With the release of OPIC’s 2015 annual report, we have now updated CGD’s OPIC Scraped Portfolio database with detailed information on 90 new project commitments. So what does the rundown look like? Three key points stood out to us:
A noticeable focus on energy: OPIC committed $1.7 billion to power projects, which is almost half of projects by value. Renewable energy projects account for slightly more than half of this total. This is the first time since data has been available that roughly half of OPIC’s annual portfolio has gone to energy projects.
Nearly half of commitments to Sub-Saharan Africa: 47% of commitments supported projects in Sub-Saharan Africa, which is the largest relative amount since at least 2000.
A move away from high-income countries: Only 0.04% of new OPIC commitments were located in high-income countries last year.
Of these three points, we are the most happy to report the third. Why? Because until 2015, OPIC had been devoting an increasing portion of its scarce resources in much wealthier countries, while committing a smaller and smaller portion of its portfolio in poorer countries. The 2015 list of projects seems to buck this trend.
OPIC’s Recent Rich Country Problem
When we took a deep dive into OPIC’s portfolio earlier this year, we found that the share of commitments going to high-income countries had increased significantly. These are countries with a GDP per capita of at least $12,746 in 2015 (think Aruba, Chile, and Israel). In 2013 and 2014, nearly one-quarter of OPIC commitments focused on these much wealthier countries. This raised a larger, more uncomfortable question about OPIC’s ‘additionality’ – both in development and investment terms. For instance, was OPIC’s involvement in solar energy projects in Chile truly ‘additional’, where credit markets are well-developed and over 99 percent of the population already had access to electricity? OPIC also increased its support for upper middle-income countries such as Brazil, Mexico, and Turkey. Collectively, these two income categories accounted for over 70 percent of OPIC commitments in 2014.
At the same time, the share of OPIC commitments in poorer countries had been declining over the previous 15 years (see figure above). The occasional exceptions to this downward trend are explained by a handful of large projects. In 2009, OPIC committed almost $150 million for a power generation project in Togo. And in 2011, OPIC committed $400 million to two renewable energy projects in Kenya and Liberia. Excluding these three projects, the share going to the world’s poorest nations was in the very low single digits. Now, there are several factors that contributed to this trend, such as a declining number of low-income countries over time (see our recent paper for details). Nonetheless, these levels were quite low overall.
In contrast, in 2015, there was a clear uptick in the percentage of OPIC commitments going towards lower middle-income countries. This trend is partly driven by large energy projects in Pakistan, Ghana, and Kenya. There also was an increase in commitments to low-income countries (those with a GDP per capita under $1,025) from $30 million to $225 million. While OPIC could certainly do more in low-income countries, the overall trend is a clear step in the right direction.
How Can OPIC Safeguard This Progress?
OPIC’s portfolio in 2015 clearly demonstrates that the agency is capable of focusing new commitments in poorer countries. Despite this, there is still the risk that OPIC could slip back into a portfolio dominated by wealthier, lower-risk countries with much deeper credit markets.
So, how can we help to ensure that OPIC continues to focus on the countries where its services are needed most? In a recent CGD policy paper with Todd Moss, we proposed a number of stoplights that would trigger increased OPIC Board scrutiny if the respective project promised more limited development impact or ‘additionality’. These sensible hurdles could provide further institutional safeguards against OPIC devoting too much of its new commitments in much wealthier countries like Chile and Aruba.
In the meantime, we should commend OPIC for striking a much better balance last year, and demonstrating that this modest US development agency is increasingly prioritizing development needs in the world’s poorer countries.
Check out the updated OPIC Scraped Database, which includes new information on OPIC’s 2015 commitments.