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Representative Ted Yoho
In February, U.S. Representative Ted Yoho (R-FL). proposed an overhaul to foreign aid. This April, with the support of U.S. Representative Adam Smith (D-WA), and Senators Bob Corker (R-TN) and Chris Coons (D-DE), the Better Utilization of Investments Leading to Development Act (BUILD Act) has gained significant momentum.

The International Development Finance Corporation

The BUILD Act, also known as S.2463, aims to consolidate the disparate U.S. agencies currently providing foreign aid into a single, new agency, to be called the International Development Finance Corporation (IDFC). More specifically, there would be a consolidation of the Overseas Private Investment Corporation (OPIC), USAID’s Credit Authority, USAID’s Office of Private Capital and Microenterprise, and USAID’s Enterprise Funds. According to U.S. Representative Yoho, this consolidation would increase efficiency of foreign spending, and promote U.S. security, economic and diplomatic interests abroad.

The proposed agency will also benefit recipients of U.S. foreign aid. More streamlined and efficient spending in the U.S. government will allow for other countries to become stronger trading partners; in doing so, this change would also open new markets, and encourage self-sufficient economic development in communities worldwide. Supporters of the BUILD Act argue that it will help combat humanitarian concerns that plague many developing nations, including poverty, hunger and disease.

In recent weeks the BUILD Act has been publically supported by the Chairman of the House Foreign Affairs Committee, U.S. Representative Ed Royce (R-CA), the committee saying that older agencies such as OPIC need to be modernized, and as Americans, not as Democrats or Republicans, will strengthen American foreign aid and make the U.S. competitive.

What is the BUILD Act?

So what exactly does the BUILD Act propose? It gives the new agency, the IDFC, grantmaking capability, the ability to make equity investments, and an increased spending cap. These capabilities increase U.S. foreign aid spending, and encourage the participation of private sector capital to complement development assistance objectives. It is important to note however, that there is a regulation on how much of foreign aid spending can be used to make equity investments.

The text of the bill describes the purpose of the BUILD Act in Section 101 of the bill as, “to mobilize private capital in support of sustainable, broad-based economic growth, poverty reduction, and development through demand-driven partnerships with the private sector that further the foreign policy interests of the United States,” highlighting the benefits of the BUILD Act going both to the U.S. and international aid recipients.

While some are concerned about how the organization will actually take over USAID’s and OPIC’s duties, many are excited by the fact that the creation of the IDFC will create further accountability and cost no money, making it an increasingly appealing bill. While more work needs to be done concerning the transition, oversight on the IDFC will fall to Congress, and external auditors, who will preform regular audits of the organization.

Allied For a Cause

U.S. Representative Adam Smith, a co-sponsor on the initial proposal, announced a press release that reads: “Through our partnerships with friends and allies, we work to raise up local communities – strengthening institutions, combating hunger and disease, and ensuring that development projects have sustainable, long lasting impacts.” Representative Smith identifies how this increased spending on development improves the lives of individuals abroad.

The BUILD Act is gaining momentum in Washington, and purports to improve efficiency and effectiveness of U.S. foreign aid deployment.

– Katherine Kirker
Photo: Flickr

BUILD Act Introduced to House Committee on Foreign AffairsOn February 27, Congressman Ted Yoho (R-FL) led a bipartisan effort that brought H.R. 5105, otherwise known as the Better Utilization of Investments Leading to Development (BUILD) Act, to the House Committee on Foreign Affairs.

Modernizing U.S. Foreign Aid

The goal of this bill is to make foreign aid programs more efficient through consolidation. The BUILD Act specifically targets development finance programs or foreign aid programs that assist other countries financially. The bill will consolidate all these foreign aid programs into one corporation that will be called the U.S. International Development Finance Corporation (IDFC).

“By streamlining our current system, we will not only spark economic growth in developing countries; we will improve America’s global competitiveness,” Rep. Yoho said in a press release.

Economic Assistance

These development finance programs are a vital part of foreign aid because they help to make a country economically stronger. Once a country’s economy is healthy, the country will no longer depend upon the U.S. for foreign aid.

The text of the BUILD Act states that the goal of the IDFC will be to primarily assist countries with low and lower-middle income level economies, as outlined by the World Bank, as opposed to providing assistance to upper-middle income economy countries.

Furthermore, the bill states that the IDFC will work primarily with the private sector in order to boost the economy of the country in need. The private sector is the part of the economy that is not controlled directly by the government, or in other words, the part of the economy that is managed by the citizens.

The IDFC will work to encourage the use of a country’s private capital to facilitate sustainable economic growth and promote poverty reduction. To achieve this goal, assistance will be provided to individuals and collectives that are part of the private sector, so that they can avoid market gaps and inefficiencies.

In addition, the IDFC will not just provide financial assistance to developing countries; it will also ensure that the civic institutions in these countries are fortified and that there is a healthy level of competition in the economy. The IDFC will also foster public transparency.

Long-Term Goals of the BUILD Act

The consolidation of the various development finance programs into one corporation will help the U.S. to more efficiently achieve its foreign aid goals.

The ultimate goal of the BUILD Act is for developing countries to eventually graduate from their need for assistance. The act will help to achieve this by making it easier for U.S. foreign aid to bolster the economies of developing countries so that over time they will depend less on traditional forms of foreign assistance.

“Taking countries from aid to trade is the end goal. We want to help countries become robust trading partners with the United States,” Congressman Yoho said in the press release.

The BUILD Act will benefit not only developing countries in need of assistance, but will also have positive effects for the U.S. in terms of business and national security.

– Jennifer Jones

Photo: Flickr