investors to invest and so forth. all these things are designed so that by reducing corruption and rent seeking you're lining economic incentives with pro-poor and broad-based growth in the economy. i'm going to talk a little bit more about each one of these areas now, starting with macroeconomic policies. on fiscal policy, the policy mix so far has been using fiscal policy to support demand which had been financed by grants and monitor policy to focus on managing inflation. this is predicated on donor flows continuing to finance the fiscal and external deficits. so as i've mentioned, revenue mobilization is needed and also to ensure that expenditure is managed effectively so there's proper prioritization, both to ensure that enough is spent on

poverty reduction, on developing needs, building infrastructure as well as this adequate money available to ensure that security is stable and security conditions are such that economic activity is unhindered by security uncertainties. next, monetary policy should continue to focus on low inflation and the exchange rate should be managed flexibly. as i mentioned, the international reserves afghanistan has does provide a buffer in terms of temporary volatility of the exchange rate. while the buffers have been built and allow accommodating some shops, policies do need to be proactive and flexible. in the case of enduring pressures, the exchange rate will need to be managed flexibly and complemented by competitiveness gains from a strength in business environment.

let me turn if i may to continue talking about fiscal policy but from the point of view of sustainability. afghanistan needs to move towards fiscal sustainability. you can see in the slide that the red line represents projected revenue and the blue line represents part of spending, the operating spending. there's additional spending that is made which is the development spending and you can see there's a considerable gap. now, afghanistan needs to move ahead to try and close that gap over time to reduce its dependence on donor support. as i've mentioned, this will mean that we'll need to step up revenue mobilization efforts as well as to improve their expenditure management through better prior itization and service delivery. revenues have stagnated in the last couple of years and they will -- and due to the slowdown in the economy, they're expected to rise, but only slowly, while operating budget expenditure are

projected to increase considerably because of the security transition about which i'll [ inaudible question ] a minute. to general rate fiscal space, tax come pluns must pliance mus. the plan should be introduced soon and new tax revenue sources will also be likely needed such as excise taxes. establishing a fiscal regime for mining rey knews, which is well under way, will need to be finalized and one that shares economic rents with the government while preserving investment incentives for investors in the sector. the large spending needs, both development and security, are projected to continue. development outlays are needed to continue reconstruction and improved public services in order to progress towards mil n millennium development goals. non-security and development needs are also expected to

increase significantly. the government plans to hire a large number of teachers and health workers to continue expanding infrastructure and, as i mentioned, the security transition means that donors are currently managing a lot of security expenditures at present. they are transferring responsibilities for those expenditures on to the budget which is behind the increase that you're seeing in the blue line between 2012 and 2017 because over time those projects will be transferred to the afghan government to manage. initially with financing from donors. so the key terrific the fiscal outlook are inadequate revenue mobilization, ineffective expenditure management, and donor disengagement. now i'd like to talk about monetary policies in this period. the monetary policies should continue to focus on maintaining low inflation. the monetary base remains the normal anchor and the exchange rate should be managed flexibly.

the international reserve position provides a buffer and this reserve buffer should be maintained given the down side risks that the economy faces. now i'd like to talk about reform -- structure reform. sustained and inclusive growth will require continued progress on a broad structural reform agenda to foster private-sector activity. potential drivers of growth including a which you are and rural development, public infrastructure and services, the extractive energies and the energy sector. private sector growth employment outside security and government is also needed and will be supported by these structural reforms. i'd like to start by talking about banking sector reform and its role in saving investment growth and improving access to finance. strengthening the banking sector -- the banking sector will -- is needed because of the

legacy of the bank crisis and poor governance in the banking system which affect public confidence in banks. the strategy requires developing financial infrastructure, improving banking, and anti-money laundering and encountering of financing of terrorism supervision and its enforcement as well as developing an interbank market. the minimum capital requirements have been increased but some banks need more capital because their loan portfolios are not performing well. further, financial markets need to start to be developed because they would not only improve the effectiveness of monetary policy but they would also provide more liquidity management and better liquidity management for the banking system as a whole. the new banking law will provide a better legal basis for financial sector development and improve bank and corporate governance. the law will enhance supervisory

oversight, strengthen corporate governance, prudential requirements and enforce measures and, if needed, bank resolution. the central bank's financial supervision department has adopted a five-year strategic plan. this plan provides increased staffing and should improve the quality and the quantity of on sight and off site supervision and improve information exchange. the central bank has also prepared policies to enhance the protection of supervisory staff. new laws on anti-money lau laundering should help improve economic governance in general as well as help afghan banks establish and maintain international correspondent banking relationships. so afghan banks have encountered difficulties in this area recently. passage of new laws for anti-money laundering encountering financing, they're in line with the recommendations of the financial action task

force would help afghan banks maintain and establish these correspondent banking relationships. and the combination of these reforms for the financial sector will encourage movement into the formal sector of the economy, increase credit to the -- increased credit and fact a.q. stoesz finance and support better economic governance. now let me turn to reforms for the business environment. improving economic governance is critical for inclusive growth. strength -- and this area of strengthening the economic governance has been an important pillar of imf engagement. the business environment remains challenging despite recent improvements due to deficiencies in economic governments. afghanistan has improved its world bank doing business ranking to 164 out of 189 economies from an adjusted rank of 170 the previous year. nonetheless it's still pretty

low and the transparency international corruptions perceptions index ranks afghanistan as 175 out of 177 countri countries. and there's significant challenges in many areas, protecting the area, registering properties, enforcing contracts and dealing with construction permits. as noted, improved governance is critical to raising growth and creating jobs. the business environment needs to be improve sod that they can there can be more private-sector activity. and this will need, among other things, a more efficient judicial system and decisive steps to counter economic crimes, to help new business improve access to finance and bolster investment and construction. over the time, such an environment reduces the economy's dependence on donor support and promote regional integration. now, let me briefly talk about promoting inclusive growth before i conclude. afghanistan has relied so far on

public sector -- excuse me. has rely sod far on and donor inflows to promote growth and development. the strategy consisted of investing in public goods, to enable economic activity and human capital to boost productivity. large investments have been made in infrastructure and access to and use of education has expanded. part nation modernizing the economy. several millennium development goals were met since 2010 while others are on track for 2015. along with increased spending on health, education, and irrigation, noteworthy progress was made to increase school enrollment for children, to raise the ratio of girls to boys in secondary education, to reduce infant and child mortality rates, increase immunization against measles and lower the rate of tuberculosis. improving female employment in

the health, education and agricultural seconders and legal reforms to remove gender equalities will help ensure more inclusive and gender-equal growth. progress is being made, but there are not many quantitative indicators to track this. female representation in parliament in 28% is high and afghanistan stands at number 40 out of 150 countries ranked by the interparliamentary union. female enrollment in education has improved but still lags male enrollment. maternal health indicators have also improved. moreover, the ministry of women's affairs implements women's programs for female empowerment, female employment and policy and gender quality. authoritiesies remain committed. the new laws will increase spending. these efforts pro molt inclusive growth through the

transformation decade and in the long run. now, to conclude, i'd like to just reiterate the key messages i have that over the past dozen or so years, afghanistan has made progress in improved living standards and has laid the foundation for macroeconomic stability and poverty reduction. second, assuming smooth political and security transitions continue to economic reform and donor financing. the economic outlook for afghanistan is positive. there are, of course, risks which we've discussed. third, continued macroeconomic stability, structural reforms and political and security stability are needed to ensure inclusive growth. . i'd like to conclude to reiterating the imf's commitment on helping with building stronger economic institutions in afghanistan. so that concludes my

presentation. thank you very much. there are a number of documents we've published recently about afghanistan and that's the web link to them if you would like to read more about the imf's views on the economy. so thank you. [ applause ] >> thank you very much, paul, for that wide-ranging, very detailed report on the state of the afghan economy. listening to you it took me back to my own days listening to board discussions when the mission chief would return and you would get this blow-by-blow account of what was happening. but i also got the sense that we were talking about some other country until you got to the end

when you mentioned the corruption index and so my first question to you is, to look at the challenges and how can afghanistan ride over the two big hurdles which are often discussed when looking at the country's polity and economy -- which is the role of drugs and the role of corruption and how that affects governance. >> it's a long-term process. i think you've put your finger on a very important point in afghanistan. the region in general suffers from weak governance, as we call it. there's a lot of corruption and afghanistan has -- faces many challenges. i think the -- in terms of the economic strategy, it's not just an economic, there's also political and social aspects. but in terms 206 economics, i think it's about improving on

the one hand the legal infrastructure, the key economic laws. so say, for example, the new banking law, the new tax administration law the laws on financing of terrorism, they help set the stage and the frame works so people have clearer view of the rules of the game and what is allowed and not allowed and what the penalties are if you transgress what's allowed. that obviously needs to be complemented by supervisory and regulatory reform. so so the way tax administration the run. the way banking supervision is run, the requirements for disclosure for corporations and companies so that they are managed in a way that reduces the scope for them to succumb or be a partner this corruption. because one has to remember corruption is a two-way street. it's both the public sector and

