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THE IMPACT OF THE WORLD BANK 

AND MULTILATERAL DEVELOPMENT 

BANKS ON U.S. JOB CREATION 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

INTERNATIONAL MONETARY 

POLICY AND TRADE 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

JULY 27, 2011 

Printed for the use of the Committee on Financial Services 

Serial No. 112–52 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

SPENCER BACHUS, Alabama, Chairman 

JEB HENSARLING, Texas, Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

ROBERT HURT, Virginia 

ROBERT J. DOLD, Illinois 

DAVID SCHWEIKERT, Arizona 

MICHAEL G. GRIMM, New York 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

BARNEY FRANK, Massachusetts, Ranking 

Member 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

ANDRE ́ CARSON, Indiana 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

LARRY C. LAVENDER, Chief of Staff 

(III) 

SUBCOMMITTEE ON INTERNATIONAL MONETARY POLICY AND TRADE

GARY G. MILLER, California, Chairman 

ROBERT J. DOLD, Illinois, Vice Chairman 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

BILL HUIZENGA, Michigan 

CAROLYN MCCARTHY, New York, Ranking 

Member 

GWEN MOORE, Wisconsin 

ANDRE ́ CARSON, Indiana 

DAVID SCOTT, Georgia 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

July 27, 2011 ..................................................................................................... 1 

Appendix: 

July 27, 2011 ..................................................................................................... 37 

WITNESSES 

WEDNESDAY, JULY 27, 2011 

Hardy, John, President, The Coalition for Employment Through Exports 

(CEE) ..................................................................................................................... 14 

Harmon, James A., Chairman, Caravel Management LLC, and former President, Export-Import Bank of the United States ................................................ 10 

Kolbe, Hon. James T., former Member of Congress, and Senior Transatlantic 

Fellow, The German Marshall Fund of the United States ............................... 6 

Leo, Benjamin, Research Fellow, Center for Global Development, and former 

Treasury Department and National Security Council official .......................... 12 

Mosbacher, Robert, Jr., Chairman, Mosbacher Energy Company, and past 

President and CEO, Overseas Private Investment Corporation ...................... 8 

APPENDIX 

Prepared statements: 

Hardy, John ...................................................................................................... 38 

Harmon, James A. ............................................................................................ 42 

Kolbe, Hon. James T. ....................................................................................... 46 

Leo, Benjamin ................................................................................................... 50 

Mosbacher, Robert, Jr. ..................................................................................... 55 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Miller, Hon. Gary G.: 

Letter in support of the MDBs from the Business Roundtable, et al. ......... 58 

Written statement of Philips Electronics North America ............................. 59 

(1) 

THE IMPACT OF THE WORLD BANK 

AND MULTILATERAL DEVELOPMENT 

BANKS ON U.S. JOB CREATION 

Wednesday, July 27, 2011 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON INTERNATIONAL

MONETARY POLICY AND TRADE, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:17 p.m., in room 

2128, Rayburn House Office Building, Hon. Gary G. Miller [chairman of the subcommittee] presiding. 

Members present: Representatives Miller of California, Dold, 

Manzullo, Campbell, Huizenga; McCarthy of New York, Moore, 

Carson, Scott, and Perlmutter. 

Also present: Representative Green. 

Chairman MILLER OF CALIFORNIA. The hearing will come to 

order. Without objection, all members’ opening statements will be 

made a part of the record. On the opening statements, we have 

agreed to a limit of 10 minutes for each side, as previously agreed 

to with the ranking member. 

Today’s hearing is focused on the impact of the World Bank and 

the multilateral development banks on U.S. job creation. This is 

the second hearing in our subcommittee’s consideration of authorization for the World Bank’s regional multilateral development 

banks, or MDBs. 

The United States is a lead shareholder at the World Bank and 

at regional MDBs. The Administration has requested contributions 

to the capital at these institutions, and has argued that such contributions are important to retain our leadership and position. 

The hearing today will focus on how World Bank and MDBs assistance to middle-income and poor countries around the world contributes to the U.S. employment base. Through the development activities, MDBs help contribute to stability around the world, opening up markets for companies to engage. 

By ensuring the global environment is stable, American companies can thrive and contribute to robust economic growth. Half of 

all global growth is expected to be in the developing world, which 

is estimated to lead to over $3 trillion in infrastructure spending. 

With MDB support, the developing world can be a source of economic growth and opportunity for American businesses. 

MDBs also provide poor countries across Africa a nation alternative to China for development finance and natural resource deVerDate Nov 24 2008 17:40 Dec 08, 2011 Jkt 067947 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\67947.TXT TERRIE
2 

velopment, allowing American companies access to these markets. 

Our subcommittee is interested in learning about how these MDBs 

help open markets and spur private sector-led economic growth and 

employment in the United States. 

We want to explore how the U.S. leadership position at these institutions provides benefit to U.S. job creation. We also want to 

hear about the potential consequences, if any, for its economic interest of a delay or reduction in paying what is committed to these 

institutions. 

Specifically, we would like the witnesses to discuss the impact 

MDBs have on the U.S. economy and U.S. job creation, the economic benefit to U.S. companies of U.S. membership in MDBs, how 

the MDBs help open markets and spur private sector-led economic 

growth and employment in the United States, and the consequence 

for global and U.S. economic interests of any reduction in the 

amount requested by the Administration for the MDBs or a delay 

in meeting the U.S. commitment to the MDBs. 

We cannot lose sight of the fact that these requests are coming 

at a time when our country must focus on getting our own massive 

debt under control. While the United States has a vital interest in 

continuing to assist emerging economies, improve economic, political and social reforms, we cannot overlook the costs. 

During these economically challenging times, Congress must continue to make the difficult choices necessary to reduce the debt and 

grow our economy. The American people are demanding that their 

government learn to live within its means and stop spending borrowed money. 

The fact is, we simply cannot continue to borrow 40 cents on the 

dollar, and pass on the debt to future generations to repay. We 

must prioritize Federal dollars to ensure essential needs are provided for, and do more with less just as American families and 

small businesses have had to do during these lean economic times. 

It is with these financial constraints at the forefront of our minds 

that this subcommittee will assess the Administration’s request for 

funding. It is important for us to understand the benefit to the U.S. 

economy and job creation of continuing to assist emerging economies in implementing economic, political, and social reforms. 

Before we act, we want to understand clearly the consequences 

to U.S. economic interests from any delay or reduction in the 

amount requested by the Administration. Since accepting the gavel 

for this subcommittee, I have said that our agenda will focus on 

four things: job creation; global competitiveness; economic growth 

and stability; and protecting taxpayers. 

This is the lens under which we review the Administration’s request for funding for MDBs. Our ultimate goal is to promote favorable conditions around the world for American companies in order 

to increase U.S. exports, and thereby create jobs in the United 

States. 

I now yield to the ranking member for 5 minutes. 

Mrs. MCCARTHY OF NEW YORK. Thank you, Chairman Miller, for 

holding this hearing and examining the important role the World 

Bank and multilateral development banks play in the developing 

world, and why the United States’ continued commitments to these 

institutions is so important for us. 

3 

Today, we will examine the role these institutions play in the 

global economy as well as the U.S. economy. Emerging markets in 

developing countries provide economical growth opportunities for 

U.S. businesses and U.S. exports. Recently, during a speech before 

the U.S. Global Leadership Coalition in Washington, D.C., Secretary of State Clinton said, ‘‘The growth of the developing world 

presents a major economic opportunity for America businesses 

today, and a thousand opportunities for tomorrow.’’ 

MDBs play a crucial role for developing countries, providing assistance to weak and fragile states to promote democracy. This 

helps advance our national security efforts and creates stable markets and fiscal prosperity. Empowering a country to move from 

poverty to a global middle class forces a desire and a need for 

American products, and provides an opportunity for U.S. businesses and U.S. job growth. 

For example, products we take for granted such as phones and 

computers are being rapidly adopted by the developing countries. 

The United States has played a leadership role in crafting a policy 

agenda to ensure our financial contributions will be leveraged by 

other donors and borrowers, and that investments may be made to 

institutions directly that support our priorities. 

If we do not maintain our leadership role, other global competitors such as China, who will not share our values, will undo the 

good reform work that has been adopted in these institutions. 

MDBs provide support in the areas of education, health, agricultural development, infrastructure development, and humanitarian 

relief. 

As well, the institutions work to strengthen principles of good 

governance, fight corruption, and encourage human rights standards. By fulfilling our commitments to the MDBs, we remain globally competitive and strive to build a safer and a better world. 

I recognize that we are faced with extremely difficult financial 

challenges in this country. As we work to address these challenges, 

we must remain committed to our economic recovery, and our participation in these institutions will allow us to do that. I would like 

to thank the witnesses for being here today, and I look forward to 

hearing your testimony. 

With that, I yield back. 

Chairman MILLER OF CALIFORNIA. Vice Chairman Dold is recognized for 3 minutes. 

Mr. DOLD. Thank you, Mr. Chairman. I want to thank you for 

calling this important hearing. And I certainly want to thank the 

witnesses for your time and your testimony here today. 

Since coming to Congress, my primary focus has been on improving the environment for job growth and economic expansion. And 

I hope we have broad bipartisan agreement that fully funding our 

commitments to the multilateral development banks will promote 

job growth and economic expansion, as well as also promoting our 

Nation’s strategic security interests. 

I believe that President Obama, congressional Democrats and Republicans, military leaders, and business leaders all agree on these 

points. However, many Americans and some politicians might not 

appreciate the value that Americans receive from our MDB leaderVerDate Nov 24 2008 17:40 Dec 08, 2011 Jkt 067947 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\67947.TXT TERRIE
4 

ship. And there seems to be a misimpression about how much 

money we spend on foreign aid and on MDBs. 

According to a recent poll, Americans believe that the Federal 

Government spends approximately 25 percent of its budget on foreign aid. And then that same poll indicated that Americans would 

prefer if we only spent approximately 10 percent. The good news 

is that we really only spend approximately 1 percent of the Federal 

budget on foreign aid, and only a small fraction of that would be 

to fully fund the MDB commitments. 

So the fact is, our MDB spending is far less than many Americans believe. And we cannot have any meaningful impact on our 

deficits and our national debt by failing to fully recapitalize these 

obligations. But in this economy and in this budget environment, 

every dollar counts, and Americans are entitled to ask what value 

we receive for these contributions. 

How effectively does our MDB leadership promote job growth 

and economic prosperity right here in the United States? And that 

is why this hearing is so important. Our military leaders have repeatedly told us that our MDB leadership makes our Nation safer 

and more secure. 

But our business leaders have also emphasized the vital importance of our MDB participation in promoting our own export markets, domestic economic prosperity, and domestic job growth. So I 

look forward to hearing our witnesses elaborate on how we can, 

with relatively little in terms of an investment, promote economic 

prosperity and job growth right here in the United States. 

And with that, I yield back, Mr. Chairman. 

Chairman MILLER OF CALIFORNIA. Mr. Carson is recognized for 

5 minutes. 

Mr. CARSON. Thank you, Mr. Chairman. Thank you. I want to 

first thank the Chair for holding this hearing, as clearly the World 

Bank and multilateral development banks are important aspects of 

combating poverty in developing countries, and our influential entities throughout the world. 

Strategies and tactics employed by the Bank and MDBs are of 

utmost importance, especially when implementing programs that 

could influence job creation in up-and-coming economies, as well as 

the United States. I am interested today in learning more about 

how the process by which the World Bank and MDBs are providing 

loans and grants for development projects in various countries, and 

how these processes can be improved upon, as this will only benefit 

U.S. markets. 

