on this program since 2008. In 2011, the APEC Business Advisory Council and the National Association of Manufacturers published a report called Investing for Growth. And in 2013, this year, the work plan of the APEC Business Advisory Council includes developing a checklist for the enablers of infrastructure investment. Today's conference will examine the benefits of infrastructure investment and consider views from the U.S. private sector on both the challenges and opportunities in the Asia Pacific region. To start things this morning, we are delighted to host His Excellency Jose Cuisia, Ambassador of the Republic of the Philippines to the United States. The ambassador has been in Washington as ambassador to the White House for just a little over two years. He has a long career in banking and insurance prior to his appointment as ambassador, and he served ably as both the commissioner of the Philippine Social Security System and as a governor of the central bank of the Philippines. We are delighted to be with him this morning. He will look forward to his presentation and follow with a panel discussion. Mr. Ambassador. Thank you, Scott, for that very kind introduction. Distinguished panelists, Mr. Scott Miller, our distinguished guests. Ladies and gentlemen, good morning to all of you. As you will see, I am focusing on opportunities and challenges in infrastructure investment in the Philippines because that is what I am most familiar, as I mentioned to Scott Miller. I hope my other panelists will recover other countries and hopefully APEC as a whole. Thank you to CSIS and to Mr. Scott Miller for inviting me to share with you the infrastructure challenges and opportunities in the Philippines. In 2005, let me first show you the outline of my presentation today. Here you will see our Covering Infrastructure Challenges in the Philippines with Governor's Agenda of the Keen Administration, Opportunities in Infrastructure Projects, Attracting Investments in Infrastructure and the Philippines' Hosting of APEC 2015. In 2005, the World Bank conducted a study on the infrastructure challenges in the Philippines and found the following infrastructure challenges, low spending on infrastructure, inefficient use of existing resources, poor business environment, unsatisfactory public sector performance, lack of long-term planning and coordination of infrastructure, lack of a healthy framework for suitable financing opportunities for infrastructure and a decrease in private sector involvement. The response of the Philippines to this infrastructure challenges was follows. Increased infrastructure spending from 1% in 2005 to 2.6% of GDP in 2012 and the intent was, of course, to continue to increase this up to about 5% of GDP, which is the benchmark, by 2016. It also adopted the 5Rs, right project, right quality, right people, right cost and right on time. These are the, of course, guiding posts. Improved business environment, transparency and anti-corruption was, of course, strengthened streamlining and online processes were, of course, adopted also by the government. Now, the underlying principle of the Philippines' transformation is President Sakino, good governance is good economics mantra. Embodied in the Philippine Development Plan are goals to accelerate sustainable infrastructure, development and achieve inclusive growth. Okay. So you see from this slide the improving economic environment in the Philippines. We're proud of our 6.6% GDP growth in 2012, the highest in Southeast Asia. And this next for four years where the government is projecting a growth of 7% to 8%. Through improved revenue and tax efforts, we're increasing resources for infrastructure spending and social spending. As you will see from this slide, the last two years particularly, there's been a significant increase in terms of tax revenues. The improved business climate has led to increased investments. Manufacture being among the top five investment sectors. You'll see from this slide in better competitiveness rankings, we improved then not just to 65th place in this world economic forum, global competitiveness report 2012-2013. So over the last two years, we've improved by 20 not just from 85 to 65. We climbed to 61st from 77th in the world economic freedom report and improved to 97th from 107th in the Heritage Foundation 2013 index of economic freedom. As I mentioned here, manufacturing has been among the top five investment sectors. It has grown from 442 to 672 billion in terms of the improved investments or in terms of level of investments over the last five years. The signing of the framework agreement on the Bang Samoro, this is the new entity that's being established in the south in Mindanao. And the signing of a final peace agreement which we hope will take place sometime this year will lead to just and lasting peace in Mindanao. Opening vast opportunities for business and investment. All infrastructure sectors have calibrated their work programs to focus on Mindanao and ensure overall inclusive growth. In terms of our energy sector, the Philippines is seeking to increase power generation and is actively promoting renewable energy investments. There are incentives that have been provided including income tax holidays, duty-free importation of renewable equipment, machinery, equipment and materials, net operating laws, carryover and other incentives. Areas in Mindanao are now being offered for oil, gas and coal exploration and development. A large part of the infrastructure budget is allocated to national roads and highways with convergence with other sectors such as tourism. As you will note from this slide, about 70% of the total budget of 144 billion is