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The American Development Finance Corporation (DFC) office, announced to open in Belgrade, was established with the adoption of the Best Use of Development Investment Loans Act (or Bild Act) in October 2018 He began working in the United States on January 2 of this year. The Bild Act is a key pillar of the new American strategy to finance development abroad. It is considered to be the most significant change in the US foreign aid system in this century and a key tool in opposing China, Ivan Nikolić of the Economic Institute told “Politika”.
In the formal sense, the DFC is the successor to the powerful OPIC, an agency of the US government that has existed since 1971 and was formed to support (secure) investment by the US private sector in developing countries. and integrates the activities of the US Agency for International Development Credit. (YOU SAID).
Therefore, the United States Development Finance Corporation has an even stronger development mandate than OPIC. New development opportunities include increased financial capacity ($ 60 billion, as opposed to OPIC’s $ 29 billion), greater emphasis on inter-agency cooperation, greater flexibility to work with non-U.S. Companies, equity financing competencies, and the ability to grant loans and guarantees. in local currency to protect investors from currency exchange risk.
The decision to locate the DFC office in Belgrade shows the determination of the United States to strengthen economic and political ties with the region, create opportunities for American companies and, more specifically, oppose the growing influence of China in the region.
– The region thus becomes an economic testing ground for a practical test of the global influence of the biggest. The condition we secretly desired. The balance can be dangerous, but it creates an exceptional development opportunity that should not be missed, believes Nikolić.
Criticism of Beijing’s global investment, including its Belt and Road initiative, has risen dramatically in Washington in recent years, making it an important dimension of the Sino-American rivalry. Many developing countries in Asia, Africa, and more recently Europe, including Latin America, have benefited from the influx of Chinese money, which helps them finance cheaper projects with fewer restrictions. The fact is that American financing is not that efficient, it cannot match the Chinese globally in terms of financial capacity, because the amount of funding for infrastructure in the “Belt and Road” project exceeded $ 1.3 billion, but, according to DFC management, it competes with higher standards and better bottom line results.
The Trump administration’s approach in an effort to facilitate and encourage US private companies and others to invest in the region through loans, bilateral dialogues, and technical assistance is undoubtedly the best tool at their disposal to respond to the Chinese influence, says Nikolic. But it must be implemented quickly and efficiently. Decades have passed since the beginning of the transition, the level of citizens in the region has remained low, with no prospects of catching up with the eurozone average in the near future. Unlike China, the US government cannot order state-owned companies to invest abroad or require banks to make loans to companies in certain markets.
This approach has other limitations. DCF projects must undergo financial, environmental and social impact analysis to ensure that they meet internationally recognized standards. Even in the Western Balkan region, many utilities and other potential borrowers are not eligible due to lack of creditworthiness. Due to stricter social and environmental standards, DFC loans will inevitably continue to slow down, deterring some investors. In contrast, Chinese banks and companies tend to have more lenient standards, non-transparent contracts, and often charge for projects without practicing due diligence …
How Russia’s Claim Against “Putnik” Became The US Government Agency Claim
The example of the privatization of the company “Putnik”, which was bought by the Russian company “Uniworld”, shows how Russian claims can be converted into American ones under the system that DFC has presented to us. When the Privatization Agency terminated the contract, “Uniworld” initiated proceedings before the International Court of Arbitration, which refused to terminate the contract. As, despite the international arbitration decision and the government’s conclusion, it was unable to collect the money from the agency, “Uniworld” appealed to OPIK, which paid the full amount of the debt in March 2008. Thus, the claim of Univorld against the Privatization Agency became the claim of the agency of the United States Government against Serbia, and the case was reported to the Political Risk Insurance Agency of the governments of all OECD countries, the Agency Multilateral Investment Guarantee, which is part of the World Bank, private insurance companies and the United States Congress and relevant agencies of the EU member states. During 2009 and 2010, OPIK repeatedly unsuccessfully turned to the Privatization Agency, the Ministry of Economy and Regional Development and the Ministry of Finance, only to be solved many years later. However, Serbia has suffered enormous damage and has been anathematized by relevant international institutions as a country with high investment risks.
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