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Center for Strategic & International Studies Southeast Asia Program

As Prepared for Delivery

Fred P. Hochberg

Jan 11, 2011 – Washington, D.C.

Let me start by thanking Ernie Bower.

Not only for this very kind, very gracious, invitation to participate in today's Banyan Tree Leadership Forum. But also for the work that the Southeast Asia program does each and every day to strengthen and advance our understanding of this vital region of the world.

Before I get into my remarks, I'd like to share with you the story of a company we are working with in Indonesia. It illustrates the role we can play in Southeast Asia and why we see so much potential in this region.

The company is Lion Air. It is Indonesia's first low-cost carrier.

To help the airline reach more customers - and to modernize its fleet - our bank has approved more than $1 billion in financing to support Lion Air's purchase of 30 Boeing 737-900 (Extended Range) aircraft. Seventeen of these planes have already been delivered to Lion Air.

Boeing has been making the 737 since 1967. The 737-900 ER is the latest model of this workhorse aircraft.

About 8,800 Boeing 737 planes have been ordered since it was introduced—and Lion Air was Boeing's launch customer for the 737-900 ER. That means they provided the critical first orders to get this plane into production.

Our work with Lion Air is the first time Ex-Im Bank financed a private-sector airline in Indonesia. This financing will allow the airline to expand its operations. And better serve its customers with a new, reliable and modern Boeing aircraft.

It also will support thousands of jobs in the United States and in Indonesia.

But that is only part of it. Lion Air itself is a great success story. And in many ways another kind of American export.

Founded in Indonesia in 2000 by two brothers—Kusnan and Rusdi Kirana—Lion Air follows the business model of Southwest Airlines.

So in this case, we not only exported high-quality, American-made airplanes, but also helped export some of the best practices---and one of the most successful business models for air travel in the world.

A model that has totally transformed modern commercial aviation.

In addition to Lion Air, the Southwest model has been adopted by GOL, Ryanair, Easy Jet, many of which are flying Boeing airplanes as well.

This transaction is emblematic of what we do—and how we work: Helping start-up companies, introducing innovative new products and developing infrastructure.

Not only in aviation, but in power, transportation and telecommunications.

Frequently, we enter a market through airline financing and then expand our portfolio into infrastructure and other projects.

Working with large companies, like Boeing, can clear the path so that smaller firms and small businesses can ultimately follow suit—and build their presence in key export markets. But let's go back to the beginning for a moment. And then talk about the opportunities we are seeing in Southeast Asia today.

Background on Ex-Im Bank

Ex-Im Bank was established in 1934 by FDR.

And some of our earliest transactions supported the construction of roads, routes and infrastructure that made the exchange of goods and services between countries possible.

And I am literally talking about building roads, such as the:

  • Burma Road
  • The Pan-American Highway
  • We also helped finance the Marshall Plan

And while much has changed in the last 75 years, our Bank's mission remains the same: strengthening the U.S. economy—and supporting American jobs—through exports.

And we are doing it by opening up new pathways within the global financial system for American businesses and for global economic development.

While it was roads and trade routes in the 30s and 40s, today it is financing the sale of American-made locomotives, airplanes and helicopters.

It is building power plants and telecommunications towers in emerging economies. It is funding for renewable energy projects, satellites and the sale of cutting-edge medical technologies. A Record Year

As a former businessman, I like to measure our Bank's work the same way I did in the private sector: Using report cards.

So to give you a little perspective: For Fiscal Year 2010, Ex-Im financing totaled a record $24.5 billion, up 70 percent from two years ago. Our work supported an estimated $33 billion in export sales and 227,000 U.S. jobs.

And our projections for 2011 are looking strong. Our first quarter numbers show we are off to a solid start for the year.

And one thing I always like to note is that we do our work at no cost to the American taxpayer. We are a self-sustaining agency.

In fact, we have actually earned $5 billion for taxpayers since 1992.

Over the course of the last two years, we stepped into the void during challenging economic times to ensure that U.S. companies—large and small—had access to capital and a competitive edge in the global marketplace.

And we are looking to build on that success in the current Fiscal Year. And we are doing it by targeting our work where it can have the most impact.

National Export Initiative

As you know, President Obama announced the National Export Initiative during his first State of the Union address.

Its goal: to double U.S. exports in 5 years. This will support more than 2 million American jobs, while creating a more resilient American economy.

To help achieve this, and to ensure that our Bank's work is closely aligned with the goals of the NEI, I wanted to focus our efforts where we could have the greatest impact.

To accomplish this, we did a thorough analysis of where the most promising export opportunities could be found for American companies.

We narrowed the list of 180 countries down to nine. Indonesia and Vietnam are on that list. I will tell you the other seven in a moment. But first let me explain why we selected Indonesia and Vietnam.

There are three main reasons:

  1. Growing GDP
  1. Appetite for infrastructure investment
  1. And because they are places where Ex-Im's financing can make a real difference.

The other seven countries are: Brazil, Colombia, India, Mexico, Nigeria, South Africa and Turkey.

Trips to Indonesia & Vietnam

My goal as Chairman was to visit all of these countries in my first year at the bank.

After flying to Jakarta, I quickly realized how long some of these flights would be—and had to reign in my plan.

I did, however, make it to 8 of 9, including Indonesia and Vietnam this past summer.