the private sector. it's just that you want to try to reduce the scope of that. for that you also need increased transparency in the economy. these new laws will provide for more disclosure by companies and banks. it will also provide for better supervision by the banking supervisor supervisors and more redressed if you have parties who feel they are forced to make payments that are not lawful then there are avenues for them to seek redress under the law. it also requires a lot more improvement in regulations for establishing a business, getting construction permits. this is going on. it's a very long road. i think some progress has been made. as i mentioned in my presentation, an awful lot more progress is needed to really help the economy lift up and reach much higher income levels and in some ways it is the primary challenge. if governance can be improved, if corruption can be reduced,

that will make it much easier to do business. it will lift our economic activity. it will also mean that the profits from activity -- be they in the form of wages or corporate profits -- will flow to the population. they won't flow in a non-equal way. it would also -- reducing corruption should help improve the distribution of the economic benefits and spread them more widely in the economy. as well help to generate more jobs. >> thank you. let's talk about governance, the capacity that has been developed. clearly when you look at the indicators, you look at the growth of the economy since 2001/2002, informs a deep hole so obviously everything compared to that shows an improvement. is the governance capacity reasonably well established for you to be sanguine or even optimistic about the possibility

should one or two things happen? should there be a prolonged political crisis as a result of the current elections? or or should there be a deterioration of the security situation following the withdrawal of the united states and its allies? is pakistan equipped to handle these challenges of governance? >> i think that they've made some progress in terms of handling the governance and improving the governance. there's a lot more to do. now, any count friday it faces political instability or security instability will have economic problems. you can't grow and develop and economy when you have political security instability and i would think the economy would suffer in many aspects if there were prolonged and severe security

stability. i think track record suggests there is potential for further improvement but there's also a lot of risks that they face. >> one of the things you mentioned a number of times in your presentation was the extractive industries. there's been a lot of talk about the potential of afghanistan's mineral resources. figures of $3 trillion, et cetera, have been bandied about. how realistic is it to see these resources become accessible to the afghan people and their economy? what kind of time frame would you put on their ability to start looking after themselves? the reason i mention this is not too long ago when this country went to war in iraq there was a very optimistic scenario that said, oh, this is not going to cost the american taxpayers

anything, we'll fund it with oil revenues. of course, the story turned out to be somewhat different. how do you see this becoming a reality and in what time frame? >> well, i think there are a number of contrasts. only a small number. they've encountered small delays. they've started to produce a small amount of oil already in afghanistan. there are two other signed contracts which are not yet at the point of approaching production. there's still some uncertainties. but i think these projects could become operational by the end of the decade, at that point they would help to tax revenue and add to the growth as i mentioned in my presentation, there is huge potential and the ability to actually realize that potential has a lot to do with afghanistan itself in terms of, you know, the business and the investment environment so that investors feel that this will be

a place where they can do business and they will be able do so profitably. it also depends on development of infrastructure and cooperation within the region. as a landlocked country some of these minerals will need to be exported over land and there will need to be cooperation with the labors on the transportation. >> thank you. i'd like to come back to the regional trade aspects of the integration of the region later but i don't want to hog the questioning on this. we've got such a great audience here so i'm going ask people if they wish to ask a question to please raise their hands and please ask a question so that we can get more of them in so let me go here first, please wait for the microphone. introduce yourself and then the next question will be on the other side. >> thank you very much. i'm from the atlantic council.

thank you for your very interesting presentation, paul. my question specifically is related to growth and you laid out all the very important conditions for growth to occur on the institutional side, structural and reforms and macrostability and all the necessary conditions. but i'll follow up on what was also being raised. to date, growth is being driven in afghanistan by donor spending and military spending. so what is afghanistan's future's comparative advantage? where is the growth going to come from? you've got all the -- you've laid out all the conditions but you haven't actually told us where this growth is going to come from, which sectors. what is afghanistan's comparative advantage?

>> thank you. in terms of sectors, the ones that seem to have the most potential at the moment is the natural resource sector and agriculture. and the interesting thing about those two is that as you know the natural resource sector is not a big employment generator but there's more scope for employment generation in agriculture. agriculture i think there's plenty of room for efficiency gains and improvements in that sector that could yield quite a big growth delta for afghanistan so they're the two principal sectors i would see in the next five years where growth could really pick up. >> can we get the mic back? just one second. >> i mean, you talked about all the reforms and the institutions and the governance and so on and so forth have to do with promoting private investment and private businesses. agriculture doesn't need those kind of institutions, does it? >> well, i talked about the macroeconomic side, you're

right. obviously they need to be complimentary sectorial policy reforms that other institutions deal with in the agricultural sector. i think there will be a need more more structure development for irrigation and there will also be the need for policy reforms although that's not an area that i'm specialized in. >>. >> i must say, mr. paul, that your presentation was very smooth like silk about a country which is very tough and rugged at the time being so we appreciate the optimism that you've demonstrated. but the realities, as was pointed out, these things that you have mentioned will happen if things are smooth.

but what kind of fears are things you have in mind after the drawdown, which most of the international community is feared for of the tribal society that there could be implications and complications and things can start falling apart because of the deep divisions as a result of the elections the society would be divided. they are generally fragmented except their rule in kabul. thank you. >> thank you. you know, i think this is a very important question. it's a very hard one for me to answer as an economist because a lot of the factors are non-economic, they're related to political developments and security developments. i would have to sort of reiterate what i said earlier that obviously afghanistan, like, i think, every country, needs political stability and security certainty for its

economy to prosper. if the splix unstable, if security is not good than that will affect its economic development. it will mean that the outlook that we foresee may not occur and that's why i kept mentioning the risks of our uncertainties on those fronts. similarly, it may not be driven by afghanistan. you know, like everybody else, afghanistan is dependent on its neighbors so that, you know, regional conditions will also affect how well it does, like what we're seeing in europe, for example. you know, the problems that some countries face in europe are affecting some of their neighbors in europe. and the same applies in the region where afghanistan is. you know, because countries' economic prospects are linked, if one country -- if a nearby country faces economic problems it can spill over into other countries nearby.

>> thank you, i'm at brookings and used to live also and work in afghanistan for a few years. mr. ross, i was impressed by your introduction and i agree that it was as smooth as silk and i was left also to wonder is he optimistic or is he not optimistic? because you were optimistic assuming that there would be a smooth political transition, a smooth security transition. that there would be continued reform, which means governance, corruption, et cetera and also that donor fatigue could be managed, which are some real big ifs. and then when it came to the mining industry you mentioned the tremendous challenge in infrastructure. so i wonder, could you give us a

little bit more of an impression, perhaps. are you relatively optimistic or are you pessimistic when it comes to the ability of a country that is not that far away from a civil war and the war against the taliban when the insurgency is still there and has come back in force over the last few years. what is your real sentiment. and you talk about the mining industry and the $3 trillion that were mentioned, potential. you said it could be possible to start extracting by the end of this decade but you need more than infrastructure, don't you? you need a solid regulatory framework and you need a rule of law environment that will enable the government and ensure that the government has the willingness to make sure that

these resources really become the property of the people and not of a few profit-hungry foreign companies and equally profit-hungry afghans. >> you've made an accusation which i think is fair. that as an economist i've assumed everything away. [ laughter ] look, i think that to prepare a projection and an outlook you have to make certain assumptions and i would say that i think i would characterize the outlook that we've prepared as one that is feasible but makes aassumptions that relatively good thing will happen. i don't think it's wildly optimistic but it's positive. it's assuming certain things that have been achieved continue. it may be wrong in making those assumptions, that's the risk of any assumption you make and any

proximatal outlook that you prepare. it depends on the parameters that you assume. now, you're talking about the mining sector and, yes, there are a lot of uncertainties there. i totally agree with you. what will actually happen very much depends on what happens with twhat happens with the new government and the security situation involved. i don't know how that will go. i've made certain assumptions that i think are as good or bad as anybody else's. but i think you're right to flag, so much depends on what happens in the future. and the actual outcomes for the economy depend on what happens in terms of the improvements in governance. the political situation, the determination for a reform. the consensus within the country, be it politically or socially. these are all uncertainties that afghanistan faces like every other country and perhaps they're larger in afghanistan than many other countries

because of its resent history. one has to make certain assumptions and move forward on that basis. i would say that we can have a vigorous debate on what are the correct assumptions. i wouldn't expect us all to come to the same view on what they should be. >> just to follow up on that point. i think he's making the point that your assumptions are well founded and therefore your conclusions based on the assumptions are reasonably well founded but what is the probability that the trajectory that you're defying will actually cur and then how do you look at previous performance as an indicator of what we should expect and if that's the case, what are going to be the mine fields? is it going to be a political mine field? is it going to be a security mine field that the government will have to go through. so maybe if you could weigh

