Cairo -- The Middle East and North Africa Economic Conference reached a level of "serious, nitty-gritty, business activity" that surpassed the previous conferences in Casablanca and Amman, Under Secretary of State Joan Spero said November 14.

"I think Cairo has taken this (process) to a new stage," Spero commented, citing Egyptian President Hosni Mubarak's historic statement" on the importance of the private sector at the opening of the conference.

Asked about the future of the Middle East and North Africa Development Bank, Spero said: "We're making very good progress on the bank." The United States will be sending a transition team to Cairo to begin work on implementing its charter, she pointed out.

Although the U.S. Congress has not yet appropriated the funds for American participation in the bank, Spero noted that the Clinton Administration intends to work closely with members of Congress to obtain the funding. "We hope that throughout this year we will get the bank up and running," she said.

Following is the transcript of remarks as delivered by Under Secretary Spero, provided by USIS Cairo. Also participating in the press conference were U.S. Ambassador to Egypt Edward S. Walker, Jr.; Deputy Assistant Secretary of State Toni Verstandig and Deputy Assistant Secretary of Commerce Judith Barnett.

(Begin transcript)

SPERO: Let me begin by expressing the sincere thanks of the United States delegation to President Mubarak and to the Government of Egypt for hosting this highly successful conference. Let me also commend the World Economic Forum for organizing this important event.

Five years have passed since the Madrid Middle East Peace Conference launched a process of dialogue and negotiations that has changed the face of the region. The Middle East/North Africa economic conferences symbolize and embody those changes. Let us not forget that we would not be together in Cairo were it not for the peace process. And we here in Cairo have undoubtedly become part of that process.

We have been reminded in recent months that the peace process is fragile and that we all have work to do to keep it moving forward. But it is also clear that peace and security in the Middle East are closer to realization today than they have been at any time in modern history. And there can be little doubt that the peace process has transformed the economic climate of the Middle East.

Peace enables countries to redirect their resources away from military expenditures toward more productive activities. Peace makes it possible for governments to lower economic barriers between countries, opening the way for gains from trade, and for access to new sources of investment and new commercial partnerships. Peace brings the promise of stability. And, from an investor's perspective, there is no substitute for a stable and predictable environment.

Of course, we know that the economic benefits of peace have yet to spread as widely as we would have hoped. There continues to be severe economic hardship today in the West Bank and Gaza, and the Palestinians have yet to achieve a full stake in the economic benefits of peace.

The peace process has been operating in conjunction with an essential partner: economic reform. We have learned, many the hard way, that it is the private sector -- not government -- which is the real engine of economic growth and development. Only the private sector can mobilize the capital and know-how needed to sustain economic growth, to generate jobs, and to create prosperity. But the private sector -- the business community -- also needs the right policy environment. So a prerequisite of sustained economic growth is for each country to get its economic house in order -- by privatizing and deregulating, and by creating a favorable macroeconomic environment and effective regulatory and institutional frameworks.

Lastly, it is no news to anyone here that we are living in an era of globalization. We now do business in a global marketplace in which the lines between domestic and international markets have become increasingly blurred and where competition for scarce capital and technology is increasingly fierce. It will no longer suffice for individual economies to reform. In an era of global markets, no one country can succeed alone. The region as a whole must become an attractive base for trade and investment if the countries of the region are to prosper.

In addition, just as free domestic markets require an appropriate legal and institutional framework to function properly, so too a more integrated world economy demands effective regional and international institutions and norms. These can only be established and sustained through effective cooperation among governments. Countries in the Middle East and North Africa are recognizing the imperative of integrating into the world economic system -- joining the World Trade Organization, working with the IMF and the World Bank and creating their own regional institutions to foster economic cooperation. One such institution is the Middle East Development Rank, which grew out of the economic summit process. The Bank will have three objectives -- to assist the private sector; to promote regional projects; and to promote regional economic dialogue. A regional Business Council, a Secretariat for the Regional Economic Development Working Group -- REDWEG -- and a Middle East Travel and Tourism Association have also been created.

It is clear that the Middle East and North Africa are already reaping dividends from their economic reform efforts and from a worldwide perception that the region is indeed moving toward peace. As we look to the future, both the peace process and domestic economic reform programs must keep moving forward or these economic gains may well be short-lived.

