▶ 0:05:43Welcome to order. The The of this hearing is to discuss the needed reforms of the DFC to be considered for the reauthorization. I now recognize myself for an opening Again, welcome to the East Asia and the Pacific subcommittee's hearing on reauthorizing the US Development Finance I want to welcome and thank our witnesses for joining us today as we discuss the future
▶ 0:06:13of the US International Development Finance Corporation or DFC, which is a vital tool of American economic and foreign And I want to thank the witnesses and thanks to your valuable input, uh the DFC was recreated through the 2018 Build And it built upon its predecessor, the Overseas Private Investment Corporation or OPIC, by integrating other development finance tools to better
▶ 0:06:43mobilize private capital. Despite being a younger agency, DFC has demonstrated a significant step forward in a enhancing our nation's ability to promote private sector-led development in emerging markets. Advancing the US national security interest and status on the global stage and strengthening communities and livelihoods around the world.
▶ 0:07:11When US foreign assistance is used efficiently, it can have a great impact in advancing the US national security and economic interests. In fact, it can even make a profit for US taxpayers.
▶ 0:07:26For instance, in the fiscal year 2023, the DFC's revenue exceeded cost by $341 The DFC is approaching the end of its 7-year authorization in October of this While DFC's current lending cap stands at 60 billion, double that of OPIC, it has already lent more than 49 billion dollars.
▶ 0:07:53So, if the current deal flow in the pipeline continues at this rate, the DFC will reach its lending cap before October, making this reauthorization process more urgent. Our subcommittee has the unique opportunity to shape and reauthorize the DFC with much-needed reforms to ensure that it remains agile, effective, and aligned with America's national security The Biden administration had an ambiguous definition
▶ 0:08:23of national security and thus pushed through projects that advanced the administration's diversity and green Furthermore, we know that the DFC was unable to fully utilize its equity investment tool and was prohibited from operating in countries that could particularly that would be particularly useful to advancing US national security.
▶ 0:08:50These are just some of the evident issues that must be addressed in the reauthorization this year. Today's hearing will therefore explore several important questions. One, how can the DFC better address emerging threats and opportunities, such as energy security and supply chain Two, what reforms or additional authorities are needed to enhance the DFC's ability to compete with the Chinese Communist
▶ 0:09:20Party's Belt and Road And third, how can we ensure that the DFC's operations remain transparent, accountable, and targeted to deliver measurable outcomes for our partners abroad and American taxpayers? We must ensure that the DFC is equipped to face the 21st century challenges with cutting-edge approaches.
▶ 0:09:45The modernization and reauthorization process offers an opportune moment to amend the DFC's mandate to expand its flexibility and financial toolkit. With that, we have a distinguished panel of witnesses before us today whose insights will inform the reauthorization process.
▶ 0:10:06And their testimony will help us assess DFC's progress, identify gaps and areas for improvement, and chart a path forward to ensure this institution remains a cornerstone of US global leadership. The chair now recognizes the ranking member, gentleman from California, Mr. Barrera for any statements that you may Thank you, Madam Chairwoman, for hosting today's important hearing.
▶ 0:10:34I also want to thank the witnesses for bringing their expertise before the subcommittee today. As the chairwoman mentioned, it's been less than 7 years since Congress passed and President Trump signed into law the BUILD Act, establishing the US International Development Finance Corporation, or DFC. The DFC was created to modernize how the United States approaches development and better allow us to compete with our strategic competitors.
▶ 0:11:01The DFC was built to catalyze our nation's strength, namely our strong, vibrant private sector, which is the envy of the world. Also, since our our former colleague and my good friend Ted Yoho is here, he was instrumental in in putting that bipartisan piece of legislation together that passed with a big vote.
▶ 0:11:21And again, I think President Trump should be proud of his legacy in helping create the Development Finance When the BUILD Act passed, um a mentor to both of us, um, H fact chairman Ed Royce noted that one of his goals was to create lasting institutional linkages with other development agencies.
▶ 0:11:40Today, one of those development agencies that DFC works closely with, USAID, has effectively been dismantled, um, through the illegal cancellation of programs. And that really does damage US security. USAID played an outsized role in helping DFC generate projects through their field staff stationed at US missions throughout the world.
▶ 0:12:02In addition, the foreign assistance freeze has also prevented the DFC from the timely delivery of payments, damaging the US credibility as it seeks to provide an alternative to China's Belt and Road Initiative that reflects our values and strengths.
▶ 0:12:19I appreciate the efforts to make sure taxpayer dollars are being used responsibly and in the most efficient and effective way, but it's critical that we allow these close to start again and that we avoid unforced errors that present a gift to our strategic rivals. In a bipartisan way last year under, um, Chairman McCaul and Ranking Member Meeks, um, the bipartisan DFC Modernization and Reauthorization Act passed out of the House Foreign Affairs Committee.
▶ 0:12:48The bill contained several critical DFC reforms, including modifying equity scoring to be calculated on a net present basis, allowing the DFC to support high-income countries under certain conditions, allowing the DFC to pay a percentage of its employees outside of the GS scale to attract highly qualified talent from the private sector, and increasing the maximum contingent liability MCL cap from 60 billion to 120 billion so the DFC
▶ 0:13:18can take on new It's my belief, as we go into the reauthorization, that the DFC Modernization and Reauthorization Act would serve as an excellent foundation um for the work as as we look at reauthorization this year. Um with that, I look forward to hearing um from the witnesses, look forward to getting their perspective and their expertise, and I'll yield back. Thank you. The chair now recognizes the Oh, we did that.
▶ 0:13:47Other members of the committee are reminded that opening statements may be submitted for the record. We are pleased to have a distinguished panel of witnesses before us today on this very important topic. The Honorable Ted Yoho, former US representative of Florida's representing third district, and Mr. Rob Mosbacher, former CEO of the DFC's predecessor agency of OPIC, and Ms.
▶ 0:14:12Erin Collinsworth, director of policy outreach at the Center for Global The committee recognizes the importance of the issues before us and is grateful to have you here to speak with us today. Your full statements will be made part of the record, and I'll ask each of you to keep your spoken remarks to 5 minutes in order to allow our members to ask questions. And I now first recognize Mr. Yoho Dr.
▶ 0:14:39Yoho for your opening Thank you, Madam Chair. It's my honor to address this committee on the importance of the first 7-year reauthorization of the US Development Finance Corporation. It's imperative that the DFC has a strong bipartisan prompt reauthorization for this important development tool so that it can fulfill the administration's goal of making America safer, stronger, and more Excuse me.
▶ 0:15:08The DFC has the ability to develop the basic infrastructure projects needed in developing countries to increase the recipient countries economic situation by creating jobs, thus helping countries transition from aid to trade. This benefits the US and its taxpayers provide by providing needed resources like critical minerals and opens up new markets for US exports to recipient nations.
▶ 0:15:33The DFC is also the preeminent development tool to counter the Chinese influence in the developing world via the Belt Road Initiative. To date, China invested an estimated $1 trillion in 147 countries since 2013 compared to the US's $76 billion in 114 countries since 2019. The Chinese influence is gaining in countries around the world while the US, ours is waning.
▶ 0:16:03China strategically invests in ports, mines, rails, roads, bridges, energies, telecommunications, and the procurement procurement of all the minerals from rare earths used in our military jets to everything electronic along with copper, gold, aluminum, and steel. These investments serve to grow China's economy by opening up new trading markets, strengthen our military from the increased revenues, corner the commodities on the world market, and they set the price.
▶ 0:16:31They leverage their influence against other countries to pressure them to their demands including the US. This allows China to expand their communist ideologies and influences in the developing world. To date, the DFC has had some notable project success but pales in comparison to the strategic investments the CCP has done. The Chinese require recipient countries to use Chinese state-sponsored businesses, workers, and engineers.
▶ 0:16:58They build Chinese hotels, restaurants, and they have very little impact on the local labor market. To be more competitive in a divided world based on the ideologies, the US should focus on developing infrastructure projects in strategic regions of the world to build economies and jobs while increasing trade and strong alliances. I recommend some basic some topics to be considered in the DFC reauthorization to make it stronger.
▶ 0:17:27First, I'd give the DFC more flexibility by raising country of eligibility from low middle-income to middle upper-income levels. This gives the DFC the option to do project more projects strategically in regions that will strengthen our national security and increase trade.
▶ 0:17:44An illustration is the country of Panama where the DFC can't operate due to these restrictions, yet China is heavily invested on both sides of the Panama Second, the maximum contingent liability MCL should be raised from 60 to 150 billion dollars. Some are recommending up to 250 billion dollars. That's going to be up to you guys. Um to enable the DFC to take on a larger and more impactful um projects.