While in Jakarta—at a meeting just blocks away from where President Obama once attended grammar school—I heard from eager local executives and bankers telling me about their country's enormous infrastructure demands. And their desire to purchase American capital goods and services to complete these critical projects. One just has to go to Jakarta's thriving open-air markets, and you can see why these infrastructure projects are so important to this region's future. Today, much of Indonesia's fresh fruit is imported. The bananas, mangos and citrus fruits that are abundant on rural farms often spoil before they can be successfully shipped to urban centers. More locomotives and better air traffic control systems—both of which American companies have expertise and vast experience building—are needed to power this country's agricultural growth. And these are exactly the types of projects where our Bank's innovative financing can make a real difference in getting these projects off the ground. Ex-Im first entered Indonesia more than 60 years ago. In 1950, we financed $18 million in infrastructure improvements after the Republic of Indonesia gained its independence. This helped rehabilitate railroads and rebuild harbors.

And today—six decades later—we continue to see real opportunities to help finance the next chapter in Indonesia's growth.

Indonesia is the fourth largest country in the world by population, and the third largest democracy. There are more than 240 million people, rich natural resources and an expanding middle class.

Over the past decade, the number of vehicles on Indonesia's roads has nearly tripled from 3 million to more than 11 million.

While I was in Jakarta, Ex-Im announced a $1 billion bank credit facility to help small- and mid-sized Indonesian businesses purchase American goods and services to build infrastructure and other projects.

According to Indonesia's state planning agency, the country requires about $218 billion in infrastructure investments over the next five years.

Jakarta, in particular, needs assistance to help generate enough electricity for its roughly 10 million residents. It also is looking to expand its public transportation system, ports and rail systems.

We believe that this bank facility can create an important foothold for U.S. businesses to be part of these projects.

Going forward, we also see enormous potential to help grow Indonesia's power sector, particularly in geothermal power.

Vietnam

In addition to Indonesia, I traveled to Vietnam this past summer, a fast-growing country with a population of about 85 million.

While there I met with the Prime Minister. He and I spoke about investments in aircraft, airports, ports, roads and the environment—all areas to help Vietnam continue its forward thrust and solid economic growth.

All projects that can unlock the promise of a better future for the people of Vietnam. He was keenly interested in small- and mid-sized businesses. And how to help them grow and thrive. We talked about how to make productive, mutually beneficial progress on trade between our countries. Vietnam is entering a new phase of economic activity. As its economy grows, Vietnam's credit options have broadened. And it is looking more to export credit agencies and commercial banks to help finance its infrastructure investments.

We are well positioned to be part of these projects. Ex-Im can provide financing to Vietnamese companies that want to purchase US goods or services.

We can also provide guarantees to receivables from Vietnamese companies purchasing America products.

To help U.S. businesses access this market, we announced in June a $500 million bank credit facility to support high-priority infrastructure projects.

In addition to this facility, our visit helped spark ongoing discussions about future satellite transactions, wind projects, and more.

We look forward to building our presence in this region and further opening it to more American companies.

And it is not just Vietnam and Indonesia that are important to the U.S. Singapore, Thailand, Malaysia have seen solid economic activity—and there are real opportunities to increase our relationships and ties in these countries.

In recent years, we have financed a large number of American-made aircraft for Thai Airways, Malaysian Airlines, Garuda Airlines, Singapore Air Cargo, BOC Aviation--a Singapore-based aircraft leasing company--and Philippine Airlines.

And, in June of 2009, just weeks after I arrived at Ex-Im, President Obama lifted a ban on our ability to do business in Laos and Cambodia.

This will allow us to finance certain transactions in these markets. And we look forward to building our relationships in these countries.

Going forward, we see a great deal of opportunity across Southeast Asia for US-manufactured aircraft—and growing markets for helicopters for off-shore oil exploration, for police forces, and for business use.

We also see solid markets for business aircraft and for US manufactured locomotives, particularly in countries like Indonesia.

We believe that American-made capital goods and services can play an important role in helping communities across Southeast Asia to meet their growing infrastructure demands.

And we are working closely with the Commerce Department, USTR, and the U.S. Commercial Service to help more companies access these important markets.

Commercial Diplomacy

So let me just close with one point before I take your questions.

The power and the potential of export sales goes well beyond the exchange of goods and services. It goes beyond simple monetary transactions. And lays the foundation for much needed commercial diplomacy.

In today's global economy, what nations build reflect what they value. Their goals. Their hopes and their aspirations. It reflects their vision for their countries' future and embodies the dreams of their citizens.

Whether roads, rail, solar energy plants, or airplanes—nations that build together are invested in each other in ways that go far deeper than just business deals. They are investing in each other's people—their prosperity and economic vitality.

Trade and investments - stronger business engagement - reinforce the mutual respect and commitment that needs to exist between the U.S. and our allies in Southeast Asia.

It provides opportunities to build on values of: Tolerance, respect for human rights, diversity, and promotion of economic opportunity for all our citizens.

It reinforces a shared commitment, in many parts of the region, to building durable democracies.

And can play a central and, hopefully, a defining role in advancing America's relations in the Muslim world.

But it requires more forums like this, as well as cultural exchanges and student programs to expand our understanding of other countries—their customs, history and traditions.

It requires a regulatory landscape in developing countries that allows American companies to be productive partners—and ensures a level playing field when it comes to competing for projects.

It requires—what Jeff Immelt at GE likes to call—understanding the nuances of foreign markets.

And as we better understand these nuances, we not only build more business opportunities. We build more trust, more understanding and more knowledge about each other. This allows us to bridge our differences and find friendship and unity and new areas of agreement.

It is these types of activities that ultimately create the 21st century partnerships that are so critical—and so essential—to achieving a safer, more secure, more equitable world.

This is the type of commercial diplomacy that guides the work of the Export-Import Bank of the United States—and what will remain our focus in the days, months and years ahead.

And we look forward to working closely with the Center for Strategic and International Studies to advance that work in Southeast Asia and throughout the world.

Thank you again for this opportunity.