If last night's SOTU was, as expected, short on development, at least the Obama administration finally made good on last year's SOTU promise to try to consolidate the government agencies that work on economic promotion. (I say "try" since the request is simply for fast-track authority; no plan has actually been revealed yet.) I'm torn on what I've been hearing so far:
The Good News: Consolidation is absolutely necessary and the ideas are fairly bold. Too many of the government's tools are spread across too many agencies and putting them under one roof could bring lots of savings and benefits (as I've argued here).
The Bad News: The proposed new (still unnamed) Super-Agency, if it includes OPIC as most reports suggest, could suffocate one of the government's most innovative development agencies. OPIC has its own governance structure, is cashflow positive (+$269 million last year), and operates relatively autonomously, all of which give it speed and flexibility that is unique among federal agencies. (And one reason OPIC is so often the "deliverable" at a big summit when we have no new money.) If the new super-structure just absorbs OPIC into the Commerce Department and its programs become like the dreaded Energy Dept Loan program, that will be its death (Solyndra, anyone?).
The Worse News: The mandate of the new Super-Agency will undoubtedly be domestic job creation and export promotion. But OPIC is built for something different: to promote development by supporting U.S. investors and building markets abroad¬. These are completely different agendas -- it makes little sense to lump them together. Unless the development mandate can be protected, we will be killing one of our only private sector tools at a time when emerging markets are looking to transition from aid to investment and when China and other new creditors are providing this type of capital.
So now what? I don't see how anything meaningful will happen before the November election, but here are two options that make sense:
1. Keep OPIC Apart. Ideally, OPIC would be excluded from the consolidated Super-Agency, and the relevant parts of USTDA, USAID, and other agencies that also focus on overseas private sector development would be moved to OPIC as part of the reorganization. OPIC would keep its current mandate and governance structure, but acquire added capacity and authorities, such as equity and more flexible terms to allow American investors to better compete globally and to assist countries in graduating away from aid. It could even be called, oh I don't know, how about the U.S. Development Bank?
2. Protect OPIC's Autonomy Within the New Agency. If the die is already cast and all agencies are going to be merged, some structure should be found to maintain OPIC's mandate and autonomy. This would mean, at a minimum: splitting the proposed trade and investment bureaus into separate components with their own governance structures. The Super-Agency could even have separate "banks" within it, perhaps:
- Infrastructure Bank (for domestic investment)
- Small Business Bank (SBA programs)
- Trade Finance Bank (ExIm)
- Overseas Development Bank (OPIC plus, along the lines of my USDB proposal with Ben Leo)
Whether the final outcome is positive or negative for development depends on the administration separating its export promotion and overseas investment agendas, and finding a structure where the former doesn't swamp the latter. Seems like we have still have time to get this right.