I understand that any project supported by an MDB must use an 

open procurement process devoid of any corruption. I would be interested in learning how exactly that is achieved, and how many 

more of these major infrastructure projects U.S. firms have won 

through the open bidding process. 

I believe there is much potential here for significant job growth. 

The United States is, indeed, the largest shareholder at each of the 

MDBs, and as a result of their large capital base, each of these 

banks holds a triple-A credit rating. As such, they are able to borrow at favorable rates in the private markets. 

However, as we grow near to the ever-looming August 2nd date 

Treasury has given us, how do you believe the potential for default 

5 

will impact not only the credit rating of the MDBs, but also our 

very own credit rating, especially as credit rating agencies are 

threatening a U.S. credit downgrade? 

During the economic crisis, private institutions sharply reduced 

lending to these developing countries and MDBs increased their 

lending to these nations which, in turn, depleted their capital. I am 

interested in knowing how negotiations to increase MDBs’ capital 

are proceeding, and what headway has been made. 

The United States continues to face a growing deficit. We want to ensure that the Administration’s $3.3 billion funding request has 

adequate oversight and will be going to service things that actually 

fit. Finally, I do not agree that investments in MDBs and a strong 

World Bank help to advance the national security and economic interests of the United States. 

We want to ensure that the money procured is actually going to 

the promotion of national security initiatives, preventing and mitigating financial instability as well as creating markets for varying 

forms of viable employment. Again, I am pleased the chairman has 

hosted this and I look forward to hearing your testimony. 

Thank you. 

Chairman MILLER OF CALIFORNIA. Thank you. I would like to 

welcome our panel of witnesses today, and introduce them to the 

public. 

The Honorable James Kolbe—it is good to have you back here 

again—was a Member of Congress for 22 years, and served as 

chairman of the House Foreign Operations Subcommittee on Appropriations for 6 years. He is currently senior transatlantic fellow 

with the German Marshall Fund of the United States. He advises 

on trade matters and the effectiveness of U.S. assistance to foreign 

countries. It is good to have you back. 

Mr. Robert Mosbacher, Jr., is chairman of Mosbacher Energy 

Company and past president and CEO of the Overseas Private Investment Corporation, OPIC. 

Mr. James A. Harmon is chairman of Caravel Management, and 

chairman of the board of the World Resource Institute, WRI. Mr. 

Harmon is past president and CEO of the Export-Import Bank of 

the United States. It is good to have you here. 

Mr. Benjamin Leo is a research fellow at the Center for Global 

Development. Mr. Leo has extensive experience in these issues 

through service to the White House, in the private sector, and at 

the Treasury Department. Prior to joining the Center, Mr. Leo 

worked at the White House National Security Council as the Director of African Affairs. Mr. Leo has also held a number of roles at 

the U.S. Treasury Department, focusing on development finance in 

Africa. 

And finally, Mr. John Hardy is president of the Coalition for Employment through Exports, CEE. Mr. Hardy has spent his career 

both in the government and the private sector in the export, promotion, and project and trade financing sector. Mr. Hardy served 

as Deputy Director, then acting Director, of the Trade and Development Agency, before managing the private sector investment fund 

at the Agency of International Development. 

Without objection, your written statements will be made a part 

of the record, and each of you will be recognized for 5 minutes. 

6 

Mr. Kolbe, you are recognized. 

STATEMENT OF THE HONORABLE JAMES T. KOLBE, FORMER 

MEMBER OF CONGRESS, AND SENIOR TRANSATLANTIC FELLOW, THE GERMAN MARSHALL FUND OF THE UNITED 

STATES 

Mr. KOLBE. Thank you, Chairman Miller, Ranking Member 

McCarthy, and members of the subcommittee. It is a great opportunity and a pleasure to be back here before this subcommittee and 

this committee in the House of Representatives. 

As you already noted, Mr. Chairman, I did serve 22 years in the 

House. And 6 of those years were as chairman of the House Foreign Operations Subcommittee on Appropriations, the one that was 

responsible for providing the funds for the multilateral development banks, or MDBs. 

During that time, I think I gained a pretty good understanding 

and level of respect for the work these institutions accomplish in 

some of the world’s poorest nations. The MDBs play a role, and fill 

a gap in development assistance—and specifically in economic development—that I think is unparalleled. 

They provide opportunities for developing nations to build economic infrastructure and capacity, create private sector growth in 

supply chains, and reform custom regulations and barriers for economic growth, all of which raise the standard of living in these nations and create new markets and consumers for U.S. companies. 

Ninety-five percent of the world’s consumers, with 75 percent of 

the world’s purchasing power, live outside of the United States. 

The combination of opening markets through trade agreements, 

and building capacity such as ports and roads, bridges, financial institutions, and trade finance provide opportunities for these developing nations to access the global market, and opportunities for developed nations to access new markets and consumers in the developing world. 

As a result, U.S. exports to, and U.S. foreign direct investment 

in, these nations increase when there is a capacity for us to expand 

into these markets. Bob Zoellick, president of the World Bank, recently said, ‘‘Aid for trade—or trade capacity building as we sometimes call it—is a practical example of aid as self-interest, not charity.’’ 

I could not agree more with that statement. There are humanitarian and moral reasons to invest in development assistance, but 

it is important—maybe even crucial—for us to recognize the economic reasons, as well. Investing in the multilateral development 

banks is a step in that direction. 

Brazil, India, Turkey, Colombia, Vietnam, and Indonesia are just 

several examples of countries that have significantly benefited from 

MDBs investments. And, in turn, so has the United States and our 

taxpayers and our consumers. U.S. exports to India have nearly 

quadrupled. Exports to Brazil have more than doubled in the past 

decade. 

Both of these countries were substantial recipients of World 

Bank and regional development bank investments not long ago. 

The United States has increased exports by more than 200 percent 

7 

to some of these nations, with the help of the work that has been 

done by the MDBs. 

In 2008 and 2009, the MDBs played an important role in the 

global economic recovery. With a sharp decline in capital flows and 

trade finance to emerging developing nations, MDBs increased 

their commitments to help stabilize these economies and, in essence, stabilized these countries at a time of global economic instability. 

They were able to fill a gap while the United States and other 

developed nations focused on stabilizing the leading financial institutions. The World Bank continues to support trade flows with 

their global trade finance program and global trade liquidity program. 

Because of their multilateral structure, the MDBs have the 

means to leverage U.S. dollars wisely for effective development assistance. According to the U.S. Treasury, for every dollar the 

United States contributes, the MDBs leverage $25 of multilateral 

development aid. Specifically, the U.S. contribution of $420 million 

to the World Bank has supported $325 billion of investments since 

1988. 

It is hard to imagine another example of such powerful 

leveraging with a contribution of this size. The World Bank’s reach 

is vast. Its International Development Association, or IDA, for example, is one of the largest sources of assistance to the world’s 

poorest countries, impacting 2.5 billion people. 

The ability of these institutions to leverage funds at a large scale 

provides the United States with a greater bang for its buck. At a 

time when fiscal constraints are at a peak, leveraging investments 

and cooperating with multilateral institutions and our allies is as 

important as ever. 

As you mentioned, I serve as the Senior Transatlantic Fellow at 

the German Marshall Fund of the United States, an institution 

that stands as a permanent memorial to the Marshall Plan. The 

goal is to decrease duplication of foreign assistance programs, and 

provide tools to effectively work together on the ground. 

Cooperation with trusted allies allows the United States to maximize development assistance with limited resources. The same is 

true for the MDBs, which were created as a means for nations to 

cooperate and to partner on development and economic priorities. 

And I would add the same is true for partnering with the private 

sector on development assistance, and you are going to hear more 

about that today. 

Countries like China are ready to fill the gaps that the United 

States, Europe, and other multilateral institutions leave open. This 

is occurring in both developed and developing countries. While the 

MDBs create opportunities for U.S. trade and investment, the Chinese provide opportunities for Chinese trade and investment. 

As China’s economic influence grows, so will their overall global 

influence. Let me conclude, Mr. Chairman, by saying that I recognize the very tough budget constraints Congress faces at a time of 

high unemployment, slow economic growth, and the burgeoning 

debt. 

And I do not think that all MDBs are the same. They are not 

all equal. It is the responsibility of this committee to look at them 

8 

very closely and see which ones have been the most successful in 

leveraging those dollars, which ones have been the most successful 

in helping lift these countries out of poverty and into economic 

growth. 

So, I think that the money is really not about development assistance. It is an investment, and I think it is a successful investment. It is aid as self-interest, not charity. I thank you for the opportunity to testify before you today, and I look forward to questions. 

[The prepared statement of Mr. Kolbe can be found on page 46 

of the appendix.] 

Chairman MILLER OF CALIFORNIA. Thank you, Mr. Kolbe. 

Mr. Mosbacher? 

STATEMENT OF ROBERT MOSBACHER, JR., CHAIRMAN, 

MOSBACHER ENERGY COMPANY, AND PAST PRESIDENT AND 

CEO, OVERSEAS PRIVATE INVESTMENT CORPORATION 

Mr. MOSBACHER. Chairman Miller, Ranking Member McCarthy, 

and distinguished members of the subcommittee, thank you very 

much for the opportunity to appear before you regarding the impact of the World Bank and multilateral development banks on 

U.S. job creation. 

As our country struggles with massive deficits and tragically 

high unemployment, it is only natural that someone question the 

wisdom of the United States’ contributions to the World Bank and 

multilateral development banks. Given the fact that MDBs focus 

more on middle- and low-income countries and not the United 

States, the temptation of some might be to cut back on our contributions and to refocus those resources elsewhere. 

And yet such a decision would be extremely shortsighted, in my 

judgment, because it would negatively impact job creation at the 

very time when we are trying to rebuild our economy. 

I spent 28 years helping run a family business, an energy business located in Houston, Texas. And we operate primarily on the 

Gulf Coast of the United States, but we have also done business 

and operated in Los Angeles, North Africa, Asia, and the Asian 

subcontinent. 

Starting in 2005, I served for over 3 years as president and CEO 

of the Overseas Private Investment Corporation, an independent 

agency of the U.S. Government, that operates profitably and helps 

facilitate U.S. private capital investment in the developing world. 

I have had the opportunity to witness firsthand the emergence 

of an interdependent global economy, and observe the critical role 

that the MDBs have played in that growth. And I believe the 

United States in general, and American businesses in particular, 

derive significant economic benefits from the contributions to 

MDBs. 

I urge the Congress to continue that support. There are a few 

statistics I would like to touch on, and by the end of this hearing, 

you will have heard all these 3 or 4 times. But nearly 95 percent 

of the world’s customers, as Jim said, live outside our borders, and 

they have three-quarters of the purchasing power. 

One in three acres of American farmland is planted for consumers overseas. One in five American jobs is related to trade. For 

9 

every 10 percent increase in U.S. exports, there is a 7 percent increase in employment. Over 280,000 small and medium-sized businesses export, and that amount is nearly one-third of all merchandise exports. 

Now, you can ask, what is the role of the MDBs in this scenario, 

and why should taxpayers support them? The answer, very simply, 

in my judgment, is jobs. It is in our own enlightened self-interest 

to access new markets, new customers, and compete on a level 

playing field. 

Half of U.S. exports go to developing countries, and those markets are growing 3 times faster than exports to the other countries. 

We often hear about Brazil, India, and China. But, for instance, the 

53, 54 countries on the continent of Africa will soon represent a 

consumer class of over a billion people. 

The MDBs are the most effective players in opening new markets 

and creating more favorable environments for business growth and 

investment. And using their leverage with governments, derived 

from the loans, and from the financial expertise they provide, the 

MDBs have been instrumental in establishing better governance, 

promoting more transparency in decision-making and bidding, and 

building stronger structures for the rule of law. 

