OPIC Uses Marshall Plan to Guide African Development, Official Says

Investment chief Joan Edwards speaks at AFCOM conference

Washington -- The Overseas Private Investment Corporation (OPIC) is working hard to help sub-Saharan African nations develop their economies, says the U.S. government agency's director of investment services, Joan Edwards. And it is doing so using the underlying principle of the Marshall Plan, the successful U.S. program that helped a shattered Europe recover from World War II.

Edwards made that point at the 10th annual African Telecommunications and Information Technology Conference (AFCOM), held in Arlington, Virginia, July 18-20. She participated in a telecommunications finance and investment workshop with representatives from the Export-Import Bank and the Small Business Administration. Like OPIC, both are federal agencies whose aim is to promote and facilitate the purchase of U.S. goods and services overseas.

The Marshall Plan came into being in 1947, Edwards said, after policymakers asked how the U.S. government could help countries around the world develop. The answer was: "It can't be done directly by U.S. government assistance; rather, it has to be done by getting the U.S. private sector, the business community, involved in those countries," she said.

"So, after that start, more than half a century ago," she continued, "we [at OPIC] still offer a range of programs that make private-sector projects move forward."

Edwards echoed OPIC President and Chief Operating Officer Peter Watson as he spoke of the agency's upcoming priorities on the opening day of the AFCOM conference. In a statement, he said, "The strategic plan I unveiled today will enable OPIC to achieve the objectives outlined in the president's budget message, which called on OPIC to focus more closely on companies and countries that cannot access private financing or insurance and to complement, not compete, with the private sector."

Edwards told her AFCOM audience, which included representatives from a number of large U.S. telecommunications companies seeking business in Africa: "Our oldest program is our political risk insurance. We protect U.S. investors against three kinds of political risk," including nationalization and expropriation, political violence, and inconvertibility of currency.

The OPIC official explained that there are two major risks associated with currency: "One is a commercial risk of devaluation; the other is the transfer mechanism called convertibility. A classic case of inconvertibility was the Asian financial crisis, when Malaysia decided that ... no monies could transfer out of the country.

"So, if you were an investor in Malaysia at the time, you may have been very successful, built up a very nice business, but all of a sudden the national bank [and] the ministry of finance -- the standard transfer mechanisms -- say, 'No, for now, until we tell you otherwise, you can't get money out of Malaysia,' or, 'You can't buy hard currency.'"

She added, "If you're in a joint venture as an American company with a non-American entity, we can protect the American portion of the investment, and our colleague agency MIGA -- the Multilateral Investment Guarantee Agency -- a division of the World Bank group, can offer similar coverage to the non-American investor."

Since 1948, Edwards said, OPIC's risk insurance "has done hundreds of millions of dollars of coverage that has resulted in not only hundreds of thousands of jobs in the U.S., but many more hundreds of thousands of jobs in the countries where the investments are taking place."

Project financing is the second major way OPIC helps emerging economies, Edwards told her audience. "We can function as a bank, and in that activity we actually have a wider range of flexibility" than with risk insurance. "We can provide financing to a project where the U.S. investor is a partner. We can lend anywhere from the hundreds of thousands of dollars to $200 million."

"Since every finance project is unique," Edwards explained, "it is hard to give all the [lending] parameters, but certainly among the most important are experienced partners -- the investor has to have a track record. Clearly, licenses, permits and concessions that will stand up to scrutiny by our lawyers [are important]."

Equity, or ownership involvement by the investors in the project, is also essential, she added, because OPIC does not provide 100 percent of the project's financing. A well-defined marketing plan is also important, she said.

"The final product we have," Edwards said, is "a series of capital investment funds that are operated by private-sector money managers. They are related to OPIC and can make either sectoral or regional investments. And we have a number of such funds for Africa."

On July 16, OPIC concluded a $1 million loan agreement to support a microfinancing fund in Africa called the Peoples Investment Fund for Africa (PIFA). The fund was established in the year 2000 in partnership with the International Foundation for Education and Self-Help (IFESH), a non-governmental organization founded by the late Reverend Leon Sullivan, to provide small entrepreneurs with start-up capital. PIFA will provide loans to micro-financing institutions (MFIs) in Africa, starting in Ghana.