being allocated to highways. But there are also allocations for basic education facilities as well as health facilities. The Philippine government has also placed high priority on transport because of increase in resources. Most projects are locally funded. However, we still continue to rely on ODA or foreign assisted for foreign assisted projects. There are a number of foreign assisted projects as indicated here like the Puerto Princesa Airport Development, New Bohol Airport Development Project and the Bus Rapid Transit System for Cebu City as well as the Maritime Disaster Response Helicopter Acquisition Project. Water has been considered an under-invested sector despite the successful privatization of water to service Metro Manila. There's still a great need to apply integrated water resources management and to rationalize financing for Millennium Development Goal commitments. Telecoms has been largely liberalized in the 1990s but opportunities exist in internet and broadband connectivity especially urban centers outside the capital. As you will see here, 79% of the country has fiber based backbone network for domestic and international broadband connectivity. The cellular mobile telephone service is by far the most dominant telecom service and increasing e-government systems, 94% of the web presence among national government agencies. There is a need to promote more private sector investment in waste management, housing, health and education. For example, there are untapped opportunities and incentives in solid waste management and there's a huge bucklug of housing units despite high need and demand. There's no doubt we want to invest more in infrastructure through smart and transparent spending and promoting public partnerships projects which have attractive investments. For preferred activities such as agriculture and shipbuilding incentives such as tax breaks and duty exemptions apply for three to six years depending on the status of the project, if it is a pioneer project or if it is just an expansion of the of an existing project. These incentives apply to preferred and mandatory activities under the investment priority plan 2012. These incentives are further enhanced under the public-private partnership program. Repayment schemes are also available through a share in revenue under the BOT law of 1994. The proponent may likewise be repaid in the form of a share in the revenues of the project or other non-monetary payments such as but not limited to the grant of a portion or percentage of the reclaimed land. For example, I think that's just one example of a non-cash payment. Subject of course to the constitutional requirements with respect to the ownership of land. You're looking at nine, well these are again investment incentives applicable to public-private partnership projects. You're looking at nine ongoing public-private partnership infrastructure projects for 2013 and it is happening in different parts of the country. These include a roadway, the Derang, the Anghari South Luzon Expressway Link Road Project, the LRT Line 1 South Expansion, the Nayya Expressway Phase 2 Modernization of the Philippine Orthopedic Center, Rehabilitation and O&M of Angat Hydroelectric and so forth. So there are quite a number of PPP projects that are now ongoing. Infrastructure funds are also being developed. One is the Philippine Infrastructure Alliance for Infrastructure or PINA. In July 2012, the Asian Development Bank approved an equity investment in a 625 million private equity fund focused exclusively on Philippine infrastructure projects. Another in progress is the ASEAN Infrastructure Fund. As of October 2012, $450 million has been raised with 20 percent from ASEAN countries and the rest funded by ADB to promote regional connectivity. There are also financing options from American institutions such as the Millennium Challenge Corporation like Simbank and OPIC. The Millennium Challenge Corporation for example funded a $214 million out of the $434 million compact project or compact grant to finance a 224 kilometer rehabilitation of a secondary national road development project in eastern summer, one of the most depressed provinces in the country. The Philippines led by APEX senior official and the Secretary Laura Del Rosario initiated an informal discussion between senior officials on infrastructure at the sidelines of the first ABAC meeting 2013 in Makati. The aim of the informal dialogue was to come out with ways to move Indonesia's proposal on infrastructure connectivity forward. For the Philippines in particular it was an opportunity to take a lead role in infrastructure issues in preparation for its hosting APEC in 2015 and making sure that there was no redundancy and that APEC builds on its past work rather than reinvent the wheel. While the Philippines is looking at infrastructure development as a priority APEC 2015 preparations are still at an early phase. Thematic issues and priorities will be further defined after domestic and APEC consultations are undertaken. With that let me end my presentation and thank all of you for your attention. Thank you. Thank you Mr. Ambassador. That was a very comprehensive presentation and noted a couple of things. First very impressive progress by the Philippines in economic reform and the improvement in the competitiveness and economic freedom indices are particularly impressive. I also concluded while I was listening to the Ambassador that a program similar in scope is probably going on in all 21 APEC economies at this point. You have a very impressive overall program. You have a budget, you have a plan and multiple approaches. The other thing was interesting about the Ambassador's