▶ 0:18:11By the end of 2024, the DFC has lent out over 90% of its MCL as the chairman uh Madam Chair has recognized, meaning they could not approve any new deals until Congress and appropriates more funds. And I'd like to mention that the DFC doesn't give out 100% of its funds in grants. Over 90% are loans which are repaid, and for 2024 the DFC lent out over 57 billion dollars in loan, yet operates with less than a 1% failure rate.
▶ 0:18:41Third, the scoring method the OMB Office of Management and Budget uses needs to be reinterpreted as intended by Congress. Presently, OMB scores any money left lent by the DFC as a grant, which is a dollar for dollar and will never be repaid. It's more accurate to view these these monies lent on a net present value that shows a positive return on investment. By scoring monies lent on a net present value versus grants follows Congress's original intent.
▶ 0:19:11And if OMB does not chart change their message method of excuse me, it restricts the DFC's effectiveness and it cannot live up to its full potential. For the DFC to expand its reach and enhance impact and grow its capacity, it needs to have more boots on the ground overseas who can proactively identify new investments and this will increase its efficiency, speed, and making investments. One last thing here.
▶ 0:19:38The DFC needs to be better integrated with other foreign development tools of the US government. Grant-based programs such as those led by the previous USAID and MCC play a critical role in identifying and de-risking investments for the DFC and this allows for the first investment to attract private equity.
▶ 0:19:56Not having these tools available would be a mistake and lastly the DFC can play a unique and leadership role in driving near and friend-shoring of highly strategic sectors and supply chains such as rare earth metals and pharmaceuticals. Thank you, Madam Chair, and I yield back. Thank you, Dr. Yoho. I now recognize Mr. Mosbacher Mosbacher for your opening statement. Sorry for butchering your It's not the first time and thank you.
▶ 0:20:25Uh Chairwoman Kim uh Kim and Ranking Member Bera, distinguished members of the committee, it's a great honor for me to have the opportunity to testify with respect to the reauthorization of the US International Development Finance Corporation and to be joined by my good friend Ted Yoho with whom I worked uh closely in 2018.
▶ 0:20:45Um having served 3 and 1/2 years as head of OPIC and having had the privilege uh since the passage of the BUILD Act to serve on the Development Advisory Council which was created under the statute, um I've had a chance to see firsthand the plusses and minuses, the strengths and weaknesses of the DFC. I'd say after monitoring the transition of uh from OPIC to the DFC and then observing the last several years of performance.
▶ 0:21:12I believe I can say without qualification that the DFC has not only been a huge improvement over OPIC, but it's also been a huge success. The agency went from three to four billion dollars of commitments per year to over 12 billion and from a total portfolio of 29 billion to over 50 billion today. And over 70% of those projects are in low and lower middle income countries.
▶ 0:21:38And yet as impressive as that is, it's still a fraction of the Belt and Road financings done by China over the past five years. The question is how to take the DFC to the next level. I believe that the committee did an excellent job of last year of addressing many of the areas that need to improve in HR 8926 and I hope you will continue to build on that base.
▶ 0:22:02But before reviewing those areas, I want to suggest uh what underlying objectives I believe should drive this reauthorization In my judgment, the DFC needs to be more proactive than reactive, more physically present in strategically important markets and more willing to take on risk that clearly will lead to greater private sector investment. In order to achieve those objectives, there are several steps that can be taken in the reauthorization.
▶ 0:22:31First, the DFC needs much more flexibility in terms of the income levels of countries which the agency is is eligible to do While I believe the principal focus of the agency should continue to be on doing deals in low and lower middle income countries where capital and credit is so scarce, I agree that changing the classification of from World Bank income credit income levels rather to World Bank lending levels is a step in the right direction.
▶ 0:23:02I also believe that giving the DFC CEO the authority to certify projects in upper middle income countries is a good change. A second essential change and one that is a leftover piece of business from the BUILD Act uh is to fix the way equity investments are scored to a net present value approach rather than treating them uh those investments as grants. For decades, OPIC participated in private equity funds.
▶ 0:23:29Um So So it's difficult and always is senior secured debt. So they for uh the decades that they had investments in private equity funds as debt, they nevertheless earned on a portfolio basis a 6% return. So I don't understand why budget officials seem to feel that there's no way of effectively evaluating risk when we have decades of experience of doing just that.
▶ 0:23:56A third area of uh needed improvement that can help expand the capacity of the DFC to commit for uh to compete for projects around the world is to increase the risk tolerance of the agency so that projects attract much more private capital.
▶ 0:24:13The The more DFC can de-risk projects by assuming more risk on their balance sheets or the balance sheets of others, the more private sector investors will feel comfortable being part of the There are a variety ways to do that including concessional finance, blended finance, small grants and technical assistance, first loss grants, and sharing risk with other bilateral or multilateral financial institutions.
▶ 0:24:39The committee recognized the importance of these tools through its support for allowing the DFC to accept a creditor status that is subordinate to that of other creditors in HR 8926. I hope the committee will strongly encourage the agency to be more risk tolerant and to create and be more creative in the use of the many tools to de-risk projects that can attract more private capital.
▶ 0:25:02And I would reward DFC employees that exhibit such creativity in structuring A fourth area to focus on relates to how to extend the coverage of the DFC to be more present in strategically important markets around the world.
▶ 0:25:19While the DFC could benefit enormously from opening some more offices in Latin America, Africa, Asia, and the Far East, the quickest way to expand their presence is and improve their market intelligence is to is to team up with other like-minded multilateral or bilateral financial institutions. A perfect example is to team up with the private sector arm of the Inter-American Development Bank called IDB Invest.
▶ 0:25:47IDB Invest has offices in virtually every country in Latin America and the Caribbean and has much greater access to the kind of deals that the DFC could help finance, particularly in the critical minerals as well as hard and soft infrastructure areas. I might add the the that IDB Invest has 300 people on Latin America and the and the Caribbean areas, we have two from the DFC. And that may be one more than they're actually is still working.
▶ 0:26:16Um so we would we believe that it would be much better if we can expand presence by teaming up with like-minded institutions. Um It's also important to recognize the role that USAID missions have played in helping drive economic growth, trade, and investment initiatives through programs like Power Africa, Power Prosper Africa, and the African Growth and Opportunity Act, AGOA.
▶ 0:26:41Finally, despite all the aforementioned improvements that can be made to the DFC, these will all come to naught if businesses that would like to deal with the DFC decline to do so because it takes too long to process deals.
▶ 0:26:55Unfortunately, this is happening way too I would urge the committee to to sit down with the DFC to see how to streamline and improve and accelerate the processing of deals, and I believe that should include a review of the current $10 million threshold for congressional notifications. I'd love to see it increased to 50 or 100 if possible. So, Chairwoman Kim, Ranking Member Bera, and distinguished committee, there thank you very much for your time, and I look forward to answering your questions.
▶ 0:27:26Thank you, Mr. Masswakwer. Now, I recognize Ms. Collinson for your opening Thank you. Um Chairwoman Kim, Ranking Member Bera, and distinguished members of the subcommittee, thank you for the opportunity to testify today. I'm Erin Collinson, Director of Policy Outreach from the Center for Global Development, a non-partisan think tank based here in DC. The views I share today are my own. I want to start by noting, as my colleagues here did, that the BUILD Act establishing the U.S. International Development Finance Corporation was an impressive bipartisan achievement.
▶ 0:27:53Credit to those, including the two witnesses to my left, who noted that despite the size and strength of the U.S. private sector, the U.S. government was falling short in deploying strategic, efficient development finance, and proposed a solution. In just 5 years, DFC's portfolio has doubled to nearly 50 billion, reflecting strong demand for its expanded And today I want to share four recommendations for DFC's First, reauthorize DFC promptly.
▶ 0:28:20I commend this committee for starting that process in earnest last year with a bipartisan bill, and for holding this Any reauthorization should include a multi-year time frame to provide certainty for business planning, a sufficient increase to DFC's $60 million contingent liability cap, and a fix to the budget treatment of DFC's direct equity authority. But I want to emphasize that timely reauthorization before October is critical. As a development finance institution structuring multi-year financing deals, DFC requires market confidence and operational certainty.
▶ 0:28:50Delays could disrupt DFC's deal pipeline and harm America's competitive position. Second, maintain a strong development focus. While I understand there's interest in affording DFC greater flexibility when it comes to country income restrictions, DFC's investments have the highest likelihood of delivering impact in lower income countries where lack of access to private capital represents a binding constraint.
