Text of Deputy Assistant Secretary Reeker's Welcome Remarks

Remarks by U.S. Ambassador Philip Reeker

Brown Forum Opening Session

9 April 2013

Thanks very much, Nevena. Good Morning! It is a pleasure to be back in Croatia, and particularly to be at the brown forum in this third iteration. I was at the first Brown Forum in Dubrovnik two years ago. Sorry to have missed the brown forum last year in Opatija, but I feel a particular connection having been involved with the Ron Brown Fellowship Program, going back many years. It’s great to see so many familiar faces and also new faces here.

I thought we ended yesterday evening particularly well with Kittu Kolluri’s talk. I was particularly inspired by some of the things he had to say about entrepreneurship, about venture capital. It reminded me as the holder of an MBA degree that diplomacy too can be entrepreneurial, and can have a certain element of venture capital. When Kittu talked about being wary of chasing sunk costs vs. the loss of opportunity costs of other things happening in the world, that is something we have to pay attention to in diplomacy as well. That is very true, I think, in this part of the region.

It is a symbol of the dedication not only of my colleagues in the U.S. State Department and our embassies here in the region, but of all of you in both the public and private sectors, to the continued reform of the business and economic climates in the countries of Southeast and South Central Europe. It demonstrates your unified desire to transform the region, so often associated with conflict, into one sought out by investors, also a desire to encourage job creation and economic growth for new generations, and improve the lives of all the peoples of the region.

I am particularly pleased to be here with Ambassador Merten and I want to thank his team at the U.S. Embassy in Zagreb along with all the partners: our Croatian friends from the Croatian ministries that have been involved, the Croatian private sector, Shannon Runyon from my office in Washington who’s done a lot to prepare for this. I want to welcome my colleague Deputy Assistant Secretary Bay Fang, also from Washington, who has been participating in the entrepreneurship efforts here, and our colleague Ambassador Alex Arvizu, U.S. Ambassador to Albania, representing another country of this region that has tried to take advantage of the opportunities of Euro-Atlantic integration, and where the United States has worked very closely and consistently to help them take advantage of the ideas behind entrepreneurship.

The United States continues firmly to believe that the surest and most expeditious path to achieve the goals that those in this region have set for themselves, and that we believe in as goals in our foreign policy, is through the region’s Euro-Atlantic integration. I was very pleased to meet yesterday with Minister Maras, the Croatian Minister for Entrepreneurship. He left us last evening to go up to Mostar where they are having the 2013 International Economic Fair and I am told that this year it is the largest fair with an enormous number of participants, exhibitors from 30 countries – 750 to 800 exhibitors expected from the EU and from the region. That is the kind of economic exchange about trade opportunities, investment opportunities that will help; because this region, first and foremost, needs to look to itself to overcome old enmities, even hostilities, to work together in an even more competitive world. That of course is what Euro- Atlantic integration is designed to help with. Two decades of NATO and EU enlargement into Eastern and Central Europe, I think, have demonstrated that the fundamental reforms that are preconditions for membership in the European Union and in NATO provide a proven foundation for lasting political stability, democratic development, and for economic growth.

For all the “political drama” that takes place in the Balkans on an almost daily basis, I think we spend far too little time really focusing on economic growth. But that really is the key here, not only in the Balkans but in the Middle East, in North Africa, in Asia, in Latin America, and in all those parts of the world where people want to “catch up” with developed economies. As I am sure you’ve heard before, economic statecraft is very much a part of U.S. foreign policy and our engagement all around the world. Secretary of State John Kerry has continued to endorse the ideals and policies that create economic development in the Balkans and elsewhere. Former Secretary Clinton was very much dedicated to this concept of economic statecraft during her term in office and we continue to place priority on it. The Brown Forum being a singular initiative for this region, which provides a great opportunity for the U.S. to engage on the ground with those of you who want to see the region your countries and your communities move forward.