presentation was the many different approaches to getting the infrastructure development including public-private partnerships. While that's somewhat unfamiliar in the United States, I will tell you the United States is believe it or not doing infrastructure and public-private partnerships. If you want to watch this happen go to Louisville, Kentucky. In Louisville, Kentucky there are two bridges being built between Indiana and Kentucky over the Ohio River. There are ones in the city ones out in the suburbs because different states, Kentucky controlled the city bridge and Indiana controlled the the bridge out in the suburbs. They had different approaches and Indiana law permits public-private partnership. So what you have are two bridges being built on the same timetable with the same general contractor. It's an Illinois general contractor building both bridges. One of them classic public sector infrastructure financing, the other public-private partnerships. So watch this space see who's done on time, see who's done under budgets and what might happen in this circumstance. But it's a great bit of a laboratory of democracy going on in the city of Louisville. But the public-private partnerships are becoming a more and more important piece of what's going on to close the gap between demand and supply in infrastructure. I'm pleased to be joined by two panelists this morning. My colleague Ted Osias who is a senior state department visiting fellow here at CSIS. Ted is a longtime foreign service officer, most recently the deputy chief of mission at the U.S. Embassy in Jakarta, but also served as political counselor in New Delhi before that and has had sort of a career-long tour through across Asia. Also would welcome Cameron Kahn. Cameron is program director for Global Infrastructure Fundance Center of Excellence, which is part of the World Bank Group in Singapore. Since 2004, Cameron has run the Singapore office, he opened the office in 2000, he's been with the World Bank since 2004, opened the Singapore office in 2009. And prior to 2004 he had a successful career as an investment banker. So we look forward to hearing from both of them. I'd like to start with Ted, who will talk about infrastructure development in Indonesia based on his past posting. Sure, and then turn to Cameron for a broader Asia-Pacific perspective. I have a few slides too. Okay, right here. You have a dropdown menu? Yeah. All right, I'm going to just go ahead. I want to thank Scott very much for inviting me. It's a real honor to be on this panel with Ambassador Kresha and Cameron Kahn. And I thought I would just spend a few minutes on some of the opportunities. Thank you. Then investors might want to consider in Indonesia the world's fourth largest nation and its third largest democracy. And first, let me be clear about the information I'm going to present. When I was DCM at our embassy in Jakarta, our economic team led by Councillor Jim Caruso observed that Chinese, Japanese, and Korean companies led the way in FDI and infrastructure. Last month a team of us from CSIS went to Indonesia and the Ambassador, Ambassador Marciel, US Ambassador in Indonesia, reminded us that when Indonesia launched its ambitious master plan for acceleration and economic development, its economic ministers visited Seoul, Tokyo, Beijing, and not the United States. So that struck us as problematic, that they didn't even consider when asked, why didn't you go to the United States? They said, well, we didn't think any American companies would be interested. That's a problem. The economic master plan is a 15-year, $1 trillion infrastructure development plan that includes public-private partnership tenders, and it will require about $700 billion in private financing. But as I said, when the ambassador asked, what about American companies, the response was, we don't think they're interested. So we thought, we've got to do something about this, and we wanted to, we embarked on a project to highlight the infrastructure investment opportunities in Indonesia's second-tier cities. It seemed that a lot of US companies were reluctant to venture out of Jakarta, and we wanted to make it easier to provide a context and to provide connections for potential investors. So this led first to an MOU between the Ministry of Industry and the Department of State for cooperation on infrastructure development for industrial purposes, and very soon after we signed the MOU, a US company and the state oil company, Pertomina, formed a joint venture to build a $2 billion coal ethanol plant, which will result in $500 million in US exports. It didn't really take that much effort to get to that point. So that suggests to me there are many more opportunities that haven't yet been exploited. So why Indonesia? And if I could, if I can go back, I will, because, oops, I'm going the wrong direction. Let's see. Previous, no, previous. I want to see, obviously, all of Indonesia. Nope, it wants to stay on South Sumatra. Well, I'm going to talk about all of Indonesia. You can look at South Sumatra. Indonesia's economy has been growing at a rate of 6.6 percent and the World Bank expects it will continue to grow about, actually it's been growing at about 6.5 percent. The World Bank expects it will hit 6.6 percent this year. The per capita income of Indonesia is $3,500. There's a very fast growing middle class of more than 120 million people hungry for consumer goods and Indonesia has a stable banking and financing system that is supplying credit to these consumers. Almost 60 percent of that GDP is from domestic consumption but the U.S. is largely not part of that picture. The master plan for economic development that I mentioned