▶ 0:29:12In the Indo-Pacific, DFC has, for instance, provided direct loans to water operators in Cambodia, taken an equity stake in a business-to-business healthcare company in Vietnam, and offered portfolio guarantees to financial services groups in Laos in support of the US government's countering PRC initiative. The Build Act set out a mission for DFC to advance development outcomes and achieve foreign policy objectives. These need not be mutually exclusive, but DFC should focus on crowding in private capital where it is scarce, not crowding it out where it it is abundant.
▶ 0:29:42Congress should reaffirm DFC's development mandate and urge the agency to adopt a higher bar for investments in more advanced economies. Third, encourage continued transparency and accountability improvements. My former CGD colleagues, Todd Moss and Ben Leo, who were among the early voices calling for a full-service development finance institution in the US, once had to, with the help of an industrious research assistant, manually create a database from PDFs to analyze the portfolio of DFC's predecessor, OPIC.
▶ 0:30:11Thankfully, we've come a long way since then. DFC now features project-level data in two forms on its website. Under the leadership of its first CEO, Adam Boehler, they also pioneered the creation of Impact Quotient, a framework used to assess the development impact of prospective projects, but also track and measure whether projects delivered those expected development outcomes.
▶ 0:30:29Congress should encourage the merging of DFC's two primary project data sets and ensure regular updates, and should direct DFC to provide disaggregated data on private capital mobilization, report more development information about impact at the project level and publish exposed evaluation results. Fourth, remember DFC is part of a broader toolkit. While DFC effectively leverages limited resources, there is mounting pressure on the agency to work in a variety of sectors, regions, and countries.
▶ 0:30:58I want to caution against lightning the agency with too many directives without a commensurate increase in resources and staff. DFC has become a critical for achieving US objectives internationally, but it is not the only channel. I hope this committee and its counterparts will take a holistic view and consider which tools and instruments the US can deploy to operate most strategically in a given setting and look for opportunities to strengthen its other tools if they appear to fall short. Finally, I want to note that while DFC has grown its overseas presence, it remains modest.
▶ 0:31:26Part of the vision for DFC was to leverage the US global footprint, particularly by working with USAID mission staff who have often served as DFC's boots on the ground. The BUILD Act mandated coordination between these agencies, and recent actions to dismantle USAID will make DFC's job harder.
▶ 0:31:41In closing, this committee has a significant opportunity to build on a bipartisan win by advancing a timely reauthorization that addresses core issues, reinforces DFC's development mandate, encourages accountability, recognizes DFC's position in our broader development and foreign policy toolkit. Thank you again for the opportunity to appear today, and I look forward to your Thank you all the witnesses.
▶ 0:32:03I now recognize myself with 5 minutes of Um the DFC certainly has demonstrated its ability and its effectiveness to use uh our tax taxpayer money very wisely. Uh as noted in my opening statement in the fiscal year 2023 alone, the DFC's revenue exceeded cost by $341 million, and that is the money returned to our US Uh so, Mr.
▶ 0:32:31Yoho, as you've seen in recent months, uh we witnessed a significant shift in the US approach to international development assistance. So, how can the DFC's model of leveraging the private sector to provide a return on investment serve as a framework for broader US foreign assistance efforts, particularly in helping countries reduce dependence on continuing aid? Thank you.
▶ 0:32:59I think that's the ultimate We need countries from aid to trade and move that. And the DFC can do that with the tools that they have, but only if they stay focused on what I call the period of purpose of what they were designed to do. When we envisioned this and put this together, we were looking at major infrastructure projects that we could partner up and we weren't able to do this with with OPIC, the predecessor, to partner up with other DFIs from other countries or to bring in that private equity.
▶ 0:33:28And what they needed, they needed to have an investment vehicle that we could come to the table first with. And that's where organizations like MCC or USAID did on their grant basis. You know, I know USAID right now is this terrible image, but yet there was some good that they did. And we don't we want to make sure that we don't lose that because they're often the ones that are on the grounds, the boots on the ground that invite in that private equity.
▶ 0:33:56So, I look forward to you guys fixing this soon and I'm sure you will. So, continuing on that, I want to talk about the equity scoring issues and ask a question to you, Mr. You know, in fiscal year 23, the DFC committed $9.3 billion in new investments. Of that, 8.8 billion were direct loans that require only 110 million in appropriations.
▶ 0:34:24Meanwhile, the $500 million equity investment required $500 million in That treatment equity equity investments, which assumes that every dollar of the investment will be lost, is out of step with the private sector. The the DFC needs an equity fix, which we all agree on.
▶ 0:34:46That would account for this on a net present value basis, which evaluates future probability and investment returns, bringing the equity in line with Congress's original intent. That fully allows the DFC to invest in countries that advance the US objective in the long run. So, uh could you talk to us about uh the you know, you know, OPIC never had the ability to make equity investments, right?
▶ 0:35:12So, can you explain to us why the DFC's ability to make equity investment is so important and how would this ability have changed your approach uh to yes. I mean, we did not have uh the authority to do equity investments, and it it actually cost us in terms of many deals.
▶ 0:35:36Even going in to uh private equity funds, which OPIC did for years as senior secured debt, we were sort of the skunk a skunk at the party because when you exited those funds, OPIC came out first, got its principal back plus interest before any of the other investors got a return. And so, uh it was not well received internationally, and many who were our uh did not like to be in funds with us.
▶ 0:36:03Today, I would say equity is even more important than it was back then. Equity is so critical, particularly as we look at how we're going to counter China on some of the competitive deals in the infrastructure or critical minerals. We have to have access to equity authority that's treated on a net present value basis. The way I've always explained uh equity is uh or the issue of how to account for it from a on a net present value basis. Say it's a little bit like a $100 loan at the bank.
▶ 0:36:32The bank has a loan loss reserve. That loan loss reserve gives you some sense of what's the probability that that loan's going to default or go go off the ditch. Um we could use a small portion of funds as subsidy, it's called in this context, to cover loans or cover investments uh that frankly will probably turn out to be very productive.
▶ 0:36:56But the lack of capacity because we have to charge these on a dollar-for-dollar basis is a huge uh impediment to our performing at that level. I just say one more thing. When Ted and and the group put the BUILD Act together, we thought it would be with a 60 uh billion-dollar contingent maximum contingent liability, we thought up as much as 35% of that 60 billion could be invested in equity. That's in the bill.
▶ 0:37:23And and so we anticipated it being a huge piece of our toolkit, and clearly it hasn't been. So that's been a wonderful I mean a an unfortunate piece of this. Well, thank you. Um let me now recognize ranking member Barr for 5 minutes of Thank you, Madam Chairwoman.
▶ 0:37:40Um I've had a chance to actually talk to all all three of you, and there has been a lot lot of conversation both in the Biden administration, but also in the Trump administration about creating a sovereign wealth fund. And you know, every once in a while DFC gets conflated with the sovereign wealth fund. I think there's healthy concern on our side about the differences here.
▶ 0:38:03And maybe each of you could just quickly comment on um you know, why you think they should be separate and and the differences and then maybe starting with Miss Collinson. Can you save our family in Syria, please? 4,000 people killed in the last 2 days in my hometown. My family is in danger. All what I'm asking you is is to a investigation, international investigation, international like we need protection. Our people are in danger right now.
▶ 0:38:33My family is in danger. I'm here standing in front of all of you just to ask this simple question. Please, we need help. We need help. You are only You are our only hope in this matter. Please, I have evidence. I have letter for all of you. I can give it to you. If If this is I I'm sorry, but I'm so so desperate. That's why I'm here just to see every one of you.
▶ 0:39:04The committee will come to order. Please proceed. Ms. Collinson. Yeah, thank you. Um so my view is that should the US move forward with creating a sovereign wealth fund that it should be separate and distinct from DFC. Um you know, while sovereign wealth funds can operate with a range of objectives, typically profit is a core motive. And DFC, you know, must practice sound financial management and good stewardship of taxpayer dollars.
▶ 0:39:30As the chairwoman noted, you know, that in some cases means sending profits back to the Treasury. Um but it you know, the promise of market competitive returns is not what drives investment decisions. Um I also think that just practically between existing statutory requirements and strong congressional interest and oversight that the effort to retrofit DFC in some way or or pursue a substantially different um model of operation would run into real Mr.
▶ 0:40:00Yoho. I like the idea of a sovereign wealth fund. I don't like the idea of it being tied into the DFC. I think it clouds the mission. I think it's it gets messy, and I think if you want a sovereign wealth fund, create a separate one. Let the DFC focus on what it was designed to do. And I agree with what they said. here's another question. I actually don't know the answer to this.
