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Workers construct a culvert along the Nampula – Rio Ligonha Road in Northern Mozambique as part of MCC's Rehabilitation and Construction of Roads Project.

Jake Lyell for MCC

The Better Utilization of Investments Leading to Development (BUILD) Act passed the House in September 2018 and the U.S. Senate in October 2018, and was signed in to law by the President on October 5, 2018. The BUILD Act will promote lasting economic growth in developing countries, which is key to continued American prosperity and national security.

How Would the BUILD Act Work?

The BUILD Act will better incentivize and leverage private sector investment in developing countries, making it easier for American businesses and institutional investors to work abroad in developing economies. The new IDFC will modernize America’s development finance tools so that they work more effectively with private sector counterparts by granting the IDFC authority to make equity investments, offer guarantees, and invest in local currency. The BUILD Act will increase OPIC’s funding cap, while maintaining a funding model that does not add costs to U.S. taxpayers.

Passage and implementation of the BUILD Act will make the U.S. more competitive within the international development landscape, where new actors have appeared and new challenges have emerged from authoritarian regimes over the last decade due to global growth. Other bilateral and multilateral donors have long had most of these authorities, with EU donors now advancing even further with the introduction of the European Union’s External Investment Plan (EIP). EIP is designed to encourage private investors to contribute to sustainable development in countries outside of Europe. The EU has committed €4.1 billion via guarantees, grants, and capital. It expects that its commitment will leverage more than €44 billion of investments by 2020. In the context of the BUILD Act, MCC—with our grant-based model, emphasis on private sector leveraging, and no-year funding—is authorized to fulfill a role in U.S. development finance that is much like the EIP, complementing other OPIC finance tools.

Where Does MCC Fit In?

MCC fits into the BUILD Act in three key ways. The new IDFC will:
  • Coordinate with MCC on its development policies and implementation efforts.
  • Utilize MCC’s relevant data for identifying a country’s key growth sectors, assessing the enabling environment for public private partnerships, and identifying investment opportunities where public and private interests overlap.
  • Consult MCC’s time-tested Constraints Analysis on the binding constraints to economic growth as a source of information to help inform the decisions of the IDFC.
In these ways and more, MCC provides the IDFC with a strategic development partner. MCC and IDFC, when operating in a coordinated manner within MCC countries, will provide the United States with development finance capabilities that match those now employed by other donors, allowing the U.S. to maintain global leadership. MCC programmatic activities, such as infrastructure grants tied to investor-friendly policy reform, offer a toolkit of synergies that will provide the IDFC with a competitive development advantage as no other global development player can.

MCC’s expertise in basing decisions on evidence and economic analysis, leveraging private sector investment, and incentivizing policy and institutional reforms position the agency to make significant contributions to the overall impact of the BUILD Act, the IDFC, and the ability of U.S. assistance to create jobs, expand markets and reduce poverty through economic growth.