includes more than 500 projects throughout the country as well as six developmental corridors aimed at creating economic clusters in various industrial sectors. Now I'll be honest, Indonesia has been pretty slow to implement this plan. A year after it was launched there have been groundbreaking that represent just 10 percent of its total value. On the other hand, any project that can be seen in any way as infrastructure will have the full throated support of the government. This plan recognizes that development is needed off the island of Java. In fact, and I think we see this in many of the APEC economies, innovation in Indonesia often doesn't come from the capital. I know we sometimes see that in our own country. Often innovation comes from dynamic local entities such as those found in South Sumatra and East Kalamantan. And I'm just going to use South Sumatra as one example. There are many and the report that our team produced includes many, many opportunities, but I think there's only time for one today. But let me mention that some of the U.S. companies that are very active in Indonesia are doing quite well. Caterpillar, Mattel, Goodyear, GE, Cisco, and Conoco are among the many, the U.S. companies that are doing quite well in Indonesia. And in just a few minutes, if I can get it to go up right, I'll show you a few, I'll go over just a few lessons from these companies about how to achieve success when doing business in Indonesia. But here is South Sumatra. It's the provincial capital is Palembang and that's one of Indonesia's wealthiest cities. The province's gross regional domestic product averaged 5.3 percent from 2008 to 2011 and 6 percent in 2012. The governor of South Sumatra, Alex Norden, has made as one of his signature achievements free education. Literacy rate for this region is 100 percent and South Sumatra's strategic position again, let's see if I can go back. No, and one the other way. The strategic position is also significant. Has the potential to become a transport hub for intra Indonesian trade as well as international trade. The province has large coal resources and reserves and is expected to be a growth center for Indonesia. It has very solid energy infrastructure such as power grids and gas pipelines to neighboring region. It has enormous geothermal potential. I don't know how many people know this but an enormous proportion of the geothermal potential in the world is in Indonesia and a huge percentage of it is in South Sumatra. There's also tremendous potential for railway and port expansion and the province has a very strong agricultural base. There are also challenges. Doing business in Indonesia isn't considered easy all the time and in South Sumatra itself while it's home to 70 percent of Indonesia's oil palm plantation area and 65 percent of its natural rubber production productivity is low. There's a coal bed methane industry it is still in its early stages but Chinese, Korean, Japanese companies are headed there and they're making money and I think maybe naively but I don't think so I think U.S. companies should be part of this mix. So we are seeing USA Inc. is seen by people in Indonesia as a superior brand in terms of our reliability, our quality and our integrity not only in South Sumatra but in all of Indonesia but we have to be there we have to be present and we have to earn the business. If this is at all interest of interest you will see many other examples of infrastructure opportunities throughout Indonesia on this website and let me leave you with just a few final thoughts about doing business in Indonesia. One you have to show up you have to socialize your business develop constituencies court your community and when I say show up I think showing up is showing respect and I think it's very important to do that in Indonesia. I think this probably applies to other APEC economies as well but I want to speak to Indonesia in this presentation. Second you have to do due diligence you can't really just sort of waltz into Jakarta sign a deal and then sit back and reel in the profits you need to know your partner if you have one some companies have been very very effective in partnering with local companies Caterpillar is an example you have to know who you'll do business with inside and out and then you have to be patient and you have to persevere if you're lucky and you have a great local partner as Caterpillar does terrific if you don't have a great local partner or you choose not to go that route you need a very strong local network and Indonesia really is all about relationships fourth is you need to give back and that can be in the form of training education capacity building corporate social responsibility the way I look at this Indonesia was colonized by a rapacious multinational company and it's no wonder that they're a little suspicious as to whether benefits will be shared they're used to companies coming in extracting resources and leaving the companies that have done best and I mentioned some of them early on are the ones that have shown that they're also committed to capacity building committed to stay the course to educate their future workers and to be part of the community and then finally stick to your guns on clean corporate governance US companies are held to a very high standard and not only via the Forum Corrupt Practices Act Indonesians respect our reputation for being clean and transparent and we need to keep earning that respect so thank you very much I look forward to your questions at the end of the battle Thank you, Ted I think your five lessons apply to life not just in Indonesia I appreciate that Cameron could you give us a little broader perspective