US International Development Finance Corporation soon to open for business

The new agency is designed to address development challenges and foreign policy priorities

The slanging match between China and the US over the Belt & Road Initiative continued last week, with Chinese Foreign Ministry spokesperson Geng Shuang accusing US National Security Adviser John Bolton of attempting to sour China's relations with other countries.

Bolton visited Kiev on August 27, and spoke out against Chinese investment in Ukraine. Analysts say that the US is in particular keen to block the sale of Ukrainian aerospace manufacturer Motor Sich to Beijing Skyrizon Aviation, citing national security concerns.

Geng rejected the comments from Bolton, and repeated the Chinese position that the BRI remains a win-win proposition.

The US view is that the BRI is a debt trap, which will erode the sovereignty of countries that sign up.

The US is responding to BRI with plans to increase lending for global infrastructure projects. On October 1, the new US International Development Finance Corporation (DFC) will begin operations.

Last October President Donald Trump signed the Better Utilization of Investments Leading to Development (BUILD) Act into law. This legislation will reform and strengthen US development finance capabilities into a new federal agency to help address development challenges and foreign policy priorities of the United States.

According to the US government, the DFC will be a modern, consolidated agency that brings together the capabilities of OPIC and USAID’s Development Credit Authority, while introducing new and innovative financial products to better bring private capital to the developing world. It will give the US more flexibility to support investments in developing countries to drive economic growth, create stability, and improve livelihoods.

The statement said at the time that DFC will make America a stronger and more competitive leader on the global development stage, with greater ability to partner with allies on transformative projects and provide financially-sound alternatives to state-directed initiatives that can leave developing countries worse off.

Products will include loans, loan guarantees, political risk insurance, and equity investments. In particular it is expected to be very active across Latin America, where Belt & Road has accelerated in recent years, notably in power generation and transmission and railways.

The DFC will open its doors on October 1. In the interim period, OPIC and DCA have been continuing to operate separately. 

 

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Date

4 Sep 2019

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