For those involved in the peace negotiations the task of broadening and deepening the peace has never been more urgent. For those involved in shaping economic policy, the task is to address squarely the need to accelerate economic reforms and create economies that can take full advantage of this region's vast potential. Finally for those in the business community the challenge is to recognize and seize emerging opportunities. At the end of the day, their investment decisions will be the final judge of whether the region's political and economic leaders have done their jobs well.

Thank you and we'll be happy to take your questions.

QUESTION: Could I ask you please how optimistic are you about regional business taking place in the Middle East with the current political atmosphere that we have?

SPERO: Well, I think that the main testament to that is all the folks around this conference. We've had a much higher attendance at this meeting and a very high quality of attendance at this meeting. There is a very high-powered U.S. delegation, a significant sized U.S. delegation, well over 100 U.S. companies represented, and they're all here to do transactions and they're all here to promote regional activities. I think the real test will come a couple of years down the road when we see whether the contacts and the contracts are signed. But I think there is a real prospect -- just over these last few days there have been discussions of Israeli investment in Egypt, Egypt-Jordanian cooperation -- so I'm hearing a fair amount, as well as a number of bilateral projects as well.

QUESTION: Does the United States have any particular vision of speeding up this process by any means?

SPERO: Well, I think one of the questions will be -- there are really two tracks to that, one is of course the U.S. continues to try to be a facilitator and supporter of the peace process, and I want it emphasized today that the MENA conferences really are a piece of the peace process. They are there because the peace process exists and they reinforce the peace process. The fact that this meeting has taken place is important, I think, to the peace process. So the U.S. has high hopes for that process. In addition, we will be active partners, both those of us on the government side and in the private sector, in encouraging follow up to the MENA conference, and there will be another conference next year. I assure you we will be active supporters of that. We will be happy to serve in any way we can to encourage the private sector. But the private sector has to do its magic. We can create an enabling environment; the challenge to them is to seize the opportunity.

Q: Could you bring us up to date on the U.S. contribution to the Bank -- I'm talking about the Regional Development Bank -- and give us some idea about when this institution might be operation?

SPERO: Yes. I think we're making very good progress on the bank. The articles have all been agreed, they are now open for signature at the United Nations and Secretary Christopher announced in his opening statement here that the United States will be signing the charter of the bank soon in New York at the United Nations. The Secretary also announced that we will be sending a transition team here to Cairo to participate in the actual detailed implementation of the charter and of the bank. We have the funding for that transition team from our Congress. There are other representatives on the transition team, obviously from Egypt, from Israel, we have representatives from Japan, the Netherlands, Italy, etc. We can get you the whole list if you want. So there will be, there are facilities here in Cairo which have been arranged by the Egyptian government, and so the next phase will be to work on the implementation. Now we also in the United States have begun a dialogue with our new Congress, the new members, to work on the financing of this institution. We in the U.S. have authorization to participate, but we have not yet received actual money for the contribution, and it is our intention to work with our Congress. And we started that immediately to get the funding for the bank, and we expect that other partners in the bank will do likewise. We are also noting increased interest form other countries which have not yet signed the charter to take up the shares. So we're very encouraged and we hope that throughout this year we will get the bank up and running.

Q: I would like to ask about the agricultural agreements, projects that were concluded and your assessment to the entire group or collection of contracts and transactions that (were) agreed upon in principle or already signed with the Egyptian partner(s) as first, and the entire involved countries within the conference.

SPERO: Well let me make a general comment and then perhaps I'll ask Ned Walker or Judith Barnett, who has joined us from the Commerce Department. Secretary Kantor, our Secretary of Commerce, participated in a press conference yesterday. There was an announcement of a number of transactions, so I don't think we want to repeat everything there, but if you'd like, Judith can sort of give you a sense of that, and I can ask Ned to comment on the agriculture. Generally, I think there are dozens and dozens of projects. I think Ambassador Walker said he was tracking 25 projects himself personally. They're all in various stages of realization. Yesterday I think the major in terms of size the two billion dollar project with AMOCO for development of Egyptian natural gas and the export of that gas, was signed. There was a very interesting panel yesterday afternoon that I participated in which AMOCO and the Italian firm AGIP outlined their plan, their vision, their dream for a network of pipelines and for exported Egyptian gas not only throughout the Middle East through pipelines, but also as liquefied natural gas to Europe and beyond. On the specifics of the agriculture, do you want to comment, Ned?

