David Bohigian
Executive Vice President, OPIC
Telephonic Briefing
November 6, 2018
Moderator: Hi, good evening to everyone from the Asia Pacific Regional Media Hub in Manila. Thank you for joining us. And a thank you to David Bohigian for joining us so early from DC.
David is the Executive Vice President of the U.S. Overseas Private Investment Corporation. He will speak about the impact of the BUILD Act, which was signed into law October 5th, and how it strengthens the U.S. government’s capacity to mobilize private sector investment, to accelerate development and move societies forward.
The BUILD Act will modernize the United States development and finance institutions so that they better incentivize private sector investment in emerging economies.
A quick reminder, this call is on the record.
In a moment, David will make some opening remarks and then we’ll move to Q&A. When we do Q&A, please make sure to state your name and your outlet.
Thanks again for joining us, and with that, David, over to you.
Mr. Bohigian: Thanks, Mary Beth, and thanks everybody for being on the call this evening.
As noted, I want to talk about a recent legislative development that some have called a legislative miracle, which is the BUILD Act. To talk about that in the broader context of what the Overseas Private Investment Corporation moving into the New Development Finance Corporation will be doing throughout Asia.
So, today OPIC has a $23 billion portfolio across 90 countries, in political risk insurance and private equity and project finance across every sector you can imagine.
And earlier this summer I took a trip, three trips to Asia. First to Singapore, Thailand and Indonesia. Next to Armenia, Georgia, Azerbaijan, Uzbekistan. And most recently to India and Sri Lanka. And together those were intended to understand how development finance can help unlock human potential throughout one of the world’s most dynamic regions, and really getting to understand at the country level of the kind of projects we were going to be able to work on.
For instance, in India we launched our Venture Capital Initiative. We’ve never before worked in that asset class, although we have a $3.5 billion portfolio across 40 private equity funds. We are moving into venture capital, earlier stage, to try and create entrepreneurial societies because we believe that entrepreneurs are some of the world’s most committed citizens. So launching our Venture Capital Initiative in India with a San Francisco as well as India-based venture capital firm. It’s a great way to promote those sort of opportunities in societies.
In Sri Lanka, we had a chance to visit the Hambantota Port, which, as you know, now is owned by a Chinese state-owned enterprise and leased for the next 99 years.
We also visited an airport that the Chinese have built that has no commercial flights.
We also flew over a cricket stadium that’s being under-utilized, as well as looked at the Colombo port city that’s being built for financial services regulations that need to happen[1] in an uncertain political environment, to make that successful.
India and Sri Lanka really was the last leg of this tour and a region where OPIC, the Overseas Private Investment Corporation, has already invested $4 billion and we expect with the passage of the BUILD Act just over one month ago we’ll be able to do much, much more throughout Asia and throughout the world.
The BUILD Act really was the capstone to a legislative turn-around unlike Washington saw in 2018. This time last year, the Overseas Private Investment Corporation was on the chopping block for the budget. Now we’re on the starting block to create a New Development Finance Corporation that is going to have additional authorities to include for the first time having equity. The ability to not only invest debt but equity unlocks tremendous potential not just in private equity but in the projects that we work in.
Beyond that, our $23 billion cap is, sorry, our $29 billion existing portfolio cap moves to $60 billion. So, being able to really go deeper into several countries where we have foreign policy and development needs.
Next we’ll have technical assistance and be able to help on the ground develop studies that promote projects, gives us an ability to work with the private sector and ensure that we are being responsive to countries’ needs for development.
Also, we have the ability to, for the first time, have a U.S. preference in our deals as opposed to a U.S. requirement. So that will give us additional flexibility throughout Asia and the world.
Then last, having more of a whole of government approach, working with our colleagues at USAID and their Development Credit Authority to bring them into the fold of the New Development Finance Corporation I think helps streamline government as well as gives us better outreach to our colleagues throughout government.
So, I would say those are the overall impressions of the Asia trips, the overall impressions of the BUILD Act. And, by and large, I think what is crucial here is that we are building 21st century opportunity societies. When I look across the world at development finance, we’re trying to encourage countries to be able to race to the top where they’re opening their markets, where they’re creating economic reform; they’re providing opportunities for their people. So I think the Overseas Private Investment Corporation has almost a 50-year history in doing that, and with the BUILD Act, the New Development Finance Corporation next year will carry on that tradition in a way that is strengthened for a 21st century economy.
So with that, I’ll take questions. Thanks.
Moderator: Thank you very much.
While people are starting to line up for questions, I’ll ask one on behalf of a colleague at the Australian Financial Review who is unable to join the call tonight. Their question was:
Question: How does the BUILD Act fit in with the recent trilateral partnership announced between Australia and the United States on regional infrastructure development?