on Asia Pacific Thank you Scott Thank you master and thank you Ted for a very good to get us started off in a very good way I'm going to address three things and first of all I have no slides I thought I'd set history of World Bank presentation without PowerPoint I will first talk about the conversation which Ted just started which is why is the U.S. not there and I'll speak to you both as an American and as a World Bank staff working in certainly East Asia in the APEC region over the last eight years and then I'll talk to you about the challenges in that part of the world to attract private capital from countries like the United States and then I'll tell you what APEC is doing and where are the different programs and how they might be of interest to you for you to follow first the U.S. situation I mean I'll break it down into two areas one is more U.S. side of things which people like Ted are really making a real effort to create the awareness for this opportunity for American firms and also through the embassy and other government agencies also creating even playing field so the American firms can actually compete properly the other side of the equation is you know what what the region is doing to attract firms from countries like the U.S. so on the U.S. side I must say first it starts with our own positioning frankly if you look at Scott mentioned one example of PPPs happening in the U.S. and there are a few scattered examples here and there but frankly over the last decade or two we are well behind the curve and when it comes to innovative financing techniques for infrastructure we have relied too far too much on public budget we are seen as not necessarily the most innovative countries when it comes to financing infrastructure we have the most efficient well-known robust municipal bond market in the world bar none there's nothing compared to that so we have that already in place long time ago but we haven't really built on that and people can look at that and say you know there's tax exemption and so on that may or may not work in every country so we have that advantage but we haven't really moved too far so I wanted to make the point that U.S. is not necessarily seen as the beacon for innovation when it comes to financing infrastructure and for our firms to go out and win business in this field we need to actually look in-house a little bit more than what we have perhaps done over the last decade or so and the second thing that is relevant is that the marketplace has changed quite a bit when it comes to infrastructure financing and emerging economies it used to be very much a bank led market where banks you know long term loans drove the market used to have a lot of lawyers and loans and that was how you got project financing done and in that where all these operating companies the people who actually build infrastructure project and operate them the market right now is led by private equity funds so it is not led by banks a lot of the European banks U.S. banks have sort of I don't want to say retreated but pulled back a little bit the operating companies who had infrastructure assets had their hands full managing the assets they have it's a very big investment to undertake so most of the market that is moving forward is being moved forward by the private equity funds and so that's one of the reasons why some of the big developers infrastructure developers from the U.S. have really sought more refuge in the Middle East and so on where public sector provides the big funding and they can go in with the contract and make money so there's a reason why so many American firms are not there which is more related to where the business is then the third issue is cost competitiveness you know we have a lot of regional banks that are very active we have sovereign wealth fund that are very active and so it becomes a little bit of a you know competitive marketplace for American firms or firms from other places in Europe and North America to come and compete in Asia and so that I wanted to just table that because that is not a trivial thing if there's a bidding process and you're competing you know how competitive can you be we do have a brand as Ted mentioned absolutely American firms are seen as the most professional and high quality players but you know with high quality come relatively higher prices and need for returns and so that has to be balanced on the ASEAN side the number one issue is deal flow they're not that many projects out there that one can say okay well you know I'm gonna have 20 deals coming out of country X therefore and you know maybe five or ten coming out from all these regions so I have a total of maybe let's say 50 transactions I can go after every year so it makes sense for me to set up an office have a team and so on that kind of deal flow is not there yet so if you are a big global firm and these are tough times you have to think twice about okay do you want to have a presence or not and as Ted mentioned you know in these markets you have to be there you have to show face you have to build relationship so that that's another angle now let me just tell you the challenges which kind of relate to this deal flow issue most of this region as you all know has gone through substantial political change over the last decade and a half or so Indonesia being a fantastic example it's practically a new country since the 90s new constitution new political system new everything I mean imagine going through a you know like what we went through as a country after the revolution it's a completely different thing you have decentralization you have a role for local governments you don't have a very strong center a lot