those into your calculations and then tell us whether you are reasonably optimistic or that you don't know which way it's going to go. >> thank you. i can't yet tell because i don't know the outcome of the elections. i don't know what will be the impact of the international troop drawdown. i don't know exactly what policies the new government will pursue. the statements that i've seen from both candidates are obviously in favor of economic growth and development and job creation. but they're not very specific yet in terms of policies and timelines and i also don't know what will be the outcome of the elections, whether they will be broadly accepted or not there are many uncertainties and that's why i'm not that

position. >> i'm just going to go back to david and then ja said are after that. just to let everyone know that david was a panelist yesterday when we talked about the transition in afghanistan and knows the country well so david, the floor is yours. >> thank you very much for putting on this event and thank you, paul, for bringing a very different perspectives on afghanistan. a perspective which people's own biases make it hard to accept and the resistance you're getting from the audience to what you're saying i think is great evidence of how hard that is and i think some things that you're pointing out such as the low level of debt, if you look at other countries, pakistan, for example, which has 60% plus of its gdp in debt or argentina which has around a% of its gdp in death and if we were talking about those countries you'd be focussing on that bad thing and

how impossible it was to overcome. this is all a lead in to say it's very hard to say positive things about afghanistan as you've heard from the various pushbacks. i have three questions that i'd like that ask you. first, there was a statement made earlier that virtually all of afghanistan's economic growth over the last decade has come from donor spending and the military and i wanted to ask you if that's accurate or if anybody knows. has there been any way to disaggregate the growth in gdp, how much is due to donor spending. how much is due to improvements in trade for the various factors that lead to that so that would be one question. the second question is in if he can of 2011 the "new yorker" published a hugely influential article on cob buell bank you mentioned kabul bank several times. that article was read at top levels of the u.s. government and treasury department and has shaped u.s. perspectives on the

afghan financial system since 200 2011. so can you comment on the last three years and if you recall the article, has the afghan financial system made any positive steps forward since 2011 and are those positive steps sufficient to give you some credence to the idea that the financial progress that you said was necessary could be continued? and the third question you mentioned and the issue of revenue and the fact that revenues have stagnated and slightly declined and you pointed to leakage. can you -- i love these economic terms. can you define leakage for us, please, and maybe be a little more definitive on that? thank you. >> thank you. you're undoing the imf euphemisms. i'lldom that.

on economic growth. i haven't seen any breakdown of to what extent the growth has been due to the large amount of spending both from donors and from military. i think that clearly that large amount of support -- and you saw the chart on donor support, that is clearly an extremely important factor in the growth that afghanistan has recorded, albeit from low bases. i think, though that -- i think one should look at not just that factor but the fact that the progress that's been made in building economic institutions does provide some scope for ensuring growth that growth continues even if donor support is not as large as it was. say it's come down from 70% to 40% of gdp over the last couple of years. growth has still continued.

it's got lower but it has continued. turning to the financial system and strengthening it over the past three years, i think there has been some progress. i think what's been very important is the new banking law has been prepared. it hasn't passed parliament. that's an important step. i think supervision department central bank has been restructured and staffing has been increased more work is needed but that should improve the ability of the central bank to monitor and supervise banks and reduce the risk of a crisis. despite those improvements, the banking system still remains quite fragile. there are a number of banks that have relatively low ratings. so i think further improvement is needed in the infrastructure for the development of banks to help improve their financial

positions. i mentioned in some cases banks would need to have more than the minimum capital required because of special situations they face with their loan portfolios. they will there will need to be continued efforts to improve the strength of management of banks so that they are well run. so i think this is the case of a half full glass quite a bit has been done there's more that needs to be don in this area then the word "leakage." well, i was referring to money that's paid by taxpayers but for various reasons doesn't end up in the treasury. what i'm talking about is an issue that every country faces. every country has leakages, perhaps they're larger in afghanistan than many other countries but it's very important that there's better compliance. not just to fund the treasury to help pay for needed social spending and poverty reduction, that's important.

but also but also as improving governance and combatting corruption. you don't want to face a culture where every time you meet the tax man you're having a long haggle as to how much of your taxpayer money will go to him or her and how much will go to the treasury because you're wasting your time as a businessman negotiating with the tax man. you should be negotiating with your customers and suppliers so there's the two-fold impact there. >> let me just follow up on that, paul. for those of us who rely on the newspapers and television, there were these abiding images of palates of hard currency being exported everyday out of kabul to dubai. has that stopped? because if there is a leakage and if the money is spent within

the country even then the economy would profit from it even if it didn't go through the filter of government. some might think that's not a bad thing. but has there been enough done to stop the outflow of money which has been facilitated by either corruption or by lax laws? >> i don't have -- the nature of this is you don't really is numbers to see how much is being exported. there were great articles, i remember, particularly in late -- what was it, 2012 at the time of the inquiry of the bank crisis there were some stories about cash exports. there were no comprehensive data so i don't have a sense of how that has changed over time. i agree with you. i think it's important that money should be invested in the

economy, preferably in the formal sector rather than the illicit sector. >> doesn't the fund have the capacity to match the inflows into the uae or other places even if you don't get it leaving kabul? or is this all smuggled? >> we don't have information to say where cash imports are coming from in partner countries. we don't have that information. it also depends whether or not that cash actually ever ends up in a bank because a lot of this cash stays outside of the banking system. >> the microphone come for you please. >> i'm retired from've s ifc so you're talking about the private sector so maybe i can make some question or input. the first question i have that is that one of your graphs showed the gap between expenditures and revenues and it

was huge at something like $10 billion or something like that and it is sustained over a long period of time so my question is that do you expect the donor to continue with this support of this level? and the second link question is that aren't the donors thinking in some way that this is linked to performance because if it just comes in and nothing happens it's s that because you've got corruption, you've got all those things and then you've got a developing of the adoption capacity to execute projects and things? so i guess i'm thinking into how you link this thing to actually results that take place on the ground. second question is that is there a little bit thinking of a different model of development

where there could be a huge focus on a couple of sectors in the economy and you said the resource sector could be one and the second could be just simply infrastructure development and not have the whole development expenditures spread out over many, many areas and therefore it just gets -- you don't see what the results are. i'm thinking that that kind of thing can happen and what advice can be given to the government. what is the likelihood of the government accepting such advice? >> yes, there are long-term commitments of donor support and they will be revisited at the conferences later this year. i mean, in 2012 the securities -- to do more to support, international partner support for security was over a ten-year hoshz. there was a ten-year commitment made and for the development assistance it was made for horizon just over five years.

linked to that there was a framework established which was designed to promote reform in various areas and donor support would be linked to those reform commitments being achieve sod there is a framework far where donors say we would like to see progress in the following areas and these are milestones we're looking to achieve within certain milestones and the donor support is linked to achievement of those. in terms of the development model, this is an area that's not -- we're not great experts in as an institution but there does seem to be at least in the near term some comparative advantage for the agricultural and natural resource sectors so that's where in the near term there does seem to be potential to get growth from moving ahead

in either exploiting natural resources or developing and improving the agricultural sector. >> paul, the fund does work with the world bank very closely and you have joint missions also, discussions. what the k you tell us about their thinking on this and then are you also in touch with the asian development bank? is there at least a common point of view that you are supporting each other in the quest for afghanistan stable and grow at the right pace and the right direction? >> we are working very closely with both the banks, the world bank and the asian development bank as well as a number of the large bilateral donors which are active in these areas. so for example on the natural resources sector the world bank has been advising on the mining law which i think is just passed parliament and we've tried to

complement that work by working with the government to develop a fiscal regime or tax regime for the natural resource sector that on the one side shares some of the rent with government for tax revenue and makes sure there are adequate incentives for companies to invest in that sector. >> do we have a question at the back there, young lady? okay, let me take -- two questions there. >> thank you. i'm michael caughy. i'm an interested citizen since i've been my career doing public opinion research in afghanistan. i see legal reform as being absolutely essential towards encouraging and basically guaranteeing economic reform bus one thing i've seen in my personal experience is that enforcement is often lax. my favorite story is when you fly into kabul international

airport and you're leaving the international section of the terminal and you see this sign and it says basically "bribery is forbidden in the government of the islamic republic of afghanistan." and there's a guard standing next to it. on my first trip to kabul i see an afghan walk up, press a couple of afghanis into the guard's palm and walk through the gate. so obviously there's a disconnect between what the law says and how it's enforced. but also in terms of public opinion what people believe to be right and you see if you look at the survey of the afghan people from the asia foundation that's done every year that many people do not support the idea of bribery, especially if it does not benefit them. how can groups like the imf and the world bank engage this public opinion and support in the form of civil society groups to press for needed reforms in terms of enforcement and laws. >> thank you. that's a very good question, one we often ask ourselves,

actually. i think when we work on these things we partner with the host country government and the value bank and we try and promote reforms. but we also do have a soap box where we try and present these reviews publicly. in kabul we try and present our views and recently we had a press conference with some kabul-based journalists and where we talk about these issues but but we are not in a position to launch a mass wave to persuade public opinion but we do try and reach out and make our views public. that's why for example we published the papers that includes some of our work on governance in afghanistan and we plan to continue to do so. >> frank miller. i just returned from afghanistan

for from being there for a long time and one of the things i wanted to make sure i said was is i would love to have you on my staff if i was king of the world in afghanistan. the issue that i -- that makes me wonder because you do have a considerable amount of depth of the organization for the requirements for the assumptions. is there some type -- because i felt there wasn't, but is there some type of a -- an authority that the afghan people, the afghan leadership looked to for the international community for the guidance and do they believe us and are there enough afghan leadership or people in leadership because it's not just ashraf ghani or abdullah abdullah, it's all those people in are there around them, supporting them, that have the insight and the understanding to take the advice that you have and potentially from other folks in similar situations from different strains and actually be able to enact that.