Mr. Bohigian: The BUILD Act helps us be more interoperable with our economic allies around the world.
For instance, working with equity, we’re able to partner better with Europeans, with multilateral, and in particular, we’re proud of having signed agreements with both the Japanese JBIC, and their other development finance institutions, as well as the Australians. And having that trilateral in place helps us look at quality infrastructure throughout the region. We’ll be cooperating across training opportunities; we’ll be cooperating across transactions. We’ve already identified several projects in which the combined strengths of Japan, the United States and Australia make it an enormously attractive package to work with.
So working with Japan and Australia is a key pillar of our Indo-Pacific strategy as announced by Secretary Pompeo and Ray Washburne on the 30th of July, and you should stay tuned for a likely announcement next week as we continue to roll out our work with our partners in Japan and Australia.
Moderator: Thanks so much.
We’ll go to the first question.
Operator: The first questions comes from the line of Dian Septiari of Jakarta Post. Please go ahead.
Question: Hi, I’m Dian from Jakarta Post.
I’d like to know, can you talk about your trip to Indonesia? And Southeast Asian countries [inaudible] benefit from the BUILD Act? Thank you.
Mr. Bohigian: Indonesia was one of the first legs of the first tour that we took, and we were thrilled to be able to talk to the business community there about some of the infrastructure projects they’re working on. Everything from ports to the Ten Bali Project. And in particular, I’m proud of the fact that the Overseas Private Investment Corporation helped finance the wind farm that the President of Indonesia was able to visit, creating clean energy. I believe 75 megawatts of energy. Replacing old Chinese-fired coal plans and creating 21st century renewable energy.
So, we had a chance to visit two ports while we were in Indonesia, went to the Strait of Malacca to understand the shipping lanes there. Met with the business community as well as some key leaders in the cabinet in Indonesia. A very positive visit.
Indonesia, we will have at the Overseas Private Investment Corporation and the New Development Finance Corporation, as one of our priority countries throughout the Indo-Pacific given the dynamism that’s happening there in the economy and our ability to truly make a difference across infrastructure as well as entrepreneurship.
Moderator: Thanks so much.
I have another question, it’s kind of more of an overview question from one of our callers who wants to understand a little bit more about how OPIC works in general. When you talk about the funds and the caps on investment, they ask if this is like the World Bank or ADB.
Could you explain a little bit about how OPIC works in terms of the funding mechanisms?
Mr. Bohigian: Sure. The Overseas Private Investment Corporation is the United States’ Development Finance Institution. When you look at the World Bank or IDB, those are multilateral, meaning many different countries are working together through the World Bank, through the Inter-American Development Bank, through the European Bank of Development and Reconstruction. The Overseas Private Investment Corporation is simply the United States working on development finance.
We have been working there since 1971 and work, practically invented political risk insurance, have a portfolio of 40 private equity firms that we work with. We have project finance in everything from renewable energy, to roads, to hospitals. So similar in respect to the World Bank, but not a multilateral institution.
We’re really closer to the IFC portion of the World Bank, because the Overseas Private Investment Corporation, in addition to its portfolio, is truly working to catalyze the private sector. We are working with businesses to make sure that the projects that we invest in together are viable for the future of the populations in which we’re working.
Moderator: Thank you.
Operator: The next question comes from the line of Camille Aguinaldo of Business World. Please go ahead.
Question: Hello. With respect to the United States BUILD Act, are there any interest from American businesses to expand investment in the Philippines? Given that the government has enacted its construction program called Build, Build, Build?
Mr. Bohigian: Yes, there continues to be heightened interest in the Philippines. It’s something that we’ve worked with our partners to better understand the Philippine market. I’m impressed by the entrepreneurial society that they’re building there within IT and their connectivity to the world. Ensuring that countries like the Philippines have more connectivity through telecom networks, through trade relationships, through having open societies is important. So I’d expect to see more investment under the Build Act and through the Development Finance Corporation in the Philippines in the near future.
Moderator: Thank you.
Operator: The next question comes from the line of Elvis Chang of New Tang Dynasty. Please go ahead.
Question: Thank you. We know that Taiwan is [inaudible] of the United States and [inaudible] the BUILD Act in the Indo-Pacific area. What’s the role Taiwan can play, or what’s the role Taiwan is expected to play? Thank you.
Mr. Bohigian: I think the question is what role can Taiwan play? Is that right?
Question: Yes.
Mr. Bohigian: Good. Well, again, working with partners throughout the region includes working with Taiwan. We recently had a team from the Overseas Private Investment Corporation in Taiwan to explore those area opportunities, to understand how together we might be able to partner in the Indo-Pacific region, with Taiwan being able to co-invest alongside with OPIC.
