Report of the

OVERSEAS PRIVATE INVESTMENT CORPORATION

ANNUAL POLICY REPORT

FISCAL YEAR 2007

Submitted Pursuant to

Section 240A of the

Foreign Assistance Act of 1961,

As Amended

June 2008
OPIC Annual Policy Report FY 2007 i

Table of Contents

EXECUTIVE SUMMARY.................................................................................................ii

I. OPIC in 2007...............................................................................................................1

Fiscal Year Overview............................................................................................1

II. U.S. ECONOMIC EFFECTS & DEVELOPMENT IMPACTS.......................................7

U.S. Economic Effects ..........................................................................................7

Host Country Development Effects.......................................................................9

III. ENVIRONMENTAL IMPACTS .................................................................................13

Fiscal Year 2007 New Initiatives Summary.........................................................13

Project Screening and Assessment ....................................................................13

Transparency......................................................................................................16

Climate Change Mitigation..................................................................................17

Fiscal Year 2007 Reporting ................................................................................18

IV. LABOR & HUMAN RIGHTS..................................................................................19

V. MONITORING OF ACTIVE PROJECTS..................................................................21

FY2007 Monitoring Activity .................................................................................21

Site Monitoring....................................................................................................22

Self Monitoring....................................................................................................26

VI. EXHIBITS................................................................................................................30
OPIC Annual Policy Report FY 2007 ii

OPIC ANNUAL POLICY REPORT –FY 2007

Executive Summary

 In Fiscal Year 2007 (FY 2007), OPIC assisted 139 projects (including 22 investment funds

subprojects and 32 framework subprojects) in 56 countries or regions, involving a wide range of

industries. These projects are expected to generate more than $760 million in U.S. exports and

support over 1,500 U.S. jobs.

 Of all the projects that OPIC supported in FY 2007, 79 percent, or 111 projects involved small

businesses. In addition, the projects OPIC assisted in FY 2007 are expected to procure $84 million

from U.S. small businesses located in 21 states, plus the District of Columbia, supporting 206 U.S.

jobs during the first five years of operations.

 Seventy-two percent of FY 2007 projects target the services sector, which includes financial services,

social services, communications, tourism and other services. The high proportion of projects in this

sector reflects the increasing importance of services to the global economy and the desire of U.S.

services companies to expand their operations internationally.

 The projects that OPIC supported in FY 2007 are expected to generate over 21,000 jobs in

developing countries. Total initial host-country expenditures are projected to be $3.5 billion, which

will support these jobs and spur additional economic activity and indirect employment in the host

countries. Ninety-four percent of the 139 OPIC-supported projects in FY 2007 were located in lowand middle-income developing countries.

 OPIC completed the first year of its seventh three-yearmonitoring“round.” InFY 2007, OPIC

monitored 36 insurance, finance and investment fund projects in 15 countries across several regions.

The seventh monitoring round initiates an integrated monitoring program, which includes coordinated

monitoring across all three disciplines – Labor and Human Rights, Environment Impacts, and

Economic and Developmental Effects.

 All OPIC-supported projects approved in FY 2007 were subject to a human rights review. OPIC

works in close consultation with the U.S.DepartmentofState’sBureauofDemocracy,HumanRights,

and Labor (DRL) when reviewing each project.

 Every project considered for OPIC support is subject to a full worker rights review and OPIC support

is conditioned upon adherence to internationally recognized worker rights. All OPIC projects are

subject to statutorily required contract language; most potential projects also are subject to

supplemental contract language addressing one or more internationally recognized rights.

 OPIC pursued its strategic initiatives by working in close collaboration with other U.S. agencies in

promoting economic development within key regions in the world, including the Middle East and North

Africa, Sub-Saharan Africa, and Central America.

 OPIC’s newly redesigned website facilitates improved public access to a greateramount of

environmental and social impact information. The OPIC website now enables public access to full

text, non-business confidential versions of environmental and social documentation for Category A

projects being considered for support by the Agency.

 In June 2007, OPIC announced its Greenhouse Gas Initiative, a commitment to reduce greenhouse

gas emissions from the OPIC-supported project portfolio by 20 percent by 2018 and to emphasize

support for future renewable energy and energy-efficient projects.
OPIC Annual Policy Report FY 2007 1

I. OPIC in 2007

Fiscal Year Overview

In Fiscal Year 2007, OPIC assisted 139 projects in 56 countries and regions.

OPIC's insurance, finance, and investment funds assisted 139 new projects1 located in 56 countries and

regions around the world in FY 2007. The 2007 total project count reflects a significant increase over

2006, when OPIC committed to 70 projects. One cause of the increase in the total number of projects

supported is due to the inclusion, for the first time, of subprojects generated under OPIC-supported

investment funds and framework agreements as separate projects.

In Fiscal Year 2007, these 139 projects included:

 7 structured finance projects

 32 framework subprojects

 36 small and medium enterprise finance projects

 22 investment fund subprojects2

 42 insurance projects.

The total investment amount of the 139 new projects was $4.8 billion, of which approximately 83 percent

($4.0 billion) represents investment from U.S. sources (including OPIC), seven percent each from both

host countries ($351 million) and from third countries ($333 million), and three percent ($127 million) from

multinational development institutions (see Figure 1). Thus, OPIC's assistance to U.S. investors

leveraged over $800 million worth of investment from non-U.S. sources, mobilizing capital from numerous

international investors.

1 In previous years, OPIC has included in its project count its framework agreements and investment funds as single projects. The

downstream investments of the framework agreements and investment funds were not included in the project count. However,

beginning with FY 2007, the downstream investments of the framework agreements and investment funds are included in the

project count -- rather than the overall framework agreement or investment fund. Using this more inclusive approach, the data will

cover all projectsthatOPICsupportsonanannualbasis.DuetothehighvolumeofprojectssupportedunderOPIC’sframework

agreements and investment funds, the FY 2007 project count appears to increase significantly over previous years.

2 OPIC also approved five new investment funds, however, due to modifications in the project count methodology beginning in

FY 2007 described above, these five funds and projected impacts are not included in the annual project total.
OPIC Annual Policy Report FY 2007 2

Figure 1

Sources of Project Investment

Fiscal Year 2007

United States

83%

Multilateral

Institutions

3%

Third Country

7%

Host Country

7%

OPIC-Supported Projects Target Emerging Markets around the Globe.

In FY 2007, OPIC-supported projects were evenly spread throughout the developing world, with a

significant portion of projects located intheagency’stargeted regions: the Middle East and North Africa,

Sub-Saharan Africa, and Central America and the Caribbean (the latter two incorporated in the Latin

America classification). The regionaldistributionofOPIC’sFY 2007 projects is shown in Figure 2 below:

Figure 2

Projects By Region

Fiscal Year 2007

Middle East &

North Africa

19%

South Asia

14%

Southern and

Eastern Europe,

Russia

18%

Sub-Saharan Africa

15%

Latin America

16%

East and Southeast

Asia

7%

Global

1%

Western and

Central Asia

10%
OPIC Annual Policy Report FY 2007 3

In Fiscal Year 2007, OPIC supported projects across a broad range of industries.

Figure 3 illustrates OPIC-supported projects broken down by sector. Projects in the financial services

sector accounted for 36 percent of all new OPIC-supported projects in 2007, followed by social services3

(17 percent), other services (14 percent), manufacturing (14 percent), minerals and energy (9 percent),

communications (4 percent), housing construction (3 percent), and agribusiness, tourism, and

infrastructure (one percent each). The entire services sector, composed of financial services, social

services, communications, tourism, and other services, accounted for 72 percent of all new OPICsupported projects in 2007.

Figure 3

Projects by Sector

Fiscal Year 2007

Financial Services

36%

Social Services

17%

Communications

4%

Other Services

14%

Housing

Construction

3%

Agribusiness

1%

Minerals & Energy

9%

Infrastructure

1%

Manufacturing

14%

Tourism

1%

OPIC Initiatives in FY 2007

In 2007, OPIC successfully launched a significant new environment initiative and targeted key regions

and sectors to fulfill its mission of promoting positive economic development in emerging markets. To

promote investment in particularly vulnerable countries that are critical to U.S. foreign policy, OPIC

continued its work with other U.S. Government agencies to promote the Rapid Economic Development

Initiative (REDI), which is designed to facilitate a coordinated and responsive approach to targeting new

projects in post-conflict and transitional areas.

OPIC continues to promote actively U.S. private investment in regions that are particularly vital to U.S.

foreign policy, such as the Middle East, North Africa and Sub-Saharan Africa. OPIC also targeted

projects that focus on housing construction and finance, with a particular emphasis on low and middleincome housing, and has coordinated improved access to finance for micro-, small-, and medium-sized

entrepreneurs in numerous developing countries. OPIC continued to forge partnerships with the

governments of Central America and the Dominican Republic to facilitate private sector investment in the

region since the enactment of the Central America-Dominican Republic-United States Free Trade

Agreement (CAFTA-DR).

3 Social services are defined as any investment providing humanitarian relief or education services.
OPIC Annual Policy Report FY 2007 4

OPIC promotes green development through the implementation of a Greenhouse Gas Initiative

that will cap greenhouse emissions of new OPIC-supported projects and encourage investment in

renewable and clean energy projects.