or it just three generations away and we just have to nick away at it and nick away at it. thank you. >> thank you. >> that's a who understand very well what are the economic issues and they agree with some of the points we have but not all of them, about you we can discuss with them very clearly. i'm not sure that concerns about the economy are broadly based within the political leadership. and i think that that's not uncommon. afghanistan is not the only country that faces that, but i think that there are enough people who understand the economic challenges and the economic issues and possible options and recommendations to address some of the challenges that afghanistan faces to make good progress in this area already, and i think they have made some pretty good progress since 2002 so that it shows it's not -- the progress hasn't

always been in a straight line. there have been a few zigzags along the way, but i think that there is some capacity to move forward and address these challenges, around thend there understanding of what the economic challenges are. but that's also tempered by various interest groups like in every country because some of these economic reforms create losers, and it's natural within any political system that if you feel that a reform may hurt your economic interests to oppose it. so there are interest groups that oppose reforms in afghanistan like in all countries. >> sorry. we had a question here first? and then at the back. thank you. >> hi. i'm mike bendel, i work for cigar. i just wanted to pivot back to a framework for moving forward for donor assistance based on agreed upon metrics of afghan

performance, and if you look at previous agreements like the imf's extended credit facility arrangement, that has not moved forward the second and third reviews have been delayed. the disbursements of funds have been delayed for several years as well. in fact, the afghan reconstruction trust fund, which in part is predicated -- the disbushesment of funds through the artf is predicated in part on movement of the extended credit facility. since that has been delayed, why should donors have any kind of reasonable assurance that their money will be we will spent or afghanistan is making sufficient progress if the imf's own program isn't disbursing funds or having program reviews. why should people have reasonable confidence that donor assistance will be well used in the future?

>> well, there are two answers to that. the short one, which is, you know, donors decide what they wish to disburse. the longer one is that although we haven't completed a review for over a year and a half, progress has been made still on the economic agenda. it's been slower than we'd hoped, but progress has been made. so, for example, you know, inflation is still under control 6%. the budget position remains quite manageable. the external position, too. debt remains low. reserves remain comfortable. also some important structural reforms have gone ahead. perhaps not as quickly as one might have liked. there's an anti-laundering law, a new banking law, a new vat law has been prepared. the kabul bank crisis public inquiry has been completed. there's been in our framework there was something like 25

structural reform benchmarks envisaged for 2012 and 2013, and 22 have been fully completed and the other 3 have been partially completed. so donors have taken that into account in making their decisions what level and how to support afghanistan. so although reviews have not been completed, there has been some progress. not as much as one would have liked. >> thank you. >> hello. my name is rafa katub. i work with capitalize international in washington, d.c. my question is about gender equality and economic development in afghanistan. what is specific measures and reform recommendations is imf along with other donor agencies in afghanistan is doing or recommending to the afghan government to haensure growth a

development is not just pro-poor as you talked about in your presentation or inclusive in those broader terms but is specifically addressing gender equality in the economic development trajectory of afghanistan so afghanistan doesn't become another latin america in its development performance. you know, latin america is the most unequal region -- developing region in the world, so what measures is imf taking to ensure that gender equality and growth. thank you. >> well, there are two aspects to this. one is there are a number of measures that are designed to make sure growth is broad based. they're not necessarily gender equality but they're meant to be broad based so it effects everybody. they're principally the types of combatting corruption, improving

the investment environment, the business environment, and job creation. so the benefits of growth are widely spread through, a better business and investment environment which i have discussed. in terms of gender equality, now, here we are not -- this is an area which is not within our principal expertise but i did mention some of the measures that have already been taken. there's a ministry of women's affairs. there's measures taken so that female participation in parliament, it's not 50%, but it's relatively high, the number 40 out of the 150-something countries that are followed by the interparliamentary union. there have been laws passed to promote gender equality and the millennium development goals specifically are targeted at improving female enrollment in education and female health and female mortality indicators, so that's meant to promote more

gender equal growth. >> paul, i think we're coming to the end of our appointed time, but i wanted to come back to one question that you hinted at in your presentation, which is the role of trade and regional trade. afghanistan has often been described as a potential economic bridge in the region between central asia and south asia and further on to the gulf. making an assumption that the security situation allows it, how big a factor would this be in stabilizing the economy and helping it grow without necessarily being solely dependent on financial flows from the west? >> yeah. i think that greater trade would benefit afghanistan considerably, and as you know, there are a number of initiat e

initiatives to try to build up the trade flows in the energy sector between central asia and south asia which would obviously benefit afghanistan as one of the transit routes. the more recent integration would have two benefits. obviously the direct enfits on income and growth for afghanistan but it would also tie economic interests and thereby security, political interests, and, therefore, act as a sort of stabilizer because then everybody would see that there's a common interest in maintaining and improving regional stability. >> and maybe on that expectant and optimistic note, i'd like to thank you for joining us today and i want to thank the audience in the hall as well as the audience at home or in their offices through c-span. thank you very much. >> thank you. [ applause ]

a reminder you can see this event anytime on our website at cspan.org. this past week singer rosanne cash, daughter of johnny cash and singer so-songwriter produc paul williams testified on the music industry and how the rules might be updated. also testifying officials from

pandora radio and the national association of broadcasters. you can watch that saturday at 3:25 p.m. eastern on c-span. homeland security secretary jeh johnson was also on capitol hill this week talking about the status of unaccompanied migrant children. here is some of what he had to say. >> how many areas of the border we have a fence have we had children coming across? >> if you're referring to -- >> for example, around san diego, southern part of california. >> this has not been a big phenomenon in southern california or arizona. >> at any place we've had a fence, have we had 5-year-old children coming across the border? >> not in very large numbers. it's got a lot to do with the fact that south texas is so closely located to central america, too. that's the migration path. >> in the rio grande valley if we had the same sort of fencing we have along the southern border of california, do you believe these children would be coming across the border in the numbers they're coming across or anything close to it? >> it's hard to answer because you're talking about the rio

grande river which is -- >> i have been there. i know what i'm talking about, and we don't have a fence down there, and if we did, we wouldn't have 5-year-old children coming across. this congress in 2006, because i was here, we authorized and appropriated the money for 700 miles of fencing. we've gotten most of that but that was done in twine. we haven't had any more since then and this is what we get for it. let me ask this, i have been down to dallas where they have the large detention facility and i have seen the folks we detained. the debriefed, cleaned up, put on a bus and sent back. why aren't we doing that with these children? >> well, first of all, nogales is being used right now as a processing center for the uncompanied children. they are leaving nogales and going to hhs custody for shelter and then placement -- >> but why aren't we putting them on a bus like we normally do and sending them back to guatemala? >> because the law requires i turn them over to hhs.