AMBASSADOR WALKER: Agriculture is a very important element of our focus in our partnership with Egypt, and we are working to try to develop the kind of leadership between our industry and Egyptian industry to improve that sector, in particular horticultural exports. It is difficult to deal with specific projects because if they were to be announced, they should be announced by the companies that are involved; the information is proprietary. But I am following several major projects that are engaged in the agricultural sector, and we have every expectation that they will be brought to fruition.

SPERO: Judith, is there anything you want to add?

BARNETT: Well actually there's an interesting aspect of this, that is, as Joan says, what we have to watch is the follow-up. At this point we go into follow-up, follow-up and follow-up. In Jordan last year after the Amman summit, at which we had 150 U.S. business representatives, almost 60 of them have returned to Jordan and have done business. Some of them have actually signed contracts. This I believe has probably been the best year for U.S. business in Jordan. So if the past is prologue I think we have a lot to look forward to.

Q: This is the third economic conference in the Middle East about these concepts, but we have not realized any progress in economic cooperation or peace process. What about the American efforts to reduce tension, and how will President Clinton play a real role in achieving peace in the Middle East?

SPERO: Well let me answer that in a couple ways. First of all, you commented that this is the third conference. There's been a massive change. I was in Casablanca, I was in Amman, and I'm obviously here in Cairo. What I've seen is that in Casablanca, the important thing was that it took place, that there were representatives from throughout the Middle East and throughout the world. But it was a heavily political meeting. In Amman last year that was more and more involvement of business. But here in Cairo there's very serious business transaction. Business people came here; they have to pay to come; that means they're willing to take their time, buy their plane ticket, or however they get here, they're willing to pay their hotel, and they're willing to pay the fee. But they don't come to waste their time or for fun and games, they come because it is a serious meeting, because they can make contacts, explore the opportunities, they can hear what's going on in the Egyptian economy, or the Israeli economy, or the Jordanian economy, and they expect to go away from here having enhanced their ability to do business in the Middle East. So I see that while this is the third conference, there's been a real progression toward, if you will, serious, nitty gritty, business activity. So I think Cairo has taken this to a new stage. And I think that was very much emphasized by the opening statement of President Mubarak. I thought that was a historic statement that the private sector matters, that the future of the Egyptian economy was with the private sector, with the regional economy, and with the world. So there's been a change in these three conferences.

Second, as far as the question of what is the United States doing to try to reduce tension in the Middle East, I can only say that the U.S. was a leader at Madrid in 1991, that certainly my boss, the Secretary of State, as well as my colleagues at this table, have taken a very active role in the political side of the peace process. But we've also taken an active role in the economic side of the peace process. We've been very supportive of the MENA conferences, we've been working bilaterally with Egypt, Jordan, Israel on their economic reforms, we've provided significant assistance to the region. I think we've put our money where our mouth is, and now you see our private sector getting involved. That is the true test for the future of the Middle East.

VERSTANDIG: If I could just add a few points. I think it's absolutely clear that President Clinton has the goal of a lasting peace in the Middle East as one of the administration's continuing top priorities. He has spent a great deal of his personal time, and that of his Secretary of State in pursuing that goal. So I think to reassure you, that remains one of our highest foreign policy goals. Joan mentioned also that, as we work on the political track of the peace process which we have been working on quite extensively over the last 6 weeks, we have also continued the effort at strengthening the economic underpinnings of peace. And this is a process. The economic underpinnings of peace support the political track and vice versa. In the context of the summit process, I think we have seen the private sector participate in panel discussions and we've heard corridor talks, and the relationships and private sector interactions are deepening. Joan, who comes from the private sector, has made it absolutely clear to you that they are doing their work, that it takes time, and we're trying to create the enabling environment, and that too takes time. The gathering here is not looking at today. It's clear that they're looking at the future and they're willing to commit their time and resources to a region that has been overlooked as a region as a whole.

Q: I was wondering whether you have more or less any idea how much capital will be needed to fuel the investments that will be needed to sustain solid development of this region in the forthcoming years. The price, or the cost of peace?