Make no mistake about it. Corruption is and has been a plague 

on African economies, Latin American economies, and Asian economies that are in the emerging markets, and it is a fight day-to-day 

to overcome that. But progress is being made. 

I would like to focus the balance of my remarks on two specific 

sectors in which some of the MDBs have focused great attention 

and have had a hugely critical role in facilitating growth: the first 

is financial services; and the second is infrastructure. With respect 

to financial services, the truth is that most small and mediumsized businesses that will generate the vast majority of jobs—not 

just in this country, but around the world—have no access to credit 

or capital in most of the emerging markets, most of the developing 

world. 

As a result of this, you do not have the growth capacity, you do 

not have the hiring capacity. But most importantly, you do not 

have the capacity to buy U.S. goods and services that would be enabled by having a line of credit at a bank or the capacity to borrow 

money on any kind of a long-term basis. 

In recent years, that has begun to change, largely because of the 

IFC of the World Bank, of the ADB—or the African Development 

Bank, the Asian Development Bank, all of which have supported 

greater access to credit for SMEs with real results. This results in 

SMEs—again, in these countries—beginning to purchase American 

goods and services and products. 

With respect to infrastructure, the absence of sufficient electricity, water, roads, etc., continues to be a huge challenge to the 

developing world in realizing their economic potential. Over the 

next several years, you will see massive investments in infrastructure, and I am thinking particularly about electric power. 

Here again, this represents a wonderful opportunity for American companies to construct dams, to construct power plants, to operate power plants, to sell gear. And this is an opportunity that we 

10 

should not lose. The MDBs are the principal financers of these 

projects, sometimes with commercial banks, sometimes without. 

But they are the lead party. You take them out of the game and 

you leave the Chinese in charge. And with the Chinese comes Chinese political influence, as well as Chinese approaches to transparency in governance, which I do not think most of us support. 

So in conclusion, I urge continued support of the MDBs for a host 

of reasons, not the least of which is the critical role they play in 

helping American businesses sell goods and services to the 95 percent of the world’s customers who live outside our borders. 

More exports, more investment, and freer trade are the only 

ways that we are going to generate the kind of broad-based economic growth and prosperity for our citizens that we all desire. 

Thank you very much. 

[The prepared statement of Mr. Mosbacher can be found on page 

55 of the appendix.] 

Chairman MILLER OF CALIFORNIA. Thank you, Mr. Mosbacher. 

Mr. Harmon, you are recognized for 5 minutes. 

STATEMENT OF JAMES A. HARMON, CHAIRMAN, CARAVEL 

MANAGEMENT LLC, AND FORMER PRESIDENT, EXPORT-IMPORT BANK OF THE UNITED STATES 

Mr. HARMON. Thank you, Mr. Chairman, and Ranking Member 

McCarthy. My goal is to try to make a case without repeating what 

you have just heard, which is all very logical. Plus, they did it in 

the New York style, which was very quick, staccato fashion. And 

that is the challenge I have undertaken in the 5-minute rule. 

First, I want to say that I am particularly proud of Ex-Im Bank. 

During the 4 years I was chairman, from 1997 to 2001, we increased support for exports to Sub-Saharan Africa from $40 million 

the first year to a bit more than a billion dollars in the fourth year. 

The AGOA legislation was helpful. I thought that was a good 

piece of legislation, and that it memorialized the work of the ExIm Bank in Sub-Saharan Africa. My first experience with the 

World Bank was the $3.5 billion Chad-Cameroon project, the largest project finance done in Africa at this time. 

Ex-Im would never have done that were it not for the World 

Bank. We looked to the World Bank to give us comfort in a number 

of different areas. There were controversial aspects to it, but were 

it not for the World Bank, Ex-Im would not have done it. And 

Chevron and Exxon, which invested $3 billion in that pipeline, and 

very significant exports were supported, I give credit to an excellent structure that was created by the World Bank at that time. 

When I graduated from public service—and you should all know 

there is life after public service—we formed a fund to invest in the 

poorest parts of the world. Probably no one has ever testified in 

Congress before who ran a fund that invests in, I will say somewhat sarcastically, failing states. 

But we actually invest throughout Africa, in some of the poorest 

countries there. Also in Pakistan, in Lebanon, and throughout the 

Middle East. Our returns, in 7 years, are a little bit more than 19 

percent compounded annually. And we are buying marketable securities that can be priced every day. 

11 

So therefore, first, you can do well by actually investing in these 

countries. The role of the World Bank and the African Development 

Bank in encouraging us to make these investments, and understanding the countries and the companies, was important. Where 

we saw the World Bank and where we saw the African Development Bank doing work, for example, in a country like Rwanda— 

that encouraged us to take a look at Rwanda. 

Two years ago, we started to invest in Rwanda. We have invested. Rwanda has made remarkable progress in the last 18 

months to 2 years. So we have invested in the two public offerings 

they have done. Both have done extremely well. I give the World 

Bank and the African Development Bank a lot of credit for the 

growth that Africa, Sub-Saharan Africa, has experienced since I 

finished public service—which is running now at maybe 5 percent 

per annum. 

So improving governance, democracy, transparency, and the rule 

of law are all very good things that the World Bank does. I jump 

ahead to January of this year. I was asked to be the representative 

from the United States to the G20 panel on studying ways to increase funding for infrastructure in, first, Sub-Saharan Africa, but 

in other states as well. 

Each of the G20 countries has a representative. It is very interesting. It was the first time that I have seen the power of the Chinese in meetings. So I sarcastically say that when each one of us 

was speaking, there was always someone else who was not listening or was typing on their BlackBerry. 

But when the Chinese representative spoke, no one took out a 

BlackBerry. The power that the Chinese now enjoy in the developing world, the significance—there are five Africans who are on 

this G20 panel—of their role in China I cannot understate, it is so 

important. 

During this period of time, I might say, the Ex-Im Bank has 

dropped from maybe 2nd or 3rd in size to maybe 12th or 13th in 

size in supporting exports relative to other export credit agencies. 

So, we are not doing a particularly good job. Not that I am critical 

of Ex-Im Bank, but the structure of our export credit agencies is 

not as competitive as it used to be. 

If we take away any support for the World Bank and the development banks, this is going to hurt us. It is going to hurt us relative to the position we have in China. It is going to hurt us 

throughout the developing world. The world is watching what the 

United States does all the time. 

They already think we are dysfunctional in our government practices for all the reasons that we know. But if we stop support for 

the World Bank and the other development banks, we are not only 

losing a good investment opportunity, but we will lose a power 

base. 

I suspect that China will, whatever we do, continue to be a very 

strong factor throughout the developing world. There is not a country that we invest in, in the poorest parts of the world—from Pakistan to Zimbabwe, to Lebanon, to all over Latin America—where 

the Chinese are not present. 

I am not sure the Members of Congress fully understand where 

China is coming from or where they are going, but the last thing 

12 

we need to do is to slow down our support for a World Bank and 

the multilateral development banks. Thank you for having me. 

[The prepared statement of Mr. Harmon can be found on page 

42 of the appendix.] 

Chairman MILLER OF CALIFORNIA. Thank you, Mr. Harmon. 

Mr. Leo, you are recognized for 5 minutes. 

STATEMENT OF BENJAMIN LEO, RESEARCH FELLOW, CENTER 

FOR GLOBAL DEVELOPMENT, AND FORMER TREASURY DEPARTMENT AND NATIONAL SECURITY COUNCIL OFFICIAL 

Mr. LEO. Thank you, Chairman Miller, Ranking Member McCarthy, and members of the subcommittee. I appreciate the opportunity to speak about this issue, which I am very passionate about 

and have spent a lot of time looking at. 

While my written statement addresses a number of issues, some 

of which the other witnesses have touched on, I would like to focus 

on just a couple of key points. First, the MDBs have a very influential, key role in generating and helping to establish the next generation of emerging markets. 

I think India provides a really interesting example of the MDBs’ 

role, economic growth, and U.S. support in contribution all come together in a way that is very beneficial for the United States, for 

U.S. firms, and for job creation as well. 

Over the years, the World Bank and the other MDBs have provided a significant amount of assistance to India to help build out 

its infrastructure, to reform its government policies, and a number 

of other areas that have a really important impact in terms of creating an environment that is conducive for the private sector. 

In the next couple of years, India is expected to graduate from 

the concessional assistance that is provided by the International 

Development Association, the soft-loan window of the World Bank, 

and move on officially to middle-income status. 

India is by no means an outlier in this case. According to my research, over the medium term, the near to medium term, about another 2 dozen countries who are currently low-income are going to 

follow, as well. In those cases, while you cannot say exactly in very 

quantitative, specific terms the role that the MDBs have played, we 

know without any doubt that they play an important role. 

You just cannot exactly quantify it in terms of the things that 

I mentioned before—infrastructure, the environment, effectiveness—in those areas. What does that mean in terms of the United 

States? Some of the other witnesses have touched on this. I will try 

and use some different statistics for you. 

So, five countries, the next ones that I expect to graduate from 

IDA and move on to middle-income status: India; Nigeria; Ghana; 

Zambia; and Vietnam. Collectively, those countries have grown. 

Their economies have grown fourfold over the last 2 decades. 

But more importantly, U.S. exports to these countries have 

grown almost ninefold over the same period. So the role that the 

MDBs are playing in promoting economic growth is having a direct 

impact here at home. Just very briefly, as these countries move on 

to the hard-loan windows like the International Bank for Reconstruction and Development, that is going to mean that there is 

going to be a lot more demand for those resources. 

13 

They are going to need more capital to be able to handle it, and 

to continue that process of promoting economic growth and helping 

U.S. firms. One thing that has not been stressed as much, coming 

out of the global economic crisis, or immediately after it, the MDBs 

stepped up big-time to plug holes, to try and minimize the fallout 

in the developing countries, as well as maintain some market confidence in those places. 

It had a very, very big impact for U.S. companies. Before I joined 

the Center for Global Development, I was at Cisco Systems doing 

business development in Sub-Saharan Africa, the Middle East, and 

North Africa. And what we saw in those first months—maybe 6 

months, 12 months—after the crisis struck was that the contract 

opportunities that were stable were almost always MDB contracts. 

I did public sector sales. The government contracts almost completely dried up. So the MDBs were where we still had opportunities, and that is what was driving our sales numbers. It was very 

powerful. In terms of that procurement, just a couple of points on 

this. 

The direct benefits to U.S. firms are quite significant. Over the 

last decade, from just one of the MDBs, the World Bank, directly 

sourced contract awards, total about $1.6 billion. While that is 

large, in my view it substantially underestimates what the true impact is. 

And again, I go back to my experience at Cisco. If you look at 

their lists of who won awards that are U.S. firms, you do not see 

any Fortune 100 companies on there. There is a reason for that. 

Because most of these firms are not directly bidding on the contracts. They are using third parties to then sell their goods. 

That is how Cisco does business throughout the world. So while 

Cisco was not in those databases, I personally was involved in millions of dollars of sales in Nigeria, Zambia, South Africa, Kenya, 

and Egypt which were financed by MDB projects and loans. 

Now lastly, on this issue in terms of the procurement, I think if 

you look at the MDBs, there is a very clear, profound benefit in the 

fact that their procurement standards are world-class—transparent, open to all countries that are from countries of their MDB 

members, and very fair. 

My experience, compared to trying to win contracts that were financed by the MDBs, compared to host governments in some of the 

more difficult environments, it was night and day. We would never 

have tried to—there were a number of markets where we would 

not even try to go after the contracts at all because it was so nontransparent, unless they were an MDB contract. 