In June 2007, OPIC announced the Greenhouse Gas Initiative, a commitment to reduce greenhouse gas

emissions from the OPIC-supported project portfolio by 20 percent by 2018 and to encourage support for

future renewable energy and clean energy projects. To meet the portfolio greenhouse gas reduction

target, OPIC has established an annual emissions cap for all new greenhouse gas emissions associated

with OPIC-supported projects to which OPIC provides a commitment in a given year. The cap is

equivalent to the emissions from projects committed to by OPIC in Fiscal Year 2007, 2.927 million metric

tons of CO2eq peryear.Ifmet,OPIC’s10-year goal will result in a reduction in emissions of more than 10

million tons CO2eq associated with projects in OPIC-supported project portfolio.

On a project basis, OPIC will work with the private sector to encourage U.S. investment in renewable

energy and clean energy projects through the application of market-based incentives. OPIC will consider

greenhouse gas emission reduction alternatives for all OPIC-supported projects, such as opportunities to

increase project energy and operational efficiencies, and the application of new technologies for the

capture, storage and recovery of greenhouse gases.

OPIC also will enhance its accounting and reporting of greenhouse gas emissions from OPIC-supported

projects. Instead of aggregate emission reporting, OPIC will report the annual greenhouse gas emissions

of each OPIC-supported project with significant emissions in the active project portfolio, as well as the

projected greenhouse gas emissions of each project receiving an OPIC commitment during the previous

fiscal year. This accounting and reporting will be subject to independent third-party verification. In

addition, OPIC will report renewable energy and energy efficiency aspects of OPIC-supported projects.

OPIC promotes projects that provide economic opportunity at the local level through improved

access to finance for micro-, small- and medium- sized entrepreneurs.

OPIC supported numerous financial services projects in 2007, with a particular emphasis on projects that

focused on improving access to finance for micro-, and small- and medium-sized borrowers (MSMEs) in

emerging markets. SMEs have been identified as a significant driver of employment and production in

developed countries, yet SMEs continue to comprise a small proportion of total employment and

economic production in many developing countries. Existing SMEs often cite a lack of access to finance

as an inhibitor to growth. To address these issues, OPIC has targeted improving access to finance in

many of its eligible countries. In particular, OPIC supported projects that directly target SME and microborrowers in all of its priority regions, as detailed in each section below.

OPIC’s Rapid Economic Development Initiative targets investment in Afghanistan, Pakistan,

Liberia, West Bank and Lebanon.

OPIC’s Rapid Economic Development Initiative (REDI), created in conjunction with other U.S.

Government agencies, targets investment in nations whose security or continued political and economic

stability urgently depend on quick and tangible economic progress. These REDI countries are Lebanon,

Liberia, Pakistan, West Bank, and Afghanistan. In FY 2007, 24 of the 139 projects that OPIC supported

were in REDI countries.

Liberia:

In 2006, OPIC reopened its programs in Liberia for the first time since 1990. In September 2006, new

President Ellen Johnson-Sirleaf challenged the international community to support the efforts of her

government in the reconstruction of Liberia. In particular, she requested support for Liberia's private

sector, which plays a significant role in the area of job creation, revenue generation, and overall economic

activity. To meet this challenge, OPIC and CHF International (CHF) have financed the development of a

non-bank financial institution called the Liberian Enterprise Development Finance Company (LEDFC),
OPIC Annual Policy Report FY 2007 5

whose purpose will be to provide credit to Liberian-owned SMEs. This project will contribute directly to

the current reconstruction effort in Liberia by providing access to financing for the small and mediumsized entities that the country will need to grow its economy. In addition to credit, Liberian enterprises

also will receive business development assistance to ensure that their ideas will have the greatest chance

for success. LEDFC hopes to address the credit needs of 1,500 Liberian businesses. CHF expects that

almost 40 percent of borrowers will be women or women-owned businesses.

Pakistan:

Through its Citibank Pakistan II framework facility, OPIC will support the microfinance lending efforts of

the Kashf Foundation, a leading microfinance institution (MFI) in Pakistan. The Kashf Foundation has

been providing microfinancing in and around Lahore, Pakistan since 1996. Kashf was the first

specialized microfinance institution in Pakistan, the first MFI targeting only women from low income

communities, and the first MFI to charge a sustainable fee for its services. This project provides muchneededcapitaltoaugmentthePakistanibankingsector’scapacityforprovidingmicro-credit to an

underserved section of the population by targeting Pakistani women. WithOPIC’sfinancialsupport,

Kashf expects to make nearly 40,000 new loans to roughly 18,000 borrowers, all of whom will be women.

The average loan size is projected to be $231.

OPIC is working in partnership with other government agencies and the private sector to facilitate

investment in Central America.

Aspartoftheagency’son-going efforts to cultivate private sector investment in the CAFTA region, OPIC

held a conference in El Salvador in May 2007 entitled Access to Opportunity in Central America and the

Caribbean. The conference was designed to identify investment opportunities in the region for U.S.

companies and included 300 participants from 15 countries, representing U.S. and regional businesses,

leading financial institutions, and the governments of the United States and Central America. OPIC also

strengthened and forged new partnerships with its counterpart agencies to promote development in the

CAFTA-DR region.

In an effort to improve access to finance for small businesses in Central America via banks and other

financial intermediaries in Latin America and the Caribbean, the U.S. Department of the Treasury, the

Inter-AmericanDevelopmentBank’s(IDB) Multilateral Investment Fund (MIF), and OPIC have launched a

technical cooperation program for banks that are committed to serving small enterprises and significantly

expanding their financing operations in the small business sector. For qualified financial intermediaries,

OPIC has a program to provide financing and guarantees for small business loans. In addition, IDB will

provide technical assistance to help banks service this market and the U.S. TreasuryDepartment’sOffice

of Technical Assistance will address regulatory roadblocks to small business lending.

Honduras:

In Honduras, an OPIC-guaranteed loan through its Wachovia risk-sharing facility will fund the growth of

BancodelPais’sconsumerandSMEloanportfolios,bothofwhichareimportanttodrivingeconomic

growth in Honduras. Banco del Pais was incorporated in 1992 and acquired two other commercial banks

in 2003. The project will foster financial infrastructure development by expanding the availability of

mortgages for middle class customers and by providing loans to support SME ventures. Honduran

consumers should benefit from greater competition in the lending sector via lower interest rates and more

readily available credit. The project will issue more than 2,000 new loans, with an average lending

amount of about $25,600.
OPIC Annual Policy Report FY 2007 6

OPIC actively has supported projects in the housing and mortgage sectors.

OPIC-supported housing-related projects span sectors as diverse as financial services for mortgage

lending and loan securitization; construction; and other services supporting the housing market. OPIC

supported housing-related projects in numerous countries, including the following:

Nicaragua:

OPIC supported a $10 million loan to Banco de Credito Centroamericano (Bancentro), a Nicaraguan

bank, via its U.S. owner, Roberto Zamora. The OPIC loan will assist Bancentro in expanding its

mortgage financing operations to underwrite a portfolio of 20-year residential mortgage loans for lowincome borrowers. With the OPIC loan, Bancentro will become the first provider of long-term, fixed rate

mortgages in Nicaragua. The project will provide financial infrastructure development through the

expansion of mortgage finance in Nicaragua, thereby assisting in developing the construction and

associated real estate sectors. OneofBancentro’smostimportantinitiatives is the San Andrés housing

project in Ciudad Sandino, designed to construct more than 1,300 homes for low- and moderate-income

Nicaraguans. Bancentro is using OPIC supported funds to offer long-term, affordable mortgage financing

at San Andrés for working Nicaraguans to achieve home ownership.

Iraq:

In Iraq, OPIC supported the construction financing of 234 single family housing units by International

Homes, LLC, the U.S. investor, in the Kurdish region of Iraq. The Kurdistan Regional Government (KRG)

of Iraq will be contributing land and infrastructure to this project. This project will have a strong

developmental impact on the region, as 86 percent of the 4,655 villages in the Dohuk, Erbil, and

Sulaymaniya governorates were destroyed in the 1991 Gulf War. While 65 percent of the villages have

been reconstructed, much of the region is still in need of housing, hospitals, and schools. KRG has been

unable to meet the public demand for housing, especially with the recent return of Kurds to this region of

Iraq. The project targets these communities in rural areas that desperately need modern housing and

provides opportunity for home ownership for the middle income segment of the population.

Ghana:

In the West African nation of Ghana, OPIC is addressing a shortage of both affordable housing and

mortgage financing options by partnering with Ghana Home Loans Ltd. (GHL), which is owned in part by

Broad Cove Partners, Inc, a Massachusetts-based investment partnership. OPIC signed an agreement

establishing a non-bank financial institution in Ghana that will originate up to 600 mortgage loans by

providing a $30 million loan to GHL Fund 1 Limited, a credit facility. Through the facility, GHL will

originate U.S.-style residential mortgages, enabling Ghanaians to obtain 15-year GHL mortgages with a

25 percent down payment. Other project investors include Standard Bank of South Africa and FMO, a

developmental finance agency based in the Netherlands. Ghana has not been able to meet its average

annual housing requirements for any period during the last two decades. A lack of mortgage finance

institutions in Ghana has made it difficult for middle class families to own homes in a country where a

fraction of one percent of the population hold mortgages. Increasing Ghana’s mortgage stock

significantly will provide both affordable housing and support the growth of its financial infrastructure.
OPIC Annual Policy Report FY 2007 7

II. U.S. ECONOMIC EFFECTS AND DEVELOPMENT IMPACTS

In FY 2007, OPIC committed to 139 projects, a significant increase over 2006, when OPIC committed to

70 projects. As noted earlier, the increase in the total number of projects supported is due to the

inclusion of subprojects generated under OPIC-supported investment funds and framework agreements

as separate projects, which was not done in the past. In previous fiscal years, OPIC estimated the

economic and developmental impact of its framework agreements and investment funds using a model

based on actual monitored results from similar types of facilities. Projects were counted at the framework

and fund level, and did not include impacts at the subproject level. OPIC now includes the estimated

economic impact of these individual downstream subprojects in its cumulative reporting data and no

longer estimates the overall economic impact of each framework agreement and investment fund using

modeled data.