SPERO: A lot. It's very hard to put a price on that because there is an endless amount that could be used in this region: for infrastructure, for specific projects, for smaller business transactions, and to me, that is the challenge that this region faces. The amount of capital that will be needed in the Middle East can never be provided by foreign assistance and will not be provided by foreign assistance in the current climate among developed countries and traditional aid donors. It cannot be provided by the multilateral institutions, although both the bilateral and multilateral institutions, the World Bank, for example, can play an important role, and it can't be provided by a regional bank like the Middle East Development Bank. All of them can help, but in the end, the test is going to be whether this region can attract private capital. There is a global financial market; the buzz word these days is "emerging markets." That's where the action is. Well, the action clearly is in Southeast Asia, in South America, and the question is, can the Middle East get into the action? Can it demonstrate to the world that it is open for the private sector, that it is stable, that it is growing, and that as a region -- and I think that is a test -- no single country has the ability to make it without the region as a whole being perceived as an attractive investment. It's a very competitive market; competition, as one of the panelists said, is "ferocious" and the question is, will they be able to attract that capital? The role of the Middle East Development Bank will be to try to act as a catalyst, as a jump starter, as a facilitator to package transactions, and as a promoter. But in the end, what will be needed will be a demonstration by this region, and the MENA conferences are an opportunity to bring the world here and to show the world what is possible.

Q: I'm very interested if you can elaborate on the talks you had with the Israeli side as regards the flow of goods to the Palestinians. It has been highlighted by the Palestinian side that they are still blocked, and that the Americans are very active in giving aid to the Palestinians and are involved with projects there.

SPERO: Let me comment, and then perhaps Judith and Toni can comment a little. It's a very broad question -- let me divide it into different parts. First of all, as far as the assistance to the Palestinians goes, I think you know there's been a very active leadership role played by the United States through the Ad Hoc Liaison group which is a group of donors providing assistance to the Palestinians. We've worked with that group; in fact there have been meetings recently and there will be a meeting of donors in several weeks in Paris to try to mobilize support not only for longer term projects but also to support the immediate needs of the Palestinians, to pay the salaries of the police, to provide equipment, etc. That effort will continue. Secondly, we are also very supportive of the economic work and development of Gaza and the West Bank. In the long term, as I said, it's not the foreign assistance that's going to help, it's really going to be the prosperity of the Palestinian people and their support of the peace process, because they will benefit from the peace process. We've had a setback there, there's no doubt about that. The bombings that took place earlier in this year led to first of all, the closure. That closure reversed the flow of goods into Israel, reduced the number of remittances to the Palestinian Authority and hurt the Palestinian economy as a result of that. That security issue is going to have to be addressed. The Israelis have understandable security needs and concerns, and I think it's very good news that they've announced here that the number of workers, 35,000, will be increased. In addition, you need to know that there are some very positive things going on trying to facilitate trade not only between the Palestinians and the Israelis, but four-way between the Egyptians, Palestinians, Israelis, and Jordanians.

One of the important things that occurred during this conference was a meeting of the Taba group and that is the Trade Ministers. Kantor participated in that meeting yesterday. The discussion there was a very detailed planning session about how to increase trade, activities over the coming quarter. I know there was a commitment there, for example, to work on issues of standards. These are four core parties in the Middle East working on reducing barriers created by standards. And what I'd like to do is ask Judith briefly if she would describe that Taba meeting to give you a flavor of kind of the positive momentum we're trying to achieve.

BARNETT: Thank you. Very briefly, because there seems to be so much going on (concerning) it. We're doing working groups and standards and an export promotion. We've set up, actually, that MENA and the Information Highway for companies, etc., etc. Probably the most poignant moment came when the trade ministers of the Core Four and Secretary of Commerce Kantor decided on a statement. It's available to all of you in the Press Room, and we can make even more available. We talked about the weak Palestinian economy suffering from restrictions, suffering from the closures. And it went on to go as far as any statement has really gone by these Core Four on the pending agreement at removing restrictive measures, (that) will prevent the decline and positively contribute to the performance of the Palestinian economy, and so on. Again, these were very important words that were worked out basically between the Israeli and Palestinian delegations. The second thing I would like to say is that there is very good news. Some of it may seem small and insignificant, but in the Palestinian community, it's not. For example, the Commerce Department is opening a trade center in Gaza next week. And this will electronically hook up the Palestinians with companies all over the world and with trade information. We announced yesterday that Cal State was doing the joint venture to create a university in Jenin. And finally, Holy Med, which is my favorite project, which is between a U.S. Californian company and a company in Gaza. It's the first state-of-the-art medical diagnostic center in Gaza. It's a 1.5-million dollar project, and we're very proud of it.