And when we were competing with the Chinese, it was an equalizer. Huawei is their big telecom company. We lost a lot of business 

to Huawei in the nontransparent environments. We could fight 

head-to-head with them on MDB contracts. So it has a very important impact. 

I will stop there, and thank you for the opportunity. And I look 

forward to any of your questions. 

[The prepared statement of Mr. Leo can be found on page 50 of 

the appendix.] 

Chairman MILLER OF CALIFORNIA. Thank you, Mr. Leo. 

Mr. Hardy, you are recognized for 5 minutes. 

14 

STATEMENT OF JOHN HARDY, PRESIDENT, THE COALITION 

FOR EMPLOYMENT THROUGH EXPORTS (CEE) 

Mr. HARDY. Chairman Miller, Ranking Member McCarthy, and 

members of the subcommittee, the Coalition for Employment 

Through Exports thanks you for the opportunity to testify on the 

impact of the multilateral development banks on U.S. job creation. 

CEE has a number of members who are actively engaged with 

the World Bank and other MDBs. We are also joined in this testimony by the National Foreign Trade Council. It is a strong supporter of the capital increase for the MDBs, and supports a broad 

pro-trade agenda. 

As you have heard from the previous witnesses, the impact the 

MDBs have on U.S. job creation is significant for several reasons. 

And I will try and keep this brief. The World Bank and the regional MDBs reflect the continuing commitment of the developed 

world to eradicate poverty and give people, wherever they live, the 

opportunity for a better, healthier life. 

It was not long ago that countries like China, India, Indonesia, 

the entirety of Sub-Saharan Africa, and much of Latin America 

were mired in poverty. After decades of work by the international 

community, through the MDBs, the situation for these countries 

has changed dramatically. These countries now have a growing and 

dynamic middle class that are potential customers of U.S. companies. 

A second benefit of the MDBs we are seeing today—that is, as 

the most dynamic portion of the world’s economy is located, to a 

significant degree, in the emerging economies—their success has 

created new trading partners for the developed world, but particularly for the United States. 

The countries with which we are now trying to complete free 

trade agreements were all beneficiaries of loans from the MDBs. 

And many other emerging markets are even now recipients of MDB 

funding. A prime example is India, whose trade with the United 

States could well make its firm some of the largest users of the ExIm Bank. 

The successful transformation of these countries is due in substantial part to the MDBs. These countries have become inextricable parts of the international economy, and increasingly significant participants in the global trading system. 

The third benefit of the MDBs is reflected in the fact that the 

projects and activities themselves represent export opportunities 

for U.S. companies. MDB funding, coupled with resources contributed by the countries themselves, represent a vast opportunity for 

private business. 

The needs are immense, not only in infrastructure and energy, 

but now in medical equipment, IT services, communication systems, and the like. And U.S. companies are ideally situated to pursue these opportunities. Let me provide you with the example of 

Philips Electronics North America, a prominent manufacturer in 

the health care and green energy sector which has partnered with 

the MDBs for over 15 years. 

Philips provides high-quality medical equipment that they manufacture in the United States, such as MRIs, CT, and ultrasound 

15 

machines, patient monitors, ventilators, ECG equipment, and cardiac defibrillators to developing countries through MDB programs. 

A senior Philips representative had this to say about the company’s experience work with MDBs: ‘‘Philips has witnessed firsthand the economic development benefits the MDB-funded projects 

confer on recipient countries, through our procurement experiences 

throughout the emerging markets.’’ And they have listed, in the 

testimony, about 15 or more countries. 

‘‘This benefit does not inure solely to the developing country. 

However, as we also have recognized the role MDB projects play 

in helping to maintain our U.S. employee base of 25,000, and potentially to create new highly-skilled U.S. jobs through the promotion of exports, as U.S. markets have declined or remained stagnant over the last several years, developing countries have led the 

world with double-digit growth rates. 

‘‘MDB procurement programs offer U.S. manufacturers unique 

opportunities to enter these vibrant developing markets through a 

transparent and accountable procurement system that limits the 

commercial risk. 

‘‘Moreover, manufacturers gain from the ability to increase their 

exports and to establish themselves within these growing consumer 

markets and develop a strong market position. These opportunities 

help to expand the overall U.S. industrial export base, supporting 

President Obama’s goal of doubling U.S. exports by 2014.’’ 

As reflected in the above statement from Philips, a significant attraction to MDB processes is the existence, over the long term, of 

strong procurement standards that ensure transparency of process 

and accountability in terms of outcome. These elements are vital to 

promote multilateral development goals, while maintaining the 

highest standards of integrity and transparency in global procurement. 

We hope the subcommittee will monitor any dilution of these 

time-honored standards. Accordingly, we propose the following recommendations to the World Bank and the other MDBs to ensure 

a predictable and accountable procurement system for all bidders: 

maintain the current international competitive bidding procurement standards and bidding documents; maintain bank procurement oversight of projects involving complex solutions and projects 

over the current procurement thresholds; enhance mechanisms for 

dialogue with civil society; ensure that any innovation which involves substantial changes to the existing procurement standards 

and processes will be tested through a pilot phase; and ensure that 

any proposed procurement changes should continue to provide realtime effective recourse to bidders for procurement issues, including 

oversight by the integrity units of the MDBs. 

We thank the subcommittee for the opportunity to submit this 

testimony regarding the important role of the MDBs, and I am 

happy to answer questions. Thank you. 

[The prepared statement of Mr. Hardy can be found on page 38 

of the appendix.] 

Chairman MILLER OF CALIFORNIA. Thank you. I thank each of 

you for your testimony. It was very informative. 

The goal of this subcommittee has been to focus on jobs. How do 

we create opportunity for American businesses, thereby creating 

16 

jobs in this country? I think we did a very good bipartisan job on 

Ex-Im, and our goal is to accomplish that here. 

And Chairman Kolbe, it is wonderful to have you back here with 

us again. It brings back a lot of memories, I know, for both of us. 

In your testimony, you talked about the important role that MDBs 

played in the global economic recovery. 

Will you comment on how this fits into the broader efforts to stabilize and improve our economy here in this country? 

Mr. KOLBE. Mr. Chairman, it does definitely fit into the broader 

stable of broader and more stable economy here at home. Because 

we live in a—it is trite, but we have said it before and we all know 

it is true—world that is increasingly a globalized economy, it is important for us to not only have access to markets abroad, which can 

be found through trade agreements, but also through investments 

which are being made abroad. We also increase our investments 

and our trade abroad when these economies grow. 

You have heard many of the statistics that have been repeated 

here today about how it has happened in countries like India and 

Vietnam, how we have had a ninefold increase in our exports to 

those countries, while their economies have grown substantially. 

Part of that growth comes about as a result of the investments 

that we make in these MDBs, not all it or even the major part of 

it, but it certainly is a piece of it. So that is why I said, in my last 

paragraph or so, my closing remarks, that we are not talking about 

charity here. 

We are talking about investments. And I do understand the really difficult position that you find yourself in today, with the enormous debt that we are facing, and the difficulties of trying to 

match that with the revenues. 

So I think it is important that as you do, you think about what 

things are really investments—investments in jobs, investments in 

the economy, investments that will help to grow this country. And, 

as a result, increase the revenues for the U.S. Government. 

I think the MDBs clearly do that. There have been a lot of studies done that demonstrate that fact. I cannot tell you here today 

exactly what the different kinds of replenishments that are being 

talked about, exactly how many jobs it is going to create. But I do 

know that it is going to help the economy here in the United 

States. It is going to help jobs here. 

Chairman MILLER OF CALIFORNIA. Thank you. 

Mr. Leo, and Mr. Harmon, you both talked about the situation 

with China. What do you think MDBs should do to become an attractive alternative to countries like China for developing finances? 

Mr. Leo, then Mr. Harmon? Either one? 

Mr. HARMON. May I add something to what was just said now? 

Chairman MILLER OF CALIFORNIA. Sure. 

Mr. HARMON. U.S. share of global consumption between 2002 

and 2008 went from 38 percent to 28 percent—38 to 28 percent. 

That is U.S. share of global consumption. The emerging markets, 

including the BRICs and all the other frontier countries, went from 

23 percent to 33 percent. 

It is only a question of time before global consumption—emerging 

markets, all the markets that we are talking about today—will exceed 50 percent. So if the United States intends to export into that 

17 

world, and to pick up this new consumption with the growth of the 

middle class, it needs the MDBs and the World Bank to continue 

to play the critical role that they have played. 

Chairman MILLER OF CALIFORNIA. They share, as partners, with 

the Ex-Im Bank, in many cases. 

Mr. HARMON. Yes. We just would not have done it unless we felt 

comfortable with what the World Bank was doing in all the major 

projects. I think it is still done. The World Bank takes the leadership role there in these major infrastructure-type transactions on 

projects. 

Chairman MILLER OF CALIFORNIA. Okay. 

Mr. Leo? 

Mr. LEO. Mr. Chairman, just a couple of quick additional points. 

And I think Rob Mosbacher actually mentioned this a little bit previously. 

There are a couple of things in terms of what the MDBs can do 

on the China issue and the influence issue. The first is the one that 

I mentioned briefly on the procurement standards. The procurement standards are a great equalizer and an opportunity-creator 

for U.S. firms. 

So, the more money that is channeled through those types of systems, the better it is for U.S. business. And the MDBs not only are 

helping create those with their own dollars that they are allocating 

on the ground, but they are also playing very active roles in terms 

of trying to reform the countries’ procurement standards themselves. 

So non-MDB financed; it has a positive spillover effect, which I 

think is very important. 

Chairman MILLER OF CALIFORNIA. They are modifying the system in large— 

Mr. LEO. Exactly. The reform. 

The other issue which has been mentioned a couple of times now, 

is if the MDBs are not in a couple of sectors—say, for example, hydropower in Africa—it is going to be the Chinese who build those 

dams, which means GE is not going to be selling turbines. 

And it means that the impact on the local communities is going 

to be much more significant than it would be if an MDB was involved in the project. We are seeing this in Ethiopia. The African 

Development Bank got pushed out of a deal, and all of a sudden 

a number of the safeguards that were negotiated with the Ethiopian government are no longer there, including some assistance 

packages. 

And I will be extremely surprised if any U.S. companies are able 

to win some procurement contracts from that particular project. 

Chairman MILLER OF CALIFORNIA. Thank you. I have many more 

questions, but I ran out of time. 

Ranking Member McCarthy, you are recognized for 5 minutes. 

Mrs. MCCARTHY OF NEW YORK. Thank you. And I want thank everybody for their testimony. It was actually a pleasure reading 

everybody’s testimony because you were all on the same page. So 

when the chairman says this is definitely a bipartisan issue for us, 

it is. 

But there is one issue that I want to explore a little bit further, 

because we are in Congress. At times, we have to explain to our 

18 

Members why this is so important. I want to go back to the China 

issue, because I do not think people understand. If we do not pay 

our share into the World Bank, we lose a rating, which means 

someone who comes in will pay a higher share. I would appreciate 

it if anybody here would explain that to the panel. 

Mr. LEO. The MDB that I know the best that is relevant on this 

issue is the African Development Bank. If the United States does 

not provide its contribution for the general capital increase that 

creates an opportunity for other members of the institution to buy 

those shares. 

So our voting share declines, and China could come in—or another country, but more likely it would be China—and pick up 

those shares. 

Which means beyond just the symbolic effect, the message— 

which is very damaging for U.S. influence worldwide—has very direct institutional governance implications, as well, in terms of what 

the United States is able to push through, in terms of the institution, some of the kind of governance issues. 