So, I think there are real opportunities there that we’re starting to explore, that the BUILD Act helps us partner with, with a larger capital base, with equity authority, with technical systems. We think partners like Taiwan can help us create an even more dynamic Asia-Pacific region in the 21st century.
Moderator: Thank you.
Can I ask, in terms of what happens next with the BUILD Act, it’s been signed into law and it will take some time to do some reorganization, but what are kind of the next steps people should be following?
Mr. Bohigian: You’ll recall it was a year ago at APEC where the President announced that he wanted to modernize development finance. So as we saw about a month ago with the BIULD Act, that promise was kept. And I know you’ll see Vice President Pence in the region at APEC next week talking about some of our key next steps.
So passage of the BUILD Act was a bipartisan accomplishment that’s been rare in Washington. And you truly see people lying around having impact as well as producing development and foreign policy outcomes.
So next week in Papua New Guinea, I think you’ll see Vice President Pence outlining more of a vision of what can happen under the BUILD Act. I will say that we’re proud of the partnerships we’ve created with Japan and Australia already. We are proud of having put someone in Japan to help manage those relationships already.
Right now, we’re going through a series of roundtables that will help create the world’s greatest 21st century Development Finance Corporation. On February 1st you’ll see a report that goes to Congress outlining some of those key steps.
So we are moving into a new era of development finance where governments, the private sector and NGOs are working together to solve problems in a way that they couldn’t solve individually.
I think you’ll see the Vice President lay out some of those themes next week at APEC. You’ll see that in our outreach to stakeholders to create [inaudible] Finance Corporation [inaudible]. And then on February 1st the report to Congress that starts to outline in more detail how reorganization and modernization can work.
Moderator: Great. Next question?
Operator: The next question comes from the line of Sao Phal Niseiy of Thmey Thmey.
Question: [Inaudible] Cambodia. I think [inaudible] how do [inaudible] more about the Overseas Private Investment Corporation [inaudible] in partnership with Cambodia and the private sector?
And my second question is how [inaudible] especially the Overseas Private Investment Corporation includes [inaudible]? [Inaudible] Cambodian private sector [inaudible]? Thank you.
Mr. Bohigian: I’m sorry, I heard the first question about potential in Cambodia. I had trouble understanding the second question. I think the line wasn’t great.
Moderator: I think it was opportunities in Cambodia as well as how this will work with the Cambodian private sector and public sector. Is that correct?
Question: [Inaudible] help improve that partnership.
Moderator: How it will improve the partnership with the Cambodian private sector and public sector.
Mr. Bohigian: Got it. We’ll need to get you figures on Cambodia, but throughout Asia, OPIC already has a $4 billion portfolio, which catalyzes billions of dollars more with the private sector.
The BUILD Act gives us an opportunity to look into low, and low and middle-income countries as well as other countries around the world to really understand what their needs are.
So I think opening a dialogue with the Cambodian government about their infrastructure needs and how they’re looking to develop connectivity and an opportunity society is something that we need to do. It was not one of the points on my visit, but I know that as we move into the New Development Finance Corporation we’re considering, we continue to consider a global approach, and Cambodia needs to be part of that.
Moderator: Thanks so much. Next question?
Operator: The next question comes from the line of Tuan Dao Minh of Hanoi Times. Please go ahead.
Question: Thank you very much. I have two questions only for you.
The first is, can you please give an update on OPIC’s operations in Vietnam and what are the priorities for Vietnam in the coming time?
The second question is when is the BUILD Act move a part of the Indo-Pacific strategy in [inaudible]? And to contain China’s rise.
Thank you very much.
Mr. Bohigian: On Vietnam, the Overseas Private Investment Corporation has major projects in the pipeline as well as on the ground today. We will get you those fact sheets that help sketch out where those commitments are.
Most importantly, the President last year in Vietnam laid out his vision for a modernized Development Finance Corporation that Vice President Pence will be talking about next week. I do think that the Indo-Pacific is a region where the New Development Finance Corporation will be more involved under the BUILD Act. The Overseas Private Investment Corporation has a $4 billion portfolio throughout Asia Pacific today. But I’d expect the BUILD Act, including equity, including the technical assistance, including the U.S. preference allows us to operate with our partners such as Japan and Australia even more effectively in Asia than we have in the past.
I think what’s important when policy-makers throughout the region look at development finance and look at financing their infrastructure needs, they consider a five-factor test. So when people are looking to build a port, or when people are looking to build an airport, they need to consider first whether or not this is truly a win for their country and for their people as opposed to the country and the banks that are providing that financing.
Second, I think countries need to be mindful that their sovereignty is more precious than any project they could undertake.