We need to get beyond the thinking that it’s only established industrial powers that can be major players economically. And we need to get beyond the thinking – which is so prevalent in this part of the world – that governments either at home or through foreign assistance can make all of that happen. Governments can help set the conditions. As Secretary of state Kerry noted in one of his first speeches when he took office in January:

Eleven of our top 15 trading partners used to be the beneficiaries of U.S. foreign assistance. That’s because our goal isn’t to keep a nation dependent on us forever. It’s precisely to create these markets, to open these opportunities, to establish rule of law. Our goal is to use assistance and development to help nations realize their own potential, develop their own ability to govern and become our economic partners. (UVA speech, Feb 20)

And that’s certainly what we’ve done in this part of the world.

The Brown Forum is the perfect place for entrepreneurs, for government leaders, for venture capitalists to sit down face to face and discuss how to improve economic conditions to enable business to flourish and to grow. We heard yesterday the importance of climate and weather in bringing together entrepreneurs who produce good ideas and good climates. I think it does take rainy days like this, though, to keep us inside as well to have the opportunity to exchange some of these ideas. Indeed, whether it’s in a sunny environment on the coast or in a more cloudy environment, you need collaboration, a collaborative approach to solve some of the most common challenges that face every economy in the world today: providing access to clean, reliable, affordable energy; cultivating a well-trained, mobile workforce; encouraging transparency and rule of law; and promoting industries where you as a region have a comparative advantage.

These foundations are now taking root here in South Central Europe. We need to look no further than this room for evidence of what is achievable. If you look at the countries that make up the portfolio I cover for the state department, Croatia, our host today, is a NATO ally and is going to become the 28th European Union member on July 1st. The countries of this region all have their own path to Euro-Atlantic integration, and they are all of the same mind: there really is no plan B. Last week when I was in Brussels and there was a focus on the continuing Serbia-Kosovo talks led by the High Representative of the European Union, Cathy Ashton, I said you know the real news today (last Tuesday) is not these talks, as important as they are, the real news was that in Slovenia the Prime Minister of Croatia and the Foreign Minister of Croatia were guests at the Parliament of Slovenia which was ratifying (unanimously at that) Croatia’s accession into the European Union. That’s news that means something, that shows that things are going to move forward. Our USD 7 billion of U.S. assistance to this region over the past 20 years is testament to our commitment to the region’s advance. As we have transitioned from the kinds of USAID development programs and funded exchanges like the Ron Brown Scholars, into supporting efforts and endeavors like the Brown Forum, we stand with the people of the region who want to actually improve their lives and look to the future instead of being tied up and looking at the past.

Some skeptics point to the European financial crisis and ask why would anyone still be interested in joining the EU? The reality is that in today’s interconnected world, no country is immune to changes in the global economy. A country that has undertaken the political, economic, and rule of law reforms required for Euro-Atlantic integration will be much better positioned to manage the challenges of an economic downturn, to attract foreign investment, and job creation opportunities created during the recovery. And as we heard last night, the opportunities are there now.

The focus of this year’s Brown Forum on sustaining economic development through entrepreneurship, investment and venture capital, highlights a dynamic and potentially powerful segment of society. Entrepreneurs have the power to transform the economies of the region, given the proper legal, administrative and financial framework and support.

We all know that entrepreneurs start businesses. A common definition of “entrepreneur” is one who organizes, owns, manages and assumes the risks of an economic venture. I would submit that this definition doesn’t do entrepreneurs full justice because entrepreneurs unite all means of production – land, labor, capital, intellectual property, and marketing to create a product or a service, and in so doing they pay rent, wages, taxes and interest, distributing the fruits of their labor, their ideas, their successes across a broad sector of society, increasing productivity and prosperity for all along the way.

With all of that going for them, and all that successful entrepreneurs can bring to a community, you’d think that countries everywhere would be doing everything they can to attract entrepreneurs. But as anyone who has done, or tried to do, business in Southeast Europe, can tell you, there are still a lot of challenges that turn entrepreneurs and potential investors away from this region, in search of greener, more transparent, more predictable pastures. It’s the job of governments in this region and our job as friends and partners to encourage those governments to eliminate the obstacles that entrepreneurs may face.

Now is the time for leaders in Southeast and South-Central Europe to implement the economic reforms necessary to attract and encourage direct investment – both foreign and domestic. Now is the time for political leaders to focus on making the hard reforms, particularly on rule of law issues and in the fight against corruption, to promote a stable investment climate and give entrepreneurs and investors the incentive to bring their businesses to your countries to help improve your economies.

