A foreign adventure worth America’s money

Good news in a tumultuous week: Congress is poised to expand a program that will boost aid to poor countries, project American values overseas, balance China’s rising influence, and (not least) offer taxpayers a tidy profit. Here’s hoping that common sense prevails and the idea becomes reality.
Last week, as part of a reauthorisation bill, the House passed a measure that will consolidate several development-finance agencies into one. The new entity would have about $60 billion in lending capacity, or roughly double that of the Overseas Private Investment Corporation (OPIC), which it would subsume.
This would be a good thing, because OPIC has been a success by nearly any metric. Since its founding in 1971, the agency has supported more than $200 billion in overseas projects through direct lending, loan guarantees, risk insurance, and other assistance for funds that invest in emerging markets. It has helped underwrite power plants, micro-lending schemes and health-care initiatives, while often providing a lifeline for small businesses operating in troubled countries.
In doing so, OPIC has offered a model of sensible development aid. By supplying financing to US businesses where others won’t, it entices them to compete in challenging markets that are starved of investment. By demanding that projects have plausible economic rationales, it reduces the risk of white elephants. And by lending at market rates and imposing high standards on borrowers, it minimizes liability for taxpayers — in fact, it has returned a profit to the Treasury every year for roughly four decades.
There’s every reason to think that the new entity, to be called the International Development Finance Corporation, would only improve on this record, and have plenty of other benefits besides.
One would be strategic. China is spreading some $1 trillion throughout emerging markets as part of its Belt and Road infrastructure plan, a primary goal of which is to draw more countries into its sphere of influence. Many can’t readily say no to that kind of cash. Yet the deals are often opaque, economically dubious, and highly burdensome for those on the receiving end. Governments across Asia are having second thoughts about this largess — and the US would be wise to step into the void.
A revitalized OPIC would be well-positioned to do so. It could help countries build needed infrastructure while upholding values such as transparent deal-making, free trade and private enterprise. By imposing conditions on the companies it does business with — labor rights, environmental compliance — it could also encourage better corporate behavior in the developing world. If only Congress would take a similarly coherent approach towards investing in infrastructure at home.
Some caution is in order. One concern is that the new agency would be empowered to obtain equity stakes in foreign companies, where OPIC could only invest in debt. Although this could ease cooperation with foreign development agencies, it might also crowd out private investment or induce undue risk-taking. Similarly, competition with China may increase pressure to fund less-than-deserving projects, a temptation the agency’s board must guard against.
But these reservations aside, the measure is a welcome one. It will bring more prosperity and stability to countries that need it, demonstrate a renewed American commitment to the developing world, and advance long-standing foreign-policy goals, all without costing taxpayers a dime. If the Senate passes this bill, it will amount to something unusual in today’s Washington: real progress.

— Bloomberg

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