Reauthorize BUILD Act to Strengthen US Leadership, Global Stability

By Ted Yoho and Daniel F. Runde | June 13, 2024

One of former President Donald Trump's foreign policy legacies is coming up for reauthorization in 2025. The BUILD Act was the most significant reform to U.S. foreign assistance in two decades. It passed with strong bipartisan and bicameral support in a Congress not known for working together.

Both Republicans and Democrats in Congress should support the reauthorization of the BUILD Act because it helps create footholds for the American private sector in future markets and provides developing countries with an alternative to Chinese government financing.

The House Foreign Affairs Committee introduced the BUILD Act in 2018, which paved the way for the establishment of the U.S. International Development Finance Corporation (DFC). DFC operations officially began in December 2019 as an instrument to counter China's growing global influence.

Many challenges in developing countries need the private-sector-led development that the DFC specializes in, such as closing the digital divide, supporting entrepreneurs, and ensuring jobs for the youth bulge in Africa and Central America's Northern Triangle. Traditional foreign aid grants are still an important tool, but the private sector plays a central role in long-term economic growth.

The DFC enables private investment that might not otherwise happen.

It is crucial to recognize that advancing American foreign policy is not a zero-sum game and that our national security is linked to a more prosperous and secure world. It is in our enlightened self-interest to see developing countries trade with us.

China continues to eat our lunch in emerging markets. China offers quicker financing and no-questions-asked infrastructure projects in Southeast Asia, Africa, and Latin America. America and our allies cannot run away when China is involved in a project and cannot just tell developing countries, "Don't take the Belt and Road money from China."

We need to enable an alternative. The DFC has helped respond to these challenges.

The DFC has accomplished a lot. Its investment portfolio hit $41 billion spanning 112 countries and in the most recent fiscal year, DFC committed to $9.3 billion in 132 transactions. More than 70% were in low-income or lower-middle-income countries, and Africa has become the largest part of the DFC's portfolio.

The DFC has also taken on projects that have a strategic value. DFC, in partnership with Australia's Department of Foreign Affairs and Trade and Export Finance Australia and the Japan Bank for International Cooperation, provided financing and credit guarantees for Telstra to acquire Digicel's network in the Pacific Islands.

This prevented the Chinese from getting the network and guaranteed a safe and secure 5G upgrade. Any reauthorization of the BUILD Act by Congress should consider the following:

  • First, it is crucial to address the challenge of "scoring equity" within the DFC's funding mechanism. This accounting issue is eye-glazing in its complexity and transcends the conventional jurisdiction of the DFC's oversight committees. Resolving it will likely require a broader consensus among congressional leadership along with the OMB director and may involve key DFC board members, including the secretary of state. Equity investments by the DFC are currently treated like grants in our budget and require $1 of grant money, which are drawn from America's limited foreign aid budget.

  • Second, the DFC needs an explicit mandate to actively finance the energy transition. Since the Bush administration, there has been an increasing bias against oil and even natural gas projects. This is a mistake and nearsighted. The goal should be to empower developing countries to build the proper infrastructure that fulfills their needs and uses their assets most effectively. One cannot build an economic base without a secure, reliable, dependable, and affordable energy source. Current green energy technologies cannot fulfill this demand. Energy development in the developing country should consider what resources are most in abundance and use them in the most efficient and environmentally effective method.

  • Third, the DFC should adopt a more aggressive approach toward strategic mining and mineral projects. A global shift toward carbon neutrality requires a two- to threefold increase in mining activities. It is a national security imperative that the American people have an alternative to China's current dominance in the critical minerals sector, essential for electric vehicles and other future technologies. America should not be dependent on rare/critical minerals from any country, especially one viewed as our greatest economic and perhaps future military adversary. Therefore, mining operations must be expanded in Latin America, Southeast Asia, Africa, and Ukraine.

  • Fourth, the BUILD Act should reinforce the DFC's role in addressing sovereign debt crises. The DFC's strategic involvement could prove decisive as global debt concerns escalate, particularly in emerging markets.

  • Fifth, the original BUILD Act explicitly called for the establishment of new "enterprise funds." The first Bush administration, and the Clinton and Obama administrations used enterprise funds in various parts of the world, which proved to be useful in supporting economic development. Now would be the time to start new enterprise funds in the Northern Triangle of Central America, the Pacific Islands, Armenia, and subregions of Southern Africa, West Africa, and East Africa.

  • Sixth, country eligibility should be increased from just low to middle-income countries to middle and even upper-income level countries. This is particularly felt in Latin America, where the DFC has been hampered in its ability to operate because of eligibility issues. The DFC needs a separate regional fund to counter China's growing presence. The Americas Act introduced by Sen. Bill Cassidy, R-La., precisely hopes to create a "Build Americas Unit" within the DFC, with access to its borrowing authority and development finance tools to strengthen U.S. collaboration with the Western Hemisphere.

  • Seventh, the DFC's lending ceiling (its "credit card limit") should be strategically raised to a higher level from its current level of $60 billion. The current infrastructure financing gap worldwide is estimated to reach $15 trillion by 2040, and China has already spent more than $1 trillion on the Belt and Road Initiative (BRI).
    In these tense geopolitical times, there is no time for hesitation in making the DFC an even more powerful and efficient tool for U.S. soft diplomacy. Failure to reauthorize the BUILD Act effectively would send a signal of weakness and uncertainty of America's leadership to our allies and adversaries. If we truly have a goal to move countries from aid to trade to build stable, strong governments that will align with the U.S., then the BUILD Act should be reauthorized with these adjustments by a bipartisan U.S. Congress.

Ted Yoho is a former Republican congressman from Florida who served on the House Committee on Foreign Affairs and was former chair of the Subcommittee on Asia and the Pacific of the House Committee on Foreign Affairs. He co-sponsored the BUILD Act in 2018.

Daniel F. Runde is a senior vice president, William A. Schreyer chair, and director of the Project on Prosperity and Development at the Center for Strategic and International Studies (CSIS) in Washington, D.C. He is also the author of "The American Imperative: Reclaiming Global Leadership Through Soft Power" (Bombardier Books, 2023).

Ted Yoho