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Program - By Regions Track:

Monday, April 27, 2009

  8:00 AM - 9:15 AM

Doing Business in Russia: Overcoming Repeated Crises

Speaker:
Alexander Kovaler , Vice President, Sales and Public Relations, Gallery Media

Interviewer:
Michael Intriligator, Senior Fellow, Milken Institute; Professor of Economics, Political Science and Public Policy, University of California, Los Angeles

"If you can find your way through this maze, you will see a reward."

These words of speaker Alexander Kovaler accurately summarized how Russia's geography, demography and culture come together to create a unique business environment: one characterized by the potential for tremendous returns on investment, but a strong need for networking and an ability to navigate the changing but ever-present bureaucracy and corruption.

To illustrate this point, Kovaler cited the experience of his friend who recently opened a nightclub in Moscow and, upon tallying over his entire experience of launching the business, found that he was visited by 80 different "bodies" requiring some action or transaction before the club's doors could be opened. However, once the nightclub began operations, it recouped its $10 million investment in only six months.

Stories of rapid growth abound in Russia, but an important point when looking forward is that "growth has covered up a lot of deficiencies and inefficiencies." Noting a particular company spent $2 million dollars per year providing fruit in their sales offices, Kovaler pointed out that there are many business practices that will need to be corrected as Russian companies compete in more efficient markets. Perhaps most problematic is the dearth of managerial skills to improve the operating of inefficient companies.

Interviewer Michael Intriligator pointed out that many of these inefficiencies arise from a post-USSR adoption of free market principles that neglected the institutions required for well-functioning market. In particular, there was a gap in legitimate public services, accompanied by privatization of public monopolies, with a general lack of concern for promoting competition. This cleared the way for the "Russian Mafia" to fill the void, and many of their operations have now been legitimized into businesses, with attendant inefficiencies in tow.

But while organized private corruption may have had a significant role in the past, Kovaler believes Russia is a much different place than it was in the early 1990s. Personal safety of officials and those doing business is a much smaller concern, but government corruption itself is a bigger problem.

There are signs of hope on this front. Medvedev, the current president, has at least put the issue of corruption and improved transparency on the table, making his income statements public, among other actions. Whether this will be sufficient to improve the business environment, not to mention the lot of Russia's population, is yet to be seen.

  9:30 AM - 10:45 AM

U.S. Governors Address Challenges Facing Their States

Speakers:
Jon Huntsman Jr. , Governor of Utah (R)
Edward Rendell , Governor of Pennsylvania (D)
Arnold Schwarzenegger , Governor of California (R)

Moderator:
Michael Milken , Chairman, Milken Institute

It is no surprise that states are suffering as a result of the current economic downturn. California, for example, is straining under a $42 billion deficit. Yet according to three governors, the economic crisis may have an upside: From crisis comes the resolve to tackle long-ignored problems.

All three governors have made education, infrastructure and the environment priorities in their respective states, moderator Michael Milken said. Pennsylvania Gov. Edward Rendell said the United States is "in a race to develop alternative forms of energy" and isn't doing well in the international competition. Rendell is optimistic, however, because "the president gets it and most of Congress gets it." The U.S. simply needs to do more.

Utah Gov. Jon Huntsman Jr. said his constituents' priorities are health care and increasing energy security. These priorities do not vary by party. "They don't care if you're red or blue; they just want you to get it done." To meet these needs, Utah is preparing to unveil a personalized health-care initiative in the next month or two while also working to create "the first natural gas corridor." This highway would stretch from Utah to California and would be reserved for vehicles that run on natural gas.

In the session's most comedic moment, Huntsman joked, "If you could tap the wind coming out of the legislative sessions, you'd have energy for years."

California Gov. Arnold Schwarzenegger called the crisis an opportunity to help reform that state′s budget system. For six decades, California lacked a rainy-day fund, so in good times the state is flush and in hard times the state is broke. "It is time to fix the budget system, which is a broken system," Schwarzenegger said.

Each state's individual difficulties aside, there have been partnerships across state and party lines to drive progress toward common goals. Schwarzenegger and Rendell have joined forces with New York Mayor Mike Bloomberg to push the federal government to increase the money allocated for upgrading the nation′s infrastructure.

The trio self-selected to include a Republican, a Democrat and an independent to highlight that "infrastructure is the most bipartisan of ideas," Rendell said. Added Schwarzenegger, "There is no reason that the U.S. should have a train system that is 100 years old while in China their train goes 250 or 300 mph."

  9:30 AM - 10:45 AM

The Forecast for Emerging Markets

Speakers:
Hüseyin Erkan , Chairman and CEO, Istanbul Stock Exchange
George Hoguet , Global Investment Strategist, Senior Portfolio Manager, State Street Global Advisors
Vikas Kapoor , President and CEO, iQor Inc.
Vasant Prabhu , Executive Vice President and Chief Financial Officer, Starwood Hotels & Resorts Worldwide Inc.
Jean-Louis Scandella , Emerging Markets Fund Manager, Comgest Group

Moderator:
Komal Sri-Kumar , Managing Director and Chief Global Strategist, TCW Group Inc.; Senior Fellow, Milken Institute

Many emerging markets are better-positioned to weather the economic downturn than their well-developed counterparts, according to a panel of experts.

Jean-Louis Scandella drew a distinction between "old" emerging countries and "new" emerging countries, noting that the latter were staying afloat in the current environment. Scandella characterized the old countries —South Korea, Mexico and Taiwan, for example — as having mercantilist business models dedicated to producing goods for the U.S. and Europe. Such countries are highly dependent on world growth and external capital and are therefore doing poorly in the current environment.

In contrast, new emerging countries such as India and China are characterized by liberalizing reforms leading to the emergence of a rising middle class. Scandella noted that these countries are less dependent on demand from the developed world and have large capital reserves of their own that makes them less dependent on external capital flows. In other words, these countries have both the domestic demand and the capital to see them through the downturn.

This theme of many emerging markets being well-positioned to weather the downturn was echoed by many panelists. Hüseyin Erkan noted that Turkey's economy has tripled over the past seven to eight years while diversifying its exports to non-EU countries by, for example, implementing bilateral tax treaties with 80 countries. Erkan also noted that Turkey′s capital markets are large and liquid.

Vasant Prabhu provided some anecdotal evidence from patrons and management at Starwood Hotels′ 5-star establishments in emerging markets. He hears long-term bullishness on the emerging world and even some talk of a power shift from traditional superpowers to the developing world as a result of the downturn. Prabhu reported that "you don′t see fear in people′s eyes (in the emerging world)" as he has when talking to managers in developed markets such as the U.S.

Vikas Kapoor pointed to a recent Business Week article — "Call center? That′s so 2004"— to show that the era of emerging markets 1.0 in which labor arbitrage was the primary driver has essentially been replaced by a model in which emerging markets actually add value rather than just perform basic tasks.

Kapoor said value-added outsourcing will essentially serve two functions, both of which will lead to growth in emerging markets: creating local demand by increasing local wealth and providing a strong conduit for emerging countries to access greater demand from the U.S. and Europe.

George Hoguet highlighted deflation as a potential concern, particularly for countries such as Japan, and noted a recent International Monetary Fund finding that approximately $4 trillion in potential write-downs have yet to be realized by banks, most notably in Europe.

Overall, the panel struck a hopeful note that at least the new emerging markets are in better shape than many think. These countries may emerge stronger from the current downturn and continue to ride upward trajectories founded on their new stimulus-driven infrastructure and value-added business models. That said, the emerging markets will probably not achieve these heady results absent strong recoveries in the developed world.

  11:00 AM - 12:15 PM

The New University and Its Role in the Economy

Speakers:
Richard Blum , Chairman, Regents of the University of California
Michael Crow , President, Arizona State University
Susan Hockfield , President, Massachusetts Institute of Technology
Luc Vinet , Rector, Université de Montréal
Deborah Wince-Smith , President, Council on Competitiveness

Moderator:
Steve Fireng , President and CEO, Embanet ULC

As the economic climate grows bleaker, universities are increasingly being looked to as incubators of innovation and talent. However, panelists said accomplishing this goal requires the delicate balancing of two competing desires: opening universities to as many students as possible and maintaining the high quality of instruction and research.

"At the end of the day, it′s in regions and places where people create, work and add value to the economy. Universities are the fulcrum of innovation hotspots," Deborah Wince-Smith said.

The panelists agreed that universities play a crucial role because they are often a laboratory of business ideas, new products and the intellectual talent needed for growth. "Forty percent of the doctors that practice medicine in this state went to the University of California," noted Richard Blum, citing one example of the power of a university in driving a region′s economy.

