House Sets Vote on Plan to Double Funding for Global Infrastructure Projects

Overview

In an apparent bipartisan push, the proposed International Development Finance Corporation (IDFC) is set to receive an annual budget of $60 billion to invest in equities in developing countries. The Overseas Private Investment Corporation (OPIC) was the previous body in charge of US commercial lending to the developing world, but it was only limited to investing in debt.

Analysis

The IDFC, along with its subsidiary “Indo-Pacific Economic Vision” announced in July, is a clear response to the Belt and Road Initiative, but it may be tricky to match the BRI’s existing scale and foundation. While the volume of money isn’t always everything, China has spent $100 billion a year on the BRI for several consecutive years already, establishing infrastructure nodes throughout areas crucial to Beijing’s interests.

The areas where the BRI has already rooted itself in are unlikely to be overtaken by the IDFC (Central Asia, Sri Lanka, Pakistan and West Africa to name a few), but the US can certainly expand its investment in the places where it already has warm ties and other countries that might be on the fence with China.

The key aspects to watch are whether the IDFC will receive an increase in its funding over time, and how China potentially reacts – especially if the US begins to encroach on China’s ‘territory’ in the BRI. Let us also not discount China from welcoming development investment for the purposes of positive optics – the telling signs will be how it manages, accelerates, and expands its projects.

Not to be Forgotten

Outside of China and the US, this can be highly advantageous for countries who may find themselves in a unique position where two economic superpowers are willing to invest in them. While this is certainly part of the global power struggle between China and the US (which can be high-stakes and dangerous to some players), positive competition can still yield massive benefits.