So it is a huge danger. And I hope it is one that does not come 

to pass. 

Mrs. MCCARTHY OF NEW YORK. I guess I want to follow up on 

that. Because from what I understand from the reading that I have 

been doing, it puts our values on it. We have our values to be able 

to put on to the say on how we work with the money in the World 

Bank. 

And I think that is important for people to know. With that, Mr. 

Harmon, with your experience in developing countries, I am interested in your thoughts on the positive involvement of MDBs, and 

how U.S. participation has impacted developments within these institutions. 

I believe it was the Congressman’s testimony that talked about 

how hard it is for us to go home and sell this to our constituents. 

I get yelled at all the time. And I try to explain to them, we only 

use basically 1 percent of our national budget to be able to do all 

the things that we do. 

But again, this is about jobs, and how many jobs we can bring 

into this country. So if you could expand on that, I would appreciate it. 

Mr. HARMON. Thank you. If I could just add one thing to the last 

point, I think the Chinese run as a non-member of the OECD. They 

do not have any environmental standards. They do not have any 

of the rules. So they are delighted to operate independently. 

And even the representative from China, who was at the G20 

panel with me, we have gotten to know each other a bit—recognizes this extraordinary advantage to be able to go to the countries 

in Africa, or anywhere—whether it be Pakistan or whether it be 

the Middle East—and propose projects which have no environmental standards. It gives them a big advantage in selling the 

product. 

Also, the fact that they do not have to be concerned about interest rate factors. It is no wonder that China’s export credit agency 

now supports $250-plus billion, and is heading towards a much 

larger number. We have to wake up to the fact that they are operating with a different set of rules. 

19 

The only way we can really continue, in my opinion, to even 

come close is by keeping the World Bank and the multilateral development banks strong. Because there, at least as Mr. Mosbacher 

has alluded to, you have a much better chance of winning business 

for the U.S. side. 

Because in those areas where procurement involves the development banks, we have close to a level playing field, but still not a 

level playing field. So I am very concerned. Even if we support 

them, as I think we have to, we are still running against a very 

tough rival and competitor in China over the next 5 years. 

Mrs. MCCARTHY OF NEW YORK. I agree. 

Mr. Leo, in your testimony you recommend that government play 

a role in helping U.S. companies win more MDB procurement 

work. Could you go into a little bit more detail on how we might 

possibly do that? 

Mr. LEO. Yes, I have some thoughts. And I think a lot more 

thinking needs to be done. My thoughts are more from experiences 

of going after some of these contracts for a couple of years. 

I think there is a very strong role that the U.S. Government can 

play from a commercial advocacy side. Whether it is an MDB 

project that you are bidding for or some other type of contract, in 

certain circumstances, in particular an experience that I had in Nigeria, I was able to see how powerful it could be. 

And it was not necessarily, or it was not at all, an issue of undue 

influence. It was more that when the U.S. Government got involved, it was to stress that we needed transparency, that we needed a competitive environment, and those types of equalizing messages. 

And it gave me a fair shake to try and get business. So whether 

it is an MDB project or not, I think that this should be looked at 

much more closely. Now within that context, I think that there 

could be a fair amount of rationalization within the embassies in 

terms of their presence, where they are focused on growing certain 

embassies in this space, and moving others around. 

I think there is probably a number of other pieces that could contribute to a broader strategy, which is a pro-export, pro-growth 

strategy in the MDB procurement space. But this is just one issue. 

Mrs. MCCARTHY OF NEW YORK. Thank you. 

Chairman MILLER OF CALIFORNIA. Vice Chairman Dold, you are 

recognized for 5 minutes. 

Mr. DOLD. Thank you, Mr. Chairman. 

Chairman Kolbe, if I can just start with you, in your oral testimony you had mentioned, in wrapping up, that not all multilateral 

development banks are created equal. They are not all doing as 

well as some of the others. Do you have any in mind that are not 

performing as well right now that we should be looking at and focusing in on? 

Mr. KOLBE. I thought I would not play the picking the winners 

and losers here today. But I do think that it is worth—and there 

is a good deal of data available that you can look at that can show 

which ones have been better stewards of the money, and which 

ones have projects that have suffered from more corruption and 

misuse, and have not been completed. 

20 

I think that some of this data can be put together and you can 

get a pretty good track record from them in terms of determining 

which ones have done the best. I want to make it clear that I think, 

in general, the MDBs have done a good job. 

But I think there are some that do better than others. 

Mr. DOLD. And I will certainly follow up with you to try to get 

more of that data. Because I would like to look deeper into that. 

One of the things that I was actually surprised about—and I 

know this is really more focused in on jobs—is the fact that we did 

not really talk about national security and how the banks actually 

will help us in terms of our own security abroad, how we are able 

to influence those emerging markets and the like. 

And I am sure we can get into that a little bit. Mr. Mosbacher, 

you talked about how supporting the banks is really supporting 

jobs. We are going to try to go back and sell this. Certainly, I think 

we are all pretty much on the same page. Can you give us some 

specific examples? 

Mr. Hardy talked about exports and the statistics about how for 

every billion dollars we increase in exports, I think the statistic is 

we create about 6,250 jobs here in the United States. And that is 

something that I think that we ought to be focusing on. 

But with the banks right now, can you give us some success stories that we can use, not only for our fellow colleagues, but back 

in our districts about wins that the development banks are doing 

for American business? 

Mr. HARDY. You could take the area of our sector of infrastructure as a great example. And, beyond the sale of turbines by GE 

or sale of large pieces of equipment that American companies compete for, there are also an extraordinarily large number of smaller 

parts and controls and items that are manufactured in towns all 

over America. 

What we do not do a good job of is tracking how those collectively 

all add up to jobs. And that is why some of the statistics, I think, 

are overwhelming in terms of the importance of growth in exports, 

growth in sale of services to growing our economy. 

I just do not see the growth in the United States at a level or 

at a breadth that will drive the kinds of job creation or the kind 

of job creation that we are seeking. In the infrastructure field, it 

is not just the small parts or the big parts. It is also the management of these projects. 

There are companies like AES. Or there is a little company out 

of New York called ContourGlobal that just built the first 100- 

megawatt project in Togo, for instance. And again, financed with 

support of international financial institutions. Commercial banks 

would not touch it. 

And that is going to be the pattern you are going to see in so 

many of these developing countries is you just will not get commercial banks to take that risk without a backup from an MDB. So as 

we look at how do we sell more equipment, how do we sell more 

systems, how do we sell more management and controls, I think 

the MDBs are going to play an integral role. 

Mr. DOLD. Certainly, I understand your point on the small businesses. We have 650 manufacturers back in the 10th District. It is 

the third-largest manufacturing district in the country, which is 

21 

surprising to most, just north of Chicago. And we get that. We need 

to make sure that we are beefing up those parts that are getting 

sold. 

Are we getting an advantage because of the MDBs? Does America have some sort of a competitive advantage in winning that business? 

Mr. HARDY. I think we have a competitive advantage if there is 

a relatively level playing field. I am quite confident that we can 

compete effectively. But I have also seen playing fields that were 

not level at all, and the fields of the sort that Ben Leo has mentioned, for instance, or Jim Harmon has mentioned, which the Chinese have come in with. 

And we have been negotiating to try to get them not only to do 

open, competitive, transparent bidding, but also to lay out specs on 

the bids that we can all comply with. The Chinese show up, decide, 

‘‘No, we are just going to negotiate this situation with you. No reason to go through this open government thing.’’ And the next thing 

you know, there is a big, front-end-loaded cash contract with all 

sorts of frills that the United States companies have absolutely no 

chance of competing with. So, level the playing fields. 

The MDBs are the principal referee in a lot of these games. And 

where they are the designated referee, we have a chance. Where 

they are not, in markets where the Chinese are interested, it is a 

tough fight. 

Mr. DOLD. I thank you. 

Chairman MILLER OF CALIFORNIA. Mr. Scott, you are recognized 

for 5 minutes. 

Mr. SCOTT. Thank you, Mr. Chairman. 

I find this to be a really fascinating subject, and I really enjoy 

this subcommittee, because it is getting right to the heart of an 

area I care very much about. I think it is important to state just 

how significant you are, particularly in relationship to the fact that 

our contribution to foreign aid period is about 1 percent of our overall budget. 

And the amount that we contribute to the MDBs is just 5 percent 

of that 1 percent, which amounts to 0.05 percent of our overall 

budget. We get great returns for that. But I think it is somewhat 

puzzling that in challenges we are measuring the success of what 

we want to do with an organization whose primary aim is international development, by how many jobs they create in our country. 

Which is a challenge to all of us, as you were pointing out, Mr. 

Mosbacher. And I share that concern. It is sort of like measuring 

the success of a car by how well it floats. That is not the function 

of what this is. But it is noble, and it is what we all care about. 

But I want you to explore that a little bit as we move forward 

on the difficulty of that. And our challenge is, how do we really 

make that happen? But I do want to mention something else. Mr. 

Kolbe and you, both, and I think Mr. Harmon, mentioned something that I am very, very concerned about. 

And that is China. I especially feel like the real future area of 

the greatest magnitude of benefit and opportunity is on the continent of Africa. And so I went there, and went into the dark heart 

22 

of Africa. If you are familiar with Africa, when I tell you I went 

to Goma, I think you will know I really went into serious Africa. 

And an interesting thing happened. The natives over there would 

come up to us as we went from place to place—and this is a serious, serious, devastating place, with the lava and all of that and 

all of the fighting that is going on—and they kept saying to me 

that the Chinese are here, the Chinese are here. 

And I would hear that where we are going. I was shocked. But 

come to find out, they are really there. And they are building railroads, they are building schools, they are building hospitals. And 

it seems that the only thing that they want in return for this, I 

found out is, their requirement is that they learn Chinese. 

That is very interesting. And if that story does not motivate us 

in this country to understand that China is serious competition and 

we truly need to realize that we need to really step up to the plate 

and really become competitive in this in our efforts. 

And we might want to change our measurement, or at least expand it, to not only just the jobs that we can get back in this country from this. But the measurement and our role in being competitive with China. 

But my question is, I wanted to ask if you could elaborate. This 

is kind of a difficult challenge here, measuring an institution whose 

basic aim and basic consequences—international aid and development—we measure success on the number of jobs it creates here. 

Just how serious is this box that we are put into? Mr. 

Mosbacher, would you respond to that? 

Mr. MOSBACHER. I think part of the problem is that many of the 

MDBs do so many different things that it is hard to identify job 

creation or opening a market distinctly with that MDB alone. It is 

a variety of factors. Some would argue that democracy and governance is every bit as important, and improvements in democracy 

and governance are every bit as important as economic development. 

But I am convinced that the MDBs facilitate, enable, and in 

many ways actually drive investment into markets where there 

simply has been nothing going on. Until they get there, you do not 

see anything going on. And then all of a sudden, things start to 

happen. And then it has kind of a demonstration effect on other 

businesses who will come in and invest. 

Jim Harmon is willing to go do private equity deals in places 

that would strike most Americans as extraordinarily challenging 

because he has been there and he knows high-risk, high-reward. 

Mr. SCOTT. No, I want to just get one— 

Chairman MILLER OF CALIFORNIA. Unanimous consent to give 

Mr. Scott an extra minute, because I know you missed out on opening statements. 

Mr. SCOTT. Oh, you are mighty kind. Thank you. That is why 

you do such a great job as chairman. Thank you so much. 