of responsibility for infrastructure has now been devolved to sub-national governments and that's why some of the innovative work is happening at the sub-national level central government is still trying to figure out how what role they play how much power they have and how much power they actually don't have so the and this decentralization is has swept all across the emerging economies including Asia and certainly east Asia so China a lot of people who don't know China get very confused I've been working in China for about seven eight years it's one of the most decentralized countries in the world we we think of China as it's quite the opposite if you haven't really spent some time in China local governments have tremendous power and room to innovate in China they can set their own even you know they're the central government is pulling back a little bit but they could even set their own taxes they can set up their own most favorite nation kind of structures for companies to come in and innovate and so all that innovation is not coming out of thin air it's coming out because there's a institutional room created for people to innovate some may go too far clearly and have and will continue to but it also provides you room for some very interesting innovations certainly in infrastructure and in the Q&A session I can give you some examples of the types of things you've seen now on the deal flow what's happening why are there not enough projects coming to the market and this is you know the Aquino Administration has really addressed this issue and is very very aggressively going after that and I must say Philippines is one of the and I'm not saying this a master because you're here it really is a star in East Asia in terms of quick turnaround and the Philippines Development Report that just came out certainly shows the progress that Philippines has made they've set up a PPP center they've got deals going they've got they have done things that other countries have been talking about that but don't forget Philippines had a head start on a lot of these countries Philippines had a PPP center way back in the early 90s I remember working on that so you know this is what happens with political change they were so far ahead they lost quite a few years but now that you have the right institutional structure they move fast very very fast imagine the marketplace as this table and you have four corners so on one corner you have the government and the government basically does not have the capacity yet to prepare projects that can be called quote-unquote bankable that a private investor could say okay this is the deal I can understand it's prepared to international standards I feel comfortable investing in this so therefore I'll go through the bidding process for this they don't have the capacity they don't have the institutional structure and in many cases the line agencies who are responsible for preparing these deals don't have the budget to prepare you'd be surprised how many times I have discussions with finance ministers saying you know there's a half a billion dollar toll road deal they want to prepare and they want to get private investment and I tell the minister yes sir but your team that is preparing this thing doesn't even have $300,000 to prepare this project so how do you expect this to happen right yeah on the other corner you have advisors people like price waterhouse groupers all these great consulting firms McKenzie's and whatnot they know how to prepare projects to international standards but these guys live on fee so they're waiting for government to sign a deal with them and say okay here's a contract for you to prepare right so they are sitting on the sideline as well what I'm describing to you is what in economics we call corner solutions but in a funny way these are pure corner solutions right so you got government on one corner you got the advisors on the other corner then you have on the side private equity guys and they're saying okay I've got money I've got the loaded gun where's the deal show me a deal I'm ready to bid right there's no deal and then you have the banks and the banks are saying I'm I have money I'm reluctant but I have money for the right project I'm willing to go but I'm not going to go until the private equity guy moves forward so if somebody puts equity then I'm happy to come behind them and provide debt but I'm not going to go and lead on my own because being a debt player anyways you are once removed so you want to be more in the equity ownership kind of situation and the solutions are sitting smack in the middle right and so the challenge now is for governments to try to figure out how do we bring all these four corners together how can the government play a proactive role to bring people closer to realizing these transactions and various governments are doing various different things setting up PPP centers setting up different institutions Indonesia for example we have helped Indonesia set up a guarantee fund for infrastructure and it's designed specifically to take away the transaction risk so Indonesia as you see you know the long-term growth prospects look fantastic in Indonesia everybody wants to invest in Indonesia everyone wants to as they say ride the curve the long-term curve but where to park your money is not so easy particularly in infrastructure so the risk associated with working with government agencies is very high so we helped set up this very customized guarantee fund which is not just a blanket guarantee of the central government it basically is designed to improve the performance and incentive structure for the line agencies so for example FIMA private firm and Ted is