NEW APPROACH TO PROMOTING GROWTH

MINISTER OF FINANCE OF THE REPUBLIC OF SERBIA SINIŠA MALI, WITH REPRESENTATIVES OF THE DFC AND EXIM, THE EXPORT-IMPORT BANK OF THE UNITED STATES

DFC and the authorities of Serbia and Kosovo are currently discussing four projects to which DFC could contribute, thus enhancing the region's growth and development while promoting the rule of law and fair business practices

The U.S. International Development Finance Corporation (DFC) opened an office in Serbia this September, while DFC and the Export-Import Bank of the United States (EXIM) recently signed Letters of Intent (LOIs) with Serbia and Kosovo, in order to help finance the important projects identified through the U.S.-brokered agreement on the normalization of economic relations between Kosovo and Serbia, signed in Washington on September 4th by Serbian President Aleksandar Vučić and Kosovo Prime Minister Avdullah Hoti.

Speaking in a recent press briefing, DFC Chief Executive Officer Adam Boehler said that four projects are currently being discussed in Serbia and Kosovo. The first two are the Peace Highway and the railway connecting Serbia to Kosovo. Some projects are already underway and are multi-phased, and DFC’s approach to them will aim to broaden the financial tools and resources available to both sides, in support of their efforts to better lay the groundwork for enhanced economic cooperation. The third project is a lending framework to help support small and medium-sized enterprises and so-called local small–mid caps. Here DFC is reviewing a proposal tabled by the Serbian Government. Lastly is a project representing an effort to better promote entrepreneurship between young Serbs and Kosovars, both cross-border but within Kosovo.

DFC is a fairly new agency that emerged via the BUILD Act

to become a new developmental entity endowed with more has operated for over 18 years without any significant update resources and a broader mandate to place development and or expansion of its original authorities. This resulted in the lack growth at the center of its work, compared to its predecessors: modern, development-finance mechanisms needed to counter the Overseas Private Investment Corporation (OPIC) and USAID’s the state-driven model of countries like China, or to cooperate Development Credit Authority (DCA). It’s enhanced authority is with Development Finance Institutions (DFIs) of U.S. allies like the intended to enable it to compete more effectively with the sup- United Kingdom, Germany, Canada, and Japan, which are investing port provided by China and Russia for infrastructure in emerging heavily throughout developing world countries. In contrast to OPIC markets,, and to combine its efforts with those of the State and the DCA, which had budget authorization on an annual basis, Department and USAID. the DFC will have multi-year authorization, in order to reassure

As stated in the President’s National Security Strategy, “the U.S. businesses and allies that the U.S. Government will continue United States must today compete for positive relationships to co-invest with the private sector in order to increase global around the world. China and Russia target their investments in development and support countries’ journeys to self-reliance. the developing world to expand influence and gain competitive As commentators note, among the enhancements are the advantages against the United States. China is investing billions doubling of the maximum size of the agency’s portfolio to $60 of dollars in infrastructure across the globe. Russia, too, projects billion (up from OPIC’s $29 billion), its authorization to make equity its influence economically, through the control of key energy and investments, and the abolition of U.S. eligibility requirements other infrastructure throughout parts of Europe and Central for the beneficiaries of guarantees and political risk insurance. Asia... The United States provides an alternative to state-directed Accordingly, these resources and authorities are seen as suffiinvestments, which often leave developing countries worse off. cient to engage the American business community in advancing The United States pursues economic ties not only for market America’s development and foreign policy goals, and to promote access, but also to create enduring relationships to advance the rule of law and fair business practices, as well as the more common political and security interests”. sustainable development of the countries that are recipients of

The executive summary prepared for the Congress states that the new institution would be better placed to advance development and national security policy goals in the developing world, which is critical to promoting American prosperity and This newly formed development finance institution will have sufficient resources and authorities to engage the American business community in advancing America’s development and foreign policy goals national security. Furthermore, the DFC would be better aligned with development and national security DFC support. Emerging trading partners are expected to adhere goals, designed to better manage U.S. taxpayer risk, streamlined to free market principles and provide transparent, rules-based to increase effectiveness and operational efficiencies (making governance. Developing relationships with the countries that more funding available for programming), focused on mobilizing are recipients of the support will, over the long term, result in private sector funding, and modernized with a 21st century toolkit a strengthened geopolitical position of the United States, as that allows the DFC to compete and cooperate globally. well as providing the economic foundation for future alliances.

The new institution combines the resources and expertise The objectives of the DFC are to deploy development finance of OPIC and the DCA, boasting similar tools to OPIC and DCA to support economic growth as part of a long-term strategy to today, e.g. loans, guarantees, and insurance. Furthermore, the DFC transition countries toward self-sufficiency; coordinate with will be able to support development finance related feasibility U.S. firms to facilitate new market entries, when appropriate; studies and other tools as authorized. Its governance structure, align development finance as a core tool of U.S. national security, which is more connected with the State Department and USAID, including as a counter to the rise of other countries’ influence in will drive better pipeline and programming coordination among developing markets; and promote sustainable and economically different agencies. Therefore, for example, the DFC will be able to responsible policies that help partner countries on their own support a feasibility study and subsequent early-stage financing journey to self-reliance and prosperity. for a new project in high priority countries, while USAID will fund The aim of the DFC is to be a catalyst for investment, as well economic-policy reforms that aim to strengthen the enabling additionally ensuring private sector resources while taking care environment and attract more private sector investment. not to displace private sector investment by deploying develop-

Prior to this modernization, OPIC spent the last 15 years ment finance in selective circumstances, where markets are operating without significant legislative updates, while the DCA otherwise unable to attract quality, stand-alone private capital.