June 28, 2018

Senate Foreign Relations Committee Mark-up of the BUILD Act (S. 2463)

3 min

This is our third update on the BUILD Act (prior updates were published on April 30, 2018 and May 14, 2018). The BUILD Act creates the U.S. International Development Finance Corporation (IDFC), a new wholly owned government corporation that will replace the Overseas Private Investment Corporation (OPIC) and transfer the Development Credit Authority, the Enterprise Funds, and the Office of Private Capital and Microenterprise from the U.S. Agency for International Development (USAID) to the IDFC. Since Senator Corker’s introduction of the bill on February 27, 2018, the number of co-sponsoring Senators has jumped from 7 to 11.

On June 26, 2018, the Senate Foreign Relations Committee marked up the BUILD Act, which adopted and expanded upon several changes made by the House Foreign Affairs Committee on May 9, 2018 under H.R. 5105.

The adoptions included (1) prioritizing countries friendly to private enterprise (meaning they have market-based economies, protect private property rights, respect the rule of law, and combat corruption); (2) improving development coordination with USAID; (3) limiting (but still permitting) products denominated in foreign currency; (4) sharing risk with private enterprise; (5) measuring the impacts on women, the environment, and labor; and (6) limiting the IDFC's lending and investing term to 7 years (although loans and guaranties may have maturities of up to 25 years, and the IDFC will continue until it liquidates its portfolio). The Committee resisted changes to the IDFC loan liability cap, which stands at $60 billion, twice the current cap at OPIC of $29 billion.

The expansions included (1) heightened national security considerations in IDFC policies regarding project selection and project liquidation; (2) increased public engagement through public hearings with the Board; (3) improved development policy coordination with USAID and the MCC through an enhanced Chief Development Officer and a new Development Advisory Council composed of nongovernment organizations, think tanks, and other international development institutions; (4) greater focus on protection of workers' rights, child labor, minimum wages, working hours, and occupational health and safety; (5) preferential treatment for minority-, women-, and veteran-owned businesses (no less than 50% of IDFC projects must involve them); (6) improved risk mitigation through the addition of enumerated duties of the Risk Committee, including the management of reputational, operational, developmental, environmental, social, and financial risk and the prevention of money laundering, corruption, and violations of human rights; and (7) improved market relevance from periodic reviews of IDFC loan guarantee fees and a project support cap to any one project of 30% of the aggregate equity contributed to such project.

Members of the Senate Foreign Relations Committee believe that the BUILD Act will pass this summer, with a 120-day window thereafter for the president to submit a reorganization plan to Congress (instead of a 60-day window as originally proposed) that establishes a date (no earlier than 90 days after the president's submission of the plan) for the transfer of personnel, assets, and obligations from OPIC and USAID to the IDFC.