The power of universities as economic engines provides great incentive for them to grow. However, "we′re not anywhere near ready to operate at scale yet," Michael Crow said. The belief that universities are underserving the nation′s needs has led Crow to oversee a dramatic expansion of the student body and course offerings at Arizona State University.

The panel agreed that American universities in particular are failing to compete globally in producing scientists and engineers. "Fifteen percent of U.S. bachelor′s degrees are in the sciences or engineering. In China, it′s 50 percent," Susan Hockfield said. The panelists concurred that the dramatic gap between the United States and other nations in the sciences could have devastating effects on the U.S. economy.

But there was heated debate as to how universities should go about generating greater intellectual capital. Hockfield warned against the type of expansion Crow championed, noting that her institution accepts just 10 percent of applicants. "If we accepted the next 10 percent," Hockfield added, "it would have a negative impact on teaching and research."

Blum blamed universities for failing to entice students into the scientific disciplines. "A lot of it is like anything else, it′s in how you market it," he said.

The panel explored whether part of the challenge lays in a general intellectual malaise in the nation at large. Hockfield said the excitement of the Apollo program drove many of her generation to pursue the sciences, and the panel largely concurred that the absence of such motivators has led to declining student interest in physics and engineering. "A culture where it′s understood that effort breeds success should be developed," Luc Vinet said.

However, Crow said the attitude problem may be confined to the leaders of higher education. "You are forced to innovate by your victories and defeats. ... We are overconfident in higher education because of our victories over the last 60 years."

  11:00 AM - 12:15 AM

The U.S.-China Relationship: The Uneasy Ties That Bind

Speakers:
Victor Zhikai Gao , Executive Director, Beijing Private Equity Association; Secretary-General, China Private Equity Association
Zachary Karabell , President, River Twice Research
Joshua Cooper Ramo , Managing Director, Kissinger Associates; Author, The Age of the Unthinkable
Rui Yang , Anchor, CCTV

Moderator:
James McGregor , Chairman and CEO, JL McGregor & Company

Immediately on taking office, President Obama emphasized that China and the United States must strengthen their sometimes rocky relationship. But at the end of the day, U.S. consumers represent the largest market for Chinese exports, and China is a major investor in U.S. Treasuries.

The U.S. and Chinese economies are so interconnected, the economic relationship is beyond the control of either government, according to Zachary Karabell, and that relationship has less to do with nation-state sovereignty than before.

Joshua Cooper Ramo said focusing on the economic relationship is too risky and restrictive because it precludes the ability address major challenges that are not economic in nature, especially issues of security and U.S. political values. But Karabell said bilateral economic interdependence provides a perspective through which other major issues can be understood.

On the issues of energy security and climate change, Victor Zhikai Gao argued that fingerpointing is useless because climate change now poses challenges to all countries. Highlighting the need for U.S.-China cooperation on climate change and energy issues, Gao said China is the second-largest oil importer and uses a third what that the U.S. uses. Per capita, China′s oil consumption is only one-thirteenth that of America′s. Gao advocated establishing an organization of petroleum-importing countries to encourage U.S.-China collaboration and avoid potential conflicts over oil sources.

Protecting intellectual property rights in China was a subject for debate. Karabell called intellectual property rights a "fetish" of American policymakers. And Gao said the concept of private property ownership is new to the Chinese. Americans should have patience as property rights protection develops in China, he said.

Ramo said China views its relationship with the U.S. through a prism of strategic significance. Rui Yang said the relationship is not viewed as a zero-sum game in China, where many leaders see many possibilities to cooperate with the U.S.

  12:15 PM - 2:15 PM

Lunch Panel
U.S. Overview: When Will Growth Resume?

Welcoming Remarks:
Antonio Villaraigosa, Mayor of Los Angeles

Introduction By:
Michael Klowden, President and CEO, Milken Institute

Speakers:
Michael Boskin , Senior Fellow, Hoover Institution; T.M. Friedman Professor of Economics, Stanford University
Douglas Elmendorf , Director, Congressional Budget Office
Jim Goodnight , CEO, SAS
Michael Miles , President and Chief Operating Officer, Staples Inc.

Moderator:
Steve Forbes , Chairman and CEO, Forbes Inc.; Editor-in-Chief, Forbes

While there may be signs of recovery and stabilization, the U.S. economy will not reach full output for the next few years, panelists agreed.

Douglas Elmendorf admitted that even his predictions that unemployment will continue to rise, the economy will continue to contract until the second half of 2010, and growth for 2010-11 will reach 4 percent is considered optimistic in comparison to others′ views.

Panelists said the question is whether the $783 billion stimulus package will be enough to bring the country back to full output. Michael Boskin said the stimulus would best serve the economy through targeted efforts. Additional stimulus aid in 2010 should be viewed critically, and current allocations of the package should be analyzed for impact. It′s important to juxtapose long-run costs with short-term benefits, he said. Ultimately, the short-term effects of the stimulus are needed but the long-term impact of higher taxes will be felt by future generations if spending isn′t curbed.

Universal health care, carbon-emission caps and unionization all stirred debates on detrimental vs. beneficial effects. However, the panelists agreed that the crisis itself has exposed gaps in the current system of regulation. While the need for systematic risk regulation and market ratings were generally viewed as necessary, it is evident that regulation must be flexible enough to adapt to variety of industries and firm sizes that exist, they said.

Michael Miles said the nation survived the "perfect storm" and that things are "looking better," at least in retail. Though small businesses were hit the hardest during this crisis, these businesses will also lead the nation out of the downturn, he said.

Jim Goodnight said this is the ideal time for businesses, large or small, to look inward and begin to optimize their processes, minimize their inventories and truly maximize revenue. It′s through innovation, investment and cost-cutting that the nation can remain competitive on a global scale.

  2:30 PM - 3:45 PM

High-Skills Immigration Can Help U.S. Economic Recovery

Speakers:
John Lechleiter , Chairman, President and CEO, Eli Lilly and Company
Richard LeFrak , Chairman, President and CEO, LeFrak Organization
Gary Shilling , President, A. Gary Shilling & Co.
Vivek Wadhwa , Senior Research Associate, Labor and Worklife Program, Harvard Law School; Executive in Residence/Adjunct Professor, Pratt School of Engineering, Duke University

Moderator:
Daniel Casse , President, G100

High-skills workers are those who labor in the back room to develop infrastructure and technology. They hold bachelor′s degree at minimum and often have invested in a master′s degree and doctorate. And historically, "whether they came on the Mayflower or on Air India, it′s a one-way ticket. They don′t go back," Vivek Wadhwa said.

Entrepreneurial opportunity and improved quality of life have attracted many well-to-do, high-skills immigrants to venture to the United States. However, current political and social sentiments on immigration have unfolded in policies that deter high-skills immigrants from building a permanent niche here and enable other countries to recruit high-skills workers to their work forces.

John Lechleiter said the research cycle plan at Eli Lilly typically takes 10 to 15 years, and Lilly′s talent largely is made up of high-skills immigrants such as graduates on student visas. However, U.S. immigration policy deters many high-skills immigrant workers from committing to the company, Lechleiter said. This causes employees to leave after about five years and undermines Lilly′s research and development, he said.

One solution is to expand the numbers of temporary residents and speed up the green card process for high-skills immigrants.

Richard LeFrak refers to the success of Canada′s 1997 immigration policy in response to the surge of Hong Kong immigrants during the island′s transition from British to Chinese governance. Canada offered these well-to-do, high-skills Hong Kong immigrants "access visas" that permitted them to live in Canada in return for their investment. This innovative foresight in immigration policy helped build Canadian cities such as Vancouver into booming metropolises.

High-skilled immigrants are educated and risk-takers, making them prime candidates for successful, job-creating entrepreneurs. Both LeFrak and Gary Shilling recognize an opportunity for high-skills immigrants to help the United States in economic recovery not just by creating jobs but also by occupying homes and taking units off the market.

Panelists agree that the subject of immigration should shy away from its current perception to the idea of value creation, with high-skills immigrants contributing to the population of homeowners, entrepreneurs and job creators. While current entrepreneurship visas permit high-skills immigrants to obtain permanent residence after three years of investment and contribution, it is not enough to retain about 1 million people who are stuck in immigration limbo. A member of the audience said that, as a high-skills immigrant who pays Social Security taxes and health-care premiums, he and immigrants like him have the resources to help repair the housing market. Panelists agreed that the United States should frame immigration differently and promote itself as a magnet for skilled immigrants.