VERSTANDIG: Just one brief comment. Joan laid out for you what the U.S. is doing, and you're correct. We are supporting the Palestinians, working with the Israelis to try and deal with the impact of the closure. But I think it's important to remember, as Secretary Christopher said yesterday, that in the context of closure (inaudible) more broadly, you cannot have security without peace; you cannot have peace without security. And this is the overall framework, and the parties are committed to both enhancing the security environment in order to permit a Palestinian economic growth. We are committed to helping both the parties. In terms of the political aspects (we are), working and helping them if we can. On the more particular aspects of security, we are very much committed to the Palestinians in terms of both the donor effort as well as -- as Judith laid out to you -- getting more U.S. private sector investment into the West Dank and Gaza.

Q: I want to ask you about how far the US is encouraging the European Union to participate on all levels in the development of the area.

SPERO: We worked very closely with the Egyptians on the government-to-government side and on the assistance side, the debt side. The Europeans are major donors here along with the United States. They work on the Ad Hoc Liaison committee, they have been very involved in all of the projects. So we coordinate very closely with them, on a government-to-government basis. Toni reminded me that the Europeans sit in the chair of the Regional Economic Development Working Group. The whole purpose of REDWEG is to focus on regional projects. And then, of course, the Europeans are very interested in doing business in the Middle East. They have a long tradition, long connections. Europe is,in fact, because of the proximity to the Middle East and North Africa, a very important market and I know that the Europeans have started something called the Barcelona process. They have been negotiating trade agreements. So, we work very closely with them. They are very interested in this region and, frankly, we don't have to push the Europeans. They have a very strong stake and interest in the peace and in the stability and the economic development of this region. I think it is a three-way Partnership, and I would include the Japanese in that.

Q: Looking at the future would you recommend next year in Doha, Qatar, to have less politicians and more business people from the region?

SPERO: Well, I guess it depends if they continue to invite the US government. It is an interesting question as to the proper balance. I think, actually, Cairo achieved a very good balance. I think we have to talk to our business people. What we have done after each of these meetings is to survey our business people and to say to them, "Well, what did you like, and what didn't you like," and we'd like to make suggestions to the new chair about how to improve it next year. Total quality management. What we have heard for the past two years is that we want more practical business sessions. And that is what you have seen in the evolution of these meetings. We want more breakout sessions having to do with individual industries. We want to be able to focus in on particular countries. I think the other participants have heard that from their private sector as well. I believe that has been achieved here. At the same time, when I asked our business people informally last night, they seemed to think that this format was a good one. They do like to have some political participation; it is interesting to them, particularly I think they like to hear from the economic ministers. They like to hear what their plans and strategies are. They are, of course, interested in the peace process. We cannot forget that the MENA conferences are part of the peace process. They are intertwined. They are inseparable, their fates are linked. Therefore, it is important to continue the political participation. I think Cairo did pretty well.

Q: Since you have been talking about regional economic cooperation and the Taba agreement, this morning in the plenary session it appeared that some seven major regional projects (inaudible). Officials in Jordan and Palestine and Egypt said they did not expect these projects along the Red Sea or the crossing point.

VERSTANDIG: I attended this meeting this morning, and the projects that were being laid down were conceived to be projects further down the road. But I think it's important, and I happen to have it with me. This is the travel weekly guide which is put out by MEMTA, and it aims to boost tourism to eight nations. Yesterday I attended the Middle East Travel and Tourism Association meeting and I have to tell you it is what the stuff of peace is all about. There sat eight very clever, well informed, mixture of the private sector and the government talking about travel, tourism, how do you market the region together as a region, how do you bring more competitive packages looking at the Dead Sea as a target of opportunity, the richness of this region. It was extraordinary, talking about how you can use security to reassure tourists and not as an inhibiting factor, looking down the road to a new agenda, how do you get visas that are more user friendly, especially if you look at Taba, Eilat and Aqaba and they were doing the practical work that has to be done. It has been done also with the very strong support of American press and they have done an extraordinary job in terms of supporting MEMTA and also the establishment of the Americas division. On the other projects, they are moving forward. You can always choose to look either at the glass half full or half empty. We are in a period of transition and I think we will see some of these regional projects begin to take hold as governments in especially Israel, Egypt and Jordan continue their efforts to privatize and make their capital markets more attractive to the private sector, you are going to see more movement on these projects and I believe that we are very much on the right track so I would choose to at least look at the glass half full at this point. Thank you.

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