U.S. Economic Effects

The projects that OPIC supported in FY 2007 will support over 1,500 U.S. jobs.

The FY 2007 portfolio of OPIC-supported projects will result in significant economic benefits to the U.S.

economy. These include:

 A substantial portion of the initial procurement for OPIC-supported projects will be supplied by

U.S. firms, resulting in an estimated $534 million in U.S. exports of capital goods and services.

 The value of American materials and equipment required for ongoing operations is estimated at

$233 million over the next five years.

 As a result of this level of initial and operational procurement from the United States, the FY 2007

projects will support an estimated 7,920 person-years of direct and indirect employment for U.S.

workers. This is equivalent to an average of 1,584 U.S. jobs over a five-year period.

 Taking both the financial and trade flows into account, the combined impact of the FY 2007

projects on the U.S. balance of payments over the first five years of operation is expected to be a

negative $315 million. However, it is expected that over the lifetime of these projects, they will

have a positive net balance of payments impact for the U.S.

Information in the Exhibits section at the end of this report shows the break-out of OPIC-supported

projects and their impact on the U.S. economy through procurement and support of U.S. employment.

Exhibit 1 breaks out all of the OPIC-supported projects in 2007 by sector –including agribusiness,

minerals and energy, manufacturing, and services. Using these four sectoral classifications, the chart

provides data on the markets –host country, U.S., and third country - in which revenue will be generated

for all OPIC-supported projects in 2007, and what the U.S. procurement amount –both initial and

operational –will be, as defined by sector. The U.S. employment impact is generated using procurement

data provided by investors.

Exhibit 2 shows in detail the revenues generated by third-country sales from all OPIC-supported projects

in Fiscal Year 2007, classified by sector. Projects are classified according to their impact on U.S.

employment –one group includes projects having a positive U.S. employment impact, and the second

group includes projects with a neutral U.S. impact.
OPIC Annual Policy Report FY 2007 8

Table 1

Estimated U.S. Economic Benefits of

Fiscal Year 2007 Projects Supported by OPIC

Total project investment $4,842 million

U.S. investment in projects $4,031 million

U.S. percent of total 83 percent

Total direct U.S. project exports $767 million

Initial procurement from U.S. $534 million

Operational procurement (5 years) $233 million

Estimated U.S. employment supported

(5 years, direct and indirect) 7,920

(1,584 U.S. jobs)

OPIC-supported projects are carefully screened for their U.S. employment effects. OPIC does not

support projects that would harm the U.S. economy or result in the loss of U.S. jobs. OPIC collects and

analyzes, both geographically and sectorally, the projected U.S. employment and associated economic

effects of the projects that it assists. Even before taking into account their positive U.S. employment

impacts, none of the Fiscal Year 2007 projects is expected to result in any U.S. job loss. For a

detailed description of the methodology used to calculate the U.S. employment effects of initial and

operational procurement generated by OPIC-supported projects, please refer to Exhibit 4.

OPIC supports U.S. small businesses, directly and indirectly.

OPIC is dedicated to assisting the small business segments of the U.S. business community expand into

developing markets. According to U.S. Census Bureau data published by the U.S. Small Business

Administration office in 2007, U.S. small businesses represent 99.7 percent of all employer firms and

employ about half of all private sector employees. U.S. small businesses have generated 60 to 80

percent of annual net new jobs to our economy over the last decade and small businesses play an

important role in U.S. trade flows, as small businesses comprise nearly 97 percent of all identified

exporters, and produced 28.6 percent of total exports captured. OPIC recognizes the importance of small

businesses as a key driver of U.S. economic growth, and actively seeks to partner with these firms in

enabling their expansion overseas.

OPIC’seffortstoreachouttosmallbusinesseshaveyielded positive results in Fiscal Year 2007. OPIC

supported 111 new projects that involved small businesses, representing 79 percent of all projects

supported by OPIC in Fiscal Year 2007. This includes:

 41 projects received OPIC political risk insurance

 35 projects received OPIC investment guarantees
OPIC Annual Policy Report FY 2007 9

 35 projects received OPIC support in the form of direct loans, which totaled over $290 million.

Since 1997, OPIC has provided over $1.7 billion in direct loans to U.S. small businesses. In addition, of

all active OPIC-supported projects, 13 include U.S. investors that are women- or minority-owned

businesses.

Many small businesses benefit from foreign investment by larger U.S. firms. Larger companies often turn

to small U.S. businesses for products and services to support an overseas project. During their first five

years of operations, the projects OPIC supported in FY 2007 are expected to procure $84 million from

U.S. small businesses located in 21 states plus the District of Columbia, supporting 206 U.S. jobs.

OPIC collects data on the specific U.S. companies that will provide goods and services to OPICsupported projects. This data help to ensure that procurement estimates are as accurate as possible and

also to identify specific regions of the country benefiting from OPIC-supported foreign investments.

According to the data collected for the fiscal years 1994 through 2007, OPIC has identified the specific

U.S. suppliers for $14.8 billion in expected procurement for OPIC-supported projects. These U.S.

companies are located in 49 states, plus the District of Columbia and Puerto Rico.

It is estimated that approximately 51 percent of these identified suppliers to OPIC-backed projects are

U.S. small businesses. Nearly all U.S. procurement associated with OPIC-supported projects is identified

by specific product type, and in FY 2007, 61 percent of project-related U.S. procurement was identified by

specific supplier. Investors are encouraged to provide as much detail as possible regarding their

procurement of U.S. goods and services so that the positive impacts on the U.S. economy of OPICsupported projects can be recorded fully and accurately.

Host Country Development Effects

In FY 2007, OPIC continued to refocus on the developmental impacts of all projects, and

implemented a new matrix to measure the developmental impacts of financial services projects.

OPIC’s core mission is to promote private U.S.investmentthatwillcontribute to the economic

developmentoftheworld’slessdevelopedcountries.OPICselects projects that are likely to serve as

foundations for long-term economic growth, and that provide innovative products or services to emerging

marketcountries.TofurtherenhanceOPIC’sassessmentoftherelativebenefitsoftheprojectsthatit

supports, OPIC created a new development assessment model specifically for financial services projects.

The standard development matrix continues to be applied for the majority of OPIC-supported projects.

Over the past several years, OPIC support of financial sector projects has increased steadily. These

projects include framework agreements, investment funds, mortgage finance and securitization projects,

microfinance facilities, and general bank lending. It became evident that in many cases the development

matrix,originallycreatedfortraditional“bricksandmortar”projects,didnotcaptureaccurately the

developmental impact of these projects. OPIC created a specialized matrix that captures more accurately

the developmental impacts of financial services-related projects and how these projects assist in

developing the financial sector of emerging market economies.

The general structure of the financial services matrix is similar to the standard development matrix, but

includes core indicators that are specific to financial services-related projects. For a detailed description

of the methodologies employed for both the development matrix and the financial services development

matrix, refer to Exhibits 5 and 6.
OPIC Annual Policy Report FY 2007 10

OPIC Projects Score Well on Both Development Matrices.

Beginning with FY 2007, all financial services sector projects were scored on the new development

matrix, totaling 33 of the 139 committed projects. The average developmental score of the 33 projects

that were scored on the financial services matrix was 90. Seventy4 of the 139 projects were scored on

the standard development matrix. Theaveragedevelopmentalscoreoftheseprojectswas85.OPIC’s

long-term goal is to achieve an average development rating of 100 across all business lines.

Two projects stand out as the most highly developmental projects that OPIC supported in 2007, including

one project that was scored on the financial services matrix and one project that was scored on the

standard development matrix.

For financial services projects, the most developmental project that OPIC supported involved a

$10 million investment guarantee to the Calvert Foundation, a non-profit organization, for the launch of its

MicroPlace Fund,a new productthatwillexpand CalvertFoundation’s microfinance program, in

collaboration with eBay. With OPIC support, the Calvert Foundation MicroPlace Fund will leverage more

than $170 million in much needed capital to microfinance institutions (MFIs) in the developing world,

which will positively impact the income and quality of life for micro-entrepreneurs and their families.

MicroPlace, a wholly-owned subsidiary of eBay, is creating an online marketplace where retail (nonaccredited) investors with investable assets can research, find, and make investments –as small as $250

- in the microfinance industry. MicroPlace has been launched with the vision of creating a profitable

company that concurrently generates social impact, financial returns and positive brand value. To

accomplish this goal, the Calvert-MicroPlace partnership will harness new technologies that will allow

MFIsunprecedentedaccesstotheU.S.retailmarket. ThisprojectishighlydevelopmentalonOPIC’s

financial services matrix due to the innovative nature of the project, its high-level of capital mobilization

and augmentation of the financial sector, and the fact that it targets an underserved sector of the

economy.

On the standard development matrix, a power project in Egypt received one of the highest development

scores. The project involves OPIC political risk insurance coverage of an investment by Apache

Corporation for continued oil and gas exploration and development activities on 18 existing concessions

in the Western Desert region of Egypt, and a new development project in the Nile Delta deepwater area.

