OPIC and EDFI sign MoU on private sector investment

4th June 2018 Jack Aldane

The Overseas Private Investment Corporation (OPIC) and the Association of European Development Finance Institutions (EDFI) have signed a memorandum of understanding outlining common practices for generating private investment in emerging economies.

At the association’s annual meeting in Cologne, David Bohigian, executive vice president of OPIC, and EDFI’s chairman Nanno Kleiterp, signed a document detailing grounds for collaboration on actions such as “direct equity and investment funds, frameworks, syndications and pre-funded lending facilities or platforms”.

The document refers to a free exchange of knowledge on issues such as impact measurement and monitoring, as well as further discussions with the OECD, multilateral development banks and private sector institutions.

Kleiterp told Development Finance that closer cooperation between EDFI and OPIC could help bring respective methodologies into alignment and provide institutional investors with more intelligible data on which to make decisions that serve the Sustainable Development Goals. He added that subsequent results in the market would “illustrate the success of the DFI model and DFI portfolios as an asset class”.

“Cooperation between DFIs is key on the level of projects in order to realise bigger investment than one DFI alone can make,” he said.

At the signing, Bohigian said that both partners would work on projects that “meet mutual policy objectives and criteria” and which promote “democratic values, self-sustaining societies, and reinforcing best practices”.

In response to growing competition for economic influence among the world’s powers, OPIC is seeking to create a brand new US development finance institution.

Last month, Ray Washburne, CEO of OPIC, used an address to the US House Foreign Affairs Committee to stress the country’s need for a development finance agency built on current best practices.

(Left to Right) Nanno Kleiterp and David Bohigian present the agreement at the EDFI Annual Meeting in Cologne

“US capabilities have become outdated. We have been operating for years without significant legislative updates,” Washburne said.

“As a result, we lack the modern, 21st century mechanisms needed to either compete with countries like China, or cooperate with allies like the United Kingdom, Germany, and Japan, which are investing heavily in emerging markets.”

The competition faced by the US is most notably exemplified by China’s One Belt, One Road initiative, which Washburne credited at the address as “changing the political and economic landscape”.

The Belt and Road initiative spans a network of trade links that account for more than two-thirds of the world’s population and around one-third of global GDP.

EDFI’s bilateral institutions represent the member states of the European Union and the European Free Trade Association (E.F.T.A). Together, they employ more than 2,000 professionals and support staff, and collectively hold 43 overseas offices in more than 20 countries in developing regions.

Since the start of Washburne’s leadership in 2016, OPIC has signed similarly collaborative agreements with the Japan Bank for International Cooperation, Nippon Export and Investment Insurance, and Australia’s Department of Foreign Affairs and Trade.

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