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Speeches and Testimony

Statement of Ray W. Washburne, President & CEO, Overseas Private Investment Corporation, to the Senate Foreign Relations Committee

Modernizing Development Finance

May 10, 2018 | Washington D.C.

(As prepared)


Chairman Corker, Ranking Member Menendez, Members of the Committee -- thank you for inviting me to testify on this critical topic.

Chairman Corker - I’d like to acknowledge all the work you have done to advance U.S. foreign policy. From Electrify Africa to efforts to combat human trafficking, you have been a champion for those in need around the globe. Ranking Member Menendez, your leadership has been instrumental in strengthening U.S. engagement in the world, particularly in the Western Hemisphere.

Indeed, this Committee’s bipartisan work has helped set the stage for the Administration’s proposal for the United States to establish a reformed, more effective Development Finance Institution - with modernized tools - and a focus on supporting private sector driven development.

When it comes to meeting the massive development needs around the globe and advancing American foreign policy, this proposal - and the legislation the committee is weighing - is essential.

As you know, “development finance” uses tools such as loans, guarantees and political risk insurance to facilitate private-sector investment in emerging markets that will have positive developmental impact. These are transactions the private sector won’t do on their own.

Through OPIC, the U.S. Government has used these tools to back projects in key sectors such as power, water, and health that improve life for millions, and lay the groundwork for economic growth.

Likewise, the U.S. Government has used USAID’s Development Credit Authority to drive private investment into countries that have not had access to commercial finance.

This model of mobilizing private investment is only becoming more prominent, as the needs in the developing world are just too great to meet with government resources alone.

Yet, U.S. capabilities have become outdated as we have gone without significant legislative updates.

As a result, we lack the modern, 21st century mechanisms needed to either compete with countries like China, or cooperate with allies like Britain, Germany, and Japan, which are investing heavily in emerging markets.

And a global competition for influence is on. While I was in Asia, I saw how China’s Belt and Road Initiative is changing the political and economic landscape. The amount of investment China has planned for this initiative is staggering - aimed at interconnecting 65 percent of the world’s population, one-third of the world’s GDP, and a quarter of all goods and services.

Of course, a condition of many of these loans is that Chinese firms – and labor – get the business. And we know what happens when countries can’t pay.

In December, for example, Sri Lanka gave control of a strategic port to Beijing for 99 years. This comes as China has been stepping up its presence in the Indian Ocean and its critical shipping lanes.

Mr. Chairman – we have to be engaged in the developing world with a robust alternative to these state-directed investments, which can leave developing countries worse off.

And we have that alternative in a new, U.S. Development Finance Institution (DFI).

This proposal is a result of the President’s Executive Order on reorganizing government, which prompted a fresh interagency look over several months. We found that the U.S. Government’s ability to deploy these tools strategically is limited by outdated legal authorities and fragmentation.

With this in mind, the Administration developed a proposal to improve efficiencies, reform programming, and - as envisioned by the National Security Strategy - elevate these tools to advance U.S. foreign policy goals.

The President’s Budget proposes to consolidate multiple U.S. development-finance functions into a new, standalone, Development Finance Institution.

The DFI will have better policy alignment and strong links to State and USAID to ensure its transactions align with U.S. foreign policy and leverage USAID’s programming.

This includes funding for technical assistance and grants for potential DFI projects that need a bridge to becoming investment ready. We also need governance and management structures to ensure the DFI and USAID’s field missions work seamlessly.

The new DFI will include reforms to better manage taxpayer risk and ensure its investments are additional to the private sector. We will not support projects that can or should proceed on their own. And we will also ensure that our work upholds the highest environmental, social and worker rights standards.

Another part of a reformed DFI is increased transparency and accountability through expanded inspection and oversight.

In conclusion Mr. Chairman: In nine months as the head of OPIC, I’ve seen the power of the private sector unleashed to advance U.S. policy:

  • OPIC approved a transaction which will increase Ukraine’s energy independence from Russia;
  • OPIC formally launched its 2X Women’s Initiative to catalyze over $1 billion in capital to invest in projects that empower women; and
  • OPIC signed an MoU with our Japanese counterparts to bolster investment in the Indo-Pacific and beyond.

A new, modernized DFI could be far more competitive, creating countless opportunities throughout the developing world.

But this modernization of development finance cannot happen without the support of this Committee.

I am extremely thankful for the leadership of Senators Corker and Coons and the many other Senators on the Committee for embracing this concept through S. 2463. Indeed, the Administration has noted its strong support for the goals of the legislation. I look forward to working with the Committee as the process moves forward to ensure the DFI is structured for long-term success.

I would be happy to address any questions you may have.