Third, countries need to ensure they are empowering their workers and not merely importing workers from another country. That they’re strengthening their labor conditions for the families that live there.
Next, and fourth, ensuring that countries are strengthening their environmental protections. The natural beauty that I’ve seen throughout Asia deserves to be protected and policy-makers need to consider that as they’re developing projects.
Last, people need to understand these projects need to be built to last. The U.S. relationships in these countries run back hundreds of years, and our relationships are built to last. And the projects that U.S. companies and the U.S. government undertake are not merely the lowest cost on day one for the bid, but truly meant to ensure total cost of ownership so that we can be proud of the projects and societies that we’re creating in the 21st century.
So I think that’s how the Build Act can help play into not just the Indo-Pacific strategy but truly how we can help modernize development finance. If you look at those five factors, we welcome development finance and infrastructure throughout the world. But it’s important that the world and the countries and the policy-makers that are considering these projects take into account those five factors.
Moderator: Thank you so much. I know it’s very early there, but you have to get to work. We have time from one last question from Bloomberg.
Operator: The question is from Ian Marlow of Bloomberg. Please go ahead.
Question: This is Ian Marlow from Bloomberg in India.
You mentioned the Sri Lankan projects earlier and some have, of course, categorized those projects as non-economic, [inaudible] and wide open [inaudible].
I was just wondering if you could more explicitly contrast your own approach as to China’s more state-led approach, and I was wondering if you could also, as a second question, maybe address what you referred to there as the uncertainty in Sri Lanka. I’m just wondering whether OPIC or other U.S. agencies will hold off while there is a lack of clarity with the political situation there in Sri Lanka. Thanks.
Mr. Bohigian: Clearly when I was in Sri Lanka I heard from the business community about an uncertain policy situation that we’ve seen play out over the last couple of weeks. So I think every business person that I talked to was seeking strengthened rule of law, was seeking a court system that was able to process cases more quickly, wanted to understand what kind of tax and tariff operating environment they needed to be able to consider. So I think policy certainty is important in Sri Lanka.
I contrast the United States’ development approach working with the private sector across the five factors that I mentioned earlier. Ensuring that these are wins for society; ensuring that sovereignty isn’t threatened; ensuring worker rights; ensuring environmental protections; and making sure these projects are built to last.
I think some of the projects in Sri Lanka highlight those differences. When you look at a 99-year lease from the Sri Lankans to the Chinese, they’ve clearly lost sovereignty in a key part of their country. When you look at an uneconomic airport that has no commercial flights, you wonder why that was built? Was it built for the people of Sri Lanka? Or was it built for the construction companies and the banks or others?
I think the projects that we saw in Sri Lanka highlight some of the misguided attempts at state-directed capital. I think the projects the Overseas Private Investment Corporation is looking at today are intended to strengthen opportunity societies. Whether that is through venture capital firms that we’re looking at, whether that’s through small, medium-sized businesses that we’re looking at investment directly, looking at companies that are able to help with environmental difficulties throughout the world. I think the contrast that you’ll see in our projects versus some of the white elephants that were noted earlier, is an important distinction between demand-led, business-led capitalism versus state-directed enterprises.
Moderator: Thank you, David, so much. I know you have to get going.
I just wanted to give you a chance, if there’s anything finally you want to highlight before we close things out tonight.
Mr. Bohigian: I appreciate the opportunity, Mary Beth. It’s a dynamic region that I know you’ll be seeing highlighted next week with the Vice President’s trip to APEC. We’ll be focusing on the contrast between state-directed versus the ability of the U.S. private sector and the U.S. government to provide a halo effect for countries and projects that are able to lift up opportunity societies.
You’ll also see the Vice President talking about our Memorandums of Understanding with Australia, with Japan, and sketching out what President Washburne of the Overseas Private Investment Corporation and Secretary Pompeo laid out July 30th for their vision for the economic pillar of our relationship with the Indo-Pacific.
So I would say the trip laid a stronger foundation for Development Finance Corporation throughout the Indo-Pacific, and I think you’ll continue to see that relationship enhanced with the Vice President’s trip and beyond in the coming weeks.
So thank you very much.
Moderator: And thank you.
Just for the reporters on the line, the exact details of the Vice President’s trip have not been announced by the White House yet, but stay tuned, and keep an eye on their web site. Beyond that, we will be sending around some links so people can get more details about the BUILD Act and the technical details behind it, as well as an audio file of this briefing. And we hope to do a lot more briefings with OPIC in the future as the modernization of OPIC gets underway.
So thanks again, David. And thank you all for joining us tonight.
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[1] Being built for the financial services industry, but there are reforms and regulations that need to happen
