President Trump’s National Security Strategy, released in December 2017, said the Administration would seek to “modernize its development finance tools so that U.S. companies have incentives to capitalize on opportunities in developing countries.”  A mere seven months later, the BUILD Act – which proposes a new International Development Finance Corporation (IDFC) that would double the financing authority of the existing Overseas Private Investment Corporation – passed in the House and out of committee in the Senate with broad bipartisan support.

This is remarkable in today’s Washington and a step that has been widely applauded.  As we approach the finish line, the hard part lies ahead:  how do we ensure it is implemented well?  How can we ensure a newly empowered IDFC has the greatest development impact?  How do we promote strong coordination between the IDFC and other U.S. development agencies?

Ensuring Greatest Development Impact

Amendments during the Senate Foreign Relations Committee addressed many concerns, just as the bill’s original co-sponsors had intended.  The BUILD Act – also known as the Better Utilization of Investment Leading to Development (BUILD) Act – now requires that the IDFC’s investments must take “development objectives” into account when deciding where to provide financing and risk insurance, and specifying how this will work in practice will be critical to ensuring the greatest development impact.  It also requires a new development advisory council of external stakeholders to advise whether it is meeting its development mandate.

While the Heritage Foundation disagreed with the increased lending authority and multi-year authorization of the IDFC that others have seen as central to its effectiveness, it noted the amendments “address some of OPIC’s inadequacies, and would make some improvements and somewhat consolidate the current disparate government development finance agencies and activities.”  It also observed that the amended bill addressed its concern that too little of OPIC’s financing had gone to lower and middle income countries by requiring a presidential certification that IDFC investments in upper-middle income countries further the “national economic or foreign policy interests of the United States” (even if it would have liked Congress to approve every project in these countries).

The White House expressed support for the amended bill, saying it meets the Administration’s goals for aligning development finance with “broader foreign policy and development goals,” enhances the “competitiveness and compatibility of the United States development finance toolkit,” establishes appropriate risk management protocols, ensures that development finance “adds to, rather than replaces, private-sector resources by mobilizing investment that would not otherwise occur” and reduces “duplicate efforts in development finance programs.”

Working Closely with USAID

As the bill moved forward, some have worried the enthusiasm for strengthening development finance could come at the expense of other tools of foreign assistance, especially against the backdrop of the Administration’s proposals to cut the International Affairs Budget by 32%.  In practice, a new IDFC based in Washington, DC will need to work closely with USAID and its missions around the world to make smart investments and foster the enabling environment that development finance needs to succeed.

Tackling obstacles to economic growth and building the enabling environment for private investment is the mission of USAID.  USAID Administrator Mark Green recently observed to the U.S. Chamber of Commerce, “what we can do is help to combat corruption and unfair market practices so you get a fairer shake when you put in a bid and greater peace of mind when you sign a deal. We can help build host country capacity for sophisticated transactions. We can help them develop the kind of legal and regulatory frameworks that will allow all of you to invest with confidence.”

For development finance to be truly effective, the United States must strengthen and ensure better coherence between all of America’s tools of development policy.  The amended legislation creates a new “chief development officer” at the IDFC to coordinate its policies with USAID, and defining how this close relationship operates will be critical to its success.

Unleashing U.S. Development Finance to Compete and to Catalyze

Commerce Secretary Wilbur Ross and Senator Chris Coons (D-DE) recently led a delegation to Ethiopia, Kenya, Côte d’Ivoire, and Ghana where they described seeing the “hallmarks of China’s economic presence” all over major African cities and hearing “from host governments and the private sector about the critical need for development finance reform to even the playing field for American companies.” They called for passing the BUILD Act to send the message that “the United States intends to remain fully engaged in Africa and elsewhere in the developing world.”

Strengthening development finance not only helps the United States be more competitive.  It can also ensure we take advantage of opportunities to tackle global problems at scale.  Despite tremendous progress in the fight against extreme poverty in the last 30 years, estimates are that the U.N.’s Sustainable Development Goals face a funding shortfall of $2.5 trillion per year.  Public investments alone will not be enough, nor is the private sector likely to step in on its own.

Passing the BUILD Act would take the next steps in a path over the last 15 years whereby the U.S. government is catalyzing private sector resources and expertise to bridge this gap, fighting poverty and helping American companies compete around the world.