In closing, Lechleiter loosely suggested that if he cannot retain high-skills immigrants in Lilly domestically, he would have to outsource. Wadhwa said that if the United States continues its current immigration policy, it would in effect hand other countries the human capital to innovate.

  2:30 PM - 3:45 PM

Moving From Aid to Investment: New Models for Supporting International Development

Speakers:
Alice Albright , Executive Vice President and Chief Investment and Financial Officer, GAVI Alliance
Gargee Ghosh , Senior Program Officer, Development Finance and Policy, Bill & Melinda Gates Foundation
Dambisa Moyo , Author, Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa
Jan Walliser , Sector Manager, Poverty Reduction and Economic Management, Africa Region, World Bank

Moderator:
Betsy Zeidman , Research Fellow and Director of the Center for Emerging Domestic Markets, Milken Institute

With 100 million more people below the poverty line, this is not the time for donors and private capital to back away from health needs of the developing world, according to Alice Albright. Rather, they should think of how different types of capital and donors can work together and leverage their services.

Moderator Betsy Zeidman noted how the unpredictable patterns of aid leave developing countries wondering if and when it will arrive. Jan Walliser noted the difficulty African nations face working with several hundred donors who are not coordinated and have not leveraged their services. Albright added that the donor environment does not help health care because each donor has its own reporting and monitoring requirements, further complicating aid delivery.

Dambisa Moyo, author of Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa said a fundamental problem with the aid culture in that donors don′t involve African governments. This removes incentives for the African government to participate in a meaningful way. The aid conversation should really focus on donor exit strategies and not short-term solutions that ultimately do not spur long-term development, she said.

In terms of long-term solutions for health-care needs, Gargee Ghosh said drugs and vaccines tend to be neglected with investment. She said grants are more effective in delivering health services to developing nations. About 50 percent of those providing health care are private entities, and there is a great opportunity for aid organizations to work with the private sector, Ghosh said.

Albright offered other solutions to access funding for health care. One is the International Finance Facility for Immunizations. The GAVI Alliance has used IFFIm to access the capital market for additional funding for government immunization pledges. These binding promises allow for long-term, predictable, funding commitments. Another solution is advance market commitments, which use up-front payments to encourage pharmaceutical companies to create vaccines more rapidly. In return, the pharmaceutical companies sell the vaccines at a lower price. However, Ghosh asserted, IFFIm is not an endless source of money.

Moyo said the solutions Albright mentioned do not address the fundamental problem that African governments need incentives to invest and underwrite such programs. Moyo said that unlike the Western view that African nations can access capital markets, other nations — particularly China — have a different attitude toward Africa that the West has failed to consider. Walliser disagreed, saying that African governments will not have easy access to capital markets and that most investors are looking to invest in Africa.

While the panelists had different perspectives on the best approaches to international development, they agreed that international aid requires a multi-faceted approach that considers donors, local governments, the private sector and civil society.

  4:00 PM - 5:15 PM

Reinventing Asia's Growth Miracle

Speakers:
William Meaney , CEO, The Zuellig Group
Keng Yong Ong , Director, Institute of Policy Studies, Lee Kuan Yew School of Public Policy, National University of Singapore
Huiyao (Henry) Wang , Vice Chairman, China Western Returned Scholars Association

Moderator:
Mary Kissel , Editorial Page Editor, Wall Street Journal Asia

Privatization, more democratic forms of government and China′s inclusion in the World Trade Organization led to Asia′s economic boom in the 20th century, but opinions differ on whether such dynamic growth can be sustained.

Just as other economies are battling against the global slowdown, so is Asia's. William Meaney said slowing export growth has and will continue to hurt most trade-dependent Asian economies. Another root cause of Asia′s economic condition is the fact that, despite its rapid economic growth, private consumption has not risen.

In response to the crisis, Asian economies have rolled out sizable fiscal stimulus plans to combat the downward spiral. Keng Yong Ong said Asian governments have attempted to stimulate their economies with fiscal policies, preservation of jobs by increasing employee training, and other tactics. However, Ong's view is that these policies are sufficient for the short term, but their effects five to eight months later are questionable.

Huiyao Wang appeared to be the most bullish on Asia's economy, outlining China′s ambitious stimulus plan and its other attempts at sustained growth and global competition. The government is also spending on medical reform, increased salaries for teachers and farmers, tax exemptions, etc. Wang goes on to explain the positive effects that China's stimulus package has had on its gross domestic product.

While time will reveal the long-term effects of Asia′s policies, it is certain the nations are in short-term pain. Businesses operating in Asia must shift resources to adjust to the downturn; investors need to regain confidence in the markets; and governments must explore policy changes and increase privatization, panelists said.

  4:00 PM - 5:15 PM

Measuring Today’s Terrorist Threat

Speakers:
Philip Coyle , Senior Advisor, Center for Defense Information
Michael Intriligator , Senior Fellow, Milken Institute; Professor of Economics, Political Science and Public Policy, University of California, Los Angeles
Alvin Toffler , Author; Futurist; Principal, Toffler & Associates

Moderator:
Peter Katona , Associate Professor of Clinical Medicine, David Geffen School of Medicine, University of California, Los Angeles

Definitions of terrorism differ not only among nations but also among agencies within those nations. As mediator Peter Katona stated, "One man′s terrorist is another man′s freedom fighter."

Like pornography, terrorism is something that you know when you see it. How it′s defined helps law enforcement track trends and try to prevent terrorist strikes. Philip Coyle said recent terrorism peaked in the 1980s; the numbers of attacks in the years after 9/11 more closely resembled activity during the 1970s. The government however quit making this type of information public because decreasing terrorism wasn′t good publicity for an administration trying to sell a global war on terror, he said.

Michael Intrilligator said obtaining weapons of mass destruction is a key goal of al-Qaida. Al-Qaida has expressed its intent to kill 4 million Americans, 2 million of whom will be children. They have arrived at this number by counting what they believe are all the Muslim deaths at the hands of Westerners. Furthermore, the sheer number of deaths can only be actualized through the use of WMDs, he said. The only two cities that al-Qaida has publicly announced as targets are Los Angeles and Melbourne, Australia. Los Angeles, with its ports, entertainment industry and large population, is an obvious choice. Melbourne, however, is something of a mystery.

Alvin Toffler commented on the asymmetry of the war on terror. There are multiple opportunities, both known and unknown, that small cells of terrorists could use to cause large impacts. Yet, to counter terrorism, the U.S. created a massive bureaucracy, or "Institutional Katrina," in the Department of Homeland Security. Created from 22 other agencies, the DHS is a very centralized, pyramidal, hierarchical bureaucracy, while terrorist groups work within decentralized, independent cells. Alvin Toffler refers to this as "pyramids and pancakes." While DHS reacts sluggishly to changes in weapons, technologies, and speed of information, terrorists are adapting, evolving and embracing this trend.

Phil said the "D" in WMD doesn′t always mean destruction. In many cases, it is more disruption and distraction. In California, a school bus could be considered a weapon of mass destruction. Government at times seems much too focused on high-profile, well-known weapons while more probable and more accessible weapons are overlooked.

Financing for terrorism comes from both illegal and legitimate sources. Many terrorist groups are affiliated with international criminal organizations, which help move money, weapons and illegal drugs. Al-Qaida receives large amounts of money from poppy farms in Afghanistan, the world′s leading producer. Some Muslim charity groups receive donations intended for less fortunate individuals while supporting terrorist groups.

The only way that to effectively counter the evolving terrorist threat is by not fighting yesterday′s war. Phil said "an ounce of prevention" now is worth more than reactive policies later. Terrorists aren′t likely to attack the way they have in the past. The world of terrorism is evolving so quickly that those in charge of counter-terrorism operations may not understand what they are fighting let alone how to fight it.

Tuesday, April 28, 2009

  8:00 AM - 9:15 AM

Milken Institute California Center Advisory Council Meeting
By invitation only

  9:30 AM - 10:45 AM

El Mundo Nuevo: Why the United States and Latin America Need Each Other

Speakers:
Frank Baxter , Former U.S. Ambassador to Uruguay; Chairman Emeritus, Jefferies & Company Inc.
Jeffrey Davidow , President, Institute of the Americas
Bruno Ferrari , CEO, ProMexico
Gabriel Rodriguez , Director of Energy, Science and Technology, and Innovation, Ministry of Foreign Affairs, Chile

Moderator:
Thomas McLarty , President, McLarty Associates; former Chief of Staff, Clinton Administration

Moderator Thomas McLarty opened this session on the relationship between the United States and Latin America by pointing out that "our futures are linked and our interests are common." He believes that the issues that exist between North, South and Central America are kitchen-table concerns, since they affect the daily lives of all the region's citizens.