▶ 0:40:26It our public pension funds as they're looking, you know, we have some very large public pension funds that are looking for investment vehicles. Potentially um are they able to you operate like private equity? Maybe Mr. Mosbacher and in the DFC. Yeah, so here's the way I think of of uh public pension funds, particularly in countries in which uh the DFC is doing business.
▶ 0:40:53Uh if we de-risk projects enough so that you attract uh serious private capital to those deals and you start to build out infrastructure projects with that kind of uh participation of the private sector. Once those projects are operational, then at that point you have a chance to sell a package of assets to a pension fund that would be willing to take an 8 or 9% blended return.
▶ 0:41:21And that's where we should go because that will dramatically increase the traffic in terms of of uh projects and pipeline and all that sort of thing. And I have that as a hope and dream and I don't think it's too far-fetched. And is that something that we'd have to do legislatively or do they currently have the authority? No, all we need to do is encourage encourage uh the DFC and others to uh be more creative about risk-taking. Mr.
▶ 0:41:48Yoho, I think you touched on and and the chairman touched on a little bit of the OMB scoring and how that does get in the way. If you want to expand on that a little bit. Yeah, the equity scoring it was it designed in the bill as Mr. Mosbacher brought up. You know, that was that 35% that they could take an equity stake in and OMB is I feel is misinterpreting this and you You I think it's you it need really a legislative fix. It's just they need to interpret it the way Congress intended.
▶ 0:42:16And I think if you do that, if you put the pressure on them, they'll have to do it. This is an investment vehicle that's going to make this country stronger. It's going to make the people we invest in stronger. And it falls into that making America strong safer, stronger, and more And then Mr. Mossbocker, you know, other vehicles that that are obviously out there in terms of multilateral development banks like the World Bank and so forth. Can you tell us how that you touched on a little bit but how it complements the work of the DFC. Yes.
▶ 0:42:44Well, so when you speak of the World Bank, I mean, the 800-pound gorilla of private sector lending is the IFC, International Finance Corporation. They're sort of the IFC and then there's everybody else. But the everybody else matters. So, teaming up like I mentioned with IDB Invest, I think brings deals in, gives us much better market intelligence, allows us to share risk, so we leverage dollars much more effectively.
▶ 0:43:13And so I think it has all plusses. And so I would recommend that not just in terms of Latin America and the Caribbean, but also Africa, Asia, the Far East. Great. And again, it does seem like we've got a number of tools in our toolkit to compete effectively. We've got those tools in our toolkit to work with like-valued allies, others that that share our values, and again, we don't have to compete with competitors like the PRC and the Belt and Road Initiative on our own.
▶ 0:43:41We certainly can do this and develop those markets. So again, let's strengthen these institutions, not weaken them. With that, I'll yield back. Thank you. Let me now recognize Chairman Emeritus uh Chairman McCaul. Thank you, Madam Chair. Let me say thank you. Mr. Mossbocker, great state of Texas. Yes, sir. Appreciate your service and your father as well being Secretary of Commerce. And uh Ted, uh great seeing you again.
▶ 0:44:09Uh you are our champion in this area. This is your legacy. It's your baby. The BUILD the Development Finance Corporation, um I know you of all people have been very uh frustrated at the implementation, uh which I would argue did not follow uh Congress's original intent. So, let me ask you this. As the author of the bill, uh reauthorized the DFC last Congress.
▶ 0:44:39Uh the Senate uh of course did not pass Um but as you pointed out, it really all it needs is an interpretation by OMB uh to fix this problem. BUILD Act of 2018, 22 USC Section 9621D, equity investment says the corporation is authorized to make equity Then it goes on to say at the end, "The corporation
▶ 0:45:09may not own more than 35% of the outstanding voting stock or other voting interest of any entity." as the author of this bill, what what is your interpretation with respect to the equity investment provision? I think it's crucial. I mean, it really increases the leverage that the DFC has, and it also brings in that much more of private equity bringing that into that without using the way it was designed.
▶ 0:45:39They're really hamstringing this, and they're it's not going to reach its full potential if OMB doesn't change how they interpret what you just read. Um I think it's a misstep by OMB, and I hope they uh the errors of their way, and and really utilize this thing. If you think about where it was started with OPEC, you know, that was where we kind of built this model from, and Rob was great at working with us.
▶ 0:46:02I they were authorized or appropriated $65 million I think it was in 2014, but they returned $265 million. Take that same concept and and put multiple factors in there of what we can do the return to the American taxpayers uh something that's um pretty much self-funding and say in my time I I I think it not only is a great return for the American but it counters our adversaries particularly China and Belt and Road
▶ 0:46:33which we are failing. Uh the DFC was not implemented properly. Um it went off on just like USAID went off on you know uh programs that had nothing to do with the core mission like drag shows and the like. Um and now because of that black eye it makes DFC even more imperative that it succeed.
▶ 0:46:55Um but I want to get on the record here today so that if we have the same problem we did last Congress and the Senate doesn't pass this we do have the fix right here from your testimony and that is what it was it your intent when you authored this bill that the scoring be at the net present No question. doubt no doubt about that. And uh I don't know if Robert Mr. Mossbarger.
▶ 0:47:24Yeah, just to elaborate it it it seems like uh the authorizers and appropriators are generally in agreement it should be on a net present value basis but then when we bring the budget committee and the CBO and the OMB into the conversation we're at a deadlock. So I would just plead for creativity.
▶ 0:47:43Um we're not exposing the taxpayers to undue risk and as you indicated I mean this is an agency that's been self-sustaining for years has made money for years partly because they've been so conservative on their risk appetite which we're asking them to loosen it up a little bit. But, uh we need some We need a I think a meeting of the minds among uh the jurisdictional folks on the Then I agree. So, Madam Chair, I hope we can pass this. And I hope the Senate wakes up and pass It's vitally important.
▶ 0:48:11And I think the Senate SFR SFRC, they recognize this as well. Uh hopefully you can pass it. If not, I think we have the answer right here before us. Last question, Mr. Mossbacker, the I've never understood the idea that a country like China can self-designate as a developing nation, therefore qualifying for low interest or zero interest loans. That defies logic and region reason.
▶ 0:48:40It also allows them to fund the Belt and Road um you know, initiative. Uh where they then take the money and use usurious interest rates on truly developing nations. What is your What are your thoughts on Well, our my thoughts are on that are they probably wouldn't be as successful as they've been if there was anybody else on the field to contest it. But, there's not. So, we haven't been around. We haven't been on the field.
▶ 0:49:07And I I would argue, and I know I sound like a broken record here, but I'm I'm a private sector guy. I've spent all my life in the energy industry. And, you know, I look at deals and look at what the risk is in that country of doing business there. And if it looks too great, I'm going somewhere else. So, I guess what I'm saying is this agency can take more risk, and we can find more ways of reducing the risk such that you have more private capital, and there's an alternative to China. Uh thank you. I yield back. Thank you.
▶ 0:49:36I now recognize Representative Sherman for his 5 minutes of questioning. I want to join the ranking member in praising USAID. And uh uh the shuttering of USAID and its termination of foreign assistance uh could very well harm uh which has relied on USAID mission staff to help generate projects.
▶ 0:50:04Miss Collinson, uh does the shuttering of USAID uh cause a problem? Yes, uh thanks Congressman. I think it does. Um I I you know, obviously D USAID and DFC share a development mandate broadly, but they have a very different model.
▶ 0:50:22And you know, whereas USAID provides complimentary grant and historically the largest share of the agency's funding has supported humanitarian response and global health services, they have really played a critical role where DFC's um overseas presence has been lacking. And and they even set up, you know, helped stand up DFC's mission transaction unit, which has been key to to deal origination, but also sort of helping to monitor and track deals.
▶ 0:50:47There's some people uh who were even on the committee last uh when we dealt with USAID who attacked USAID for having tourism development projects because they thought US aid had to be just food. They didn't realize AID stood for uh development or agency for international development, which of course includes uh tourism. Um I've been involved for at least a couple uh decades in this with Mr.
▶ 0:51:14Mossbacher um wrote the OPIC reauthorization bill in which the House passed and the Senate didn't, thus proving the wisdom of Nebraska in having a unicameral legislature. Um there were certain provisions we had there that I want to s- make sure that we have this time.
▶ 0:51:35One of those is a requirement that the private sector entities that are substantially involved uh certify that not only they, but everyone in their corporate family is abiding by US sanctions, particularly those on Because we had a lot of pushback then that said, well, we'll have one subsidiary benefit from this program, while we'll have a different subsidiary violating American sanctions.