>> the law required obamacare to be kicked in two years ago and it hasn't stopped the administration from doing something different. you know, you talked a little while ago about trying to talk with the guatemalan government about what we should be doing. i think what you need to do is ask the ga watt mall lan where they want the kids dropped off when the buses bring them back down there. what are we doing other than taking them and putting them in a facility that will make it more likely we will keep them here for months if not years. tell me what we're doing it get them returned home? >> we're creating additional detention space for adults who bring their children, and i'm considering -- i want to consider every option for stemming this tide, sir. the law requires, the law that was created in 2008 requires that we turn these kids over if they're uncompanied to the department of health and human services within 72 hours

generally, so that's what we do, but they're turned over with a notice to appear that, you know, is effectively a deportation proceeding that's been commenced against them but the law requires i turn them over to hhs. >> do you believe these are exigent circumstances? >> i believe these are exigent circumstances, yes. >> do you believe that the president should issue an executive order due to these exigent circumstances to deal with this crisis? >> i'm not sure i can comment on that. of what nature? >> to supersede the law. i mean, this is not the first time the president -- i don't know why he can't -- >> last time i looked an executive order can't supersede the law. >> well, that's what we thought, too. we can find a way to get in front of the supreme court we'd resolve that but write now we have a crisis and i don't see this administration doing anything about it other than trying to house the children and i understand the humanitarian basis for that, but we need to send a signal to these other countries that it's not going to work. you can't send your children up here and let them stay.

we're going to turn them right back and give them right back to you. that's what i'm looking for from you as a way for us to do that. that's the clearest signal to these parents to not send these children up here like this in the future. tell me what you can do other than give them to hhs. nothing? have you called the national guard out? or asked for it? >> like i said, i'd like to consider every option that is presented. i went through in my prepared testimony the 12 or 13 steps we've taken to deal with the crisis which includes building more detention space -- >> but that's once they get in here. the president -- the speaker of the house last week called on the president to mobilize the national guard to go down there and give some relief to the border patrol and fema. why can't you call on the president to do that? >> well, sir, if you're asking me if i can take an uncompanied child, turn them around on the border and send them back to guatemala, i don't believe the law would permit us to do that.

>> thank you, mr. chairman. >> and you can see all of that hearing with homeland security secretary jeh johnson this sunday at 12:25 p.m. eastern over on c-span. we believe that all men are created equal, yet many are denied equal treatment. we believe that all men have certain unalienable rights, yet many americans do not enjoy those rights. we believe that all men are entitled to the blessings of liberty. yet millions are being deprived of those blessings. not because of their own failures, but because of the color of their skin. the reasons are deeply embedded in history and tradition and the nature of man. we can understand without rancor

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c-span3 we complement that coverage by showing you the most relevant congressional hearings and public affairs events and on weekends c-span3 is the home to american history tv with programs that tell our nation's story, including six unique series. the civil war's 150th anniversary, visiting battlefields and key events. american artifacts touring museums and historic sites. history bookshelf with the best known american history writers. the presidency looking at the policies and legacies of our nation's commanders in chief. lectures in history with top college professor delving into america's past and our new series real america featuring archival government and educational films from the 1930s to the '70s. c-span3 is funded by your local cable or satellite provider. watch us in hd, like us on facebook, and follow us on twitter. wednesday business, finance, and government officials include

export-import bank president fred hochberg testified on the role of the ex-im bank and it's complies with requirements made. representative jeb hencer lick of texas chairs the house financial services committee for this hearing.

the committee will come to order. without objection the chair is authorized to declare a recess of the committee at any time. entitled examining the reauthorization of the export-import bank corporate necessity or corporate welfare. i recognize myself for six minutes to give an opening statement. today we'll examine the obama administration's request to reauthorize the export-import bank. first, we should examine where the money comes from to finance ex-im. whose money is it? well, obviously it is taxpayers' money. the cashier at the corner grocery store, the cop on the beat, your children's teachers, the small business owner

struggling to keep the doors open. where does the money go? it goes to foreign countries and foreign companies in the way of direct loans and credit guarantees. the taxpayer money goes overseas to china and russia, nations that openly challenge or economic and security interests. taxpayer money goes to oil-rich countries like saudi arabia, the united arab emirates. the taxpayer money even goes to countries with a demonstrated history of atrocious human rights abuses like the congo and the sudan. so who benefits? overwhelmingly and indisputably it's some of the largest, richest, most politically corporations in the world like boeing, general electric, bechtel, and caterpillar. in 2013 over half of ex-im's financing went to a handful of the fortune 500 companies and big wall street banks apparently benefit as well. as reported in the press recently, one former jpmorgan

and citigroup banker said of ex-im's credit guarantees, quote, it's free money, unquote. so if you're politically connected bank or company, that benefits from ex-im, no doubt you would like it to continue. after all, it's a sweetheart deal for you. taxpayers shoulder the risk, you get the reward. if you work at a small business or another american company competing in the global marketplace, it's unfair. ex-im effectively taxes you while subsidizing your foreign competitors. we hear a lot from powerful voices on k street and wall street about the bank but we also should listen carefully to some voices from main street like harold richards in my district. quote, as a small business owner who exports, i think it's outrageous that my own government puts my business and other small businesses at a competitive disadvantage through the export-import bank. how is that fair?

now, ex-im tells us sending taxpayer money to foreign interests supports jobs for americans. but the government's chief auditor reported programs like ex-im, quote, largely shift production amok sectors within the economy rather than raise the overall level of employment in the economy, unquote. delta air lines, whose ceo will testify shortly, points out that ex-im's loans to foreign airlines have killed as many as 7500 domestic airline jobs because the bank will subsidize the foreign competitors. caterpillar was a recent beneficiary that went to an iron ore prove jekt. an american iron ore company said it will no longer be able to effectively compete with its australian competitors due to the subsidy and they are now having to cut employees' hours. another american competitor feeling the sting of ex-im is

valero energy in texas. ex-im is lending $141 million to a turkish company to build a new refinery. vale valero's ceo said the actions jeopardize u.s. refining jobs and undermine the strength of the u.s. refining infrastructure. professor donald bow boudreau of george mason said, at best the ex-im bank creates jobs in export industries by destroying jobs in nonexport industries. the bank tells us essential to u.s. exports, but over 98% of all u.s. exports occur without risking taxpayer dollars. again, over 98%. most of the others who take advantage of ex-im, certainly they could do it without taxpayer support. even boeing, the bank's biggest beneficiary, has admitted it doesn't really need ex-im and could, quote, arrange alternative financing without it. now, the bank has also told us

it doesn't cost taxpayers a dime. the congressional budget office respectfully disagrees and tells us if the bank were to use fair value accounting, the accepted accounting method for almost every bank, private company in america, ex-im's ledger would show a net loss to taxpayers into the neighborhood of $200 million a year. that's the difference between washington accounting and main street accounting. perhaps what is most disturbing about the ex-im bank is the ideological and crony-based lending practices. it has a green bexport policy. last year more than 60% of ex-im's financing benefited just ten mega corporations that clearly have a strong political and lobbying presence in this town. recently a spanish multinational corporation received a $33 million xm loan while former

secretary bill richardson simultaneously sat on its advisory board and ex-im as well. they guaranteed $10 million in loans to benefit solyndra. just yesterday, just yesterday we woke up to the report in "the wall street journal," quote, the u.s. export-import bank has suspended or removed four officials. in recent months amid investigations into allegations of gifts and kickbacks as well as attempts to steer federal contracts to favored companies. ex-i am may not just be guilty of cronyism. it may be guilty of corruption as well. i will admit republicans may disagree on whether xm should be reformed or allowed to expire, and i certainly hope that this hearing will help illuminate that decision. but we are united in believing

we cannot reauthorize the status quo. the smarter and fairer way is by fundamental tax reform, strong trade agreements, a regulatory freeze with the exception of health and safety, and greater american energy independence with projects like the keystone pipeline. i now recognize the ranking member for 5 1/2 minutes. thank you mr. chairman. thank you for finally holding this hearing on the reauthorization of the export-import bank even though it comes less than three months before its charter expires. it's been over a year since this committee even discussed the bank at a subcommittee hearing to assess its progress on reforms, but let's be serious. this hearing is not going to be a forthright discussion on the merits of the bank. mr. chairman, we know your position on the bank.

we know you have made ending the bank your top priority. regardless if it's at the expense of thousands of american companies trying to compete against businesses in china, russia, korea, and countries across europe, all of which have their own version of the ex-im bank. i'm dismayed to see that the republican leader elect, kevin mccarthy, has also changed his view on the export-import bank. i'm saddened that he has followed the lead of the extremists in an effort to show his tea party credentials. at one time programs like the ex-im bank were so apolitical na th that they did not require a vote. now policies that create thousands of jobs are under constant attack. i'm becoming more and more concerned that the republican party's willingness to work together on issues like flood

insurance, tree ya, and the export-import bank has fallen victim to fringe elements who put their gender over the well-being of our country's workers, manufacturers, business owners, and the broader economy. as the extremists celebrate, i have to admit i mourn it as a loss for our country. our new reality is government shouldowns and debt ceiling crisis. it's constant uncertainty. it's not knowing whether the government is going to help pick up the pieces after a major flood or terrorist attack. it's about telling businesses large and small, you're on your own to go up against competitors backed by a global super power, and now they have set their sights on, quote, exiting the export-impact bank, an entity that creates or sustains hundreds of thousands of jobs and over the past five years have supported $233 billion in

u.s. exports. i'd like to take a minute and thank representatives denny hack and william lacy, clay, who have just yesterday included a clean ex-im reauthorization bill. mr. children, i'm not an expert at whipping votes, but if you add these co-sponsors to the 41 whereupons who recently signed your ler in support of xl's renewal, i believe you have a majority of the house in support of extending the bank's charter for the long time. opponents like to use the term crony capitalism. over the past few weeks swef been working hard to find out about the crony capitalists. mr. chairman, did you know there are 12 exporters in your district that i guess are crony capitalists and 11 of them are small businesses. over the course of this hearing,