Jeffrey Davidow reported on his recent experience attending this year's Summit of the Americas as a senior adviser to President Obama, observing that the event was marked by a decidedly different tone than in years past. Davidow outlined President Obama′s approach, describing it as a call for close cooperation, with no junior or senior partners, working together on a plethora of global issues such as energy, climate, poverty, immigration, public safety and trade.

Bruno Ferarri CEO of Pro Mexico noted that a response to many of these issues lies with ending protectionism. He pointed to the high level of intraregional trade within Europe, which he felt led to the tremendous success of the European Union. He suggested that by applying the same kind of trade policies in the Americas — where many of the countries have large internal markets — could create a major force.

Gabriel Rodriguez of the Chilean Ministry of Foreign Affairs also called for more targeted associations between countries, specifically to promote the advancement of human capital and technology. Rodriguez encouraged targets and standards for these interactions in meeting the needs of the region.

Each panelist pointed out that the future of U.S.-Latin American relations is dependent on the United States devoting increased awareness and attention to the region. Ferrari interjected that he would like to see some of the media and international attention typically given to the Middle East directed toward Latin America. Former U.S. ambassador to Uruguay Frank Baxter agreed, explaining that Latin America is seldom on U.S. radar screens; it's not a danger to the United States, it's not poor enough to need foreign aid and it's not growing fast enough yet to excite board rooms. To make matters worse, Ferrari added, Latin America has not done a good enough job marketing itself and the potential benefits of partnership to the United States.

In closing, the panelists called for more direct U.S. attention to Latin America, increased and more effective education to prepare Latin Americans to compete in a 21st-century world and the promotion of more open borders for people and products.

  9:30 AM - 10:45 AM

Energy Efficiency: Tightening Our Energy Belts

Speakers:
Martha Amram , CEO, HomeZ Inc; Senior Fellow, Milken Institute
David Arfin , Vice President, Customer Finance, SolarCity
James Davis , President, Chevron Energy Solutions
Bill Phillips , Director, Merchandising, THD At Home Services, Inc., Home Depot
Mark Pougnet , Chief Financial Officer, Tendril Networks Inc.

Moderator:
Nancy Pfund , Managing Partner, DBL Investors

Three trillion dollars.

That is the potential savings in new electricity generation costs if the G-8 countries were to double the speed at which they increase energy efficiency. This and other stark facts kicked off a discussion about how improving energy efficiency can be a profitable venture with clear potential for environmental and economic good.

A common theme was that, for homeowners, the desire for energy efficiency is not solely "dollars driven," in the words of Martha Amram. People look for ways to improve the comfort in their home, and if that can be done by increasing energy efficiency, so be it. David Arfin reiterated the point, with a slight twist, emphasizing the need to move from portraying decisions about home efficiency and renewable energy as one of "investment" to more of a no-brainer: "If I could save money and help the environment, why wouldn′t I do this?"

Toward that end, his company, Solarcity, began offering a lease-based system to reduce up-front costs and lower overall energy payments while greatly obviating a homeowner's need to navigate a complex web of regulations and financial credits on their own. The result? A tremendous take-off in home installations relative to SolarCity's major competitors.

Bill Philips said Home Depot has seen growth in "do-it-for-me" rather than "do-it-yourself" projects, in which customers contract with Home Depot for purchase, delivery and installation. Being responsible for the "envelope of the home," Phillips was naturally led into the business of energy efficiency, with items like insulation and windows playing a critical role in keeping heat and cold where they should be, resulting in lower energy bills and increased comfort.

Not all efficiency problems can be solved easily at the level of the individual homeowner. James Davis and Mark Pougnet said their businesses work with large organizations to increase their effect. In the case of Chevron, Davis described how its focus on large institutions like the federal government allows them to undertake beneficial efficiency projects with longer payback periods than a private homeowner would find enticing.

While they plan to expand to home-based sales, Pougnet's company began its business of smart metering and monitoring software by linking with utilities, with a long-term vision that a well-monitored and data-rich grid will allow for gains at both ends of the power line, helping utilities better forecast demand and allowing users to make informed decisions about their electricity use. If that happens, it would neatly link energy efficiency with the efficiency of markets.

  9:30 AM - 10:45 AM

A Conversation With Lado Gurgenidze, Former Prime Minister of Georgia

Speaker:
Lado Gurgenidze , Former Prime Minister, Georgia

Interviewer:
Michael Intriligator, Senior Fellow, Milken Institute; Professor of Economics, Political Science and Public Policy, University of California, Los Angeles

The story, as Lado Gurgenidze will tell it, is that in fall 2007, President Mikheil Saakashvili called, looking for "a technocrat, not a politician." Saakashvili was in luck. After a career in banking, Lado Gurgenidze served as prime minister from 2007 to '08, helping to stabilize Georgia's financial sector and attract foreign investment.

Stability and growth have been hallmarks of Georgia's coherent and comprehensive reforms. From 2004 to 2008, the nominal gross domestic product grew from approximately $4 billion to almost $13 billion. Even after the armed conflict of 2008, the Georgian economy showed its ability to be "instability-proof," demonstrating 2 percent growth and recovering the 12 percent lost in bank deposits during the war.

Equally important has been the virtual elimination of corruption. According to IRI and Gallup research, less than 3 percent of Georgian respondents have paid a bribe in the 12 months before the poll, a result that has held for the past five years. No longer is Georgia characterized by the endemic palm greasing, high tax rates, low tax collection, inflation and inconsistent policies that used to ail the country. As Gurgenidze said, "We are cleaner than clean — never gray listed, blacklisted, watch listed, whatever."

How did Georgia do it?

The answer is in a series of fiscal and public sector reforms that expanded the tax base, flattened tax rates, capped public expenditure, freed up trade, increased labor market flexibility and installed new mechanisms for transparency and accountability. The cumulative effect has been a reduction in the state′s size and reach in the economy and an increase in the economic liberties enjoyed by individuals and businesses.

Take, for instance, the ease of doing business. According to the World Bank, Georgia was ranked 112th in 2005. In 2008 it was ranked 15th — ahead of virtually all emerging markets and the majority of European Union markets.

Gurgenidze′s self-professed "single crowning achievement" was passing a law in 2008 that limited budget expenditures to 25 percent of Georgia's GDP. In addition to reducing deficits, the law introduced the public to the discourse of a monitored and controlled fiscal state, Gurgenidze said. To make these changes sustainable, various mechanisms were needed to keep reforms "succession-proof, Marxist-proof, idiot-proof." In addition to being pervasive, permanent, quantifiable and tangible, reforms were made sustainable by being codified in legislation. Fiscal deficits, for instance, are illegal. Underperformance by statesmen results in a vote of no confidence in Parliament.

In the end, Georgia is "still a poor country at a crossroads" that could continue on the "European path" or degenerate into a post-Soviet, corrupt state, he said. Reform was going to stem not only from emulating other models of success but creating from creating its own. As Gurgenidze said, "It′s not enough to be like other countries. We have to be better. Unabashedly, unequivocally better."

  11:00 AM - 12:15 PM

Reinvestment from Washington, Recovery in California

Speakers:
Dale Bonner , Secretary, Business, Transportation & Housing Agency, State of California
Richard Hartnack , Vice Chairman, U.S. Bancorp
Kevin Klowden , Managing Economist, Milken Institute
Bill Lockyer , Treasurer, State of California

Moderator:
Tom Unterman , Managing Partner, Rustic Canyon Partners

You know California is in trouble when state Treasurer Bill Lockyer gives out his home number and asks anyone with ideas to call him.

Lockyer said California's operating shortfall is projected to grow dramatically in coming years, and outcomes from the May 19 election could increase the deficit by $6 billion. To make matters worse, the state routinely borrows in the summer to meet short-term cash needs. This summer it needs $13 billion to 16 billion, but financial institutions and banks the state used to deal with either don't exist anymore or can't lend the money. Because Lockyer sees no possibility of a tax increase, the only apparent solution is to cut the budget.

California has been at the forefront of the economic downturn in many ways, Kevin Klowden said. The state was one of the first to feel the downturn; it's among the national leaders of property devaluation and unemployment; it has one of the lowest credit ratings; and its economy is closely tied to the global economy. Furthermore, according to Lockyer, California has been subsidizing other states by sending more money to Washington, D.C., than it gets back.