▶ 0:52:03And so we need to have whichever entity is benefiting from the program, whichever private sector entity, certify that none of their sister corporations, parent corporations, or subsidiary corporations, or nephew corporations are violating our sanctions on Iran. Would that pose a a problem in making this an effective bill, Mr. Mosbacher? No, sir.
▶ 0:52:28We also had a provision in there that I don't know if it's still relevant, but it wouldn't hurt to put it in, to not fund an anti-Armenia railroad, defined as a railroad jogs around Armenia connecting Georgia and Azerbaijan. We had that, I believe, in the bill or in your regulations. Did that cause a problem, Mr. Mosbacher? Not to my knowledge.
▶ 0:52:52We also had provisions, I believe, that were in current statute dealing with uh companies not boycotting Israel. Was that a problem to carry out? No, sir. And at times the board has had at least one member from organized labor and one member from small business. Is that currently applicable and does it cause a problem?
▶ 0:53:20I don't think that's still applicable, but I I will get an answer for you because there's someone here from the Okay, and would it back in the day when it was imposed, was there a problem? No, there was not. I I worked very well with that representative. Now, there's a lot of talk here about going to higher mid income countries. I did believe Ms.
▶ 0:53:49Collison said that Is there a way to structure the bill so that we give a preference to low-income countries or at least low mid-income countries without necessarily prohibiting high high mid income countries? Yes, Congressman. And I think actually the bill passed last year by this sort of helped try to strike the right balance.
▶ 0:54:14I would probably go a little further in terms of some guardrails around high-income investments, but it did in fact even though it expanded DFC's ability to invest in some high-income countries, it also put you know, allowed it to do or preference low and lower income lower middle-income countries. And I should say I agree with Mr. Barr that the upper certification as it currently stands is not as workable as it needs to be.
▶ 0:54:43I would ask you to submit some ideas and Mr. Barr Becker and Mr. Yoho submit ideas on how we can tighten that language and I yield back. The gentleman yields, the chair recognizes Mr. Barr. Thank you, Mr. Chairman, and thanks to our witnesses today. I appreciate the testimony.
▶ 0:54:59Um as you all know, the Belt and Road Initiative since 2013 has invested over a trillion dollars across the globe expanding the reach of the Chinese Communist Party's malign investments and debt trap diplomacy.
▶ 0:55:15I have said on this subcommittee and also in my capacity as a member of the Select Committee on the Strategic with the CCP that as Americans, we shouldn't try to compete with China or counter China by becoming more like China. Imitating their industrial policy, misallocating capital Um, actually their Achilles' heel. Uh, and it I and it is exacerbating their own debt crisis. Our advantage is that we're capitalists.
▶ 0:55:46Our advantage is that we allocate capital effectively and efficiently. And so, let me just ask uh, any of you all to comment on uh, whether or not the DFC has the proper resources it needs because I think the model of attracting private capital and allocating that capital is a better way of delivering returns, but also geopolitical objectives than uh, China's um, scattershot uh, misallocation
▶ 0:56:16of resources. Am I right about that? Um, do we counter China better by looking at investments that deliver returns? Uh, uh, and should we avoid bad deals just because China's there? Start with you, Mr. Mosbacher. Yeah, I would argue that our biggest competitive advantage is the fact that we have a free market rule of law capitalist approach.
▶ 0:56:46They have a state-owned enterprise autocracy. They don't have to make returns, although they like to be repaid for their money, but we have no business emulating uh, the Chinese in terms of any investment model or structure. So, I think we play to our strengths, which is entrepreneurial capitalism. Uh, uh, uh, Ted, good to see you. Uh, my former uh, colleague, Congressman uh, Yoho. Great work on on the BUILD Act. Uh, appreciate it. Let me uh, ask you to comment on the equity scoring piece.
▶ 0:57:14Um, do we attract more private capital uh, into these deals if we fix the equity And how would that how would that attract more private capital to go along with uh, DFC? Because we can leverage a lot more. You know, the way it is right now, it's a dollar for dollar. If you know, we uh, give it out a million dollars, it's a million dollar loss. This way OMB looks at it erroneously versus looking return on investment.
▶ 0:57:41So, we're really leveraging that and that's what the private sector is looking for, you know, plus we bring in de-risking of that of a project and as we do that, that's more attractive to the to the private equity. I appreciate that and I appreciate all of the witnesses' testimony in support of also the aperture of of DFC and allowing DFC to move into higher income countries, Panama being the great example, Congressman Yoho, that
▶ 0:58:11you cited. Um The fact that Panama is ineligible for DFC investment is is really one of the reasons why China has moved in. And I've been to Panama twice and I've talked to high-ranking government officials there and they want to do business with the United States. They would prefer US private capital and this is the win-win where United States could displace China um and and and take back de facto control of the of the canal to the benefit of national security.
▶ 0:58:41So, Congressman Yoho, if DFC correctly focused on combating national security threats as opposed to just this development objective, would that be a better way to counter China in the Panama Canal? Yes, but I wouldn't just be national security. I would look at the whole picture, you know, as you brought up, we're capitalists. We bring this to the table. People want to do business with people they know, like, and trust. You hear it over and over again. It's easy to get money from these other countries, but we don't trust them. We don't like them.
▶ 0:59:11And that's what we bring to the table and I think if we do that, we're going to win just on what we have to offer. Mr. Mosbacher, should DFC play a role in Ukraine? How could the DFC help the reconstruction of Ukraine in a way that could deter further Russian aggression? Yes, I think the DFC could be enormously valuable in helping support economic rebuilding at all levels.
▶ 0:59:35I mean, one of the things that the DFC has done in OPIC before it most effectively for years was to support small and medium-sized businesses. And that's the way you rebuild economies. But then But what would you say to those who say that DFC or formerly known as OPIC would support the agenda of the globalists? I I think we support our own agenda. I don't see I'm not sure what the globalist agenda is, but I my sense is particularly on small and medium-sized business, but also infrastructure. And infrastructure is going to have to be rebuilt.
▶ 1:00:05But the DFC is as good as anyone in the government at knowing how to do this. Thank you. I yield back. Can I just add one thing, Mr. Chairman? you asked the question, Congressman Barr, about about having the DFC and private equity funds. The reason that the that OPIC was able to be such an important catalyst for the private equity funds over the years where it was in the deal as debt was because once you got the US in the deal, it all of a sudden became much more attractive to private sector investors.
▶ 1:00:36And that's exactly what would happen if you have DFC in equity funds. Thank you. Chair recognizes Mr. Amo. Thank you, Mr. Chairman. As others have mentioned, the Development Finance Corporation provides enormous return on investment for the American taxpayer.
▶ 1:00:54By working with the private sector to build development projects, whether it's strengthening mineral supply chains in Angola or expanding fish farms in Vietnam, the DFC advances the United States' foreign policy goals and our economic interests. The DFC opens up markets to American businesses, thereby reducing the reliance on foreign aid and shifting our relationship toward an equal playing field where American investment advances American diplomacy.
▶ 1:01:24In doing so, it's the perfect counter to China's Belt and Road Initiative, a coercive financing scheme that pressures countries into accepting unfavorable investment terms while forcing them to look the other way on China's human rights abuses. If we want government that is both efficient and effective, then Congress must reauthorize the DFC to extend and expand their track record of success. Thankfully, we already have a blueprint in hand.
▶ 1:01:53The Bipartisan DFC Modernization and Reauthorization Act of 2024, which passed through our committee last Congress. This bill would make key reforms to strengthen American competitiveness while authorizing the DFC to continue its unique role for another 7 years.
▶ 1:02:11And I use that word intentionally because the DFC does play, in fact, a unique First created in 2019, the DFC consolidated the various development finance tools from across the federal government, including USAID and the Overseas Private Investment Corporation, to better coordinate our development finance work. And while the DFC consults with USAID on projects related to foreign assistance, they serve separate and distinct roles.
▶ 1:02:37So, that raises some alarm on the Trump administration's activity to openly float uh moving some of USAID's work into the DFC as they tried to unlawfully shut down USAID. So, Ms. Collinson, could you please explain how USAID and DFC's roles are different? How would shutting down USAID while folding some of its work into the DFC harm the DFC's core functions? Yeah, thank you, Congressman.
▶ 1:03:07I mean, I as I mentioned before in my testimony, I think, you know, the one of the biggest um deleterious effects of of USAID's dismantling for DFC will just be not having sort of folks on the ground in missions who can help with deal origination in particular. Again, they helped set up this mission transaction unit that was really critical in that arena.