The project will create several hundred permanent local jobs, including managerial and technical

positions. All employees receive training, some conducted overseas. Employee benefits are offered,

including significant gender specific benefits such as extended maternity leave and childcare. The project

will be a significant contributor to local community development programs, most notably 200 one-room

schools for Egyptian girls built by Apache and operated by the U.S. nonprofit Springboard –Educating the

Future. The project will provide strong infrastructure improvements as the project expands crude oil and

natural gas production throughout the country, with the majority of output to be consumed by the host

country. Finally, the project will have strong fiscal benefits, as the Government of Egypt will receive

annual tax payments.

In Fiscal Year 2007, OPIC focused its activities in low- and middle-income developing countries,

providing an important source of employment and tax revenue for these economies.

The projects supported by OPIC in FY 2007 will provide significant economic and social benefits for

developing host countries. The projects are expected to generate 21,599 jobs in developing countries

directly, of which 10,050 (or 47 percent) are projected to be in skilled (management and professional)

4 Performance bid bonds, insurance coverage for existing assets, and framework and fund subprojects that had not disbursed by

9/30/07 were not evaluated on either development matrix. This comprises 36 of the total 139 projects.
OPIC Annual Policy Report FY 2007 11

positions. Forty-four of the FY 2007 projects are ventures with local partners, 17 of which feature equal

or majority local ownership.5

Seventy-one projects (51 percent) are located in low-income countries, such as the Democratic Republic

of Congo and Haiti, while 59 projects (43 percent) are located in middle-income developing countries,

such as Russia and Turkey.6 Nine projects (6 percent) are located in high income countries, with seven

projects in Mexico,acountrythat“graduated”from medium-income to high-income only two years ago,

two in Poland, and one in South Korea.

7 The concentration of projects in low- and middle-income

countries, over 94 percent of the projectsthatOPICsupportedinFiscalYear2007,demonstratesOPIC’s

success in fulfilling its mission to focus on countries most in need.

The total initial host-country expenditures for Fiscal Year 2007 projects are projected at $3.5 billion. This

procurement of local raw materials, services, and semi-finished goods will support economic activity and

employment in the host countries. The OPIC-supported foreign enterprises are expected to generate

$419 million annually in taxes and duties for the host countries. Once in operation, the projects will

generate an estimated $173 million in annual export earnings for the host countries.

5 Financial services projects were not included in the local partnership project count, though most of these project do include

collaboration with a local partner.

6 As defined in OPIC’sstatute,low-income countries are classified as those with per capita GNP of $984 or less in 1986 dollars.

Middle-income countries are those with per capita GNP of $985-$4,268 in 1986 dollars.

7 Despite this change in classification, over 20 percent of the Mexican population lives on less than $2.00 per day, indicating that

there is significant income disparity within the country.
OPIC Annual Policy Report FY 2007 12

Table 2

Estimated Developmental Impacts of

Fiscal Year 2007 Projects

Amount or Number

Host Country (thousands of $ or

Effects # workers)

A. Foreign exchange benefits 1

Exports generated $173,651

Imports replaced $ 82,724

Total A $256,375

B. Foreign exchange costs 1

Capital outflows $439,350

Project imports $239,524

Total B $678,874

Net foreign exchange impact (A less B) 1($422,499)

Net annual taxes, revenues and

duties paid to the host country 1$419,274

Initial local expenditures $3,516,848

Local employment generated in fifth year of

operation

Technical and management 10,050

Skilled and unskilled labor 11,549

Total 21,599

1 Average annual amount over a 5-year forecast period.

Approximately 93 percent of the output associated with FY 2007 projects will be sold in host country

markets. For projects that will export to third countries, Exhibit 2 (at end of document) shows a break-out

of the final destination of output for FY 2007 investments over the first five years of operation.
OPIC Annual Policy Report FY 2007 13

III. ENVIRONMENTAL IMPACTS

The Environmental Impacts section ofOPIC’s2007 PolicyReportisthe firstyearenvironmental

considerations of OPIC-supported projects have been presented in this format. Beginning with this

Annual Policy Report, this section replaces the stand-alone OPIC Annual Environmental Report.

Specifically, this section will report information related to environmental screening and assessment,

annual emissions reporting as well as introduce and summarize any other environment-related policy

matters undertaken by OPIC during the previous fiscal year.

Fiscal Year 2007 New Initiatives Summary

Since 1985, OPIC has had a strong environmental mandate, incorporated into its authorizing statute and

articulatedmostfullyinAppendixAofOPIC’sEnvironmentalHandbook.

(www.opic.gov/doingbusiness/investment/environment/documents/opic_env_handbook.pdf).

In Fiscal Year 2007, OPIC undertook several new initiatives to enhance and strengthen its

implementation ofthatmandate,including effortsto increase the transparencyofOPIC’s project

assessment process, development and implementation of a Greenhouse Gas Initiative, and enhanced

monitoring of active OPIC-supported projects. These initiatives are discussed in detail in this section and

the Monitoring section.

Project Screening and Assessment

OPIC screens all applications to identify the risk of adverse environmental and social impacts of a project

and to identify project impacts that could preclude OPIC support on categorical grounds. If a project is

determined to be categorically ineligible, OPIC immediately informs the applicant so as to avoid any

unnecessary effort or expense. If the project is categorically eligible, OPIC categorizes the project to

determine the requirements for documentation, disclosure, consultation, reporting and post-commitment

monitoring. Projects may be categorized as A, B, C or D, with Category A representing the greatest

potential for adverse environmental and/or social impacts.

OPIC Utilizes a Rigorous Methodology for Assessing and Calculating Potential Environmental

Impacts.

Environmental assessment is the process used by OPIC to evaluate the environmental and social

impactsofanapplicant’sprojectandtoidentify the means to improve the project by preventing,

minimizing, remediating or compensating for adverse impacts as a condition of OPIC support. The

process includes the following:

 Identification of potential adverse environmental and social impacts;

 Disclosureoftheproject’senvironmentalimpactassessment(EIA)forpublicreviewand

comment when the project has been screened as Category A;

 Comparisonoftheproject’sperformanceinrelationtointernationally-accepted standards and

alternative approaches;

 Evaluation or design of mitigation measures;

 Evaluation or design of associated management and monitoring measures.
OPIC Annual Policy Report FY 2007 14

Three of the 139 OPIC-supported projects in Fiscal Year 2007, or two percent, were classified as

Category A; that is, likely to have significant adverse environmental and/or social impacts that are

sensitive, diverse or unprecedented in the absence of adequate mitigation measures. These three

projects required the preparation of full EIAs, which were subsequently disclosed to the public for

comment.

Eighty-five (61 percent) of the 139 OPIC-supported projects were screened as Category B. Category B

projects are likely to have limited adverse environmental and/or social impacts that are few in number,

generally site-specific, largely reversible, and readily addressed through mitigation measures.

Fifty-one Fiscal Year 2007 projects (37 percent) were screened as Category C projects. Category C

projects are likely to have minimal or no adverse environmental and/or social impacts.

To avoid double counting and confusion, OPIC is no longer reporting on Category D projects in this

annual report. Category D is reserved for projects implemented by financial intermediaries such as

investment funds or financial institutions that make investments in, or provide financing to, identifiable

projectsorenterprises(“Subprojects”)engagedinactivitieswithinCategoriesA,BorC. Subproject

investments are now included within the annual project counts.

Figure 4

The 139 OPIC-supported projects for FY 2007 are a subset of the 260 projects reviewed by the

Office of Investment Policy.

AmorecompletepictureofOPIC’senvironmentalactivitiescanbeillustratedbythe260 prospective

insurance and, finance projects reviewed by the Office of Investment Policy during FY 2007. Many of

these projects continue to be reviewed on credit, underwriting, or policy grounds and may ultimately

receive OPIC support.

As illustrated in Figure 5, of the 260 projectreviewsinitiatedbyOPIC’sOfficeofInvestment Policy during

FY2007, three projects (1 percent) were categorized as Category A activities. These projects included a

copper mine, ethylene storage facility and a thermal power plant.

FY 2007 OPIC Projects by Environmental Category

A

2%

B

61%

C

37%
OPIC Annual Policy Report FY 2007 15

The 112 projects (56 percent) screened as Category B involved housing construction, provision of

humanitarian relief services, small manufacturing operations, small agribusinesses, leasing operations,

bottling plants, hotels and ecotourism initiatives, among others. The 88 projects (43 percent) classified as

Category C that were reviewed in Fiscal Year 2007 included telecommunications, cable television,

mortgage financing, on-lending to microfinance institutions, and other banking activities.

Figure 5

OPIC’sEnvironment Group Conducts Extensive Due Diligence on All Category A Projects.

AspartofOPIC’senvironmentalassessmentprocess,OPICenvironmentalofficersperiodicallyconduct

on-site due diligence prior to a commitment of OPIC support. OPIC conducted due diligence on seven

projects in seven countries in FY 2007 including:

 an ethylene storage facility in Pakistan;

 a copper mine in the Democratic Republic of Congo;

 a hydroelectric power plant in Mexico;

 a marine services port in Kazakhstan;

 a thermal power plant in Jordan;

 a port in Egypt; and

 a natural gas pipeline in Yemen.

The following examples illustrate the diversity and novelty of some of the projects assessed by OPIC

during FY 2007:

MATH Hydro Power (PVT) Ltd.