The state faces particular challenges because so much of its budget is determined by voters, Klowden said. Such direct democracy is both a blessing and a curse because it's hard for voters to authorize giving up things, he said.

Richard Hartnack spoke for businesses when he said it's hard to make the argument to open locations in California because it's more expensive on every possible level. Shareholders, he said, don′t care about sunshine and good weather.

Dale Bonner emphasized, however, that California is not racing to the bottom for certain types of jobs. He argued that California should draw on its strengths, including its universities, national research centers and ability to attract innovators and entrepreneurs.

Bonner stressed that there must be an interagency process to ensure that the state maximizes the stimulus money′s impact. He said agencies need to align strategies so that one project doesn′t slow down another, to screen for "shovel-ready" projects, and to understand the best distribution of money across the state. It's important, he said, to focus not just on where the money is going but on how it's being spent.

The stimulus money is preventing things from getting worse, Klowden said, but much of what the state needs to do must come from within. Bonner, at least, was cautiously optimistic that California will use the current crisis as an opportunity.

  2:30 PM - 3:45 PM

Investing in Iraq

Speakers:
Zeki Fattah , Senior Economic Advisor to the Prime Minister, Kurdistan Regional Government
Charles Ries , Senior Fellow, Rand Corporation; former U.S. Ambassador to Iraq for Economic Transition Initiatives
John Sullivan , Partner, Gibson, Dunn & Crutcher; former Deputy Secretary, U.S. Department of Commerce

Moderator:
Stephen DeAngelis , Founder, President and CEO, Enterra Solutions LLC

A window of opportunity is open for doing business in Iraq.

Iraq is a leading source of human capital in the region and is motivated to re-establish its presence after years of war and unrest, and the international business community is interested in getting a stake in a country that will be a leader in the region, panelists said. But a dramatic increase in foreign capital will only occur upon stabilization of the overall security in the region, they said.

As security in the region increased dramatically from 2006 to 2008, so has U.S. interest in direct investments, John Sullivan said. Much of Iraq's potential lies in the young, urban, literate Iraqis who make up three-quarters of the population, he said. Nevertheless, panelists said investors need of real commitment from Iraq to accept foreign investments.

While 90 percent of the Iraqi government's revenue comes from oil and gas sales, Charles Ries said opportunity exists in other economic sectors, including agricultural development and human capital. He said the Iraqi government has become more open recently to infrastructure and development investments from foreign companies. For a full deployment of international investments, Ries said, the Iraqis need to establish a legal structure to regulate competition, liability protection, land ownership, intellectual property and, ultimately, compliance with World Trade Organization rules and regulation.

According to Zeki Fattah, Kurdistan is a model for the economic development in Iraq. The region, near Syria, Turkey and Iran, has a population of 5 million — 18 percent of Iraqis. After the destruction of war, the region has undergone major changes. Infrastructure has been rebuilt, and urbanization has taken place. The region is open to the private sector, and except for South Korea and the United States, all major economies have set up trade offices there. To give investors confidence, new laws have been passed guaranteeing repatriation of profits and protecting foreign investors from nationalization and expropriation.

Fattah said Kurdistan has capital but lacks technology, management and human resources. Highly educated individuals have emigrated from the region and have failed to return.

  2:30 PM - 3:45 PM

India's Human Capital: Educating the World's Largest Population of Children

Speakers:
Pramod Maheshwari , Founder and CEO, Career Point
Grace Pinto , Managing Director, Ryan International Group of Institutions
Anand Sudarshan , Managing Director and CEO, Manipal Education
Jeremy Williams , Chief Academic Officer, Knowledge Universe Education

Moderator:
Dilip Thakore , Publisher and Editor, Education World

India's children number 1 1/2 times the population of the United States, and educating 450 million children is not one of the priorities of the Indian government, according to Moderator Dilip Thakore of Education World. Of the 450 million children in India, just 10 million will go on to higher education.

Grace Pinto of Ryan International Group has started more than 200 private schools across the country. Among the biggest challenges are the rules and regulations for creating private schools in the different states in India. As a result, she said it is important to develop a friendly relationship with the state and national government to create more educational opportunities for children. Pinto also noted that one must take into account the different languages and cultures that exist in the country when creating schools in different states.

If a foreigner is interested in investing in India′s educational system, she said, it is essential to have a credible Indian partner to help navigate the educational system. While is it challenging to start up a private school as a foreigner, it is possible through private-public partnerships, Pinto said. Moderator Dilip Thakore emphasized how challenging it is to create private education institutions in India and said the government "doesn′t want to do it themselves, but they don′t want others to do it."

Pramod Maheshwari brought about another point about the competitiveness of higher education in India. Although only 10 million students will continue onto higher education, there are just six educational institutes that meet global education standards. Thus private career coaching to prepare students for acceptance into these institutions is a competitive business. Accessibility to career coaching is a major challenge, and one way Maheshwari said that United States can help is through technology that will allow the delivery of education to remote, rural locations. The fact that 80 percent of rural schools do not have electricity remains a major problem.

Another challenge is teacher absenteeism of around 25 percent, Jeremy Williams said. "Part of the problem is that there is a disconnect between the learner and the teacher," he said. In addition, little has changed in India's curriculum in the past 60 years, and teacher training is far outdated.

Anand Sudarshan was more optimistic, saying opportunities certainly exist in India. Individual aspirations are extremely high, and the lengths to which middle-class families will go to for their children′s education is remarkable, he said.

An audience member asked about the lack of education for girls. Generally, girls are not allowed to continue beyond fifth grade, Pinto said. However, the private sector has been able to reach out to young girls by providing evening classes. Special education is weakness in India's public education system, but private schools are addressing the issue, including Pinto′s Ryan Group.

  4:00 PM - 5:15 PM

The End of Export-Driven Development: Searching for China's Next Growth Engine

Speakers:
Timothy Dattels , Partner, TPG Capital
David Tao , Vice Chairman, Beijing Municipal Overseas Returned Chinese Federation
Perry Wong , Senior Managing Economist, Milken Institute

Moderator:
James McGregor , Chairman and CEO, JL McGregor & Company

China's next growth engine will be its own people, panelists said, but its population and economic profile make it clear that some things must change at the same time.

David Tao said consumption as a fraction of GDP in China is 37 percent compared with 75 percent in the U.S., with exports making up a large share of the difference. At the same time, demographic projections cited by Perry Wong show that, in 20 to 30 years, the average worker will have to support more than 3.5 elderly Chinese. With a high rate of savings and a decline in exports, these numbers will force China to restructure its economy.

China will have to deal with two areas that went unaddressed during its decades of export and infrastructure-driven expansion. One, the environment, has been receiving more attention in China in recent years. "China will run out of water before it runs out of capital," Timothy Dattels said.

The other area is social and human capital. China is already investing in human capital through higher education. McGregor said university enrollment has ballooned from 3.4 million in 1998 to 21 million in 2008. Wong said social safety nets, insurance and pensions are all key neglected areas. China's pension fund holds just $63 per capita, he said, while the admittedly troubled U.S. Social Security system has 100 times that per capita. As with education, the government is taking some steps, devoting a large portion of its economic stimulus package to insurance programs to drastically increase coverage, panelists said.

The group focused on the government's ability to solve problems with a strong hand. "The irony is, regulated industries are actually good places to invest in China," Dattle said. "Yes," McGregor agreed, while making clear the potential consequences: "But you can get thwacked."

  4:00 PM - 5:15 PM

Dispelling Myths: The Real Role of Women in the Middle East

Speakers:
Nadereh Chamlou , Senior Advisor to the Chief Economist, Middle East and North Africa Region, World Bank
Neveen El Tahri , Chairperson, Delta Holdings for Capital Investments
Guity Nashat , Research Fellow, Hoover Institution

Moderator:
Laurie Brand , Director and Professor, School of International Relations, University of Southern California

Guity Nashat set the tone with a quote from a 1999 New York Times article: "A captain in the Middle East said, 'We should be glad God created us men and not women.'"

Most people assume the captain was from a Muslim country, Nashat said, but he was Israeli. In fact, most religions demote the status of women, she said. The misconception is that the trait is more prominent in Islamic culture.

Nashat said the treatment of women was institutionalized as the study of science, math and humanities emerged, then the division of labor ensued. Because women bore children, it seemed natural that they would stay at home for their protection and that men would dig the canals and build the homes. Those roles became the societal norm. During the Crusades, priests wrote about their glimpses of Islamic society, spreading misconceptions. "The Crusaders brought back an image of women in Islam as sex objects," she said.