▶ 1:03:26But also, as DFC is trying to do a much better job of monitoring and tracking their impact, um then they you know there there were if there were not USAID staff there, they just have much less presence and DFC's presence overseas is quite limited. Thank you. Uh and as we know that the DFC is also a key tool in the United States as the United States deploys our support uh to our ally Ukraine in their fight uh for survival against Russia Russia's unlawful invasion.
▶ 1:03:53Last year, I led a bipartisan letter requesting that the DFC scale up their work in Ukraine to support the Ukrainian economy and business community. Ukraine's economy is vital to success in this war. A stronger Ukrainian economy benefits the war effort, supports Ukraine's capacity for reconstruction, and reduces future reliance on foreign aid.
▶ 1:04:16I'm glad, especially glad that the UFC uh the DFC, rather, committed uh to providing over 400 million in additional political risk insurance for companies investing in Ukraine. A- Again, Ms. Collinson, how does the DFC uh political risk insurance for private sector investments in countries like Ukraine support those countries' economies and encourage American companies to invest?
▶ 1:04:44Yeah, maybe I'll start by just noting that the political risk insurance tool that DFC had is actually pretty unique one. There's sort of a few other actors that have a comparable tool, multilateral investment guarantee agency being one of them. But it's really been shown to be catalytic in fragile and conflict-affected states in particular.
▶ 1:04:59And you could imagine just, you know, being able to offer and and take on at least, you know, assume a part of that non-commercial project risk in a setting like Ukraine has really been a vital um a vital way to to just grow private investors confidence in the economy and and lend both to the economy now, but also Ukraine's recovery and reconstruction down the road. Thank you.
▶ 1:05:24With that, I yield back the rest of my Thank you. I now recognize our vice chair of the committee, Miss Representative Radewagen, for 5 minutes. Thank you, Madam Chairwoman, Ranking Member Bera. Tialavea, good afternoon.
▶ 1:05:47Today, we're discussing one of the most important programs to counter the PRC's Belt and Road Initiative, the Development Finance Corporation. Congressman Yoho, I too want to echo my thanks to you for your leadership in writing this legislation. This hearing comes at an apt time for my home district.
▶ 1:06:08As I've stated in previous hearings, American Samoa is now surrounded on three sides by other Pacific island nations that have signed major deals with the PRC. America needs to be present and active in the Pacific. If we aren't, Americans will be cut off and isolated from the mainland. The DFC is a great tool in our playbook to invest in the Pacific's future.
▶ 1:06:36My question for all three of you, my home, the Pacific Islands, we face significant challenges in securing investment for essential projects and infrastructure. How can Congress and the administration to encourage greater risk tolerance among private sector companies, enabling them to invest in the less secure, yet highly impactful areas?
▶ 1:07:06I'll start. Congresswoman, there there are a variety of tools that the agency has that can significantly reduce the risk to private sector investors. So, if you're talking about how do we attract investors to areas that are starved for capital, you need two things. One, equity.
▶ 1:07:27Uh because it's fine to to support financing or debt, but many of the companies on and some of the spaces that we're talking about desperately need equity as well. So, equity is one and two is to reduce, again, the risk of a project, which you can do by establishing small grant and technical assistance or a whole host of things that will encourage private sector investment. And that's would be my suggestions.
▶ 1:07:59Thank you, Congressman. I agree with that. And being from where you are, you're a long way from anywhere. And so, how do you get capital there? How do you get people to invest in that? The best way is to have the de-risking of it. And you also have to have a partner that is credible, somebody that has that the clout, like the United States government with a vehicle like the DFC, but can the DFC can they man it on the ground?
▶ 1:08:23And that's where organizations like the MCC, I'm a big fan of that that's weaned 17 countries off of foreign aid. And so, working with companies or agencies like we have there or that arm of USAID that was first on the ground, with the boots on the ground to do those things, to carry a project forward, they work hand in hand with DFC and let the DFC go in there with the big guns, you know, the big equity and bring in that private
▶ 1:08:53capital. And course, that all ties into what do you need in your country? What is the most vital thing? And it's usually infrastructure where it starts. Ms. Callison? Yeah, no, I don't have too much to add. I think I agree with both of their Thank you, Mr. Madam Chairwoman. I yield back the balance of my time. Thank you. Let me now recognize Representative Olszewski for 5 minutes of a questioning.
▶ 1:09:22Thank you, Madam Chair and Ranking Member. Appreciate all of our witnesses' time today, as always. I wanted to dig a little bit into two issues that you both mentioned today. One is something I support expanding the amount of countries that can be lent to. Our focus include more higher earner countries.
▶ 1:09:41But as we open up those even if we extend preference for the Do you have any thoughts on how we can operate operationalize ensuring that we actually don't just express a preference, but actually ensure that we execute on that? Yeah, I think you know, one of the ideas and I I know Mr. Yoho and Mr. Massie and I have some common ground here because we've discussed it and I'm including it as part of a modernizing foreign assistance network, which we both participate in.
▶ 1:10:12But one idea would be to think about, you know, having a sort of a reporting requirement from DFC to come to Congress and and let them know should sort of the balance start to move in a certain direction. So you maybe put a threshold on high-income investments or, you know, certain upper-middle-income and high-income investments and say we want to hear from you why you know, it gives a lot of flexibility, but also sort of puts a check on the system in the event that you feel like it's getting too far in one direction away from the mandate.
▶ 1:10:40Yeah, I mean So just to build on on her comment, you can use percentages. So at the end of a fiscal year, I think last year they did 181 projects. If uh more than two I mean if less than two-thirds of those projects were in low and lower middle income countries, then you could require that they come before a committee I like this and explain why is it you're not focusing as much on the low end.
▶ 1:11:08Uh same thing could go for high income I mean my personal view is and you all did this last year in 8926, I would eliminate the focus on just the European group of countries and I make it much broader but say no more than 10% of all the projects done in a given fiscal year can be in high income countries and if they are, then you have to come explain it to the Congress.
▶ 1:11:33That's helpful as we consider reauthorization which I think I'll just join the chorus of bipartisan support for here. I also wanted to just pick up a little bit on the conversation around USAID and actually turn a little bit to workforce at DFC itself. I know that in fiscal 25 there was a goal to expand the US workforce up to 700 staff. Obviously we've seen lots of conversation around DC these days about reducing staff size.
▶ 1:12:00So as we're talking about providing higher borrowing limits, that we're talking about allowing markets to go into more countries, as we think about reauthorization in the context of what we've already talked about at USAID and what's happening with staff generally in the United States government, what what should this committee be thinking about to sort of account for those limitations or is that any reason to be concerned as we work do that work? Yes Congressman, I think that's a great question.
▶ 1:12:29And I would just start by noting that sort of OPIC, DFC's predecessor, really ran lean in terms of and portfolio exposure. And so DFC has really had to take an active role in, you know, staffing up as it was growing its portfolio and as you noted, you know, was quite successful over time but it took quite a while to get to this, you know, 700 or near 700 number. And a lot of those roles that they're hiring for are not the sort of typical federal workforce positions.
▶ 1:12:57So, you know, something like underwriting capacity, you can make quite a bit of money um, in the private sector doing that. And so, being able to recruit those people and the right people to do this work takes time. And I think um, it's really that important to ensure that those, you know, the folks that they have hired and that they have the ability to continue to hire if we want to have the kind of ambition for growth at the agency. I agree with that. You got to have the boots on the ground to be able to, you know, start a project. And with your previous question, you don't forget the low-income countries.
▶ 1:13:27You expand your portfolio. And that's the whole purpose of raising the maximum contingency liability. Because that way you can focus developing countries moving from aid to trade. Then you have your other countries that you say, well, strategically from a geopolitical standpoint, this is where we should be investing, whether it's critical minerals or whatever.
▶ 1:13:47But I agree with what she says and it's it's imperative that we have the boots on the Yeah, and I I would just add particularly if you're going to focus more on infrastructure and critical minerals as a priority. Those Those deals are very labor-intensive for lawyers. I know that makes a lot of people nervous, but that's the fact. Thank you all. Yield back. Thank you. Let me now recognize Representative Sherrill Biggs for 5 minutes of questioning.
▶ 1:14:16Thank you, Madam Chairwoman. And thank you to the witnesses for participating As President Trump has sought to refocus America's influence in the foreign policy sphere, the Development Finance Corporation has taken on new importance as the primary vehicle for America to demonstrate soft power abroad by providing valuable resources and support to combat the People's Republic of China's influence.
▶ 1:14:46Through alternative financing for critical infrastructure and development projects, the DFC empowers our allies and partners with the means to achieve self-determined economic growth while shielding them from the predatory debt and coercive influence inherent in the PRC's Belt and Road Initiative.
