The Overseas Private Investment Corporation:

Its Role in Development and Trade

ID-81-21: Published: Feb 27, 1981. Publicly Released: Mar 6, 1981.

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The Overseas Private Investment Corporation (OPIC) was created to mobilize and facilitate the participation of U.S. private capital and skills in the economic and social development of less developed friendly countries. GAO was asked to review OPIC to determine the developmental impact of OPIC-supported investments, the effects of these investments on the U.S. economy, and the participation of small U.S. businesses in OPIC programs.

OPIC has made progress in diversifying its finance and insurance portfolios toward the poorer developing countries and has adopted project screening criteria consistent with congressional guidelines. However, OPIC has only limited opportunities to enhance the developmental aspects of individual investment projects or to be particularly selective in choosing investments to support. For the poorer countries and for small business investors, the availability of OPIC services has some importance in the decisions of potential investors. GAO believes that a restriction on OPIC activities in countries having per capita incomes above $1,000 could be removed. The kinds of investments likely to spur U.S. exports and the possible conflicts that might arise between country development interests and U.S. export interests need to be more fully explored. OPIC needs to examine each investment proposal thoroughly for trade effects and possible development conflicts. GAO did not find a direct relationship between overseas investment and subsequent U.S. job losses but found clear inadequacies in aspects of the OPIC screening and monitoring processes. Large U.S. firms remain the major users of OPIC as small businesses generally lack the resources and expertise to establish ventures overseas and to remain for long periods. OPIC could increase small business participation through closer collaboration with embassy and Agency for International Development (AID) officials and by providing more advantageous insurance rates for small businesses.

Recommendations for Executive Action

  1. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The President of OPIC, in consultation with the Director of the International Development Cooperation Agency, should fully implement the new system for evaluating and following up on OPIC small business promotion efforts, particularly the investor-mission and feasibility-study programs.

    Agency Affected: United States International Development Cooperation Agency

  2. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The President of OPIC, in consultation with the Director of the International Development Cooperation Agency, should fully implement the new system for evaluating and following up on OPIC small business promotion efforts, particularly the investor-mission and feasibility-study programs.

    Agency Affected: United States International Development Cooperation Agency: Overseas Private Investment Corporation

  3. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The President of OPIC, in consultation with the Director of the International Development Cooperation Agency, should require the OPIC staff to: (1) consult with appropriate Labor Department and labor union officials, as well as a wide range of industry experts, when assessing import-sensitive industry project proposals; and (2) develop specific operational guidelines for approving projects in all import-sensitive industries.

    Agency Affected: United States International Development Cooperation Agency

  4. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The President of OPIC, in consultation with the Director of the International Development Cooperation Agency, should require the OPIC staff to: (1) consult with appropriate Labor Department and labor union officials, as well as a wide range of industry experts, when assessing import-sensitive industry project proposals; and (2) develop specific operational guidelines for approving projects in all import-sensitive industries.

    Agency Affected: United States International Development Cooperation Agency: Overseas Private Investment Corporation

  5. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Director of the International Development Cooperation Agency and the President of OPIC should develop and implement policy guidelines and a system of closer coordination with the Departments of State and Commerce to: (1) identify in the poorer developing countries more development-oriented and financially attractive investment opportunities; (2) help resolve problems encountered by U.S. businesses in the investment process; and (3) assist interested developing countries to improve their foreign investment screening and approval processes, priorities, and promotion efforts.

    Agency Affected: United States International Development Cooperation Agency

  6. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The Director of the International Development Cooperation Agency and the President of OPIC should develop and implement policy guidelines and a system of closer coordination with the Departments of State and Commerce to: (1) identify in the poorer developing countries more development-oriented and financially attractive investment opportunities; (2) help resolve problems encountered by U.S. businesses in the investment process; and (3) assist interested developing countries to improve their foreign investment screening and approval processes, priorities, and promotion efforts.

    Agency Affected: United States International Development Cooperation Agency: Overseas Private Investment Corporation

  7. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The President of OPIC, in consultation with the Director of the International Development Cooperation Agency (IDCA), should undertake, in conjunction with the primary U.S. export-oriented agencies, a concerted effort to further identify the specific areas and means by which U.S. foreign investments can significantly stimulate U.S. exports. They should also improve OPIC project selectivity, by requiring that more consideration be given in the OPIC analysis of proposed "trade exception" cases to: (1) strengthening its procurement requirements to include production inputs as well as initial procurement; (2) comparing U.S. with other industrialized nation trade benefits from U.S. foreign investments; and (3) examining long-term effects of possible technology transfers. The President of OPIC and the Director of IDCA should establish a more active role for AID in screening trade exception cases for possible conflicts with development objectives and devising guidelines and criteria for analyzing these cases.

    Agency Affected: United States International Development Cooperation Agency

  8. Status: Closed

    Comments: GAO has no information on the actions taken in response to this recommendation.

    Recommendation: The President of OPIC, in consultation with the Director of the International Development Cooperation Agency (IDCA), should undertake, in conjunction with the primary U.S. export-oriented agencies, a concerted effort to further identify the specific areas and means by which U.S. foreign investments can significantly stimulate U.S. exports. They should also improve OPIC project selectivity, by requiring that more consideration be given in the OPIC analysis of proposed "trade exception" cases to: (1) strengthening its procurement requirements to include production inputs as well as initial procurement; (2) comparing U.S. with other industrialized nation trade benefits from U.S. foreign investments; and (3) examining long-term effects of possible technology transfers. The President of OPIC and the Director of IDCA should establish a more active role for AID in screening trade exception cases for possible conflicts with development objectives and devising guidelines and criteria for analyzing these cases.

    Agency Affected: United States International Development Cooperation Agency: Overseas Private Investment Corporation

 

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