OPIC provided a $4.3 million direct loan to a U.S. investor for the construction and operation of a 5MW

hydroelectric power plant in south central Sri Lanka. Although the project includes the construction of a

small diversion weir, the investor has committed to maintenance of downstream base flows throughout

the year. The project also implemented several unique operational procedures to insure normal feeding

and ranging behavior of the Toque Macaque, a small primate commonly found in the project area. The

project will sell electricity to the government-owned utility.

SEP Energy India Pvt. Ltd.

FY 2007 OPIC Prospective Projects by Environmental Category

A

1%

B

56%

C

43%
OPIC Annual Policy Report FY 2007 16

OPIC provided political risk insurance for a U.S. investor to support projects involving the purchase and

installation of two small wind turbines on existing wind farms in India. The turbines are 250 KW and will

be located in the state of Maharashtra. In the case of both farms, the electricity generated by the turbines

will be sold to the State Electricity Board.

AES Jordan PSC

This project involves the development, construction and operation of a 370 MW gas-fired combined cycle

power project to be implemented as a 25-year concession under a Build, Own, and Operate structure.

The power plant will consist of two gas turbines, an associated heat recovery steam generator (HRSG)

and a single steam turbine. The plant will be located approximately 14 km east of Amman near the village

of Al-Manakher on a 42-acre site to be leased from the Ministry of Finance/Department of Lands and

Survey. The plant primarily will burn natural gas, but will use distillate fuel oil when natural gas is not

available.

The electricity generated by the plant will be exported to the Jordanian national grid network through a

400kv substation that will be constructed adjacent to the site by the National Power Electric Company

(NEPCO). The project also will require a 10 km transmission line to connect with the existing power grid.

Water will be supplied to the power plant through an 18 km water line to be built, owned and operated by

the Water Authority of Jordan (WAJ). The project was competitively bid and is the first independent

power project in Jordan.

Transactions Rejected on Environmental Grounds

OPIC rejected one application for insurance in FY 2007 on the basis of categorical ineligibility. This

application was related to a rubber export project in Liberia that involved the sourcing of raw rubber from

a critical forest area. For reasons of business confidentiality, OPIC does not disclose the name of

investors, foreign enterprises, or projects at issue.

Transparency

On September 21, 2006, OPIC announced its Anti-corruption and Transparency Initiative. This initiative

buildsoneffortsbytheagencytoenhancetheclarityofOPIC’sactivitiesanditscommitmenttocreatinga

level playing field for lawful business activities. By demonstrating that profitable international investment

is compatible with evolving best practices for corporate social responsibility, the initiative also supports

OPIC’sdevelopmentalmandate,resultinginimproveddeliveryofprojectbenefits.Keyelementsofthe

initiative include improved information disclosure and improved coordination with locally affected

communities.

Improved Information Disclosure. In FY 2007, OPIC redesigned its web site to facilitate public access to

a greater amount of environmental and social impact information. The OPIC web site now enables public

access to full text, non-business confidential versions of environmental and social documentation for

Category A projects being considered for support by the Agency. This documentation includes

Environmental Impact Assessments, Baseline Environmental Audits, Environmental and Social

Management and Monitoring Plans, and Remediation Plans. These documents are now available for

reference after completion of the statutorily mandated 60 day public comment period.

In addition, OPIC now discloses host country notifications for Category A projects. OPIC is required by

statute to notify host country governments of any environmentally sensitive investment considered for

support prior to execution of the applicable OPIC agreement. This notification must include a summary of

applicable international guidelines that would apply to the investment, and any restrictions related to

public health or safety that would apply to the project if it were undertaken in the United States.

Finally, OPIC will post on the web site third party audit certifications for Category A projects. During the

tenure of OPIC support, all Category A projects are required to undertake a third-party environmental and

social audit of operations. OPIC receives a certification from the third-party auditing entity verifying that
OPIC Annual Policy Report FY 2007 17

the audit has been conducted and that Category A projects are in compliance with all environmental and

social conditions contained within the OPIC agreement.

OPIC publishes for public comment information on all Category A projects.

In Fiscal Year 2007, seven potential Category A projects under consideration for OPIC support were

disclosedonOPIC’swebsitefor60daysandannouncedviatheOPIClistserver,givingthepublicand

nongovernmental organizations full opportunity to request copies of the EIAs or Baseline Audits, and to

commentontheprojects’environmentalandsocialimpacts.All transactions that required approval by

OPIC’sBoardwerepubliclydisclosedforatleast60days prior to the Board vote on the transactions.

Beginning in the fall of 2007, full text versions of EIAs and Baseline Audits are available for download

directly from the OPIC website.

In response to the posting of these seven project EIAs, public comments were received on two projects.

One of these projects was removed from OPIC consideration prior to the Environment Group responding

to the submitted set of comments regarding that project. Comments also were received regarding the

Tenke Fungurume mining project in the Democratic Republic of the Congo. These comments were

reviewed closely andanalyzedbyOPIC’sEnvironmentGroup,andthecompletesetofcommentsand

OPIC’sresponsetothosecommentswereprovidedtotheOPICBoardofDirectorsfortheir consideration

prior to the Board vote. A written response also was issued to the author of the comments. A summary

oftheconcernsposited,andOPIC’swrittenresponse, was released to the public.

(http://www.opic.gov/news/pressreleases/2007/documents/tenke.pdf).

Climate Change Mitigation

In 1998, following a stakeholder dialogue, OPIC began tracking and reporting the climate change

implications of the power sector projects of OPIC-supported projects using a methodology consistent with

guidance available from the Intergovernmental Panel on Climate Change (IPCC), the World Bank Group,

and others. Using this methodology, OPIC undertook annual estimates of the CO2eq emissions from

these power sector projects during the preceding fiscal year and published the results in its Annual

Environmental Reports. In addition, OPIC published a cumulative greenhouse gas (GHG) report for the

years 1990–1999, and issued an update to the cumulative report in its Fiscal Year 2003 Annual

Environment Report.

In Fiscal Year 2004, OPIC adopted the World Business Council for Sustainable Development (WBCSD)

and World Resources Institute’s Greenhouse Gas Protocol(“Greenhouse Gas Protocol”)as its

accounting and reporting system. Under the Greenhouse Gas Protocol, emissions from a particular facility

are categorized in three distinct scopes, as defined below:

Scope 1: All direct greenhouse gas emissions of a company or organization, with the exception of direct

emissions from biogenic sources;

Scope 2: Indirect greenhouse gas emissions of a company or organization from the consumption of

purchased electricity, heating, cooling or steam;

Scope 3: (Optional): Other indirect emissions associated with the lifecycle of products or services

associatedwiththecompanyororganization’sactivities

OPICusestheEPA’spowerprofilerwebsiteto generate a supplier-specific conversion factor of 1.096 lbs

CO2eq/kWh for its calculation of indirect emissions (Scope 2) associated with electricity consumption. For

Scope 3, OPIC uses a mass balance methodology, similar to that used by the IPCC and the World Bank

Group, the U.S. Department of Energy and the U.S. Environmental Protection Agency, to quantify CO2eq

emissions from overseas thermal power projects where OPIC provided financial services or insurance to
OPIC Annual Policy Report FY 2007 18

a U.S. investor, lender or contractor (OPIC assumed no significant carbon dioxide emissions from

hydroelectric or wind-turbine projects). (http://www.epa.gov/cleanenergy/powerprofiler.html)

Fiscal Year 2007 Reporting

As illustrated in Table 3, OPIC reports no direct (Scope 1) emissions associated with its activities because

OPIC has no direct CO2eq emissions. OPIC reports indirect (Scope 2) emissions totaling 1,312 metric

tonnes of CO2eq associated with its purchase of electricity. In addition, in order to maintain its commitment

to tracking and reporting climate implications, OPIC is reporting voluntarily Scope 3 direct emissions

associated with the new power sector projects that OPIC supported during Fiscal Year 2007

In reporting Scope 3 emissions, OPIC committed support to seven power projects in seven countries with

a total capacity of 636.25 megawatts (MW). Measured in terms of MW capacity, these projects are

approximately 97 percent thermal (with natural gas and diesel as fuel sources), 2 percent hydroelectric

and 1 percent wind powered. Two combined cycle projects, accounting for 470 MW of total capacity, are

designed to use natural gas as a fuel source but may use diesel fuel as a fuel source if natural gas is not

available. To be conservative in the estimation of greenhouse gases from these projects, for the purpose

of calculating Scope 3 emissions, it was assumed that these facilities will use diesel fuel for 100 percent

of their fuel source needs. The third thermal power project will use only natural gas.

As illustrated in Table 3, assuming full capacity operations, the three thermal power projects could emit

approximately 2,927,000 metric tons of carbon dioxide (CO2eq) per year.

Table 3: OPIC FY 2007 CO2eq Emissions (in metric tonnes)

SCOPE 1 EMISSIONS SCOPE 2 EMISSIONS SCOPE 3 EMISSIONS*

OPIC 0 1,312 2,927,000

* Includes emissions from FY 2007 OPIC-supported power sector projects for which owner/operator would typically report direct

(Scope 1) emissions.

OPIC’sNewGreenhouseGasInitiative

Demonstrating its commitment to responsible and sustainable investment, in FY 2007 OPIC adopted a

policy to reduce greenhouse gas emissions associated with projects that receive OPIC support, and to

increase support for renewable and clean energy projects. The goal of the new policy is to reduce the

directgreenhousegasemissionsassociatedwithprojectsinOPIC’sactiveportfolioby20percent over a

ten year period (2008 –2018).Forthepurposeofthispolicy,“activeportfolio”isdefinedasallinsurance

contracts in force and all guaranty and direct loans with outstanding principle balance.

