The Trump administration wants to consolidate existing U.S. government development finance agencies to replace the outdated Overseas Private Investment Corporation (OPIC).
In that vein, members of Congress introduced the “Better Utilization of Investments Leading to Development (or BUILD) Act of 2018. But a recent Heritage Foundation analysis found that the bill would merely rebrand and double the size of OPIC. The bill would create a new Development Finance Corporation (DFC) to “replace” OPIC, but it mandates no substantive change in focus or operations.
Moreover, contrary to proponents’ arguments, the DFC would not counter the influence of China through its Belt and Road Initiative.
The proposed DFC would not address OPIC’s fundamental flaws. Instead, it would retain all of OPIC’s current authorities, grant OPIC the ability to engage in equity investments in foreign countries, double OPIC’s resources, and insulate OPIC from regular congressional oversight in the appropriation and authorization process.
To fix OPIC, Congress needs to start over and work with the administration on a bill that:
- Makes explicit the mission to counter the influence of China;
- Limits DFC projects to low-income and lower-middle-income countries;
- Requires the DFC to encourage pro-market, pro-investment policies; and
- Reduces the contingent liability of the DFC to OPIC’s current level, and subjects the DFC to the normal appropriation and authorization process.
A new U.S. development finance institution to replace OPIC and USAID’s Development Credit Authority, with a mandate to support specific U.S. foreign policy and national security goals, could play a useful, albeit small role if it emphasizes U.S. support for policy reform in low-income and lower-middle-income developing countries lacking access to private capital markets.
Conservatives and others interested in reforming and focusing development finance to advance U.S. foreign policy and national security goals—particularly countering Chinese influence—should oppose the BUILD Act. It fails to embrace these priorities and would continue business as usual at OPIC.