Congress, Trump eye new agency to invest in projects overseas
Lawmakers are pushing to revamp the way the U.S assists and invests in struggling countries, finding a rare area of agreement with President Trump when it comes to foreign aid.
With little fanfare, lawmakers are advancing two identical bipartisan bills in the House and Senate that would consolidate several federal international development agencies and expand their investment tools.
The White House is onboard, making it one of the few times the president has sought to bolster, rather than slash, the foreign aid system. Key groups in business and foreign relations are supportive of the legislation, which, so far, has faced little opposition in Congress.
The House Foreign Affairs Committee on Wednesday approved its version of the bill unanimously, while the Senate Foreign Relations Committee will hold a hearing Thursday on its version.
The White House supports both versions of the legislation and said in a statement last month it would help the U.S. “compete more effectively in this new era of strategic competition.”
The bills would create a new U.S. International Development Finance Corporation (IDFC) to replace the Overseas Private Investment Corporation (OPIC). That entity invests in and draws private capital to international development projects meant to advance U.S. interests.
OPIC would be combined with several funds at the U.S. Agency for International Development (USAID) that now support projects meant to boost economic growth in poor countries.
The IDFC would also access a new suite of financial tools to support development projects — such as power plants, ports and other infrastructure. While OPIC can only offer loans, political risk insurance and support venture funds, the IDFC could acquire equity in projects to help support them.
OPIC President Ray Washburne told The Hill in an interview that the reform effort would help the U.S. partner with allies on development projects in new ways and expand the country’s “soft diplomacy”
“We’re getting left out of a lot of projects because we didn’t have the ability to put equity into the projects,” Washburne said. “OPIC really hadn’t changed since 1971, but financial tools in the world have changed dramatically in that time. Like anything, it’s time for it to be reformed and redone.”
Like OPIC, the new agency would focus on projects that boost local economies in volatile regions, with a focus on Central America, Africa and Southeast Asia.
While OPIC in name would be gone, the plan would preserve an institution that had been targeted for elimination by the White House. The agency was established in 1971 with bipartisan support as a way to promote U.S. interests through economic development in countries with weak economies and volatile politics.
Both Republicans and Democrats have protected foreign aid for decades, calling it an essential diplomatic tool that helps prevent military conflicts by promoting economic growth.
But foreign aid has also come under criticism from some conservatives, including from Trump, who during his presidential campaign talked of putting “America first.”
In his first budget, Trump and his conservative budget director, Mick Mulvaney, proposed a 26-percent cut to State Department funding over the objections from Congress and concerns of the Pentagon.
“When the administration first came in, there wasn’t any kind of focus on what OPIC could really do when used properly to put our national interest first,” said Washburne, a veteran GOP fundraiser and Dallas investor appointed to OPIC in 2017.
Washburne said he pitched Mulvaney and White House chief of staff John Kelly on OPIC as “a prime America First agency.”
“We’re a profit-making venture, and we help by stabilizing governments and regions of the world,” Washburne said. “So once I talked Mick through all of that, the White House actually issued a letter in support of what we’re doing.”
The White House outlined the proposal for a new development finance agency in its fiscal 2019 budget request, released in February. The Trump administration’s National Security Strategy also urged Congress to consolidate and expand U.S. investment efforts in vulnerable countries.
Sens. Bob Corker (R-Tenn.) and Chris Coons (D-Del.) and Reps. Ted Yoho (R-Fla.) and Adam Smith (D-Wash.) introduced bills to create the new agency later that month.
It’s unclear when the House and Senate could vote on enacting the changes, though the plan has attracted wide bipartisan support in both chambers.
Washburne’s two immediate predecessors have backed the plan, as has the U.S. Chamber of Commerce and analysts at the Center for Global Development and the Brookings Institution, though some have called for minor changes.
George Ingram, a senior fellow at Brookings, expressed concerns at the Thursday hearing about folding USAID’s Office of Private Capital and Microenterprise into the new agency, which he said would limit the government’s technical abilities.
Sen. Bob Menendez (D-N.J.) also raised questions about a provision giving the new agency more flexibility to contract with foreign companies on projects abroad. That section is intended to help the agency assist projects in distant, volatile places that U.S. banks see as inaccessible or too risky.
Supporters of the creating the new agency also say it would help fend off Chinese efforts to expand its influence and acquire strategic ports and infrastructure centers near the U.S.
Corker said the plan would help tackle “China’s aggressive and potentially damaging lending.”
“China seeks to promote a state-led, centrally planned development model that benefits China first and foremost,” Corker said Thursday. “Our bill instead would advance responsible lending so citizens in recipient countries will be full participants in economic growth.”
Washburne said China invests in projects with a “loan-to-own” mentality: saddling local developers with millions of dollars in debt to fund the project, then seizing control once they default.
“We don’t need the Chinese in the Panama Canal,” Washburne said. “It’s important that we’re in those same areas.”