Opening Statement of Congressman Brad Sherman
Chairman, Subcommittee on Terrorism, Nonproliferation and Trade
The Reauthorization of OPIC
May 24, 2007
I am pleased to call to order the hearing today on the Reauthorization of the Overseas Private Investment Corporation (OPIC).
OPIC's primary mission is to promote economic development by assisting U.S. businesses to responsibly invest abroad in developing nations. Equally important is OPIC's ability to use its programs to promote core, internationally recognized labor rights, to guarantee environmental protection, to reach out to small and medium sized businesses, to create U.S. jobs, and to increase U.S. exports, while having no net cost to the federal government. I hope to convince the agency to take on the additional responsibility of deterring investment in the terror sponsoring states of Iran, Sudan, and North Korea. It is a tall order, but I am confident that OPIC will take these mandates as seriously as it has previous Congressional priorities.
OPIC and National Security Objectives - Confronting Corporate Investment in Rogue Regimes
As noted, one of my priorities for this hearing is to encourage the adoption of mechanisms to screen OPIC's corporate applicants on the basis of their involvement in rogues states such as Iran, Sudan and North Korea. I expect that this would have only a very limited impact on OPIC's programs, as only a handful of companies would be affected. Only a handful of companies that have benefited from OPIC's programs have operations, investments or have done business in, or with, these countries.
In addition to a moral imperative - prohibiting taxpayer assistance from going to those who assist our enemies - such a policy could be an important component of our larger effort to discourage corporate investment in Iran, Sudan, and North Korea. It could serve as a model to be employed across government programs that benefit corporations, including especially procurement.
Most direct beneficiaries of OPIC's programs are American companies. Most of these firms are prohibited from doing business directly with these worst of regimes by American sanctions. But some American firms do business with these countries through their foreign subsidiaries. Also, OPIC-supported projects often involve an American beneficiary working in consortium with various foreign firms, some of which may be doing business with these states. These foreign firms may end up being significant, if indirect, beneficiaries of OPIC.
I hope to use this hearing to determine what level of corporate investment should disqualify a firm from OPIC's programs, and how low to set the bar in cases where the indirect beneficiaries may be doing business with our enemies.
Working for Small Businesses
It was only a decade ago that Congress demanded an accounting of OPIC's failure to work with small and medium sized businesses. At that time, over 80 percent of their work was with large corporations. My colleagues and I asked OPIC to change course. I was particularly concerned that smaller businesses were being shut out of OPIC by needlessly complicated paperwork and bureaucracy. I am pleased to see that OPIC took our concerns seriously. OPIC's management set up a Small and Medium Enterprise Finance Department (SMEF), to assist with applications for direct loans, and the agency worked to reverse the trend seen a decade ago. Today, over 80 percent of OPIC's projects are with small and medium sized businesses. Consistent with this trend, I also expect to see a rise in the percentage of the value of loans and insurance projects that go to small businesses in the next few years.
Standing Up for Labor Rights
At the core of OPIC's mission is promoting responsible investment which guarantees that internationally-recognized labor rights are respected. But, it goes beyond that. OPIC is also charged with certifying that its projects do not outsource American jobs, and I am particularly cognizant of OPIC's impact on our trade deficit.
Given the current Administration's lax treatment of labor rights violations and its complete unwillingness to address our mounting trade deficit, I am eager to learn whether the steps taken by OPIC are adequate.
Protecting the Environment
OPIC's mandate certainly dovetails with the growing international movement toward "going green." In the last few years, the agency decreased its emphasis on oil and gas projects and put forward a new initiative on improving transparency of OPIC's environmental program is also underway. Despite these success stories, more needs to be done to meet today's challenges. The agency needs to focus more on renewable energy, combating global warming, and consensus building with indigenous communities. I look forward to hearing recommendations today on how Congress should direct OPIC to best address these environmental goals.
Mechanisms to Increase Funding
Given the challenges that I expect OPIC to meet in the coming years, I believe that its important that we explore mechanisms that allow the agency to retain a greater share of its profits, not as a cash horde, but to allow OPIC to aide more projects, and to require as smaller fee from projects of special merit. More capital will fund greater investment and allow the agency to take on a broader array of issues, including growing U.S. exports, improving enforcement of labor standards, protecting the environment, and deterring investment in State Sponsors of Terrorism.
Conclusion
There are two camps - which are polar opposites on the issue of reauthorizing this agency. There are those who believe no changes should be made, and there are a handful of individuals who - for ideological reasons - believe that we should eliminate OPIC. I am in neither camp. I believe that we should take this opportunity to improve OPIC and ensure that it is staying true to its mandate.
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