Let me ask you, Mr. Kolbe, or Mr. Harmon, any of you, how are 

the Chinese measuring their success? Are they measuring it with 

how many jobs that they are creating back in China on this? Or 

in other words, it might be wise for us to have a broader vision, 

to be very serious about this. 

23 

What do the Chinese say they get out of it? How do they measure their success in it? Jobs back home? 

Mr. KOLBE. Mr. Chairman, others will, I am sure have a comment on this. Your comments, Mr. Scott, were very interesting. Because I was just in Malawi a couple of months ago, and I saw the 

same sort of thing that you were mentioning there, where the Chinese had moved in in a very large way. 

They have built a stadium. That is typical of what they do. And 

they have built a very large hotel and conference center there. Not 

exactly things that help people an awful lot. But they have also, 

in the countryside, moved into a very large amount of agriculture 

development. 

But the interesting thing is, their people are now scattered 

throughout the country. And they stay there after they finish these 

projects. They remain there. They have their own set of clinics, 

their own set of schools, their own set of stores and retail businesses. 

And what they are doing is essentially spreading Chinese influence there. I think what they are looking for is, they understand 

that these markets may be very small right now but they know 

they are emerging and they are going to be much bigger. 

And they expect that business will come their way. That these 

people, just as they have done in places like Malaysia and Singapore and Indonesia, where you have had for more than a hundred 

or several hundred years Chinese communities there that still have 

ties to the homeland, and business connections as a result of that, 

that is what they are looking for in Africa. 

They are basically cleaning our clock in Africa right now, and 

Europe and the United States are both in the same boat in this. 

Chairman MILLER OF CALIFORNIA. We should have time for another round of questioning so we can expand on that in the second 

round. 

Mr. Campbell, you are recognized for 5 minutes. 

Mr. CAMPBELL. Thank you, Mr. Chairman. You all speak with 

one voice. I hear you. What is unsaid here is that we are being 

asked, or will be asked, to authorize nearly a billion dollars of taxpayer money for the World Bank. You all know what is going on 

now, and this weekend. 

And so as you have all alluded to, the pressures around that. 

And on the margin, obviously, any dollars we spend are 100 percent borrowed. And there is a little irony there that we would borrow this money from the Chinese, the Indians, and the Brazilians 

to put into a bank to loan to the Chinese, the Indians, and the Brazilians. 

That irony is not lost on me. But my question is this: I heard a 

number of you use the term ‘‘investment’’ a number of times, and 

many times that is used as a euphemism for ‘‘spending.’’ But that 

is not the case here, and I get that, that the MDBs and the World 

Bank lend money and it gets paid back with interest, and that they 

make money. 

But that then we take that money and put it in IDA, and then 

many times we loan it—‘‘we,’’ the World Bank—and then it does 

not get paid back. The question I have for you is this. Is there a 

way to look at this, or to change this or whatever, so it is more of 

24 

a true investment in the sense that we put money in and perhaps 

get a return on it. 

Or at the very least, not eventually lose that money that we put 

in. But at least keep it reinvested. Because what you are all here 

to talk about is the non-direct, the indirect, return from this investment in the bank. And I get that 

What I am asking is, is there a way to change the actual return, 

which currently is negative in terms of the U.S. taxpayer? 

Mr. MOSBACHER. I would argue that some of it is a grant and, 

as you said, it is simply mitigating the impact of poverty. But you 

can look at from a national security standpoint and say, ‘‘Fine. To 

the extent that poverty becomes breeding grounds for violent extremism then maybe we ought to be mindful of that and try to prevent some of these things from deteriorating any further.’’ 

I think on the investment side, and by ‘‘investment,’’ I mean 

things you get a return on— 

Mr. CAMPBELL. Right. 

Mr. MOSBACHER. —I think we could do a much better job of 

structuring transactions in which public sector players team up the 

private sector players so the public sector dollars are being used to 

catalyze or to leverage more private sector investment. What do I 

mean by that? 

Like building a farm-to-market road that has to be built in order 

to get increased produce from an area that wants to sell under the 

international market to a market in a timely way. By the same 

token, I think, and this is a conversation we could have about foreign assistance, U.S. foreign assistance could be used much more 

strategically to enable private sector-driven economic growth. 

And that conversation should take place. The same thing could 

take place with the MDBs. 

Mr. CAMPBELL. Any other comments? Yes? 

Mr. LEO. Yes, if I could, I just want to add another point. If you 

are looking for a way to think about this in terms of a direct return 

or a direct investment, I actually think when the general capital 

increase, or the GCIs, are the cleanest for trying to find that, 

frankly, if you are not talking about national security or or poverty 

or something like that, take the last GCI for the World Bank, the 

IBRD. 

The United States contributed about $420 million over a set period of time. And that GCI lasted, I guess, 23 years or something 

along that. That is how long that capital lasted them before they 

needed to go back to the till and get more. 

And so, the United States was probably paying in maybe a third 

of that time, and getting procurement contracts during that time, 

as well. Once they quit paying in, once the U.S. Government 

stopped having to pay in, they are still getting procurement contracts and you are still getting financial benefits. 

So over the last 10 years, IBRD contracts, U.S. firms—and this 

is the issue that I was differentiating before—just direct procurement contracts were about $700 million. And I would argue it is 

much bigger are able to quantify, in some way, the indirect thirdparty sales, as well. 

So this goes back to, on the GCIs, the leveraging issue. It is very 

big, and it is very powerful. 

25 

Mr. CAMPBELL. And in my last 11 seconds I will just, and I do 

not know how, and maybe but to Mr. Mosbacher’s point, some of 

this stuff is grants and some of it is not grants. Maybe there are 

some ways we look at this to separate those. 

I just happen to believe, not just in this case but in other cases 

of things we deal with here, when you know you are not going to 

get something back necessarily, this is true in housing and other 

things, if you sequester that, and you know what that is and you 

identify that, and you do not confuse it with the part which you 

do expect to get back, I think it is just better clarity in budgeting, 

or authorizing. 

And I yield back. Thank you for your indulgence, Mr. Chairman. 

Chairman MILLER OF CALIFORNIA. Ms. Moore, you are recognized 

for 5 minutes. 

Ms. MOORE. Thank you, Mr. Chairman. And I want to thank the 

panel for appearing. 

The hearing title is, ‘‘The Impact of the World Bank and Multilateral Development Banks on U.S. Job Creation.’’ And certainly, 

we are all concerned about that. So I guess my question is, how do 

we track, how do the MDBs leverage U.S. commercial lending to, 

in fact, make sure that we are creating more exports? 

I am really interested in the mechanics of this. Does a potential 

exporter approach the commercial bank? Because if they do, they 

are liable to be turned down, particularly in this environment. So 

how, really, does it operate that American businesses have the opportunity to interface with the MDBs? 

If we are going to be making this investment, we want to make 

sure that this is accessible. 

Mr. HARMON. If I may take a crack at that, the joint financing 

that was done for Ethiopian Airlines with the African Development 

Bank, together with the U.S. Ex-Im Bank, if the African Development Bank had not played a role, Ex-Im would not have done it. 

Boeing was the beneficiary. Boeing is, sadly, not at this table. 

But if they were here, Boeing would be able to give you chapter 

and verse on the number of small and middle-sized companies in 

the United States that participate in every Boeing equipment. They 

have become very good at that. 

And it is very important for jobs in small and middle-sized companies all over the United States. I have five other illustrations 

where I have followed, all of which are impressive. With regard to 

Africa, we could be discussing this in other parts of the world, too. 

The African Development Bank was the lead arranger and 

financer of the Main One fiber cable project in West Africa with 

Tyco. They finance the Kivu Watt Power in Rwanda. That was particularly important for Rwanda. In the next few months, Rwanda 

will announce that they are buying equipment from Boeing for 

their airline now. 

Again, each one of these—and I could give you three others that 

I have listed here that I have watched the African Development 

Bank work on—which, had they not done it, the United States 

would not have benefited as exporters and jobs would not have 

been created. 

So I am frustrated a little bit that I cannot come up with an answer from the Congressman who raises what is the specific return 

26 

that we can earn from this. It is an impossible question, in my 

judgment. We can show how, without the African Development 

Bank and the World Bank, certain jobs would not be created. 

Mr. MOSBACHER. May I add to that? 

Ms. MOORE. Yes, sir, Mr. Mosbacher? 

Mr. MOSBACHER. I want to reemphasize a point I mentioned during my testimony because it is so critical. I do not know of a single 

business that I have ever been around where access to credit was 

not pretty important to your survival, much less your growth. 

And yet, many of these SMEs in the developing world simply 

have not had access to that. That is changing. That is a sea 

change, and it is changing because MDBs are coming in alongside 

commercial banks and sharing the risk on loan portfolios that are 

not 12 months or 60 days, and 30 percent interest rates. They are 

5-year and 7-year term limits. 

Ms. MOORE. Who initiates it? What does the commercial lender 

do when a deal comes to them? Do they call the MDB, or does the 

MDB initiate the— 

Mr. MOSBACHER. Usually, the borrower initiates how they are 

going to be able to finance the transaction. So, ‘‘borrower’’ is the 

person who wants to expand the business or make— 

Ms. MOORE. But they do not necessarily know about the MDB. 

Mr. MOSBACHER. Oh, many do. Many do not. But the MDBs have 

actually taken the initiative in the last 3 to 5 years to go in and 

look at banking systems and seeing where they can partner with 

commercial banks to say, ‘‘All right, let us start lending to SMEs 

so they can buy more goods and services,’’ which includes American 

goods and services. 

Ms. MOORE. And so to mention goods and services, Mr. 

Mosbacher, in your testimony you articulated a truth, that 95 percent of the world’s customers live outside our borders. And 80 percent of Sub-Saharan Africans have no infrastructure, do not have 

any electricity, and so on and so forth. 

The United States is really struggling to have some kind of comeback in U.S. manufacturing, but there has been a real shift in providing services. So how do the MDBs support American service industries like banks and insurance companies? 

And to what extent are there activities, or are there markets, for 

services in the way of exports? 

Mr. HARMON. Yes, there are a number of financial services that 

are created throughout all these countries in terms of doing the arranging for the financing. Certainly, legal services. Even the small 

business that we run, with 14 people, is involved in investing 

throughout Africa. 

To the extent that the African Development Bank and the World 

Bank are involved, that gets us involved. So there are many illustrations of financial services and legal services and engineering 

service companies. In fact, most of the services related to project 

finance benefit the United States. 

Maybe not quite as dramatically as when they buy an aircraft or 

when they do a major pipeline type project but, certainly, services 

benefit. 

Chairman MILLER OF CALIFORNIA. Mr. Manzullo, you are recognized for 5 minutes. 

27 

Mr. MANZULLO. Thank you. Jim, it is always good to see you 

here, and miss you. And then the great codels we used to take to 

Mexico and all the fun we had. 

Mr. KOLBE. Thank you, Mr. Manzullo. It is a pleasure to be back 

with— 

Mr. MANZULLO. I am sure you do not miss it. 

Mr. KOLBE. —good friends like you. 

Mr. MANZULLO. I miss you also. 

Gwen and I serve on the manufacturing caucus, and she has a 

Harley Davidson, and we are big into grease in our congressional 

districts. And also we have, in our district, Rockford, Illinois, nothing less than 90 manufacturers that are involved in private jets. 

I get very upset when President Obama talks about the people 

flying private jets, and I think about companies such as Skandia, 

with about 89 employees, that makes seats for these private jets. 

And the reason I bring that up is the lack of understanding in most 

of this country, especially in the White House, as to the basis of 

manufacturing. 

I have a constituent who utilized the program that I set up in 

the Ex-Im Bank for small businesses, an $11,000 transaction so 

that she could afford to export. And I thought that was remarkable. 

