The best way to fight poverty is a job. And one of the most efficient ways for the United States to promote stability and support our allies around world is to encourage private investment in infrastructure, especially energy. That is why the House passage on July 17 of the Better Utilization of Investments Leading to Development (BUILD) Act is so valuable and timely. The Act, if it clears the Senate and is signed by the President, creates a new U.S. International Development Finance Corporation. This idea is a triple win: it catalyzes investment in some of the most fragile countries, bolsters U.S. national security, and is a great deal for American taxpayers.
The BUILD Act is the single most significant bipartisan international economic development legislation in a decade. A new modernized agency is necessary because private finance, rather than aid, is the future. Foreign aid is the appropriate tool for tackling health challenges and responding to humanitarian crises. Development finance — or the deployment of commercial capital for public policy purposes — is the most potent weapon we have to expand markets, spread the benefits of capitalism, and spur private sector growth. The White House’s National Security Strategy recognizes that, “modernized development finance tools can promote stability, prosperity, and political reform.” When the U.S. wants to foster business in Pakistan, build infrastructure in Haiti, or encourage women entrepreneurs in Egypt, development finance is the tool.
The U.S. International Development Finance Corporation will be particularly useful in the energy sector. An adequate supply of affordable and dependable energy is fundamental to modern living and competitive economies. While the U.S. has become an energy-abundant superpower, countries across South Asia and Africa face chronic shortages of power. In these markets, energy cost and reliability is a leading barrier to economic growth and productivity. The new U.S. agency will enable far greater investment and risk insurance in power plants, transmission lines, and all kinds of new energy technology.
Nigeria, for example, is an important American ally that will have a larger population than the United States by around 2045. Yet, they are on track to have just 23 gigawatts of electricity generation capacity, while the U.S. has more than 1,000 gigawatts. If we don’t find ways to strengthen the energy systems in countries like Nigeria, they will become sources of instability rather than thriving trade and security partners.
The BUILD Act is especially timely because of the rise of China and other emerging markets. Many countries are already using development finance to enhance their influence and to expand investment opportunities. The U.S. has made a start, but without a fully enabled finance institution, we risk falling further behind, particularly as China aggressively pursues projects in strategic parts of the world.
Most of all, Americans believe in private sector entrepreneurship. Our deep capital markets, our capacity for innovation, and our belief in free markets all provide a unique platform for using development finance to promote prosperity and stability. That is why the BUILD Act has broad bipartisan support, originally co-introduced by Congressmen Ted Yoho (R-FL) and Adam Smith (D-WA) and Senators Bob Corker (R-TN) and Chris Coons (D-DE).
The U.S. International Development Finance Corporation will be built on the foundation of the Overseas Private Investment Corporation, a small high-performing agency that since 1971 has provided risk insurance and debt to projects in support of U.S. foreign policy and development goals. The new agency will inherit OPIC’s investment portfolio, but will be bigger and better because of additional flexibility and a capital base that’s double in size.
The BUILD Act is also good for U.S. taxpayers as it will not cost any new money and will consolidate some programs from other federal agencies. The corporation is designed to operate at a modest profit, continuing OPIC’s record of paying money into the U.S. Treasury for 39 years in a row.
The growth of the global middle class creates huge opportunities for American business and to support U.S. security, business, and energy goals. The new U.S. International Development Finance Corporation is a big step to help America seize those opportunities.
Rob Mosbacher, Jr. is chairman of Mosbacher Energy Company and previously served as CEO of the Overseas Private Investment Corporation.