the government agency and let's say Scott you are the guarantee fund if the government agency says I will provide land or do XYZ for you by such and such time if you don't do that then in my contract I stipulate the penalty per month or what have you and when there's a default the fund will pay me but most importantly the fund then has a backdoor recourse through ministry of finance to recoup its money and that's designed to keep the line agencies honest so when they promise something when they sign something they actually deliver the problem is in a big country like that for private sector it's very difficult to sue the government it's very difficult if they don't honor their obligation to kind of take them to court because that ends your past and future endeavors in that country governments are trying that we're also helping a number of governments set up what we call viability gap financing schemes which is to say let's say there's a project that costs 100 million dollars but if it was at 100 million it's not very attractive meaning it doesn't pay enough the returns will not be high enough but let's say at 80 million it would be very attractive to private sector so it makes sense for government to provide the 20 million through a transparent consistent manner and then let the private sector fund the remaining 80 on its own and so you know these types of programs are now being implemented again innovations to try to bring people closer to that solution but I will stop here I think I've already gone over my quota but in the Q&A we can discuss further thank you thank you thank you Cameron very interesting and a very helpful perspective for a U.S. audience that here in the heart of innovation we're losing out in innovation and infrastructure which is in a world like East Asia that is growing at six to eight percent a year that's a big loss so thank you very much what I'd like to do now is turn to questions from the audience would it like yes sir just a second four rules for the questions one wait for the microphone to arrive okay because we are podcasting and webcasting this event second introduce yourself and your organization third direct your question if it's too specific individual on the panel and fourth what I call the Alex Trebek rule make sure your question is in the form of a question thank you yes sir thank you Scott my name is Hong Fung Foe with the Department of Commerce I do Vietnam, Laos and Cambodia deal flows there of course not smooth as yet that's so that's why I'm particularly interested in Mr. Khan's full corner solutions there I want to say that there are ways that we're trying to look at this and to see what kind of role the government and namely US government has in trying to pull together those different players in order to provide for the deal flows to happen one thing that I'm particularly concerned with is the fact that as you all mentioned US companies don't seem to in the eyes of the customers be there so what are your suggestions to for us to be able to affect changes so that the perception first will change and then actuality hopefully will follow thank you can you take one other question while we're stop here yes sir I'm Mr. Lloyd from the University of Maryland I'd like to address my question to Mr. Khan and Mr. Ambassador Kwish as well a huge of the Indonesian and Filipino diaspora especially in North America and Europe are very interested to invest back to Indonesia and the Philippines but unfortunately we have a big problem in especially in the south part of the Philippines like Muslim insurgency communist problems and should investors come to the Philippines what are the assurances that they would not be kidnapped or tortured or extorted or things like that much as we wanted to invest in issues like infrastructure or railway or health for example so we just want to be sure so that we don't put all our eggs into one basket and everything get broken thank you okay it's a very difficult question actually what can the US government do and I say that it's difficult not because it's technically difficult but we have to be cognizant of how much budget we have and how much how much of our resources can we actually spend you've seen our foreign ops budget has declined or has been diverted to certain other priorities so within that context you have to be realistic about what you can do there are a couple of things that that can be done which don't require that much budget one is I think supporting people like Ted and the ambassador in Indonesia and other foreign missions that we have to really show senior level presence on commercial issues and not just political issues that's you know I've had discussions with the master in in in Singapore and other countries and I always say you know commerce commerce commerce we will win or lose East Asia based on our positioning on commerce not not on political stuff it's a very very tough road to hoe if we go down that track because of very obvious reasons that you I think all know you know some of these countries do not yet have an even playing field I mean I'm not going to name them but you know there there are issues there and so the more senior level presence you have the more dialogue and engagements you have the better your chances are that you will not only do service to yourself meaning us us but we will be doing service to those countries as well the the guarantee fund that we set up one of the many objectives was to clear create even playing field they used to have separate MOUs with different different countries where you know if you were bidding in the same project you could have country X firm from country X which would have different situation