All of the countries of this region are struggling with minimal or negative GDP growth projections, raging unemployment, and growing public debt. On top of that there are grave deficiencies in infrastructure and energy generation and distribution. Add to that even greater competition for direct investment, Europe-wide, because of slower than expected recovery from the global financial crisis, and it would suggest a pretty daunting situation. But these obstacles can be overcome.

Governments, for their role, need to support entrepreneurs and their potential investors by creating fair and transparent employment laws; enacting clear, transparent, and predictable tax schemes; investing in improving support service infrastructure (whether it’s for energy, water, waste, transportation); and cracking down on corruption. All of these reforms are fully consistent with, if not explicit requirements, of the European integration process. Croatia and Croatians know that very well. It’s a tall order, as you well know, but these are not insurmountable problems.

As I said earlier, it’s really not up to just the governments. Citizens can encourage their governments, the governments that represent the people, to take these actions. While many focus on foreign investment, it’s really domestic investment in each of the countries of this region that will get the ball rolling, that will develop home-grown habits of free enterprise and individual initiative in which government is a partner, not an obstacle.

If I may, in closing I’d like to share one success story of my friend and fellow alumnus of Thunderbird School of Global Management, Jordan Traijkov. For those of you who know Jordan, he was a participant in the Ron Brown Fellowship program, went to Thunderbird through that program in Arizona, and got his MBA there. He shared part of his story at last year’s Brown Forum in Opatija for those of you who were there.

Jordan is really a visionary entrepreneur and is the founder of the Popova Kula Winery in Demir Kapija in Macedonia. He started the winery from nothing in October 2004, having come back from the United States with his MBA degree. It was a true “green field” project, and indeed Demir Kapija has a unique climate. It’s near the main north-south highway, corridor ten that passes through Macedonia from Serbia down to Greece. By August 2005 he had started this winery and harvested the first grapes there. But Jordan wasn’t content to just be a successful winemaker, vintner. He had a far grander vision for what he wanted to do in bringing vino-tourism to the historic setting of his winery. In fact the winery that belonged to the king of Yugoslavia from the kingdom days is quite nearby.

He started out by applying to local authorities for the address of his winery, calling it “One Wine Boulevard” for a dirt road that led up the hill to the winery. And then he had to get permits to build a hotel and restaurant. Over time, with much perseverance, he managed to impart some of the vision he had to the authorities who ultimately granted him that address – a very marketable one. That illustrates that with vision, determination, and communication, it is possible for entrepreneurs and other business people to work with government entities to achieve great things.

In 2009 when I was already in Skopje as U.S. Ambassador, Jordan opened his hotel and restaurant, and these now serve as major sources of local income and employment in Damir Kapija. He has made a point of sourcing his grapes locally, taking advantage again of the rich harvest from that region, and helping participate in a traditional agricultural process with some 700 families that cultivate small vineyards in the area.

In addition, the winery gives back to the community in other ways. After the first year of successful production, Popova Kula held an event to support a local institution for the disabled. By auctioning off the last 600 bottles of their very popular 2005 Sauvignon Blanc, (I still have a couple of bottles), the winery raised over half a million denars or USD 10,000 for the charity.

So, this is one small story of entrepreneurship born out of the Ron Brown experience, it’s something that Ron Brown himself, I think, would be so proud of as we commemorate him each year with this forum. He understood the importance of entrepreneurship, of initiative, of mixing government with private sector. Of taking advantage of the synergies that can be created when you do that, when you do away with barriers – whether they’re barriers of race or ethnicity or of historic grievance or barriers of economic and rule of law or corruption. And indeed I think it’s very appropriate that we call this the Brown Forum because the inspiration he provided can be an inspiration to all of us.

I know there are many other success stories out there. We’ll hear about some of them over the course of this, whether here in the plenary room or in the corridors and in small meetings. But we need to have even more stories and I look forward
to next year when we’ll continue this process. There is so much to be done. I’m going to let you get on with it. Again, I want to thank our partners on behalf of the Secretary of State and the U.S. Department of State, on behalf of U.S. Embassy Zagreb. To all of you involved with the Brown Forum, I want to wish you the best of luck and much success in your entrepreneurial visions.