democratic members of this committee will share with you the truth about these hard working americans, not cronies, that are assisted by the bank. they are companies like spacex, a revolution firm in my district that designs, manufacturers, and launches rockets and spacecraft. it is the first private somebody to build, launch, and dock spacecraft at the international space station and it's a company that has been strongly supported by the majority leader elect kevin mccarthy. who went so far as to call its founder elon musk the wright brothers of the next generation. in just a few short years, the ex-im bank has authorized close to $900 million in support of exports from space excreting thousands of quaulity high-tech

jobs across california and in the united states. i wonder when mr. mcthat are think decided he no longer could support his friend, elon musk, or support the bank that keeps spacex invo nating and competing despite the fact he's identified himself as a big supporter. i believe in spacex because i know the pain in my district after losing our manufacturing base. supporting companies like spacex is critical. they're bringing manufacturing jobs back and then ensure the united states remains a world leader. i thank you, mr. chairman. i look forward to this hearing and i yield back the balance of my time. >> chair recognizing the gentle lady from west virginia, miss capito, for two minutes. >> thank you, mr. chairman. for the last two years the ex poverty-import bank has joined the obama administration's assault on our nation's coal

industry. in december of 2013 the bank imposed guidance that would prevent the financing of coal fired power plapts in all but the world's poorest countries. this guidance combined with the epa's proposed regulations to ban domestic coal fired power plants will hinter the development of clean coal technologies. this is administrations intent to pick winners and losers and i can no longer support the authorization. i have expressed by concerns to the bank to no avail. in a letter and a meeting, i discussed by opposition this quidance. i have been clear it is inappropriate to use the bank's financing mechanisms to drive an ideological eye ven da rather than promote u.s. exports. the administration's policies come at a time when we should be ensuring the united states is leading the world in developing new coal plant technologies. we won't see carbon capture and sequestration developed by u.s.

countries if we choke off the market for coal technology. the bank's guidance is bad for our nation's economy and bad for the environment. for these reasons i do not support the extension of this charter. i yield back. >> the chair now recognizes the gentleman from california, mr. sherman, for two minutes. >> mr. chairman, a point of order. we had those clocks going for the national debt. they're going too slowly. you're proposing to eliminate the ex-im bank which will add billions of dollars to our national debt. and you've been unwilling, unless you change your mind, to join me in tax increase measure that is would replace that revenue. the -- now, whenever somebody wants to increase the national debt, they always say change the accounting system. the ex-im bank would be costing us money if we used fairytale value accounting. i don't think we should. the fact is, we should use gaap,

not gop accounting. g-a-a-p. not g-o-p accounting. what is the underlying theory of fair value accounting? it is that we look not at the profits and losses of the ex-im bank properly accounting for the risks they take, but we look at what their costs would be if they weren't the ex-im bank but at a higher cost of funds. that's like saying pizza hut is overreporting its income because they report accurately the cost they pay to the bank for the money they borrow, not the higher amount they would pay if they were jack's pizzeria instead. the fact that pizza hut has a lower cost of funds doesn't mean they should report higher interest costs and report a loss, but that's what you do under fairytale value accounting. also, i'm in on foreign affairs. i sit there while republicans say that democrats might support unilateral disarmament.

that we would give up our arms and then go into the arms limitation talks asking others to follow our -- our lead. that's what we're doing here. germany has an export credit authority that's three times as large. they have total exports three times as large per capita. and they run a trade surplus. and we would go into negotiations with germany giving up the ex-im bank. why don't we -- >> time of the gentleman has expired. the chair now recognizes the gentleman from new jersey, mr. garrett, the chairman of the capital market subcommittee, for two minutes. >> first of all, thank you, mr. chairman for holding this hear. thank you also, mr. chairman, for all of your efforts on fostering not only this area, but also in general economic growth and job creation in this country, including manufacturing. as the ranking member has bemoaned the fact that she has lost it in her district, i just note that the chairman is

encouraging economic growth and manufacturing, but not on the backs of the american taxpayer. thank you also, mr. chairman, for holding this hearing in a very timely manner as well. thank you to the panels. you know, panels, i was struck by an article in the front page of "the wall street journal." it was entitled "officials at ex-im bank faces probes." what i found especially interesting and concerning in this article, notwithstanding the fact that four bank employees have been suspended or removed for allegations of kickbacks, was a statement of the agency spokesman that, quote, the export-import bank takes seriously its commitment to taxpayers and its mission to support u.s. jobs. really? to begin with, i would question the bank's seriousness to taxpayers given the commitment learned in this committee. we only learned of the alleges of potential criminal misconduct simply by reading the front page of the "wall street journal." i guess this serious commitment

to taxpayers did not reach the level of requisite seriousness that would result in congress being notified of various serious allegations like this. while we need to be certain we have the facts and assured that this committee does not jump to proverbial conclusions, i do find it curious that these examples of employee misconduct were withheld against the backdrop of this debate over the future as well as the well funded lobbying campaign to ensure the bank's continued existence. if true, these allegations would go to the heart of the concern about this bank, it's lending, and of the special interest of multibillion dollar corporations. i only need to look at lobby disclosures from our biggest corporations. when you mix corporations and taxpayer guarantees you get something that looks a lot like crony capitalism. with that, i yield back. >> chair now recognizes the gentle lady from new york, ms. mccarthy, for a minute and a half. >> thank you, mr. chairman. and i appreciate this hearing. i'm a little confused on what i'm hearing. this is about jobs.

and i can talk about my district. i work my district. i try to bring certainly businesses into my district. and i know in the last several years, i have been able to help my small businesses $86 million, just into my district alone. a lot more jobs added over the last seven years. that's what our job is. to make sure that we can bring jobs home. as the ranking member had mentioned, mr. hensarling, who unfortunately didn't bring a lot of money into his district, but maybe he didn't work the district. i don't know. and mr. mccarthy, who always supported the ex-im bank, did have over $69 million that came into his district. this is about jobs. my colleagues on the other side keep saying, we're going to do jobs. we're going to do jobs. where are they? people seem to have a very short memory. when we went through the great crisis, nobody went after the banks.

nobody went after the insurance companies. when we look at the ex bank and we hear my colleagues talking bf that they found four employees, can i remind everybody, yes, they found four employees. they did an investigation, and they let them go. that's the way the system works. anybody that understands any business, there are always going to be people that are going to try to rig the system. if we brought this bill up on to the house floor, we would get it passed. so stop with this. let's do jobs -- >> time of the gentle lady has expired. the chair now recognizes the gentleman from illinois, mr. hultgren, for one minute. >> thank you, mr. chairman. i want to take a hard look at the current structure of the export-import bank. protecting taxpayer dollars by keeping government out of tasks that the private sector can perform itself is central to a nation based on free enterprise. an estimated 760 jobs in the 14th district alone rely on the bank to ensure their export

reach their customers. a company in geneva, illinois, asked me to support the bank. the crystal lake matthews company, a manufacturer of agricultural equipment has jobs dependent on the bank. we can't overlook the 29 smaller production suppliers who fulfill boeing orders in my district. since 2007, the bank has supported almost $6 billion in illinois exports from 301 exporters, including 204 small businesses. an outright elimination leaves u.s. jobs in peril. we must ask the hard questions. do we know the job impact of eliminating the bank without a proper glide path in place? have we addressed the worldwide subsidies offered by our competitors through trade agreements? can we put a reform plan on the table to ensure a more limited scope for the bank? i'm committed to working together to put a viable alternative forward. i yield back. >> time of the gentleman is expired. the chair now recognizes the gentle lady from arizona, ms.