We have worked with OPIC. I chair the Small Business Committee. 

A lady by the name of Monique Matty, born in Liberia, became 

a U.S. citizen, got an OPIC guarantee, and went into business in 

Tanzania and Ghana. And it was at that point, with Danny Davis 

who was sitting on the committee with me, to see what OPIC was 

doing in Africa. And the bottom line is that both OPIC and Ex-Im 

programs make money for the United States. 

We, of course, want to push OPIC and Ex-Im to concentrate. Not 

concentrate, but to make more money available for the small 

businesspeople. But the problem that we are having with the 

World Bank is the fact that Argentina defaulted on $81 billion in 

sovereign debt, has stuck many American investors. 

Bond holders that won over 100 U.S. Federal court judgments, 

in excess of $7 billion. There has been $900 million in arbitration 

awards threat the ICSID arbitration process. And yet, the World 

Bank continues to give money to Argentina. And we are looking at 

a situation here where this Congress may decide to defund the 

World Bank. 

I cannot impress on the people at the World Bank enough that 

they have to do something except, we will work with you, we will 

do this. We had a hearing here about 3 weeks ago, and the same 

thing happened again. World Bank turned around and gave $400 

million more in loans to Argentina. 

And my question to anybody who wants to tackle it is, why 

should the United States, why should this Congress, continue to 

support the World Bank when it does not back U.S. citizens who 

have been stuck with Argentina debt, and shoved it right in the 

face of American investors and bondholders and other world investors, and yet continue to be a recipient of the World Bank. 

Mr. MOSBACHER. I guess— 

Mr. MANZULLO. You got stuck. 

28 

Mr. MOSBACHER. —Mr. Manzullo, the World Bank is operating, 

as its title suggests, all over the world. And I think we ought to 

continue to put as much pressure as we can on them to help protect those who have been defrauded, or stiffed, by obligations that 

are held by sovereign governments. 

But I personally do not believe that we would be doing ourselves 

a favor by cutting off the World Bank completely. I think we lose 

influence. In that situation, we would reduce our chances of being 

able to ultimately protect those who are impacted negatively by the 

failure of the Argentineans to pay their debts. 

Mr. MANZULLO. But when you see that—go ahead, Mr. Harmon. 

Mr. HARMON. First, I would like to say there have been, obviously, some defaults. There was a default in Russia, there was a 

default in Argentina. There could be further defaults in Europe at 

some point. The amount of profits that Americans have made in 

the emerging world far exceeds any losses that have been exceeded— 

This is a very profitable area. In fact, one of the problems the 

United States had is increasing flow of capital from outside the 

United States to the emerging markets. 

Mr. MANZULLO. But we could do that if we did not give any more 

money to Argentina. The World Bank will not even cut off the spigot to Argentina. 

Mr. HARMON. I am not sure it is the World Bank that the criticism should be leveled at. I think that a number of other major departments in the United States Government could have acted with 

Argentina, or shortly thereafter, to have been sure that there was 

a fair resolution on that debt. 

I do not think it was the World Bank who should have done it, 

myself. I think the State and Treasury Departments could have 

played a role there. But there are not too many experiences in the 

last 20 years. Argentina is one, granted, where there have been 

some losses. Clearly, there have been losses in Greece. 

There were a few others that we all can think about. But they 

are modest compared to the total amount— 

Mr. MANZULLO. But you have U.S. citizens, who are bondholders 

who have been stuck with debt from Argentina, who are being 

asked to use their taxpayer dollars to give more money to Argentina through the World Bank. That does not pass the sniff test. 

Mr. HARMON. But I am not sure that the resolution is to thereby 

cut off the World Bank because of all the good the World Bank may 

do. I think that every multilateral institution is clearly going to do 

a few things that are not perfect. On balance, from my observation 

of the World Bank in the last 30 years, they have done a lot more 

good than the few illustrations that you could be critical of. 

And I have some reservations about the Argentina illustration 

there. You will have other countries which are going to default on 

American investors. At least the Americans should have an investment agreement. We do not have an investment agreement with 

Russia, so Americans lost over a billion dollars on Yukos back in 

2004 and 2005. 

We should have done something about that. I can give you other 

illustrations having nothing to do with the World Bank, but I think 

29 

it is more Treasury that should be involved in some of these areas 

rather than the World Bank, when you are looking for criticism. 

Chairman MILLER OF CALIFORNIA. The gentleman’s time has expired. 

Mr. MANZULLO. Thank you. 

Chairman MILLER OF CALIFORNIA. We are going to have a second 

round. Mr. Manzullo, we had a meeting with the Under Secretary 

of the Treasury last week on this specific issue. And Treasury is 

trying to move forward, see what they can do on this. So we took 

your concerns to heart the last time you brought them up, and we 

are trying to— 

VOICE. [Off mic.] 

Chairman MILLER OF CALIFORNIA. They are moving forward to 

see what they can do, yes, sir. 

Mr. Perlmutter, you are recognized for 5 minutes. 

Mr. PERLMUTTER. Thank you, Mr. Chairman. And I just have to 

say to my friend, Mr. Manzullo, about the corporate jets, I was hoping we would not get into a—firing across the bow for each other. 

But we want your people to work. I know I do. 

I just want to make sure that before I take it out of grandma’s 

hide on Medicare that millionaires and billionaires are paying their 

fair share as we put our fiscal house back in order. And I think 

that is where the President is coming from. 

But having said that, speaking of jets, we now have the FAA 

shut down. Boeing, who was mentioned earlier, has several jets 

that are in the process of being tested—787s, big 747 cargo 

planes—that are to be sold in the international market that cannot 

be tested today because we basically do not fund the FAA completely. 

I do not know how many millions of dollars that is to the commerce of the United States. So, these games that we are playing 

with the budget have to stop. I do agree with Mr. Campbell. And 

Mr. Harmon, I want to direct these to you and Mr. Leo. We really 

do have money going in that we are probably borrowing on the 

margin. 

So we do need to know, generally, just like a bank gets money 

from its depositors and then lends it out and hopes to make a 

spread, hopefully I can show to my constituents, the people of the 

suburbs of Denver, that there is some real value here. 

There is maybe the spread, I can show an interest spread, or the 

intangibles are valuable. And the intangible that is most important 

to Americans today are jobs. So how do I show them direct jobs 

coming from providing funds to the World Bank or to any of these 

other banks? 

How do I show that? How do I quantify, you gave this amount 

of money to the World Bank. It provided this kind of return, or it 

helped us get this many jobs, and separate it from, say, USAID or 

Millennium Challenge Corporation or whatever? 

Do you understand my question? 

Mr. KOLBE. Yes, it is a good question. But I gave you, on the African Development Bank specifically, six financings—I just had to 

make notes to them before I came to the meeting here—where, in 

the last few years, if they were not involved, the financing would 

not have taken place. 

30 

They would not have bought the equipment from the United 

States. We have these GE turbines, or Boeing equipment, or other 

pumps that we saw. Those transactions would not have gotten done 

without the African Development Bank. You could actually go a 

step further. 

I just did not have the staffing like I used to have when I was 

in the public service area to be able to do the calculation. But you 

could almost calculate the number of jobs created by each of those 

transactions. I have no question that part you could analyze. 

Mr. PERLMUTTER. I am just saying we need to do that, and I am 

sure we can. And if we are going to continue to provide capital for 

these organizations, I have to go back to my area, because they are 

asking, ‘‘Why are we giving all this money to other countries? Why 

are we doing all this when we need to have people with good, longlasting jobs here, where they got a chance to provide for their family, to have the American dream.’’ 

And I always say, it is just a tiny part. It helps us develop investments overseas and export. But for me, I really have to show 

them that this is 20,000 jobs. Boeing, right here, or Seattle, whatever. And you said we have made a lot of profit over time. We are 

definitely in a ‘‘what have you done for me lately’’ moment. 

Okay? So you have to show us. Otherwise it is hard, whether you 

are a Democrat or a Republican, to sell this stuff. 

Mr. KOLBE. Mr. Perlmutter, may I just respond to this? I share 

your frustration at wanting to be able to quantify this very precisely. But I think, as you know, in many of these areas it is very 

difficult to quantify very precisely because it is not as though it is 

a completely controlled experiment where you can isolate one 

thing. 

There are a lot of things that go into this. But I take to heart 

what you are saying, and I am going to go back and take a look. 

There have been some studies that I know that have been done 

that I think have quantified some of this. And I am going to see 

what we can find, and make that available to you. 

Mr. MOSBACHER. Congressman, I would recommend that you find 

a few exporters in your district. They may be manufacturers, they 

may be farmers who are selling into these markets and whose purchases are being financed through lines of credit through local 

banks, or through trade finance, that exist in the purchasing country solely because of the MDBs. 

In other words, there is connectivity there. 

Mr. PERLMUTTER. And I want to support this. I just want to be 

able to show it. Because this is an uphill battle right now. 

So with that, I appreciate the chairman— 

Chairman MILLER OF CALIFORNIA. Thank you. 

Mr. PERLMUTTER. —letting me take a shot at Mr. Manzullo. And 

I will move on. 

Chairman MILLER OF CALIFORNIA. You guys get boxing gloves. 

We will figure this out. 

I ask unanimous consent to place a statement in the record from 

Philips Electronic North America. Without objection, it is so ordered. 

Mr. Hardy, would you you please comment on that relationship 

with multilateral development banks and Philips Electronic? 

31 

Mr. HARDY. I think it is reflective—and this is why I wanted to 

include it in our testimony—of the fact that in a variety of sectors, 

U.S. firms are doing extremely well in terms of being able to market their goods and services within the MDBs. 

I think that the World Bank actually has an agreement focused 

on the IT sector. And so that companies like Cisco, Oracle, and others are very heavily engaged in terms of being able to expand their 

access into the emerging markets by being able to work through 

the MDBs. 

I certainly understand the concern the Congressman has raised. 

And I think that there are a number of issues around it. For example, the Department of Commerce has for years had commercial 

support officers actually in the banks who act to be able to assist 

exporters as they came in. 

They would not necessarily know their way around or who to 

contact. And because of limitations, Commerce is now thinking 

about withdrawing those individuals right at the time when we 

really need to be be doing more. So it is really an issue across the 

government in terms of being able to keep the pieces in place so 

that we have a system. 

But it is very clear that in particular sectors, such as with Philips, that they have a 15-year relationship with the MDBs. And as 

these markets have grown, as the middle class has developed, their 

market has only expanded. And so it has been, I think, very fruitful for them. 

But if I can add one element, and that is an element that actually they focused upon in the statement that they made, was it 

about the security of the procurement system? And in a way, this 

goes back in my mind to what Congressman Manzullo was talking 

about, which is that the MDBs need to understand that there are 

standards they absolutely need to comply with. And in terms of 

bankruptcy situations, in terms of people losing money, that there 

be consequences to that. 

There are clearly concerns within the business community about 

potential erosion in procurement standards. And I think that is 

very clearly an issue that needs to be monitored. Very clearly, if 

there is an erosion in the procurement strategies, then, very clearly, you are going to see American, European, and Canadian firms 

begin to back away from— 

Chairman MILLER OF CALIFORNIA. That is the United States 

maximizing the financial benefits of MDBs that they create. 

Mr. HARDY. I think we are, as long as the pieces are in place. 

That needs to continue, so that it is difficult to be saying, on the 

one hand, we need to continue to expand the role that the MDBs 

are playing, and then at the same time for Commerce to be pulling 

out individuals who have a concrete role in terms of assisting exporters and U.S. companies in terms of getting work and understanding how the procurement process works and how they can 

maximize the benefits of that. 