The baseline that will be used to assess progress toward this goal is the sum of direct emissions from

projects with significant emissions of greenhouse gases to which OPIC provided a commitment between

1974and2007andwhichwereinOPIC’sactiveportfolioonMarch31,2007.Projectswithsignificant

emissions of greenhouse gases are defined as those projects with direct emissions exceeding 100,000

tons of CO2eq per year within the following sectors: combustion installations; oil and gas extraction and

transportation; mineral oil refineries; coke ovens; metal ore roasting and sintering; production of pig iron

and steel; rotary kiln production of cement clinker; glass manufacturing; and pulp and paper production.

Beginning in FY 2008, baseline and annual accounting and reporting will be subject to independent third

party verification.
OPIC Annual Policy Report FY 2007 19

IV. LABOR AND HUMAN RIGHTS

OPICtrackscountries’eligibilityaspartofitsstatutoryobligations.

OPIC support in a country is subject to a country-level statutory criterion, specifically whether a country is

takingstepstoadoptandimplement“internationallyrecognizedworkerrights,”asdefinedunderthe

Trade Act of 1974. The Generalized System of Preferences (GSP) program, a trade benefits program

overseen by the Office of the U.S. Trade Representative (USTR), has parallel statutory requirements for

GSP beneficiary countries. For U.S. Government-wide consistency on country-level determinations based

onthisparticular“takingsteps”standard,OPICfollowstheUSTR’sactionsoncountryeligibilityforthe

GSP program on worker rights grounds. When a country becomes ineligible for the GSP program on

groundsotherthanworkerrights,orinsomeexceptionalcaseswherethegroundsforacountry’sGSP

eligibility or ineligibility have not been established firmly, OPIC makes its own country eligibility

determination, oftentimes in consultation with the U.S. Departments of State and Labor, and relevant

members of its Board of Directors.

OPIC follows closelythe USTR’s petition and review process,including theirTrade Policy Staff

Committee’s(TPSC)finaldeterminationsonthesereviews.DuringFY 2007, no countries regained their

GSP benefits, and hence their eligibility for OPIC programs on worker rights grounds. Similarly, no

countries became ineligible for GSP benefits or OPIC programs on worker rights grounds. However, for

its 2007 GSP Annual Review, the USTR accepted petitions to review formally the GSP status of the

following countries on worker rights grounds: Bangladesh, Niger, Uzbekistan, and the Philippines; OPIC

willimplementinitsownprogramstheTPSC’sfinaldeterminationsofthesecountries’GSPeligibility.

Historically,asaresultofUSTR’sGSPand/orOPIC’sowndeterminations,OPICprogramshavebeen

suspended in 15 countries8 on account of their failure to meet the statutory "taking steps" standard. In a

number of those countries, including Liberia and Chile, GSP and OPIC programs have been restored as a

result of progress in adopting and implementing internationally recognized worker rights standards. At the

present time, the following countries remain ineligible for OPIC programs on worker rights grounds:

Belarus, Maldives, Qatar, Saudi Arabia, Sudan, and the United Arab Emirates.

OPIC places contractually binding worker rights conditions on every project it supports.

Attheprojectlevel,OPIC’sstatuterequiresthatprojectsassistedbyOPICdonot"contributetoviolations

ofinternationallyrecognizedworkerrights.”Theserightsinclude:therightofassociation;therightof

organization and collective bargaining; a prohibition on forced or compulsory labor; minimum age for

employment and a prohibition on the worst forms of child labor; and acceptable conditions of work with

respect to minimum wages, hours of work, and occupational health and safety. OPIC also includes

statutorily required standard worker rights language in every insurance contract, and every finance and

investment funds agreement. The language prohibits explicitly the use of forced labor and requires the

investor to respect the rights of association, organization, and collective bargaining, and to observe

applicable laws with respect to minimum age and wage requirements, hours of work, and occupational

health and safety.

In certain cases, the applicable laws of the host country or the implementation of such laws may not meet

internationally recognized worker rights standards. In these instances, and as a condition of OPIC

support, OPIC requires further that the investor meet the relevant International Labor Organization’s(ILO)

standards for internationally recognized worker rights through additional contractually-binding conditions.

Such contract conditions typically refer to non-discrimination on account of union activities, minimum age

8 Historically, these countries include: Belarus, Maldives, Sudan, UAE, Saudi Arabia, Qatar, Liberia, Central African Republic, Chile,

Nicaragua, South Korea, and Mauritania. Some countries (e.g., Chile and Liberia) regained GSP and/or OPIC eligibility as a result

of steps taken to implement internationally recognized worker rights standards.
OPIC Annual Policy Report FY 2007 20

of workers, payment of minimum wages, timely payment of wages, limits on hours of work, and rights

related to hazardous work situations. In FY 2007, all OPIC-supported projects were subject to a full

worker rights review, and OPIC support was conditioned upon contractual adherence to internationally

recognized worker rights standards. Supplemental contract conditions addressing one or more of these

rights were included in an overwhelming majority of these clearances.

The Labor and Human Rights Group conducts on-site due diligence for particularly sensitive

proposed new projects.

For projects deemed particularly sensitive upon initial project review, OPIC may conduct additional due

diligence at the project site prior to issuing approval on worker rights or human rights grounds. A variety

of factors may determine whether a potential project warrants on-site due diligence, including general

country- or sector-level labor and human rights sensitivities, location, project size and size of workforce,

potential for the use of child and/or forced labor, and the nature of the work conducted at the project,

including the level of hazardous work activity.

The number of potential projects that warrant on-site due diligence varies yearly. In FY 2007, OPIC

conducted due diligence site visits to two projects: 1) a copper mine in the Democratic Republic of the

Congo, and 2) a cut flowers project in Colombia. After site visits and a full review of each project, it was

determined that the projects could be given OPIC support with the appropriate contractually-binding

covenants to bring each project into compliance with the relevant worker rights and human rights

statutory requirements.

Human Rights

The promotion of respect for basic human rights is essential to successful OPIC-supported projects, and

OPIC recognizes the importance of human rights in its programs and project evaluation process. The

OPIC human rights clearance process is designed to ensure that OPIC-supported projects meet their

statutory requirements, as required by the Foreign Assistance Act. For all potential projects, OPIC works

incloseconsultationwiththeU.S.DepartmentofState’sBureauforDemocracy,HumanRightsand

Labor (DRL), prior to making a final commitment. Since 1990, OPIC programs have been suspended by

statute in the People’s Republic of China.

In FY 2007, OPIC strengthened further its human rights clearance process with DRL by developing a

quarterly system of updates and checks to improve the consultation process and to keep apprised of

human rights matters that could be affected or impacted by potential OPIC projects. Every project

considered for OPIC financing, insurance or for investment by an OPIC-supported Fund in Fiscal Year

2007 was subject to a human rights review.

OPIC focuses attention on human rights at projects in all sectors and supports multi-stakeholder

initiatives such as the "Voluntary Principles on Security and Human Rights." The Principles provide

guidance on safety, security, and human rights for companies in the extractive and energy sectors. OPIC

encourages signatories to the Voluntary Principles to implement them to the best of their ability in OPICsupported projects.
OPIC Annual Policy Report FY 2007 21

V. MONITORING OF ACTIVE PROJECTS

FY 2007 Monitoring Activity

OPIC considers monitoring active projects an important part of the project oversight process and

undertakes two types of project monitoring: site monitoring and self monitoring.

Site monitoring involves field visits to OPIC-supported projects that (1) have been randomly sampled by

the monitoringteam,(2)havebeendesignatedassensitiveforatleastoneofOPIC’sstatutorydisciplines

(U.S. economic impact, host country developmental impact, labor and human rights, environment), or (3)

are located in close proximity to other projects that are planned for site-monitoring.

Self monitoring requiresthe Projectinvestorto complete a “Self-Monitoring Questionnaire”(SMQ)

annually - theSMQreportsontheProject’sactualresultsfrom themostrecentfiscalyear.A new, more

user-friendly website for this questionnaire is currently being developed and should be functional by mid2008.

Information gathered during both site monitoring and self monitoring are similar, but site-monitoring

involves more detailed and qualitative discussions between OPIC personnel and representatives of the

OPIC-supported project. In addition, OPIC site monitors projects to ensure compliance with relevant

conditions and covenants in OPIC support agreements.

FY 2007 represented a major change in the way OPIC implemented and performed its monitoring

responsibilities. In previous years, the various statutory disciplines were implemented individually with

separate monitoring programs and schedules. Starting in FY 2007, OPIC integrated the site monitoring

process so that, in one visit, OPIC endeavors to monitor for all of the statutory disciplines for each

selected OPIC project.

In total, over 220 OPIC projects were either site monitored and/or self monitored in FY 2007.

One objective of site monitoring is to monitor those projects that present the greatest environmental and

social risk. Accordingly, the monitoring of Category A projects represented over 27 percent of the site

visits performed in FY 2007. As a result of site monitoring, projects mainly were found to be in

compliance with OPIC contract conditions pertaining to environmental and/or social considerations. The

majority of instances in which a deficiency was noted involved a delay in submitting required

documentation in a punctual manner. In these instances the project investor was informed of the delay

and in multiple instances the appropriate documentation was submitted accordingly. If the documentation

or other requested information was not promptly received following the site visit, OPIC issued a formal

letter to inform the project of its non-compliance. Other issues raised and resolved by monitoring

included incorrect usage of property, plant, and equipment, or improper waste management procedures.