▶ 1:15:10So, in a testament to fiscal the agency generates significant returns operating profitability with a net income surpassing $500 across fiscal years '23 and '24. It is clear that the DFC is an effective and value-driven alternative to PRC However, the DFC's current operational framework presents certain limitations.
▶ 1:15:41The legislation that governs the agency prioritizes investments in low-income countries with restrictions on the ability to operate in upper middle-income and especially high-income While this focus is valuable, it creates practical challenges when engaging with strategically significant countries like Panama, Indonesia, Vietnam, and Brazil.
▶ 1:16:12So, with that being said, I'd like to direct my first question to Dr. Yohan. Good to see you today. In your experiences, what are the key areas where DFC-supported projects are in high demand within middle-income countries? You know, if you look at the different countries you know, around where we're invested, the majority are in the lower-to-middle-income countries.
▶ 1:16:39You know, where we're restricted is like in Panama, we can't go into Chile, we can't go into uh Costa Rica. And you look at the geopolitical areas that we can't go into, we should be able to go into like New Zealand, uh some of the other nations, you know, in in Europe that we could go into that would really bolster our national security. And I don't want to go across this too much. I I'm not wanting to compete against China. I think we can outperform them by the product and our values.
▶ 1:17:08And if we invest in these um those countries will be included in that, those middle lower and middle-income. I hope that answered your question. It does, but I do have a little second part to that. So, what do you feel that are the potential benefits of increased DFC involvement in these nations? You kind of answered that, but I think the biggest thing is the the work that we can do to change the dynamics in a lower-income country.
▶ 1:17:37You know, we're moving them from aid to trade. Uh that was something that was one of the impetuses behind the DFC. Uh how do we get countries from that? And then we built on models from OPIC and MCC. But then we look at where can we strategically invest that will counter somebody that's wanting to gain influence some in our hemisphere.
▶ 1:17:56Um and I think that's so important that we use this strategically, but also on the other side raising countries out of that economic disaster that they sometimes Great, thank you. And just one more quick question um for Mr. Mosbacher. A critical component of our strategic competition involves energy security.
▶ 1:18:20How do you propose we ensure that the DFC can effectively support high-impact energy projects in strategically important middle-income and high-income Well, I think energy is an essential component of any economic progress.
▶ 1:18:38So, I believe we need to be as flexible as possible in honoring the fuel source that the host country has that it may want to use, even though that fuel source may not be to someone's liking. But, I'm a big believer in a wide-open sort of all of the above type approach, and the DFC should be available to try and help countries implement legitimate energy deals that will advance the economic growth of the country. Great.
▶ 1:19:08Thank you so much, and I yield Thank you. I now recognize Representative um Ryan Mackenzie for 5 minutes of questioning. Well, thank you, Madam Chair, and thank you to all of our panelists. Uh I don't know if I could have asked for a better segue into my question than uh the latest comment from Mr. Mosbacher.
▶ 1:19:31So, I want to particularly focus on DFC and its investment in energy uh because, as was mentioned, such a critical component uh to developing countries around the world, and we see the increased demand for energy uh in so many areas of our lives.
▶ 1:19:48And so, what I see though when I look at DFC in the list of projects is a concerning focus solely on climate-focused solar, low-carbon transition, green loans, climate mitigation. These are all a grab bag of buzzwords that are listed in all of the projects on DFC's website. What is absent from that is any investment in fossil fuels. And I have heard from developing countries.
▶ 1:20:17I had a an ambassador to a developing country in my office just the other day who said that he is seeking out and has been unable to get so far, uh but is still seeking for an American investment uh into natural gas in his country because they have a deposit or a reserve of that. And he feels like that would be the best thing to help develop their country and move them forward economically and with energy reliability.
▶ 1:20:44So, when I look at the DFC's website though, my my concern only gets worse when I look at the criteria that is laid out from 2024, April of 2024, the environmental and social policy and procedures.
▶ 1:21:02And the reason that's so concerning is because it seems like it is projecting a an unnecessary screen on the types of investments the DFC is even going to receive in applications, let alone what they ultimately determine as the criteria that they're going to use to select those projects. But you're just that messaging and that criteria alone that is laid out there, you are going to stop people from even coming to DFC with these potential types of projects.
▶ 1:21:31So, what I would like to to raise as a question is in a a time where we are seeing the markets and investors moving away from ESG towards purely profitability and also other criteria that they they want to set on their own deals. I would like to hear from each of you what your thoughts are on that policy and procedure in DFC and what we should do about it going forward.
▶ 1:22:00Well, let me start by saying that when I said each country should have the right to choose what type of fuel source they use, I was suggesting that if a country's sitting on top of a bunch of natural gas, they ought to have every right to try and build a natural gas fired power plant. And but I don't think the DFC is is automatically opposed to that. I think in fact, you know, each administration has priorities.
▶ 1:22:26The last administration had a prioritization of of renewable energy sources. This administration can move towards a more balanced approach and I would recommend that. In terms of the the comments you made about standards, I agree we can overdo it. I do I do think sometimes some of the standards we have probably run some companies off, but I also believe we have to find the right balance.
▶ 1:22:50In other words, if we go in and make a mess of a country because we've we've not abided by just balanced approaches in terms of the environment or impact on the people that are are maybe displaced by a project, then we're not we're sort of cutting off our nose to spite our face or we're undermining our effectiveness.
▶ 1:23:08So, I think you need a balance in there and in terms of energy source, I'd be for mostly whatever they want in their Along that I agree with that, but I I think when you're looking at the DFC to go into a country, you're looking to build an economy in the developing countries. The primary thing they need is infrastructure. The primary infrastructure is energy. You can't build manufacturing or any of that unless you have a reliable baseline energy and you're not going to get it on solar and wind.
▶ 1:23:38They can augment and supplement it, but you need to go and meet the the resources within that country, help them develop it responsibly and so I think that's what we should focus on. Yeah, I mean I would certainly hope that DFC doesn't rule out renewable energy where those are a good source.
▶ 1:23:55I will say I agree that I think where lack of energy access is a real challenge where there places in energy poverty in low and lower income middle income countries, you know, they need energy to be able to run an economy and so we shouldn't be ruling out natural gas particularly when that's a fuel source we use regularly at home. Great. Well, thank you and I I appreciate Mr.
▶ 1:24:14Mack Thacker's comment particularly around the balance and I think that is something that we can and both environmental responsibility and stewardship, but at the same time developing up those energy sources that are reliable, affordable for these developing countries. So, I think we need to bring back that balance and I'm concerned that this policy and procedure in place puts too much of a focus and an emphasis on a certain category.
▶ 1:24:39So, I would like to see that broadened as we move forward in in discussing DFC and what we can do to make it even better than it already is. Thank you and I yield back. Thank you. Let me now recognize Representative uh Schneider. Uh thank you. I want to thank Chairwoman Kim and Ranking Member Bera for holding this important uh hearing on reauthorizing the U.S. International Development uh Finance Corporation. Uh let me I take a special privilege Congressman Yoho. It is so good to see We miss you on this side of the dais.
▶ 1:25:10Um but you look more relaxed and calm on that side of the dais. Uh and thank you for work for your leadership on on on this project. The DFC created was created by a bipartisan the bipartisan BUILD Act. Two parties working together. I think it represents one of our nation's strongest tools to bolster international develop development while also advancing American strategic interests abroad. China's Belt and Road Initiative expands its own global footprint. Mr.
▶ 1:25:39Yoho indicated that over the last 10 years, 12 years, they've invested more than a trillion dollars in contrast to the U.S. a fraction of that at 70 billion dollars. DFC has to provide a compelling alternative to China. It has to be one that upholds transparency, respects environmental standards, and reinforces good governance. And it has to be one that advances U.S. interests.
▶ 1:26:05One area that I'm particularly interested in, the Abraham Fund, announced following the historic Abraham Accords between Israel, UAE, and the United States was designed precisely for these purposes to enhance regional economic cooperation, support peace, and present a tangible alternative to authoritarian Unfortunately, as of today, questions remain about the Abraham Fund's operational clarity and the commitment of the current administration to fully realize its potential.
▶ 1:26:33For the DFC to succeed, especially in strategic initiatives like the Abraham Fund, which has broad range of implications, timely reauthorization, as was recommended earlier, increased flexibility and equity investment scoring, and greater risk appetite are all essential. Equally important is ensuring transparency and effective oversight to reinforce confidence among our private sector partners.