Chairman MILLER OF CALIFORNIA. And you talked about the 

growing middle class in Vietnam, Indonesia, countries like that, 

and how that is a benefit for the American workers. I have seen 

some of the tariffs placed on some of our exports to Vietnam that 

are quite outrageous. How are we dealing with a lot of those? 

32 

Mr. HARDY. Trade rules an ongoing negotiating process. There is 

no question that everybody is looking to take advantage of the system, to try and work the system in a way that most supports their 

own particular situation, which means that the USTR and the Department of Commerce need to continue to be aggressive in protecting U.S. exporters and supporting rules of fair trade. 

And even as we continue to pursue free trade and FTAs—because that is a necessary and, indeed, a critical part of the process, 

we cannot just enter in agreements, and then let them slide and 

not pursue, and ensure that the rules are being followed. 

Chairman MILLER OF CALIFORNIA. Mr. Harmon, you painted 

quite a scary picture of what might result from reduced contributions for the MDBs from the United States, and the specific role 

China is trying to backfill. You argue in favor of spending funds 

over the years that go to directly to American jobs. 

Do you think that the picture you have painted is going to become a reality should we lose our position with the MDBs? 

Mr. HARMON. Yes, I do. I think this is almost a no-brainer in my 

mind. Because if we drop back, we are going to lose our leadership 

position. 

Chairman MILLER OF CALIFORNIA. I agree with that. I would like 

to hear you expand on it. 

Mr. HARMON. Right. I have watched the G20 now in these meetings I have been attending for the last 8 months, and the other 

countries are constantly asking about what is happening in the 

United States. What is happening not only in our politics—because 

they do not fully understand that—but the role of the World Bank 

and the African Development Bank and the other development 

banks, too—who come to all of our meetings, by the way—are so 

important to all these other countries. 

If we take a position which says that we are not fully supporting 

them, someone else is going to fill the position that we are not. 

China is already at our throats, as far as I can see, on a competitive basis— 

Chairman MILLER OF CALIFORNIA. [Off mic.]. 

Mr. HARMON. And so it is so clear to me that this would just add 

fuel to a fire that we are having trouble controlling right now. I do 

not think the American people fully understand what this means 

long term for jobs in the United States. 

Chairman MILLER OF CALIFORNIA. And it is our job to explain 

that. Thank you. 

Ranking Member McCarthy, you are recognized for 5 minutes. 

Mrs. MCCARTHY OF NEW YORK. Thank you. And again, I want 

to thank everybody for their testimony. This is actually my first 

year on this particular subcommittee. I had an awful lot to learn, 

and I had to read a lot, and I had to ask a lot of questions to find 

out. 

Because I was probably like—Members of Congress, we know a 

little bit about everything, but we do not know a lot about some 

things. I went back to Long Island, and I wanted to find out because the first thing we were going to be working on was our exporting. 

I went to the Long Island Business Association, which is the 

largest business association on Long Island for small businesses. 

33 

And the numbers that I received on how much we were making for 

Long Island on exporting blew my mind—$10 billion. 

So to answer some of the questions that my colleagues asked, 

those companies are all paying taxes. That, to me, is a way that, 

again, we are getting money back into the system. And the more 

I started digging in and educating a lot of small businesses on the 

island, they are third contractors, subcontractors. 

But with that being said, those are jobs. Those are hundreds and 

hundreds of jobs that would not have been there if they had not 

been exporting. And the Export Bank helped them a lot. Same as 

all of you, when we were talking about the economy that we have 

been going through, and everybody has been doing it, it was the 

MDBs that covered those loans. 

The Export Bank did the same thing. So in my opinion, for the 

amount of money that we owe, hopefully we will pay and this Congress will okay that. Our returns, in my opinion, are extremely 

strong and a good reason why, because we are getting back, and 

it is certainly having an effect as far as jobs here in this country 

with large corporations, but very also small corporations. 

And people have to understand that. I know it is hard because 

we still have to do an awful lot for jobs here in this country. But 

to me, it is a good deal. When I see a return, as Mr. Leo has said 

and others have said on what the returns are coming back into this 

country, it is a good deal, especially if you look at what you are getting on some of your accounts right now as far as whether it is savings or money management. I know we all think that way, but it 

is a good deal as far as the government goes. So with that being 

said, I do want to ask one other question. 

As we came through, and as the MDBs have covered the loans 

that were given out to other countries that we are helping, what 

do you think? What do you see, I should say? Do you see the support shifting back to more traditional infrastructure and development projects? 

Because right now, the MDBs were helping the banks, helping 

the countries just kind of get through this with loans to do what 

they had to do to get through everything. With the global economy 

recovering, where do you see that these countries are going to be 

going to stabilize their own country a little bit better, and to do the 

infrastructure 

So large roads. Afghanistan, gosh, I called that the land of dirt 

the couple of times I have been there. But you give that country 

some roads. We know they have minerals. We know that they have 

products. 

They have a lot of water. They can grow. They can be part of 

that part of the country as far as supplying food. But if you do not 

have roadways or trains, if you do not have refrigeration at the 

end, it is not going to go anywhere. So where do you see the world, 

on the whole, going forward as we get out of this recession? 

And we will get out, by the way. I feel confident on that. 

Mr. MOSBACHER. I might say on Afghanistan that the World 

Bank and the MDBs have been absolutely instrumental in helping 

finance infrastructure there beyond what the United States Government pays for. The MDBs have played an integral role there. 

34 

Second, the Inter-American Development Bank has taken a very 

aggressive posture in trying to finance infrastructure additions 

throughout Latin America. This is a continent, actually, that relatively speaking is doing pretty well. There are obviously countries, 

just like there are in Africa, that are going backwards. 

But there is an awful lot of growth. Even beyond Brazil, look at 

Colombia. And so the MDBs financing of projects on infrastructure—roads, water sanitation, electricity plants—are having a tremendous impact on improving the competitiveness of those countries. 

The same thing goes for Africa and Asia. So I think they are 

stepping up. I think they are, frankly, the only game in town once 

we went through the financial crisis of 2008. And as you said, as 

well—very important point, and Ben Leo made this case—when 

things started to fall apart they could have fallen even worse apart 

around the rest of the world. 

But for the staunching of the building, if you will, that many of 

these MDBs did. A role that was little-sung, little-understood, but 

had a huge impact on how free the fall was that we were going 

through. 

Mrs. MCCARTHY OF NEW YORK. Thank you. 

Chairman MILLER OF CALIFORNIA. In fact, our next hearing will 

be on the MDBs’ impact on national security. 

Mr. Scott, you are recognized for 5 minutes. 

Mr. SCOTT. Thank you. Just a few quick questions. What, in a 

nutshell, would each of you say to the question, what are the Chinese really up to? What are they up to in Africa? 

I just was so amazed with my trip there, and I want to come 

back to that. I tend to think they are up to more than what the 

surface is showing. And if you had any figures on how much the 

Chinese are spending on foreign aid, and how much they are 

spending in Africa, for example. 

And just to try to get a good little quick handle on how we sum 

up Africa, I mean China, right quick. I would like to just—yes, Mr. 

Harmon? 

Mr. HARMON. I will start, just briefly. The Chinese need to maintain a growth rate of probably north of 7 percent. They are at 9 

percent now, but 8 or 9 percent in order to keep their own country 

stable. Because at a lower growth rate, they will have serious problems with their own people. 

In order to— 

Mr. SCOTT. But let me ask you about that, because that is where 

my mind was taking me. I figure there is something else. When 

you say a problem with their own people, are we talking about the 

rapid population growth of the Chinese? 

Mr. HARMON. If you have unemployment in China, you will have 

disruption. There is a history in China that you would have those 

problems. The Chinese are a very capable people. They know what 

they are doing. There is nothing that I have seen yet that puzzled 

me about what they are doing. 

They have to maintain a growth rate in order to maintain stability in their whole system. And that growth rate is much higher 

than most of us in the United States are used to. So when we talk 

35 

about numbers like 8 and 9 percent, this an enormous growth rate 

for a country the size of China. 

In order to maintain that growth rate, they have to continue to 

be very active in exporting product. They also have to transition 

into more of a consumption society. But what they are up to in the 

developing world, in Africa specifically, is resources, natural resources. 

So short-term, or medium-term, they negotiated as they could in 

Zimbabwe for certain natural resource products. They have done 

the same over and over and over again. So it is natural resources. 

When you operate outside the rules of the OECD, it is enormously 

difficult competition for the rest of the world. 

China does not have to be worried about that. In fact, in this 

particular G20 panel that I am on, the Chinese are hoping that we 

are going to encourage more infrastructure in Africa, which would 

be good for the African people, good for commerce. 

But they intend, when the project preparation gets completed appropriately, they are going to go in and bid for that infrastructure 

project themselves. They will take control of that infrastructure, 

and they will build it. Some people in Africa think it is 

colonialization again—by the Chinese coming in and not taking 

much time, as the World Bank will tell you or the IFC will tell you, 

as they got through their process, and all the procurement obligations that we have at the World Bank, the IFC is at a disadvantage. 

Because the Chinese have moved in and said, ‘‘We do not need 

to check any of that. We will do the following for you.’’ And so, they 

take off with a project. Over and over again, you are seeing that. 

We are competing against a much larger entity. 

Now in real numbers, in the year 2000 the Chinese came to me, 

as chairman of the Ex-Im Bank and said, ‘‘We would like to secund 

a few people to Ex-Im Bank so we can learn more about export 

credit agencies.’’ I thought they were going to do two or three people. And it was a joke at the Bank because the number of full-time 

employees of the Ex-Im Bank is about 440. 

And they said, ‘‘We would like to secund 40.’’ I said, ‘‘Forty people? That is 10 percent of our whole staff. We could never do such 

a thing as that.’’ But at that time, they were supporting, literally 

I think the number was something like $5 billion of exports from 

China. And today we think they are doing something like $250 billion. 

Mr. KOLBE. Mr. Scott, could I just add very quickly to that? It 

not about political colonialism. It is about economic colonialism. 

They do have to have a very rapid growth rate. And it is about resources in Africa. Clearly, they are looking for resources. 

But in a country like Malawi, which does not have a lot of natural resources, it is something else. And it is about markets. So 

they take a very long-term view of this thing. They have a very 

long-term view, and it is about expanding their markets and being 

able to maintain that growth rate. 

And that is what they are doing in a very effective way. 

Mr. SCOTT. Thank you. 

Chairman MILLER OF CALIFORNIA. I would like to thank each of 

you for your testimony. It was very, very informative. It helps us 

36 

to undertake the goal we have sought after to complete this process. And you have given us a lot of very, very good information. I 

mean that from my heart. You did a great job. 

Thank you for your time, your expertise, and your talents. And 

Chairman Kolbe, it was very good to have you back with us today. 

Without objection, I would like submit for the record a letter in 

support of the MDBs signed by the following organizations: the 

Business Roundtable; the Coalition for Employment Through Exports; the Emergency Committee for American Trade; the National 

Foreign Trade Council; the U.S. Council for International Business; 

and the U.S. Chamber of Commerce. 

The letter states that: ‘‘MDB loans and expertise help developing 

countries become reliable trading partners and open up their markets for U.S. goods. And over half of all U.S. exports now go to developing countries that have received assistance from the MDBs.’’ 

The Chair notes that some members may have additional questions for this panel which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 30 days 

for members to submit written questions to these witnesses and to 

place their responses in the record. 

This meeting is adjourned. 

[Whereupon, at 4:08 p.m., the hearing was adjourned.] 

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A P P E N D I X 

July 27, 2011 

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