Then, in the first Gulf War, Nashat said, women were educated and trained to enter the work force as their husbands left to fight. When the men returned, the women balked at going home, as happened in the U.S. after World War II.

Nadereh Chamlou of the World Bank offered three main thoughts. First, female entrepreneurship is vibrant and growing throughout the Middle East and North Africa, a trend that should not go unnoticed. The success of these entrepreneurs paves the way for greater women's empowerment. Second, the current business environment provides a more level playing field for women than expected. It is easier to promote women's rights and opportunities as entrepreneurs, drawing on a deep-rooted tradition that dates back to the wife of the prophet, who was a leading businesswoman of her time. And third, the younger cohort of women is just as educated as the men of their generation. This has created a new dynamic that may be similar to the effect of the baby boom generation in the U.S., which achieved many gains on women's rights.

Neveen El Tahri, who started working at Chase National Bank in the 1980s and started her own company in 1994, said a disparity between men and women isn't seen in Egypt. "Equality between men and women has existed in Egypt for a long time," she said. But within her own company, she has seen more women than men with long-term vision.

Wednesday, April 29, 2009

  6:30 AM - 7:45 AM

New Energy in Canada

Speakers:
David Abel , Chairman and Managing Director, VerdeXchange Institute
Lynde Coit , Executive Vice President, Corporate Development, Plasco Energy Group Inc.
Andrew Treusch , Associate Deputy Minister, Environment Canada

Moderator:
David Fransen , Consul General, Canadian Consulate in Los Angeles

Moderator David Fransen opened the panel by explaining Canada's unique position in global energy markets, including its role as a major source of U.S. crude oil imports. Its oil reserves are the second-largest in the world, trailing only Saudi Arabia. Canada is also intent on leading the world toward a more sustainable future.

Andrew Treusch of Environment Canada, a national Canadian body responsible for environmental policy and programming, presented the various and rather aggressive initiatives and goals for meeting the global climate challenges. On the domestic front, Canada has pledged to reduce greenhouse gases by 20 percent by 2020 and by 60 to 70 percent by 2050. Canada has also set a target of using 90 percent renewable energy by 2020, a goal that they hope to meet by taking advantage of abundant access to hydropower. On a global level, Treusch explained that 75 percent of global emissions come from the major economies, with China presenting a particular point of concern. Canada is optimistic about working with the Obama administration on these issues.

David Abel of the VerdeXchange Institute offered a regional perspective from California. In light of policy issues and political hurdles, his assessment of energy in California is that no single form, such as coal, oil, nuclear or natural gas, is likely to dominate. California, he said, is trying to change the mix of fuels used to meet current energy needs but given the targets laid out politically and how quickly these energy sources will change and develop, it's unclear how California may deal ultimately address climate change and sustainable energy.

Lynde Coit of Plasco Energy Group asserted that green technology is extremely expensive. His company recently built a state-of-the-art power plant to convert landfill waste into usable energy. He believes that governments must find a way to encourage private investment into green technology because we cannot meet the environmental challenges with tax dollars alone.

As the discussion closed, Treusch pointed out that despite Canada's focused and aggressive environmental policies, it will amount to very little in terms of reversing some of the damaging effects of our current energy consumption without global participation, particularly from China and the U.S.

  9:30 AM - 10:45 AM

Ensuring the World’s Water Supply

Speakers:
Joseph Boystak , President and CEO, Brightwaters Capital LLC
Yoram Cohen , Director, Water Technology Research Center; Professor, Henry Samueli School of Engineering and Applied Science, University of California, Los Angeles
Paul Pelosi Jr. , President, San Francisco Commission on the Environment
Tom Soto , Managing Partner, Craton Equity Partners
Susan Weil , Partner, Lamont Financial Services Corp.

Moderator:
Roy Doumani , Founder, California NanoSystems Institute, University of California, Los Angeles

Some 1.1 billion people around the world lack access to safe drinking water, and growing wealth is leading to increased demand for water-intensive products. With looming challenges such as these, concepts of integration and coordination featured prominently during this panel discussion.

One theme was the need to consider the links between water, energy and carbon, and to develop solutions to those problems in an integrated manner. Another point was the need for greater coordination between different government agencies, and also entities outside of government, to ensure that technologies and management options for dealing with impending water crises are not accidentally stifled by bureaucracy.

The importance of linkages between water and other environmental concerns is crystal clear in California, where, according to Yoram Cohen of UCLA, "19 percent of California's electricity goes to moving water." There are several solutions to this. Cohen and Joseph Boystak of Brightwaters Capital both emphasized that as we go forward, we need to focus on building a distributed water infrastructure somewhat analogous to smart grids and distributed generation in the electricity world; this is a smarter strategy than spending hundreds of billions of dollars just to maintain what we have. Cohen pointed out that when we properly account for the full transportation cost of bringing water to southern California from northern California or Colorado, even desalination is financially viable in many ocean communities.

The panelists provided examples of water-purification technologies that are already viable or soon will be, and interest in such technologies is justified given the burgeoning urban population. As noted by Paul Pelosi Jr. of the San Francisco Commission on the Environment, we are for the first time living in a world housing more than half its population in urban areas. Yet still, as pointed out moderator Roy Doumani of UCLA, 70 to 80 percent of water used goes to agriculture. Panelists agreed on the need for conservation in this area.

But regardless of our technological know-how in either urban areas or agricultural lands, all panelists agreed that solving our water problems required coordination and streamlining of the regulatory and financing process. According to Cohen, it takes seven to eight years for desalination plant to get fully permitted. Pelosi and Susan Weil of Lamont Financial Services Corp. cited the tremendous amount of stimulus money soon to be available for water — but in Weil's words, here in California we are not set up to "push it through the funnel" of Sacramento.

Paul Soto of Craton Equity perhaps summed it up best when he noted there is really no technical obstacle, but one fundamental challenge: the need for "unprecedented collaboration."

  9:30 AM - 10:45 AM

Fostering Change in Africa: Transforming a Continent Through Innovative Business and Philanthropy

Speakers:
Rod MacAlister , Managing Director, Africa Middle Market Fund
Nazeem Martin , Managing Director and CEO, Business Partners Ltd. and Business Partners International
Aleem Walji , Head of Global Development Initiatives, Google.org

Moderator:
John Simon , Visiting Fellow, Center for Global Development

Africa is at a critical crossroads and can either build a foundation for further growth or take a temporary hiatus, moderator John Simon said.

Nazeem Martin said there are a few common perceptions of Africa: dark Africa; dictators; romantic Africa; and industrious Africa. A person's perception determines whether he sees opportunity, which decides whether he will invest in Africa.

Africa is relatively stable politically, which has created numerous opportunities for economic growth and job creation, Martin said. Recently, remittances and cash flow into Africa have been increasing, creating greater opportunities for businesses to grow. Martin warned, however, that potential investors first must understand the environment, including the particular country′s traditions, cultures, laws and regulations.

Aleem Walji said the way people think of philanthropy in Africa must change. The continent is disproportionately young, and its youth could either be an opportunity or an obstacle, Walji said.

Walji said empowering Africans to create their own online content can shed light on issues on governance. A community in Ghana was able to demand more money for their schools after the budget was posted for all to see. Using technology to generate data, Africans can share content and hold officials accountable.

Martin warned that there is a risk of instilling a culture of dependency when it comes to aid and that relief groups should consider actively involving the local community. Martin said aid should help provide the skills people need to lift themselves out of poverty, not get stuck in a perpetual cycle of dependency.

Africa's economy is shaped largely by policies adopted in respective countries. Martin said one problem with governance is that political officials stay in power too long in African nations. Rod MacAlister said he is seeing a trend toward better leadership on the continent. MacAlister further emphasized the many opportunities available in the middle market in empowering people who will then create jobs for the local population.

  9:30 AM - 10:45 AM

Reviving Israeli-Palestinian Economic Cooperation

Speakers:
Amir Dajani , Deputy Managing Director, Bayti Real Estate Investment Company
Jacob Dayan , Consul General of Israel in Los Angeles
Saed Nashef , General Partner, Middle East Venture Capital Fund
James Prince , President, Founder, The Democracy Council
Zvi Schreiber , Founder and CEO, Global Hosted Operating SysTem (G.ho.st)
James C. Williams , Director of Insurance, Overseas Private Investment Corp.
Steven Zecher , Principal, Strategy Partner

Moderator:
David Pollock , Senior Managing Director, Bear Stearns/JPMorgan.; Chairman, Milken Institute Israel Center

The West Bank is open for business, and venture capital is welcome as Palestinians and Israelis work together in the private sector to create wealth and economic stability, a panel of experts and entrepreneurs said.