financially because it had a guarantee from its government or it had a special arrangement in Indonesia which some firm from another country did not have so this guarantee fund basically creates an even playing field now that kind of stuff we did it from the World Bank engagement side because we think it's good for Indonesia to have an even playing field so they can attract the right kind of firms but not all countries have such things and the Philippines has worked very hard to even the playing field but it's still tough you know sometimes on a project by project level so that's one thing we can do it doesn't require too much it just requires this issue to be included in our set of agendas with that country and I'm not sure Ted can comment on that I'm not sure that that these infrastructure and these types of commercial dealings are really front and center in our dialogue yet and I think they could be the second area is technical advice which the US government provides less and less off and that goes back to that resource issue and so on and I think that probably we need to be engaged I used to be at USAID many many years ago and I've seen how far the agency has moved over the last decade or so from these types of engagements and I think we really need to rethink our priorities just very quickly I also wanted to say from the APEC side there's an initiative to help on this at least the government institutional side so as ambassador mentioned we've been working with Indonesia to put in place a program that is a three-year program you know one of the problems at APEC is that every year there's a new chair and every year there's almost like a reset button so the agenda changes so for infrastructure finance we have agreed and I think Indonesia is now really moving forward is we connected the dots between Indonesia this year China next year and the Philippines the year after so we have one program deliverables in each of the three years so that by the end of 2015 we would have a concrete results and the results actually are to try to move the entire region towards certain basic thresholds of legal institutional frameworks that can support private investment in a very transparent and at an international standard so and I'm very thankful to Philippines because Indonesia was on board but we needed to get Philippines on board for the last leg and I think now getting China on is is going to be easy because they are very big on this agenda as well very good point Mr. Ambassador you want to talk about the diaspora yeah well thank you for that question certainly there are numerous opportunities I talked about the large projects but there are also numerous opportunities for Filipino Americans to invest in in small businesses we see one example for example tourism facilities there's so many tourism facilities that have been set up Luzon, Visayas and even Mindanao these are being set up by Koreans Taiwanese and of course local investors too Filipinos there are franchises for example that have sprouted all over the country McDonald's franchises Jollibee and so on quite a number of in fact Filipino Americans have already been investing in the country so now if you ask about Mindanao I think I would wait until that final peace agreement has been signed which we hope will be done this year because you know the turmoil over the past four decades the investments in Mindanao have been very limited only in major cities like Davao again the Oro and and of course they have avoided the cities where there have been conflicts over the past four decades so but with the signing of this peace agreement which we hope will be sometime this year tremendous opportunities will will open up in Mindanao too thank you thank you yes sure I just I'll briefly I want to answer Fong's question because I think it's very important I completely agree with Kamran that our we will succeed or fail based on our economic engagement with Asia the pivot the Indo-Pacific pivot will not work if it's just military it will only work if it has an accompanying effective successful economic engagement strategy what can we do as government to help well one thing and now I put here the onus on us is we have to be coordinated very often as you know senior official in an embassy I would have TDA one week XM a few weeks later OPIC a few weeks later no one shows up in time for the deals they show up when it's convenient when they've got a budget you know a travel budget to show up that does not work we have to be effective USA Inc we have to be coordinated we have to be in the middle of the table making all the pieces of the deal come together one of the things that the economic team did in Indonesia is we organized and after putting out this report we organized visits to Surabaya Bandung East Kalimantan South Sumatra we took US companies to the second tier cities introduced them to the provincial planning officials to the people whom we already knew leveraged the fact that we'd already made investments sometimes USAID investments or MCC investments in those regions so we could open the doors we could get people in to see the top people the problem is not enough US companies are showing up so we set up these trips and you know one or two companies will show up to go on them in my view we have to show up we will not succeed if we don't show up thank you Ted and on that I'm sorry we've run out of time for the first panel the people will stick around you've been generous with your time this morning it's my job to keep this program on time so please join me in thanking the the first panel I'm right this is what I do for a living thank you for your great kind words you're welcome thank you