sinema, for one minute. >> -- and of the export-import bank, because helping arizona businesses expand their manufacturing capacity and exports ability creates jobs and grows our economy. export-import bank fills gaps in private financing stepping up where the private sector can't or won't. last year fred hochberg visited my district. from fiscal year '07 to '14 the agency supported $176 million in exports from companies in my district. one of those companies, maritek, inc., was reluctant to sell semi-conductor equipment to examiners in asia. they were concerned once the equipment left their building there was no guarantee they'd be paid. the bank issued an insurance policy so maritek could have sales and guarantee they get paid. thanks to the bank they now export to companies in asia, europe and the americas. allowing the bank's current charter to expire would threaten the competitiveness of these and

many other arizona businesses. that's why i'm a co-sponsor of legislation to extend the bank's authorization and will continue to work to reauthorize this important investment in american jobs. >> chair recognizes the gentleman from georgia, mr. westmoreland, for one minute. >> thank you, mr. chairman. the problem with the export-import bank is the entire mission and structure. simply, the export-import bank is designed to advantage one u.s. industry at the expense of another. even if congress directed the bank to make changes as it did in 2012, we have seen that this massive bureaucracy will not yield to even modest reforms. people talk about the cost of jobs that would be lost if it's not reauthorized. how about the new jobs and the more capital for growth created by finally being competitive with foreign competitors? the bank has shown it is not able to conduct mandated

economic impact analysis, and the bank regularly employees fuzzy math and accounting. congress mandated the export-import bank be more transparent and quite simply, they have failed to follow this mandate. i'm happy to join the chairman and the new majority leader in this effort. i yield back the balance of my time. >> chair now recognizes the gentleman from missouri, mr. clay, the ranking member of the monetary policy subcommittee for one minute. >> mr. chairman, the mission of the ex-im bank is to support american jobs by facilitating the export of u.s. goods and services. the ex-im bank does not compete with private sector lenders, but provides export financing that fills gaps in trade financing. the bank assumes credit and country risk that the private sector is unable or unwilling to accept. the ex-im bank helps to level the playing field for u.s.

exporters by matching the financing that other governments provide to their exporters. you know, refusing to reauthorize the ex-im bank would reduce the number of ecas from 60 to 59. hurting only u.s. exporters and workers that they employ. in my home state of missouri, the ex-im bank supported 1 bltz in exports and $339 million in exports from the district that i represent. mr. chairman, those are american jobs. >> time. time of the gentleman has expired. the chair you recognizes the gentleman from washington, mr. heck, for one minute. >> thank you, mr. chair. just because somebody says something that's untrue over and over and over again doesn't make it one wit less untrue. let's start this hearing with the truth. here's the truth. the ex-im creates jobs. 205,000 last year. here's the truth.

the ex-im supports small businesses. 90% of its transaction go to small businesses. in an appalling lack of understanding of how the private sector works, even large corporations are dependent on small businesses. the greatest plane manufacturer in the world is dependent upon 15,000 suppliers, 6,600 of which are small businesses who would be put at risk by your position. here's the truth. there are no tax dollars involved in subsidizing the ex-im. the ex-im transferred over a billion dollars to the treasury. where's the proof the treasury ever transferred anything to the ex-im? finally, here's the truth. if we abandon ex-im, we'll engage in unilateral disarmament. unilateral disarmament. every other developed nation in the world has an export credit authority. don't render the united states the only one without one. >> time of the gentleman has expired. we will now turn to our first panel of witnesses.

and to introduce our first witness, i will yield to the gentleman from georgia, mr. westmoreland. >> thank you, mr. chairman. it's my pleasure to introduce richard anderson, chief executive officer of delta air lines. richard has been the ceo of delta since 2007 and has more than 25 years in the aviation industry. as you probably know, delta air lines is one, if not the largest, employer in my district and across georgia. delta has been placed at a competitive disadvantage by the actions of the export-import back and the time has come to level the playing field. richard, welcome to you and the members of the delta family team that's with you. i look forward to your testimony. >> our next panelist, dr.

veronique de rugy is a fellow at the mercatus center at george mason university where her primary interests include the u.s. economy, federal budget and varies financial issues. captain lee moak is the president of the airline pilots association which represents almost 50,000 professional airline pilots in the u.s. and canada. before becoming an airline pilot captain moak served as a marine corps fighter pilot. last but not least, steven wilburn is the chief executive officer of firm green, a newport beach based energy company that participates in virtually all aspects of the green energy business. before we proceed, mr. wilburn, we have one clerical matter to clean up with you. we received two different copies of your testimony.

one 6:00 last night. in that testimony, in that version, when describing why your commercial bank officer could not provide financing to a brazilian company, you said, quote, simply out of the question given the new t.a.r.p. regulations and the then new dodd/frank legislation. a couple hours later from the democratic staff, we received a new copy of your testimony that struck that language and included the reason, quote, reluctance of banks to support small business exports, unquote. to ensure for the record we have the correct copy of your written testimony, which did you intend? the one we received from you at 6:00, or the one we received from the democratic staff at 8:00? i'm sorry. could you hit the button there. just for the record, we just need -- which testimony is it your intention to include?

>> my intention is to provide an accurate written statement. i was flying from california on an airplane wi-fi trying to respond to your staff. and i was working, realtime editing. the last version -- >> the last version is the one you intend? >> that is my official written statement. >> okay. thank you. thank you, sir. that's what we needed to know. without objection, each of your written statements will be made a part of the record after your oral remarks. not unlike a traffic light, if you are new to this, there is a green light, yellow light, red light system. the yellow light will tell you there's one minute remaining. the red means that it is time to wrap up so we can move on to the next witness. mr. anderson, you are now recognized for your testimony. >> well, thank you. thank you very much for having me here today. just as a private citizen, it is a privilege to be in the halls of congress and have the opportunity, regardless of what the issue is, to participate in the process.

second, it's a real privilege here to be here on behalf of the 80,000 people that i serve at delta air lines and the 165 million passengers that the delta family serves around the world with over 6,000 flights a day. i would note that we're one of the largest operators of boeing airplanes and ge engines in the world. we currently have 100 boeing airplanes on order with ge engines, and we're paying cash for them. and there are not many airlines in the world that buy 100 boeing airplanes and pay cash for them. so let's make sure we put our discussions here in context. i was pleased to hear that we're talking about jobs because i have about 100 delta employees here with me that have my back today. they're the pilots and the flight attendants that provide the best airline service in the world.

and i'm here to talk about their jobs because the ex-im bank takes their jobs. and if that's really what we're serious about, we should be serious about reforming the bank. you tried to reform the bank in a bipartisan way the last time, and your reforms were ignored. and it's our jobs that are at risk. and i have a slide up here. the ex-im bank finances the wealthiest, most profitable airlines in the world with huge amounts of our treasury dollars. and you can see on this slide, we have an example of an ex-im bank financing that was just done and a market based financing that was just done. and those financing numbers show you that a very wealthy airline that goes in the private market

on a regular basis to finance airplanes gets over the life of the airplane about a $20 million advantage. and these airlines are also owned by governments and deeply subsidized by their own government in addition to being deeply subsidized by our government. our focus here today is on a narrow issue. i -- i am pleased to hear the job growth. my business depends upon job growth. we have no objection to anything that anybody does in the halls of congress on a -- on either side of the aisle that grows jobs in this country. my business, our business, the delta family serves people that work at all the great companies in the united states. but we shouldn't have a government policy that sacrifices the jobs of hard working people at the delta family in order to subsidize the wealthiest, most creditworthy airlines in the world.

i was the chairman, elected the chairman of the international air transport association by the ceos of all the airlines of the world. and in the course of doing that, i've had many conversations with the ceos of the most profitable airlines in the world. and they tell me, look, i don't really need the ex-im bank financing, but it's so cheap, i might as well take it. this is effectively a free airplane every eighth airplane. all i want is a level playing field. the story as delta air lines is a great american story. we're now the most successful, profitable airline in the world. but we have to compete against deeply subsidized government airlines that are in turn deeply subsidized by our government. and the prime example is air india. a government owned, government subsidized airline that drove us out of the marketplace with a billion dollars of ex-im bank financing. that cost about 1,000 jobs. so when we talk about creating

jobs, why can't we navigate a policy? and our objection is a narrow objection. it is wide body financing for creditworthy, state-owned and state-subsidized airlines. we have no objection in narrow bodies. we have no objection to small business. our focus is on the policy junction of where u.s. jobs are destroyed by the bank. so if we're serious about creating jobs, this bank needs to be reformed. i yield my time. >> dr. de rugy, you are now recognized for your testimony. >> thank you, mr. chairman. ranking member, member of this committee, it's a pleasure to be here today. we don't agree on much in washington. but i think we can all agree that the federal government shouldn't be sending our limited resources to the wealthiest and most politically connected

corporation. and, yet, that's what the ex-im bank does. some say that there are good reason for doing this. they say that the ex-im bank promotes export, supports job, return money to treasury and helps taxpayers. none of these argument withstands scrutiny as my written testimony has shown. and i will briefly address in my statement today. however, my main focus will be on groups who are affected by ex-im activity that have gone ignored. these people don't have connection in washington. they don't have access to press offices and lobbyists. but they matter, too. it is difficult, but extremely important, that we consider the unseen cost of political privilege. whatever form it takes, whether it's market distortions, job losses, potential destroyed or higher prices. so let's start. first, the bank claims it is essential to promote u.s.

