OPIC Looks to Modernize Investment Strategies as U.S. Sounds Alarm Regarding China in Africa
Overseas Private Investment Corporation (OPIC) President and CEO Raw Washburne testified Wednesday before the House Foreign Affairs Committee about re-structuring OPIC’s model of financing overseas development. The testimony perhaps demonstrated the United States’ recent alarms regarding China’s increasing financial presence in Africa.
Washburne told the Committee that, although OPIC’s model of mobilizing private investment is starting to see success, the corporation is in serious need of legislative updates.
“When it comes to meeting the massive development needs around the globe and advancing American foreign policy, this proposal is essential,” Washburne said.
However, what Washburne, and other Committee members, especially focused on during the testimony was finding ways to match China’s growing financial status abroad, especially in Africa.
OPIC, a self-sustaining U.S. Government agency that is the United States’ main instrument for development finance, assists American businesses in investing and gaining footholds in emerging markets.
According to its website, OPIC has supported over $1 billion in projects in Africa during the past decade, and it currently holds over $ 4 billion in investments throughout the continent. Nevertheless, it appears as though the corporation, with a nearly 50-year-old operating authority and a limited budget, has recently been unable to keep pace with China’s investments in Africa. Over the past decades, China has invested billions of dollars in construction and infrastructure projects, among others, in nearly every country on the continent.
As a result, Committee members on Wednesday spoke of possible ways for the United States to shift the financial momentum in Africa in America’s favor.
“The U.S. can’t and shouldn’t match China’s investments dollar for dollar, but we can and should do more to support international economic development with partners who have embraced the private sector-driven development model,” Representative Ed Royce, the committee’s Republican chairman, said.
Countering China’s extensive presence in Africa, however, could prove to be extremely challenging. Chinese President Xi Jinping has declared China’s increased activity in Africa to be part of his country’s “One Belt, One Road” initiative, which looks to create several trading routes connecting Asia, Africa, and Europe to China. This plan is central to Xi’s foreign policy approach, which makes investment in Africa crucial to China’s ambitions abroad.
In fact, there is evidence that China’s increased operations across the continent have already brought increased economic growth to several African countries, which is why many African countries have begun turning away from the United States for financial support. The United States has traditionally looked to assist African nations with financial aid, which often proves ineffective, while China has taken the approach of direct investment in African economies, a model that more often leads to growth and a rise in employment.
As a result, many African nations view China as an ally, if not as an economic savior, and believe Chinese investment could help advance Africa’s own plans for development. Indeed, China’s operations have included some vastly ambitious plans, with one notable example being a plan to expand the existing Trans-African Highway 5 into a road crossing nearly the entirety of Africa, the early stages of which China has helped fund.
However, China’s direct approach to investment has also come under some scrutiny. American and European financial assistance in Africa has often been tied to conditions on human rights, democratic practices, or other such issues. Thus, a major reason why many African countries have found Chinese investment so popular is because it is often offered unconditionally. While this is usually more convenient for countries, China’s style of investment has also been criticized for putting capital into countries without taking into consideration the principles of those countries’ regimes.
In addition, while the United States often either invests or gives aid to countries, China has become known to give large loans in exchange for their investments, causing potential issues in the repayment of these loans further down the road.
Nevertheless, despite these criticisms, China’s financial presence in Africa continues to grow, and many African countries continue to be keen to welcome this massive new source of finance.
So, while OPIC and the United States look to find new ways of balancing China’s growing financial stakes in Africa, doing so is a mountainous task. With Chinese investments seeming to benefit both Africa and China, convincing African countries to turn their backs on the Chinese capital that has brought Africa economic progress will likely prove a major, if not impossible, challenge to American policy in the continent.