WASHINGTON — A bill creating a new, expanded United States development finance agency was introduced Tuesday in the U.S. Congress.
The Better Utilization of Investment Leading to Development, or BUILD Act, will create a new agency that will combine the Overseas Private Investment Corporation and the several private sector oriented parts of the U.S. Agency for International Development, as well as expand U.S. development finance capabilities. The new agency will have the ability to make equity investments, have a higher spending cap, and have a grantmaking facility for project development and technical assistance.
See more related topics:
The bill creating the U.S. International Development Finance Corporation, was introduced simultaneously in the House and Senate by Rep. Ted Yoho, a Republican from Florida, and Adam Smith, a Democrat from Washington, along with Senators Chris Coons, a Democrat from Delaware and Bob Corker, from Tennessee.
The move comes as European countries and China are expanding their development finance investments and would aim to modernize U.S. development finance and make it more competitive.
“The purpose of the corporation shall be to mobilize and facilitate the participation of private sector capital and skills in the economic development of less developed countries, and countries in transition from nonmarket to market economies, in order to complement the development assistance objectives, and advance the foreign policy interests, of the United States,” the bill reads.
The free-market approach to development finance proposed in the bill will be more accountable and is not expected to cost any money, Corker said in a statement.
“The bipartisan BUILD Act will create a 21st century development finance institution with the full suite of tools to attract private sector investment to low income countries,” Coons said in a statement. “This new institution will make targeted investments to reduce poverty in countries that are critical to our national security. I look forward to working with my cosponsors to pass a strong bill that helps make markets work throughout the developing world.”
Yoho, in a statement, called the proposed corporation a consolidation of agencies distributing foreign aid that would create one “full-serve, self-sustaining” entity that would spark economic growth in developing countries and improve U.S. competitiveness.
In addition to bipartisan support in Congress, the bill is expected to have strong support from the administration. President Donald Trump committed to reforming U.S. development finance institutions in a speech last year in Vietnam, and reiterated the commitment in the National Security Strategy and again in the fiscal year 2019 budget proposal — which said the administration is reviewing development finance activities and proposes consolidating functions into a new development finance institution.
The new agency would incorporate some new authorities which proponents of development finance have long wanted the U.S. to have. Chief among them would be the ability to make equity investments, though the bill does put limits on the proportion of the corporation’s investments that can be made in that way — it cannot take a stake of more than 20 percent in any one company, and equity investments can’t be more than 35 percent of its portfolio.
There are however, some potential questions about the corporation. Some have questioned how it will absorb existing USAID functions, particularly the Development Credit Authority, and how connected it will be to USAID.
The bill proposes folding DCA, USAID’s enterprise funds and Office of Private Capital and Microenterprise into the new corporation, as well as giving it grantmaking authority, which the U.S. development finance institution did not had in the past.
The bill does contain explicit language requiring the chief executive officer of the corporation to consult with the USAID administrator and the CEO of the Millenium Challenge Corporation to coordinate around development priorities and outlines that the USAID administrator should serve as the vice chairperson of the corporation’s board.