export. economists disagree. we have long known that export subsidy schemes like ex-im do not meaningfully improve national export. and, in fact, the data proved this point. ex-im backs less than 2% of u.s. exports. ex-im likes to tout subsidized firms' successes. but they do not consider the unseen cost imposed on everyone else involved with the other 98% of unsubsidized export. in these cases, it is the firm's own government, not foreign government, that puts them at a competitive disadvantage. for instance, ex-im harmed these firms' export opportunity by making it harder for unsubsidized buyer to secure their own financing. that's because ex-im gives lenders an incentive to shift resources away from unsubsidized

project towards subsidized project, regardless of the merit of the business. these capital market distortion have ripple effect. subsidize project, attract more private capital, while other worthy projects are being overlooked. the subsidized get richer and the unsubsidized get poorer or, worse, get out of business. unfortunately, we'll never see the businesses that could have been. perhaps they would have been better, more profitable, more responsible than the well connected subsidized businesses. second, the bank claims to support 205,000 jobs in 2013. this number, however, should be taken with a grain of salt. since gao has criticized the bank's job calculation methodology for failing to consider how many jobs would

have been created without ex-im, among other flaws. but even if we accept the bank's questionable jobs claim, that means that it only support 1.8% of all export related jobs in 2013. the bank doesn't promote jobs as much as it promotes job for favored company at the expense of everyone else. the other 98.2% of unsubsidized export jobs are placed at a competitive disadvantage by ex-im. the unsubsidized employer may not expand hiring. they may not increase wages. and they may even have to fire employees because they face competition from subsidized project. third, the bank claims that it benefits taxpayer. a recent cbo report debunks claim of future ex-im profitability. ex-im is projected to yield losses for taxpayer over the next decade.

but taxpayers are unseen victims in other ways. the ex-im bank transfer risk away from lenders and towards every single u.s. taxpayer that you represent. this creates what economists call moral hazard. since well connected lender like citibank and jpmorgan, they're almost no risk when a company defaults. they have very less incentive to apply transaction oversight. they collect high fees on billion dollar loans in good times. but normal tax paying americans pick up the tab in bad times. everyone in this room knows who will benefit if the bank is reauthorized because the beneficiaries are few enough in number that they can effectively organize and are wealthy enough to apply significant political pressure. but what about the forgotten firms, workers, taxpayers and

consumers whose voice are so easily drowned out by the corporate beneficiary of government privilege. they should not matter less than boeing, ge and caterpillar. this is your opportunity. this is your opportunity. thank you. >> captain -- captain moak, you are now recognized for your testimony. >> mr. chairman, ranking member waters and members -- >> i'm sorry, captain. could you move that microphone a little closer to you, please? >> yes, sir. >> thank you. >> mr. chairman, again, ranking member waters and members of the committee, i'm captain lee moak. i'm the president of the airline pilots association. and it's an honor to represent our more than 51,000 pilots. as a labor leader, i believe that airline employees should work with their companies to better our industry. alpa's goal is to make the pie bigger rather than focusing on getting a bigger share. ensuring our company's ability to compete is essential in

safeguarding u.s. jobs and our national economy. i don't believe in subsidies. if we're going to grow our economy, it must be based on fair competition. fair competition is good. and on a level playing field, i'm here to tell you u.s. airlines can compete with anyone in the world. however, we compete in a global economic environment. and it's one thing to compete with foreign airlines that are subsidized by their government. and i know i can't do anything about them. but it's an entirely different matter to compete with foreign airlines that are subsidized by our government. we need to do something about that. this is where the export-import bank comes in. i don't take issue with the historic mission of the bank. but the bank has lost its way. today, the bank is being used to provide subsidies to foreign companies. companies that don't need the financing, but use the advantage to undercut u.s. companies.

recently, the house of representatives voted unanimously to require the u.s. d.o.t. to simply follow the law when it considers foreign air carrier applications. why does this matter? because norwegian air shuttle is attempting to subvert u.s. law and international policy to establish a flag of convenience operation. norwegian has also applied for ex-im bank financing that it does not need and that will hand it an unfair economic advantage that threatens u.s. airlines, u.s. jobs, the u.s. economy, and i'm going to tell you, u.s. national interests. we thank this committee for recognizing that unfair business practices such as nai should be rejected. international flying is crucial for u.s. airlines. tens of thousands of flight crews at the three largest u.s. carriers fly international operations.

so our jobs are directly at risk from this competitive and inappropriate imbalance. since the united states first implemented its open skies policy, the u.s. share of international wide body fleet has dropped from 45% to 17%, and the share is now forecast to be at 5% by 2025. and if that doesn't concern you, well -- well, that should concern you. and the threat affects airports such as los angeles. los angeles international, where in 2013, american, delta and united flew only about 16% of the total international passengers. international jobs at main line carriers are in jeopardy. but so are jobs at the small regional airports that are u.s. destinations for many of these

international passengers. in 2013, the ex-im bank approved $7.9 billion in financing for u.s.-made aircraft that will be operated by our foreign competitors. ex-im financing is not available to u.s. airlines. and through this financing, the bank is effectively providing a subsidy to foreign airlines to operate on routes that are, have been and could be served by u.s. airlines. as a result, u.s. airlines have been forced to withdraw from or not enter key international routes. one example mentioned earlier is air india and using his bank subsidizeded airlines, the state airline flooded the u.s./india market. in 2008, this excess capacity forced delta airlines out of the new york-mumbai route, displacing u.s. workers due to unfair competition. n that was u.s. jobs that we

lost, directly the result of actions by the ex-im bank. in 2012, the reauthorization congress rightly directed the treasury department to negotiate with the european union to end wide-body aircraft financing. alpa encourages this committee to seek a full accounting of that effort. i'm going to say because i can go on and on. thank you, and i'm looking forward to all of your questions. every one of them. thanks a lot. >> mr. wilburn, you're now recognized for your testimony. >> thank you, chairman hensarling, ranking member watters and honorable members of this committee for allowing me the great honor to be here. mr. chairman, i do apologize. i'm a disabled veteran and i have post-traumatic stress disorder. i'm using it as an excuse, but i don't have a staff to write my reports or anything, my written

statement. so when i got that e-mail from one of your staff members that said they had to have the statement right away. i was editing it in realtime on an airplane coming from california. i don't want to take up more than my time than that. hopefully, no one influenced my statement. no one will ever influence my statement, i guarantee you that, sir. with that, said -- [ applause ] and i wasn't looking for that, but thank you. my name is steven wilburn and i'm the ceo of firm green. i'm married to margaret wilburn, proud father of five children, nine grandchildren, and one great-granddaughter. i won't bother with their names right now because it would take up too much of my time. but i love them. i work hard for them. i built this business for my family first and my employees second. my employees are treated like family. we're a small company.

i want to put a face on small business today, if i can, okay? it's an awesome burden because there's thousands of small businesses out there. i don't have the authority to speak for all of them. i can only give you my story. and semper fi, sir. thanks for your service. i started pursuing the firmgreen ten years ago. i'm a firm believer of the lord my god and serving as a marine in vietnam, i fight for free rights, free trade and limited government. but i do not share, nor do i understand the rabid anti-government ends that seems to be motivating the current tax on the export-import bank. it is people working together to accomplish the greater good that can't be done by individuals alone. in combat, i could not have survived without my fellow marines. we cooperate. that's the way i thought we

acted in america. i firmly believe that export-import -- excuse me, i firmly believe that the ex-im bank delivers enormous value to main street america. it provides small business like mine with the opportunity to grow and prosper in commerce without borders. we're now limited to domestic markets. we dare to reach out to the world's markets. for example, my award-winning bio gas project in brazil, my client asked me how we intended to present our eca finance proposal for the project. i was embarrassed. i had to ask him what eca meant. they laughed that meant the export credit agency, your ex-im bank. that's how i was introduced to the concept of export bank support. i was that naive. but i was competing with air liquide and linde corporation,

multibillion-dollar companies. much more prepared for that type of discussion and finance plan than me. but my clients went positive-to-the export-import bank my clients went through a rigorous underwriting, and thankfully, they were approved for the financing that i could not obtain through my private bank. at that time, it was wells fargo. and they just basically told me it didn't meet their underwriting criteria. well, i'm going to deviate from my prepared remarks a bit more. and just say due to the air of uncertainty swirling around the reauthorization, in large part, i think by harmful words uttered by the bank's opponents in an orchestrated unprecedented nonstop public smear campaign, i feel i lost a valuable contract in the philippines. words do have consequences. especially when they're uttered by people in power and position. i'm a small man. i can't combat the machines that

are out there saying what they're saying. i'm not a crony capitalist. i don't receive any welfare, corporate welfare, whatever you want to call it. we work hard. as a result of losing the memorandum of understanding because the korean bank came in with my korean competitor who had lost to me and basically came up and said, the bank's not going to be reauthorized. he's not going to get the deal. now my employees, including miss deerngs my general counselor, are on furlough. we're scrambling. please, words have consequences. be careful. i yield back the balance of my time. >> thank you. >> if the gentleman needs extra time, i would request the same time that was alotted to miss rugby when she went over her five minutes. do you need extra time? >> not at this time. hopefully, i'll have adequate tin