The United States needs a bigger and better development finance institution. The Overseas Private Investment Corporation (OPIC) is an overperforming federal agency, but is currently far too small and outdated to fulfill its mandate of catalyzing private investment in strategic emerging and frontier markets. We’ve been pushing for years to modernize US development finance, while the timing for a new agency is ideal right now. The bipartisan BUILD Act creating a new US International Development Finance Corporation (USIDFC) was introduced in both houses a few months back and the administration has signaled support.
In last month’s markup of the BUILD Act, the House Foreign Affairs Committee advanced a number of smart changes. Yesterday, the Senate Foreign Relations Committee followed suit, giving the legislation a greenlight and making some of its own improvements.
Among the most important changes:
More time to plan a smooth transition. As anxious as we are to see the US government move quickly, the original 60 days is probably not enough for a detailed reorganization plan. The new deadline is 120 days.
More transparency (of project-level data). OPIC began publishing project-level information only in 2009, while much of the data was scattered across different pages or locked up in PDFs. In order to sort, filter, or analyze OPIC’s data, CGD had to spend months creating a public database. The original bill required the USIDFC to “maintain a user-friendly, publicly available, machine-readable database with detailed country-level information,” but the newly-amended legislation takes it a step further, requiring “project-level” detail.
Establishing a development advisory council. Like OPIC, the new USIDFC will have to balance competing objectives: managing financial risks, supporting US foreign policy goals, and achieving development outcomes. We’ve written before about how OPIC can do a better and more transparent job delivering on its development mission. We’ve also proposed a simple traffic light reporting system to track trade-offs. Another positive step is in the Senate amendment to create a nine-member development advisory council of outside experts to offer advice and guidance to the USIDFC Board.
Adding an independent accountability mechanism. Part of the rationale for the new agency is to provide an alternative to China’s financing model. Since 2005, OPIC has had an Office of Accountability, which plays an important role in addressing concerns or conflicts that might occur during projects. The bill advanced by the Senate panel includes language to ensure a similar accountability mechanism is present for the new institution.
On to the floor!
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.