Opportunities exist in high-tech fields like information, communications and technology, or ICT, said Israeli entrepreneur Zvi Schreiber of G.ho.st and Palestinian venture capitalist and ICT expert Saed Nashef.

Together with Yadin Kaufmann, an experienced Israeli venture capitalist who funded Veritas and Tmura Venture Funds, Nashef is establishing Middle East Venture Capital, which focuses on Palestinian ICT companies and startups.

"Palestinians are well-placed to capitalize on the growing market in Arab-language content and mobile applications," Nashef, a Microsoft veteran, said. The Palestinians are technically savvy, and ICT is resistant to political volatility while opening global doors, offering high-paying jobs and fostering local stability.

With offices in the West Bank and Israel, G.ho.st is experiencing exponential growth in international virtual computing services and garnering international awards. CEO Zvi Schreiber talked about the challenges and achievements of his Palestinian-Israeli team of 30. Joking that he is probably the only CEO who has never visited his own company′s central office, Schreiber described how the company uses videoconferencing as a main management and meeting tool. He said his is the first Palestinian-based company to attract international venture capital (Benchmark Capital).

Coincident with these developments is the first planned community at Rawabi, in the West Bank. Amir Dajani from Bayti Real Estate Investment Company manages this first of its kind project, which will provide 5,000 residential homes in a mixed-use community that includes retail, a high-tech business cluster, a research university campus, education facilities and a multi-purpose cultural center. The cost of construction is estimated at $500 million, said Dajani who emphasized the job-creation potential of the project. He estimated the project will bring 8,000 -10,000 construction positions, 3,000-5,000 permanent jobs for residents and various employment opportunities for nine surrounding villages.

East Jerusalem presents its special challenges, but entrepreneurial spirit and opportunities exist there as well. With a focus on "what can be done now independent of 'final status' outcome," Steven Zecher of Strategy Partner highlighted opportunities in Jerusalem in international tourism, business networking, business skills training and targeted branding. These industries are scaleable and strengthen local brick-and-mortar businesses, providing greater value for tourists and opportunities for local youth, Zecher said.

All projects and entrepreneurs could potentially benefit from U.S. involvement through the Overseas Private Investment Corporation. James Williams of OPIC sees great economic opportunities in Palestinian communities as OPIC helps organize private-sector financing and equity while serving unaddressed needs by providing small-business loans and offering innovative instruments such as specialized insurance for political risk and trade disruption.

These successes encourage local banks to lend locally instead of investing overseas. Local lending has been problematic, said James Prince of the Democracy Council. The Palestinians receive significant aid, but political and security instability has encouraged local banks to invest overseas, he said. Reversing this trend is important because local banks are best-positioned to support local small business.

Other business challenges are the restricted physical movement of people and goods and the need for greater emphasis on investment and development instead of security and politics, panelists said. Technology reduces some physical movement challenges, but the absence of high-tech economic development zones complicates business operations where Palestinians and Israelis need to come together to produce goods and services, they said. The current security checkpoint and administrative processes are inefficient, complicating travel and making business planning and operations relatively difficult and expensive. Where physical projects materialize, solutions are a prerequisite for the completion of the project itself. For example, in Rawabi building materials will need to be transported and an access road must be built.

"Strengthening the economy of Palestinian neighborhoods is in Israeli interests," Israeli Consul General Jacob Dayan said at the end of the panel. The "everything or nothing" approaches are gone, he said. Israelis and Palestinians are working together to strengthen the economy through private development, to expand the Palestinian middle class and to foster and sustain democracy.

  11:00 AM - 12:15 PM

Global Risk

Speakers:
Asim Hussain , Adviser to the Prime Minister of Pakistan on Petroleum and Natural Resources
Jami Miscik , Vice Chairman and President, Kissinger Associates
Karen Monaghan , National Intelligence Officer for Economics and Global Issues, National Intelligence Council
Jean-Louis Scandella , Emerging Markets Fund Manager, Comgest Group

Moderator:
Joel Kurtzman , Senior Fellow, Milken Institute; Executive Director, SAVE

When it comes to assessing global risks, "the old ways are not the new ways," said Jami Miscik, suggesting something has fundamentally changed across the world.

Miscik, of Kissinger Associates, identified three hazards: the risk of the unknown — not knowing how long the downturn will last or how bad it will get; the risk of opportunism — people taking advantage of the downturn to achieve malicious objectives; and the risk of unintended consequences — that solutions may create problems of their own.

Asked why experts did not see the crisis coming, Miscik criticized those who relied too much on quantitative tools. These tools created confidence because they were based on models that predicted good results. Scandella went even further, calling these models "exceedingly bad" because they were based on value at risk, a calculation he said "has no meaning."

Karen Monaghan of the National Intelligence Council spoke to the second-order risks caused by the economic downturn, the risks of political and social instability in countries across the globe.

The panelists discussed whether the swine flu, the latest global threat to make headlines, is risk or hype. When determining the true threat of the flu or other events, experts must make decisions while facing uncertainty, and Miscik applauded the Mexican government for its quick action and communication with other countries.

The panelists discussed various hot spots that pose risks to the global market, including China, Russia and Pakistan. Russia, which Monaghan called a "wounded bear," is of particular concern to the global market because of the recent devaluation of the ruble. If oil prices remain low and Russia's downturn continues, panelists warned, the government may pursue aggressive strategies to avoid the appearance of weakness.

Despite an apparent de-escalation of the downturn, several vulnerabilities remain for the United States and its global partners. Miscik pointed to consumer credit card debt and commercial real estate, and food scarcity remains a primary concern across the globe.

Scandella predicted a change of global leadership toward China that will leave the United States and Europe behind. Yet, the Milken Institute′s Joel Kurtzman cautioned, "Perhaps the riskiest bet of all is to bet against the United States."

  11:00 AM - 12:15 PM

CEO Conversation: Outlook for India With Infosys CEO Kris Gopalakrishnan

Speaker:
Kris Gopalakrishnan , CEO and Managing Director, Infosys Technologies Ltd.

Interviewer:
Komal Sri-Kumar, Managing Director and Chief Global Strategist, TCW Group Inc.; Senior Fellow, Milken Institute

Defying the global downturn, India's economy is on pace to grow more than 6 percent this year. Driven by far-sighted investment in developing human capital and the resulting expertise in fast-growing, technical fields, India remains on a trajectory to strengthen its status as major economic player.

Nowhere is this trend more evident than in the information technology sector. Infosys CEO Kris Gopalakrishnan elaborated on the key drivers of India′s rapid expansion in IT and shared his expectations for India and the region.

Gopalakrishnan said three factors have kept the Indian economy on track during the downturn. The government tightly regulated banking activities, leading to careful lending practices and relatively few of the leverage issues that have plagued the other economies. Additionally, rising incomes have driven India′s economy. The middle class has grown from 100 million to 300 million people, Gopalakrishnan said,and this has created, "an engine for sustained growth." Finally, because of rapidly growing wealth and fairly recent trade liberalization, significant pent-up demand exists. As evidence, Gopalakrishnan pointed to the sale of 11.5 million mobile phones in a single month.

Moderator Komal Sri-Kumar asked about the success of the Indian economy, especially with respect to IT, in the past 15 years. Gopalakrishnan noted that in 1991 the Indian government began liberalizing the economy and easing trade barriers. Then, to prove the strength of Indian technology products, the industry adopted a Japanese Kaizen-style approach to quality control and improvement.

Fundamental to this effort were education and the early adoption of training systems to develop IT professionals, Gopalakrishnan said. Today, Infosys alone has the capacity to train 40,000 people annually, he said. He also suggested that in some ways India′s global business practices have benefited from having roots in U.S. and British methods.

Sri-Kumar and Gopalakrishnan also discussed vulnerabilities in the Indian and regional economies, with Gopalakrishnan outlining short- medium- and long-term concerns. The revelation of election results in mid-May poses the most immediate concern, he said. The lack of a strong coalition coming out of the election is not guaranteed, he said, and stability is less likely if post-election coalition building must occur.

Further, turbulence at each of its borders may have a negative effect on India's stability, especially considering Pakistan′s ineffectiveness in combating the Taliban.