With regard to worker rights issues, none of the projects site monitored was found to be out of compliance

withOPIC’scontractualrequirements. Commitments to the OPIC worker rights requirements were

demonstrated during monitoring. Monitoring also provided OPIC with a more complete understanding of

country conditions. Site monitoring also often revealed a strong commitment by U.S. businesses to

contribute to localcommunitiesin waysthatextended above and beyond the OPIC’scontractual

requirements, such as initiatives on social certification programs and general job skills training.

U.S. economic and host country developmental impact site monitoring concluded that no projects were

out of compliance with conditions precedent, and all projects were determined to have quantifiable host

country developmental impacts.
OPIC Annual Policy Report FY 2007 22

ThefollowingsectionsprovideadditionaldetailontheresultsofOPIC’sFY2007 monitoring.

Site Monitoring

In FY 2007 OPIC site monitored 36 projects located in various sectors in almost all world regions. The

figures below provide a breakdown of the locations, sectors, and products involved for projects sitemonitored in FY 2007.

Figure 6:

Site Monitored Projects by Industry Sector

Manufacturing

11%

Financial Services

42%

Services

11%

Agriculture

11%

Mining

3%

Infrastructure

22%

Reflecting the shift in the OPIC portfolio over the past few years toward financial services investments, in

FY 2007 OPIC monitored a significant number of projects in this sector. Financial services projects are

often easier to monitor in volume, as many of these projects are located in larger cities in developing

countries.

The focus on financial services also is reflected in the percentage breakdown of projects monitored by

OPIC product line. Most financial services projects are supported through OPIC investment guarantees

and this is reflected in the projects site-monitored by OPIC product in FY 2007.
OPIC Annual Policy Report FY 2007 23

Figure 7:

Geographically, the majority of projects monitored in FY 2007 were in Latin America and Eastern Europe.

This is mainly due to a large number of microfinance facilities visited in Central America, and a significant

amount of correspondent banks site-monitored in Turkey (Eastern Europe).

Figure 8:

Site Monitored Projects by Geographic Location

Latin America

39%

Eastern Europe

31%

Russia

14%

Asia

8%

Africa

8%

Site Monitored Projects by OPIC Product

Investment

Guarantee

59%

Direct Loan

11%

Direct Loan &

Insurance

8%

Insurance

19%

Investment

Guarantee &

Insurance

3%
OPIC Annual Policy Report FY 2007 24

FY 2007 Monitoring Observations

Latin America

In FY2007 OPIC site monitored 14 projects in Latin American for statutory compliance. One project of

note is the Seminole Cattle Ranch outside of Managua, Nicaragua. The project is involved in upgrading

the quality of breeding, dairy, and beef produced in Nicaragua. Additionally, it is implementing advanced

technology and U.S. standards for its operations and products. From a technology, management and

operational standpoint, the ranch is considered one of the most advanced in Central America. Aside from

these broad developmental benefits, the project employs approximately 90 workers from an

impoverished, rural area of Nicaragua, provides them with generous benefits, and trains them in

advanced cattle ranching techniques. The workers receive training on nutrition and management, and

the ranch brings in technicians from the U.S. and Mexico to train its workers on dehorning, managing the

cattle, and harvesting embryos. Additionally, the ranch is improving the local environment through

reforestation in several areas of the ranch. This project has a minimal U.S. economic impact. It does not

export or import to the U.S., nor has it had any capital flows to the U.S. besides its insurance premia paid

to OPIC.

Another Latin America project monitored in FY 2007 is the Manquiri silver mine in Bolivia. The project

expects to produce at least six million ounces of refined silver per year. Though the mine is not yet at its

fully-staffed employment level, the operation currently employs 60 full-time staff located in La Paz, and 40

employees on location in Potosi. In addition, 650 contractors have worked on the project through Fluor

International. The project has worked proactively to partner with cooperatives and the local community to

build a positive relationship with all parties involved. This has included the construction of a school,

introduction of electricity to the resettlement location and the resettlement of seven families residing in

Jesus de Machaca, a village located on one of the mine sites. In addition, Manquiri is working with the

cooperatives to fund (with an initial contribution of $300,000 and subsequent contributions as a

percentage of profits) and establish a non-profit organization called FUNDESPO, to provide local services

and be managed by the local community. With respect to benefits, each employee receives

complimentary transportation to and from work, hot lunches, and access to a medical clinic. The project

company also provides a performance bonus and short-term insurance. All employees are trained in first

aid and are provided personal protective equipment. Lastly, Manquiri is committed to preserving the

natural environment in the area, and is doing this by refurbishing centuries-old aqueducts that have been

designated a World Heritage Site. Although the project is behind its projected operational date, the

company has made significant progress toward commencing operations despite a turbulent political

environment.

Asia

OPIC monitored three projects in Asia this year. Preferred Brands International (PBI), which received a

loan from OPIC, is an excellent example of a well-managed OPIC project that is both developmental and

a successful going concern. The company is an industry leader in its market space and has developed a

successful strategy to take advantage of a rapidly growing segment of the international convenience

foods industry in the U.S. Theproject’smostimportant direct impacts are a combination of micro and

macro achievements. On the micro side, the project has strong employment effects, training, and social

benefits. In addition, the company is run by a dedicated and aggressive management team and supports

several community outreach projects. Monitoring efforts revealed a high level of employee loyalty, which

was demonstrated through a particularly high employee retention rate. Additionally,amongPBI’s

employee benefits, management matches contributions to an education fund to help pay for schooling

feesoftheemployees’children.Environmentally, PBI has adopted biomass as its fuel source, which has

cutthecompany’senergycostsinhalfwhilealsosignificantlyreducingthecompany’sfuelburning

emissions.

On the macro side, PBI provides a strong demonstration effect as an Indian food manufacturing company

that can compete successfully in the U.S. marketplace, especially with demanding vendors such as

CostcoWholesale,TraderJoe’s,andWholeFoods Market. PBI is the only Indian company able to

provide consistent and high-quality, ethnic foods at volumes required by U.S. supermarkets and

warehouse companies.
OPIC Annual Policy Report FY 2007 25

In FY 2007, OPIC monitored the India portfolio of Clearwater Capital Partners, an OPIC-supported

distressed debtfund. Monitoring revealed thatClearwater’s India portfolio has some positive

developmental impact.

The main developmental impacts of Clearwater India are liquidity provision and strategic advice to high

potential, yet operationally-challengedcompanies.Clearwater’sstrengthslieinitsabilitiestomakesound

judgment calls on management capacity and sector/industry viability. Thus, after making a portfolio

investment the task becomes one of steering and guiding until the investment goals are reached.

Clearwater’sactivitieshavedevelopmentalimpactsattheportfoliocompanylevelintermsofsustaining

and improving company operations and turnover. The Fund has cleared over $33 million in nonperforming bank debt from the Indian financial system to date.

Africa

OPIC monitored three projects in Africa in FY 2007.OPIC’slendingintoFlamingoHoldings,afloriculture

project in Kenya, occurred at a critical time, as the company was commencing an aggressive growth and

product mix redistribution phase. Flamingo is a highly developmental project, having created more than

1,800 permanent new local jobs. The company provides training for its workers, using a training matrix

that ensures all workers have adequate knowledge on subject matter relevant to their specific job

functions. The project provides excellent benefits to its employees and the local community. All workers

receive daily transportation to and from work, hot meals while at work, free medical care, and a

subsidized drug benefit.

The project has a firmly established Corporate Social Responsibility program, is very familiar with various

social certification programs and hence is monitored regularly on worker-related issues by certification

groups. The company also funds the local hospital, which offers free HIV testing and prevention to the

community. To prevent competition with domestic cut flower production, OPIC restricted Flamingo

Holdings from selling its products in the United States. Monitoring confirms that Flamingo only sells its

products in the U.K. market, which is the destination for less than one percent of U.S. fresh cut flower

exports. This assures the project does not have a negative impact on the U.S. flower industry.

Another project site monitored in FY 2007 in Africa is South Africa Plywood (SAP). This investment by an

OPIC-supported fund into South Africa Plywood also occurred at a critical time, as the plant would

otherwise have been closed. Keeping the plant open has enabled SAP to compete more efficiently in the

plywood market and to retain its significant percentage of market share in the region.

South Africa Plywood is a developmental project, having created 162 permanent new local jobs. The

company provides induction training for all workers that covers all safety and corporate best-practice

policies. SAP provides a maize nutritional supplement to its workers on a monthly basis, and offers use

of an on-site health clinic for primary care to all employees. The health clinic also provides HIV outreach

and prevention services to all employees. The project provides some local community-oriented benefits.

SAP hasanewlycreated“CorporateDevelopmentManager”whoiscurrentlyrevisingthecompany’s

social-responsibility plans. SAP expects to focus on education programs for local residents and currently

provides donations to three area high schools. There are no negative U.S. economic impacts associated

with this project.

