The African continent offers real opportunities thanks to some of the world’s fastest growing economies and an expanding labor force.
As a Cabinet Secretary and a Democratic Member of the Senate Foreign Relations Committee, respectively, we agree that the United States must do more to present our African partners with better alternatives to state-led economic models, promoted by countries like China, so Africa can assume its rightful place in the global economy.
Through efforts such as its Belt and Road Initiative, China is pursuing a neo-mercantilist vision that uses investment in infrastructure to secure an economic foothold, from which it is attempting to secure political, diplomatic, and in some cases military access, with potentially serious consequences for U.S. interests from Central Asia to Eastern Europe and Africa. China is, at the same time, bankrolling new financial organizations that aim to rival or displace the international institutions created by the United States and its allies after the Second World War.
By pouring money into Africa, China has seen an opportunity to both gain political influence and to reap future rewards in a continent whose economies are predicted to boom in the coming decades.
Just spend a few hours in a major African city – from Abidjan, to Addis Ababa, to Nairobi – and you will see the hallmarks of China’s economic presence. Over the past decade, China has either financed or contributed to financing infrastructure projects across the continent, offering billions of dollars in commercial loans at concessional rates to African governments and state-owned entities. But China’s commercial path has not always applied the highest international standards of openness, inclusivity, transparency, and governance.
The United States seeks sovereign African states that are integrated into the world economy, able to provide for their citizens’ needs, and capable of managing threats to peace and security. We oppose opaque investment and development initiatives that impose undue costs and burdens on recipients, limiting their options for determining their own future.
As competitors like China explore opportunities to leverage state financing to pave economic inroads, U.S. government foreign investment entities remain fragmented and outdated. The Overseas Private Investment Corporation, the leading U.S. development finance institution, is unable to compete with its Chinese counterpart. Unlike Chinese institutions, OPIC works to fund private sector-led projects that will be economically sound over the long haul. Yet the agency lacks any consistent Congressional authorization and has no way of leveraging new financial tools that have drastically changed the face of the global economy.
Passage of the Better Utilization of Investments Leading to Development Act of 2018, better known as the BUILD Act, would change this unsustainable situation. This bipartisan legislation would reform and modernize government development finance by establishing the U.S. International Development Finance Corporation (IDFC).
Moreover, this legislation would allow the IDFC to more than double OPIC’s investment portfolio and allow us to participate in equity investments, provide technical assistance, and issue catalytic grants to mobilize capital for innovative projects that advance our national security and foreign policy objectives. Most importantly, the Congressional Budget Office estimates that, on net, implementing the legislation would reduce Federal costs and direct spending.
The BUILD Act also contains important reforms to reduce risks to taxpayers and ensures Congress will maintain strong oversight to make certain the agency does not provide financing where the private sector could.
By modernizing our development finance tools, the United States can send a clear message that we will continue to lead the world in supporting sound, responsible and fair economic growth, as well as sustainable and equitable business practices. This matters more than ever before as developing countries decide whether to follow a model based on free market capitalism, the rule of law and transparency, or an opaque, autocratic, state-led alternative that promotes corruption, debt, and dependency.
Passage of the BUILD Act will make a real difference by increasing American investment in low and middle-income countries while also making a positive impact on local communities and populations. In 2017, OPIC investments supported 13,000 new jobs in host countries. With the BUILD Act, this number could grow significantly, helping to create new trading partners and therefore greater prosperity for the United States and our partners.
By planting the seeds of free market growth, the IDFC will help businesses and economies grow by supporting critical development projects in sectors such as energy, agriculture, infrastructure, and healthcare around the world.
The President’s Advisory Council on Doing Business in Africa, a 50-person strong delegation of American CEOs and senior leaders of the United States Government tasked with identifying and addressing barriers to expanding trade with African partners, recently concluded a two-week fact-finding mission to Ethiopia, Kenya, Côte d’Ivoire, and Ghana.
At each stop, the delegation heard from host governments and the private sector about the critical need for development finance reform to even the playing field for American companies. With the BUILD Act having just passed the House, and now proceeding in the Senate, we must send a loud and clear message: The United States intends to remain fully engaged in Africa and elsewhere in the developing world. The IDFC would expand America’s influence there and help support its private sector.
The BUILD Act has the support of the Trump Administration and a bipartisan coalition, including Senate Foreign Relations Committee Chairman Bob Corker, R-Tenn. and Senator Tim Kaine, D-Va. It unanimously passed the House of Representatives, with a bipartisan coalition led by Representatives Ted Yoho, R-Fla. and Adam Smith, D-Wash.
The two of us, supporters of the bill from two political parties and two branches of government now urge the Senate to act swiftly to ensure the United States maintains its historic role spearheading global economic growth and prosperity.
Commentary by Sen. Chris Coons, D-Del., and Wilbur Ross, Secretary of Commerce and a member of the Board of Directors of the Overseas Private Investment Corporation (OPIC).