Looking further into the future, Gopalakrishnan said having 15 percent of India′s GDP come from 70 percent of its people is not sustainable. The large agrarian-base economy is particularly at risk, he said. The basis of this risk is the opportunity for education, Gopalakrishnan′s long-term concern for the nation. Infosys has spent $116 million in the past year on education, but he says education is still too hard to access for most.

  12:15 PM - 2:15 PM

Lunch Panel
Global Overview

Speakers:
Gary Becker , Nobel Laureate, 1992; University Professor of Economics and Sociology, University of Chicago
Kris Gopalakrishnan , CEO and Managing Director, Infosys Technologies Ltd.
Karen Monaghan , National Intelligence Officer for Economics and Global Issues, National Intelligence Council
Keng Yong Ong , Director, Institute of Policy Studies, Lee Kuan Yew School of Public Policy, National University of Singapore

Moderator:
Robert Hormats , Vice Chairman, Goldman Sachs (International); Managing Director, Goldman, Sachs & Co.

How will the U.S. and the rest of the world adapt and change because of the economic downturn? The biggest turning points will be in education and technological innovations, a panel of experts said.

The U.S. economy will thrive on its strengths, such as the powerful effects of education, the growth of trade and the creation of new technologies, Nobel laureate Gary Becker said. The financial sector will face increased regulation, "some of which will be good and some that will be counter-productive," he said. He also sees an increased concern with energy, innovation and more economic power veering toward Asia.

The panelists agreed with Becker's notion of a power shift. Kris Gopalakrishnan of Infosys Technologies said consumers are driving the shift. At the same time, he sees interconnectedness among economies within Asia and worldwide. India's economy has slowed because of its dependence on foreign economic investment. Still, consumers are becoming wealthier, and they are investing more in their children's education, he said.

"Here, again, there is an opportunity to collaborate more," Gopalakrishnan said. The recession could bring about innovation that will drive significant changes in technology and health.

Keng Yong Ong of the National University of Singapore agreed but said the recession shows how much China still depends on the U.S. The best outcome for China from the recession would be to reduce its dependence on the U.S., which will take time, he said. Then, the value of China′s own traded goods will increase, and Asia will move up the technological ladder as more manufacturing returns to the U.S.

Ong says the U.S. is still the No. 1 market. "No one can beat the American consumer in spending," said Ong, to laughter from the audience. Going forward, Ong predicted more saving in developed countries and less saving in Asia as consumers begin improving their own lifestyles.

As all countries reevaluate their economic systems and operations, the shift of power could also mean a shift — and perhaps redistribution — of the burden, according to Karen Monaghan of the National Intelligence Council. She is confident the power will remain with the United States.

"It′s one thing to sit at the table," Monaghan said, "but it′s another to be willing to carve the turkey. I don′t think the other players are willing to take that role."

  2:30 PM - 3:45 PM

Reverse Oil Shock in the Middle East

Speakers:
Peter Barker-Homek , CEO, Abu Dhabi National Energy Company (TAQA)
Neveen El Tahri , Chairperson, Delta Holdings for Capital Investments
Jason Peers , Group Chief Executive, Jasper Capital Ltd.; Chairman, Middle East Association GCC Region
David Scott , Executive Director, Economic Affairs, Executive Affairs Authority of Abu Dhabi

Moderator:
Jerrold Green , President and CEO, Pacific Council on International Policy

The financial downturn has been felt in the Middle East, but the investments and growth potential in the region will make it a leading player in the world economy when the slump ends, a panel of experts said.

"As I sit in Abu Dhabi and look out from the seventh floor, the world is changing," said Peter Barker-Homek of the Abu Dhabi National Energy Company. Barker-Homek says literacy and industrial entrepreneurialism are on the rise, and a middle class is emerging. He attributes the growth to leaders who have stimulated an environment of economic freedom, high rule of law and startup-friendly policies. The Gulf Cooperation Council, North Africa, China and India may not be growing at the same pace as in years past because of the financial downturn, but these regions are still growing, he said.

Naveen El Tahri of Delta Holdings for Capital Investments agreed. "Egypt is named as one of the 10 least vulnerable countries in the world," he said. While the effects of the oil shock and worldwide economic crisis are visible — including a 61 percent decrease in what was once considered the best-performing stock market in the region — Egypt remains a safe haven for the Arab world and is being used as the "backdoor" of Europe, El Tahri said.

The effect of declining oil prices is still clearly visible in private-sector investments, panelists said. Jason Peers of the Middle East Association says the petrochemical and steel industries in particular have felt the pain.

However, reverse oil shock will not be a "mortal blow" to the region, said David Scott of the Executive Affairs Authority of Abu Dhabi. He said Abu Dhabi views this as the ideal time to invest so that "when this crisis is over, they′ll be ready and open for business … with the necessary infrastructure of a more diversified economy."

Other key issues the panelists predicted in the Middle East′s future: A shortage of natural gas, a diversion of crude oil to produce electricity, a smaller carbon footprint, and the need to invest in technology that will directly address these issues.

  2:30 PM - 3:45 PM

Financing Israel's Future

Speakers:
Yadin Antebi , Commissioner of Capital Markets, Insurance and Savings, Ministry of Finance, State of Israel
Zvi Chalamish , Consul and Chief Fiscal Officer for the Western Hemisphere, Israel Economic Mission, Ministry of Finance
Stanley Gold , President, Shamrock Holdings Inc.
Carl Kaplan , Managing Director, Koret Israel Economic Development Funds
Scott Tobin , General Partner, Battery Ventures

Moderator:
Yossie Hollander , Chairman, Israeli Institute for Economic Planning

In 2007, spurred by financial reform legislation and direct foreign investment, Israel experienced a great leap forward in the Milken Institute Capital Access Index, rising from 25th to 12th place among the 122 countries ranked. As coordinated measures for financial reform faltered and the growth of Israel's entrepreneurial economy slowed, the 2008 index shows that Israel relinquished some of those gains, falling back to 21st place in the international competition for increasingly scarce capital. How can Israel set a course forward, navigating through the global financial crisis, restructuring debt and enhancing investment? What are the financial, economic and technological drivers that can boost Israel's economy? How can the next wave of entrepreneurial growth be financed? In an open and rigorous discussion, panelists outlined the next steps for Israel's new government and new markets.

  4:00 PM - 5:15 PM

Innovation Out of Necessity: Incubating Solutions in Israel

Speakers:
Dorit Inbar , General Manager, New Foundation for Cinema & Television
Erel Margalit , Founder and Managing Partner, Jerusalem Venture Partners
Ron Maron , Director, Business Development, Israel-U.S. Binational Industrial Research and Development Foundation
Isabel Maxwell , Director and Chair of the Social Entrepreneur Fellowship Program, Israel Venture Network
Yitzhak Peterburg , Senior Visiting Fellow, Milken Institute; Former CEO, Clalit Health Services; Former President and CEO, Cellcom Israel Ltd.

Moderator:
Glenn Yago , Director of Capital Studies, Milken Institute

Israel is uniquely capable of creating something out of nothing, according to Erel Margalit of Jerusalem Venture Partners. So began this panel on Israeli innovation held on Israel′s Independence Day.

Venture capital in the '70s and '80s caused Israel to become the research and development center of the world, Margalit said. Today many global corporations have centers in Israel, and Israel continues to start many of its own companies. Margalit′s hope is that Israel will shift from being an R&D center to a center for creative capital. To do this, he said, Israel needs to engage in partnerships with other countries. Startups cannot be local, he said, they must be mini-multinational.

Yitzhak Peterburg of the Milken Institute described how Israel is an emerging powerhouse for the life sciences. Thirty-five percent of civilian research in Israel is in life sciences, a young industry that is advancing quickly.

Israel has one of the highest numbers of scientific articles published by GDP; its ratio of medical device patents per capita is nearly the same as that of the U.S.; and the number of biopharma patents per capita is high and increasing, Peterburg said. Israel has 140 health information technology companies, and electronic health records cover 100 percent of the population. Just 8 percent of Israel′s GDP is spent on health care, compared with around 17 percent in the U.S., and this percentage has stayed stable over time, he said.

Dorit Inbar spoke passionately about the film industry in Israel, which she said is made up of professional and talented personnel. The Israeli government invests around $18 million per year in the industry, mainly in productions, and there are co-production treaties and tax incentives for investment.

Israel is trying to encourage entrepreneurialism through several innovative programs, and Isabel Maxwell described how the Israel Venture Network initiates and incubates entrepreneurship to help fill gaps that can′t be filled by government alone.

The panelists said Israel has great opportunity for investors at home and abroad. Israel, Margalit said, is "a small place, and you can make a big impact."


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