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The OPIC Blog

Global Development Supports Domestic Development

By Elizabeth Littlefield, OPIC President and CEO

At first glance, the prospects for American foreign aid and investment might look grim these days. As debt ceiling discussions and proposed austerity measures cast a shadow on all federal spending, money spent or invested far from home might seem an easy target for deep cutbacks.

But such a response would be based on the mistaken assumption that it’s possible to separate our country’s domestic affairs from our global affairs. In reality, American foreign aid and investment has a solid track record of paying dividends to our own economy. From assisting Europe after World War II to supporting South Korea in the wake of the Korean War, these investments have long laid the groundwork for economic and political stability to take root and international trade and business to flourish.  Today, in an age when instability in poor nations poses a major global threat, investment in these regions is not only essential, it is also cost-effective. It’s a lot cheaper to create an environment where economic opportunities squeeze out radicalism than it is to deal with the instability and conflict that is born out of neglect.

As former Secretary of Defense Robert Gates said, “Development and security are inextricably linked – you can’t have development without security and you can’t have security without development.”

We’ve barely crossed the halfway mark on the year 2011, but it’s safe to say that this year will go down as one of the most pivotal years in American foreign policy since 1989, when East and West Germans joined together to bring down the Berlin Wall. A year ago, few if any Middle Eastern experts were predicting  so many wildfires of protest and open dissent. Now it seems that every day brings a new turn of events from Tunisia, to Egypt, Syria, Libya and Yemen. The question is not whether the United States has a long-term interest in helping these nations as they seek peaceful transformations. We most certainly do. The questions are: How will we help? What tools will we use? And, at what cost?

Now more than ever, the United States must take a strategic approach to foreign investment. We must invest in regions and projects where we can make a difference, and we must continuously monitor our investments to ensure they are working as designed. We must recognize that many post-conflict regions present an economic opportunity as well as a competitive challenge and that even if we do not enter these new and emerging markets, our most formidable trade competitors will.

Finally, we must invest in ways that are mindful of the budget debates waging here in Washington: We must find ways to stretch a dollar.

Private sector investment, led by a combination of American businesses and development finance agencies such as the Overseas Private Investment Corporation (OPIC), is an increasing – and increasingly appreciated – part of this equation.  Since 2002, OPIC has financed more than $200 million for projects in Afghanistan, ranging from housing and microfinance to manufacturing and solar power. This investment has catalyzed $100 million from private investors. That two-to-one ratio bears repeating: Rather than fronting the bill for entire aid projects, U.S. taxpayers have had every $2 of their money matched by $1 from private sources. In fact, by investing alongside the private sector, OPIC is able to earn profits from interest and fees and thus operate at zero cost to taxpayers. It returns money to the U.S. Treasury every year

Today, OPIC is bringing a similar investment model to the Middle East and North Africa (MENA) region, with a recent deal for $500 million for small business lending in Egypt and Jordan. As Secretary of State Hillary Clinton said this past spring, when she traveled to the region, one of the best ways to support the transformation in Egypt and Jordan is to support small business – the universal engine of economic growth. Research shows there are between 1.9 million and 2.3 million small and medium-size enterprises in the MENA region, most which lack access to credit. The OPIC deal, by providing that access to credit, will support growth and job creation.

There is little debate about the benefit of such foreign investment. President Obama, with support from both sides of the aisle in Congress, is promoting changes in foreign aid to focus more on scientific, technological, and private investment solutions that help permanently break the cycles of poverty, famine, and disease.  Programs that can be self-sufficient or that will share the cost with an outside investor will be an increasingly popular tool for doing more, with less.

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