▶ 1:26:57I look forward to exploring how Congress can ensure DFC remains an effective tool for development and strategic competition, particularly in strategically vital regions, but I'd like to again focus on on the Abraham Fund Abraham Fund. And if I can ask the witnesses, um, do any of you have a sense of the current status of the fund, uh, and have applications for projects stalled? If so, any sense why?
▶ 1:27:23looking beyond that, uh, and I'll I'll ask you, uh, Congressman Yoho, cuz we worked together on so many things. How important is having the soft power of a program like the, uh, DFC to promote not just American interests, but American relationships around the world, specifically in the context of of China's efforts to expand and increase its influence around the world?
▶ 1:27:54Oh, it's vital. It's vital. If we're not at the table, um, somebody's going to fill that void. Um, we've got to be there. People have to know we're reliable, we're trustworthy, that we're going to be there not just for the now, but for 50 years from now. And I think if we fund this, if it goes through, um, rapid reauthorization and enhance what the house did last Congress, uh, build on what you did. That sends a strong signal. The worst thing you can do is pull back and you know nature affords vacuum.
▶ 1:28:24Somebody's going to fill that vacuum. Somebody's going to fill it with their ideologies. You want it to be Western ideologies, liberal democracies, or do you want it to be authoritarian? That's the choice that we have to offer. Right. And and Ms. Collins, you, uh, in your recommendations, uh, I think gave wise counsel to us. Remember that DFC is part of the broader US development and foreign policy toolkit. And the current administration has basically wiped out aid completely and celebrated that.
▶ 1:28:52Um, can you touch on if we don't have that in our toolkit, what is left for us and and what are the implications of that? Yeah, I know again, I would echo I I think that USAID's sort of dismantling is is a real problem for DFC and particularly when it comes to deal origination and tracking the impact that it can deliver on the ground.
▶ 1:29:13Um, I do hope that DFC will be able to work increasingly with the State Department and also with the Millennium Challenge Corporation, um, which, you know, they set up their own, um, platform for collaboration precisely to try to do that in the places where MCC invests. And I think it'll be really important as as Mr. Mossbacker pointed out to work with a lot of other DFIs, too, to try to, um, you know, share intel and and develop deals collaboratively if we don't have the kind of presence on the ground that we'd expected. Thank you.
▶ 1:29:41And I'll use my last 10 seconds just to make a statement because whether we like it or not, if the United States turns its back on the rest of the world, the rest of the world is not going to throw up its hands and stand still. They'll proceed forward and China will lead the way and they will lead it for their interests of China, as, uh, you said, Mr. Yoho. We need to engage with the rest of the world and the United States created the American century in the last century because of our engagement, things like the Marshall Plan and and other other work.
▶ 1:30:10Uh we can do things no other nation is able to do because of who we are, because of our values, because of our philosophies and and uh um our our systems. And to turn away from that, I think is a a grave mistake. I hope we can turn the other way. Uh I yield back. Thank you very much. I would like to recognize Representative Zinke for your 5 minutes of questioning. Well, thank you for for coming. Uh so, a couple things. One, I agree with flexibility. I I agree with equity.
▶ 1:30:40I'm not sure percentage I would agree with you on. Uh I think it should be aligned with the policy of the United States with the executive and the So, it it is it is that from where our policy is driven and should be driven. So, a couple things. USAID's come up a Uh and of course, USAID's gone through a lot of scrutiny. Uh as it should.
▶ 1:31:03But when you have transgender medical clinics in India or condoms for the Taliban, and we can go through the list after list after list after list. So, some of it then uh is spread to you because you have a relationship with So, on your loans, do you have a single database because uh when I was in Interior, I went in and I canceled every loan until I could figure out where they're going.
▶ 1:31:33Uh it took what took us a while. And we're seeing the same thing with USAID canceling. So, you haven't been in the papers lately. Uh do you have a database of where your loans are? Are your outstanding loans? Is that database accessible to the United States Congress? It should be. I I'm uh I believe that uh there are some platforms like the FATA.
▶ 1:32:03Yeah, so technically DFC is I believe required to report to the foreign assistance.gov dashboard under FATAA, the Foreign Aid Transparency and Accountability Act, which bill act was extended its purview to. Right now it's just reporting grant and technical assistance on that dashboard because there's been And and and listen and and I I've heard this from from multiple. It's amazing.
▶ 1:32:25The Department of State does not have a list, the one that's a a database that you can query on loans on on on grants. Uh and and and if you have one, I would love to see it. I and what fidelity cuz a lot of things are as titles and this is whether you love or hate him, uh DOJ what it has done is open up files that when you and I were in Congress, we couldn't access.
▶ 1:32:53When I was a secretary, I couldn't access the files. But I've I've evidently just a few can and and trying to run ahead if there's files out there, I would like that you to share So maybe can I Sorry, just to clarify, DFC does post it has two databases actually on its website that have project level data. Now they're a little bit lagged, so we're missing the most recent data, but you can query and search.
▶ 1:33:21One of them has more fields than others, so you get more level greater granularity, but I think those are both areas where Congress should push the DFC for even greater transparency. And I'm you know, and and perhaps you know, we want to make every loan a billboard for debate, right? Because we give you the authority and we should for you to make a deal. You know, as long as in line with the US policy and I agree with that. Um but I think the chairs, you know, or the and the ranking members should have access to see what I think that's that's fair and prudent.
▶ 1:33:51So I'd like to see that. Lastly, up close to 5-meter target, we could go to a government shutdown. Uh, so what does that do to you? I just I just want to know if a government shutdown, how does it affect your mission if we go to a a government Go ahead. Well, I don't work for them, so it's not going to affect me. do what do you what do you think it would do? Well, it'll do like any other government shutdown. You just you press a reset button, everything's got to start all over.
▶ 1:34:18All those contracts that weren't negotiated, if the government shuts they have to renegotiate all those contracts. It's a waste of money, and let's hope we don't do that. And as far as the oversight, all those loans are on a book somewhere, an inspector general, and they have a board of people that approve these It's up to Congress when you get the inspector general report to hold them accountable. You know, we always talked about transparency and accountability up here.
▶ 1:34:45It's happened under this administration, and if you don't like what they did, shame on us cuz we didn't act. It's happened, we can't change it. Let's move forward and make it better. Well, and I I Congressman, if I could just add to businesses are have every right to understand there needs to be some certainty and predictability about contracts they have.
▶ 1:35:08To the extent that we have a stop and start funding system in our government that impacts private sector partners of our government, it uh damages our capacity to attract new I agree. I'm hoping we're at that point. And with that, uh I I I wish you a a lot a lot of luck. I know I know you have a lot of influence on there. And for the record, I do agree with the program. But it needs it needs greater scrutiny like anything else.
▶ 1:35:37And now we can justify uh taxpayer dollars uh when we know about them. And we should have that debate whether whether we should or shouldn't, but we never should have debate with fraud, abuse, and waste, and that we should all stand firm on. And with that, I yield back. Thank you, Representative Meeks.
▶ 1:35:54And with respect to your question about uh uh if you go I think uh on dfc.gov website, you will see the list of countries where DFC is funding those projects. And if you click on each country, it will also give you a whole list of the programs that is already being funded. So, I think that would be a helpful tool there.
▶ 1:36:18Uh and uh we had a lot of discussion here, but one thing is for sure, despite its uh short lifespan, the DFC has uh emerged as the key US national interest uh tool and national security tool.
▶ 1:36:34So, with this commitment to uh making America a stronger and more competitive leader and partner on the world stage, I think we have a tremendous opportunity to improve and strengthen its operations and how DFC's impact is felt around the world. Uh the CCP, as we know, is funding critical infrastructure projects and uh signing security pacts across the East Asia and the Pacific region and throughout the world.
▶ 1:37:03But, we know the US remains the economic and security partner of choice. Uh with that, we must provide the partner nations and allies with the alternative to exploitative state-led initiatives. Uh so, but this is not the US government can do alone, right? We need partners.
▶ 1:37:25Uh we need uh to also incentivize and mobilize our US private sectors to unleash the economic opportunities and investment abroad. So, I look forward to working with all of you uh as we go through this uh reauthorization process, uh we'll engage in further discussions to make it even stronger and tighter and make DFC the best uh security tool that we need.
▶ 1:37:51So, with that, I want to thank the witnesses for your valuable testimony and all of our questions. And I want to thank the members who have participated. The members of the subcommittee may have some additional questions for the witnesses. So, we'll ask you to respond to those in writing if you get those questions. First one to committee rules, all members may have 5 days to submit statements, questions, and extraneous materials for the record subject to the length limitations.
▶ 1:38:22So, without objection, the committee now stands Thank you, Madam Chair. Thank you.