Eastern Europe/Russia/Caucasus

In FY 2007, 15 projects were monitored in Eastern Europe, Russia, and the Caucasus. A number of the

investments were correspondent banking projects in Turkey. Correspondent banking projects are loans

made to foreign banks through a U.S. bank. OPIC participates in this structure by guaranteeing the loan

madebytheU.S.banktotheforeign“correspondent”bank.OPICguaranteedfundsareusedforspecific

purposes such as lending to small- and medium-sized enterprises, or for mortgages. OPIC has

supported many of these projects in Turkey, and site monitoring has confirmed that OPIC support has

allowed the correspondent banks to offer borrowers financing at longer tenors and lower rates than they

would without the OPIC investment guarantees. Thus, entire new populations of bankable clients are
OPIC Annual Policy Report FY 2007 26

able to access financing that otherwise would be effectively locked out given constraints in the domestic

lending environment.

OneOPIC projectinRussiainvolvesa$25millioninvestmentinFlexaLtd(“Flexa”),awholly-owned

subsidiary ofOAOPolygrafoformlenie(“Polygraf”).PolygraphisoneofRussia’sleadingmanufacturersof

printedpaperandplasticpackagingmaterials.FlexaLtd.isthesubsidiaryofPolygrafthatproduces“flex”

packaging, which is mainly paper and plastic wrappers for individual candies, bags of potato chips, and

other foods. The project involved the construction of a new 6,500 square meter building on the outskirts

of St. Petersburg to house the Flexa subsidiary. This project is an effective, high-technology, sustainable

employer that is part of a significant supply chain in Russia. In addition to this broad and important

developmental impact, Polygraphalsohasa“TechnologyDevelopmentDepartment”dedicatedto

keeping it on the cutting edge of the printing business. This group has developed various wrapping

products that are only offered by Flexa, and Flexa is the only company with the capability of fabricating

these niche wrappers. Flexa is also ISO 9001 certified.

Monitoring revealed that employment levels at Flexa were reduced more than 35 percent due to the

installation of the new and significantly more productive equipment purchased using the proceeds of the

OPIC loan. OPIC support also led to significant capital investment which has created a large amount of

capital allowances for Flexa. OPIC support has allowed Flexa to respond to significantly increasing

demand in the amount of 15 percent per year and its financial performance has reflected this increase in

capacity. As the project continues to increase capacity, it may increase staff levels. On the U.S.

economic impact side, Flexa does not export to the U.S. or any of its major trading partners for printed

goods. Therefore, the project does not have a negative impact on the U.S. economy or employment.

As is evident from the selected project examples above, OPIC supports a wide array of developmental

projects in various sectors and industries. Site monitoring allows OPIC to document project compliance

with conditions precedent in their OPIC loan agreements and insurance contracts, and evaluate each

investment’sdevelopmentalimpact.While the vast majority of projects site-monitored are free of issues,

non-compliant projects are guided through a process to remedy their shortcomings. Additionally, the

entire site monitoring process serves to inform OPIC on the future support of investments across regions

and sectors worldwide.

Self Monitoring

The Self Monitoring Questionnaire required by contract/agreement since 1993, is completed by all

projects that have had OPIC support for at least one year. The analysis in this section is based on data

obtained from nearly 200 Self-Monitoring Questionnaires (SMQs). Of the SMQs received in FY 2007,

Table 1 below shows the percent of OPIC-supported projects which had certain quantifiable

developmental impacts.
OPIC Annual Policy Report FY 2007 27

Table 4: FY 2007 Self-Monitoring Results

Capacity Measured Qualitative Monitoring Percent of

SelfMonitored

Projects

Reporting

Affirmative

Involve Other Federal/Regional/Multilateral Organization 27.7%

Capital Mobilization

Involve a Public/Private Partnership 20.9%

Provide Overseas Training for workers 45.8%

Have Equal Employment Policy 50.9%

HavePoliciesforWomen’sNeeds 72.3%

Human Capital

Development

Provide Company Benefits 79.1%

Corporate Social Help the Local Community 63.8%

Responsibility Preserve the Environment 41.8%

Introduce Innovative Mgt Techniques 45.2%

Introduce New Marketing Techniques 32.2%

Introduce New Technology 27.7%

Technology and Knowledge

transfer

Introduce New Products 29.9%

Contribute to Economic Diversification 45.2%

Have Local Owner or Small & Medium Enterprise 20.3%

Encourage Private Ownership 27.7%

Economic Diversification

Help a Poor Region 62.7%

Capital Mobilization

OneofOPIC’sstatutory objectives is to play a key role in leveraging private sector resources for

development. The most obvious parameters to measure this is the involvement of non-OPIC project

financing and equity, the involvement of other development institutions, and the promotion of PublicPrivate partnerships through the involvement of local development banks, civil societies and nongovernmental organizations.

Of the 2007 Self Monitoring Questionnaires received by OPIC, approximately 28 percent reported the use

of non-OPIC investment sources such as USAID, IFC, ADB, and EBRD or a host country government

entity, civil society, or a non-governmental organization. In 2007, about 21 percent of OPIC supported

projects involved a Public-Private Partnership (PPP). Examples of local government support may include

a local government agency offering technical assistance, or a state agency providing construction

support. The idea behind PPPs is to bring about local ownership in the project and to increase the

number of stakeholders which would amplify the projects significance and support.

Human Capital Development

Employment generation is one of the key indicators OPIC uses to evaluate the developmental impact of

projects it assists. The aim is not just to create jobs, but also to increase the overall skill level of the

workforce through proper training and development. In 2007, approximately 46 percent of the SMQ

respondents reported employees receiving training abroad. When these employees are trained in their
OPIC Annual Policy Report FY 2007 28

various job aspects outside of their home country, they are able to diffuse the same knowledge that they

received abroad to the local employees, increasing the technical knowledge base of the population.

Company and employee benefits are another indication of a maturing employment market. In 2007,

79 percent of the SMQ respondents offered various company benefits to its employees such as

transportation or meal subsidies, pension plans, medical coverage, etc. An equal employment policy is a

way to protect discrimination on the basis of race, color, gender, religion, etc.; approximately 51 percent

of SMQ respondents had an equal employment policy over and above that required by local law. Finally,

about 72 percent of OPIC-supported projects had special policies and benefits in place specifically to

benefit women in their workplaces.

Corporate Social Responsibility

Corporate Social Responsibility (CSR) defines organizations taking responsibility for the impact of their

activities on customers, employees, shareholders, communities and the environment in all aspects of

their operations. OPIC evaluates CSR in its projects by identifying socially responsible and

environmentally conscious benefits that are offered to the greater community. For example, in 2007, 42

percent of the SMQ respondents sought to improve the environment. Sound environmental practices

could include superior safety standards for workers in manufacturing facilities or proactive measures to

protect natural resources. CSR also includes community outreach programs whereby the foreign

enterprise allows public access to company-sponsored clinics and schools, funds community centers,

sponsors sports teams and cultural events and provides financial support for local foundations and

organizations. In 2007, 64 percent of the SMQ respondents were involved in community outreach

programs through application of various programs.

Technology and Knowledge Transfer

These transfers include the dissemination of innovative management practices, marketing and distribution

expertise, and adoption of new production technologies. Often they lead to the development and

introduction of new products or services into emerging markets. These transfers frequently have a

substantial effect on the host country by improving worker productivity levels and the quality of other

factors of production. Moreover, additional impacts may be created through the diffusion and adoption of

new technologies and ideas by other firms in the host country due to the implementation of these ideas by

OPIC-supported investors.

OPIC seeks to gauge such transfers of technology and knowledge in its support. For example, in 2007,

45 percent of SMQ respondents introduced innovative management techniques in the host country while

32 percent introduced novel marketing methods. Furthermore, almost 28 percent of OPIC-supported

projects sought to introduce new technologies in the host country, while almost 30 percent of projects

introduced new products in foreign markets. Such practices assist the foreign enterprises trying to seek a

competitive edge in the global market and lead to the strengthening of national capacities through

development of a domestic technology base.

Economic Diversification

OPIC encourages private sector ownership of projects in order to promote entrepreneurial growth and

sustainable development. Moreover, OPIC encourages economic diversification of the private sector as it

decreasesthelocaleconomy’sdependenceoninternationalmarketswingsandondomesticbusiness

cycles; and brings about overall macroeconomic stability.

OPIC measures the economic diversification impact of its investments through various indicators. Of the

projects surveyed in 2007, approximately 45 percent contributed to the economic diversification of the

country. This can be achieved by developing a new sector of economic activity such as introducing a

homemortgagefinancingprogram inacountrywithoutsuchlendingfacilities. OPIC’sproductsalso

extend credit to SMEs in order to encourage private sector investments in entrepreneurial endeavors

which would lead to further economic diversification. As such, approximately 21 percent ofOPIC’s

projects involved SMEs while around 28 percent encouraged private ownership. Finally, in order to

facilitate widespread development in the country, OPIC recognizes the need for rural development in

order to avoid creating income and developmental disparities between thriving cities and rural
OPIC Annual Policy Report FY 2007 29

communities. Sixty-three percent of OPIC-supported project reporting in FY 2007 were located in poor

and affected regions in order to promote overall societal welfare and prosperity.
OPIC Annual Policy Report FY 2007 30

VI. EXHIBITS

1. U.S. Employment and Associated Effects of OPIC-supported Projects

2. Breakout of Final Third Country Destination of the Output of OPIC-supported Projects

3. U.S. Employment Effects and Host-Country Location of OPIC-supported Projects

4. Methodology for Calculating Economic/Employment Benefits

5. Development Matrix Methodology

6. Financial Services Development Matrix Methodology

7. Methodologies for Site Monitoring
Annual Policy Report 2007 31

Exhibit 1

U.S. EMPLOYMENT AND ASSOCIATED EFFECTS OF OPIC-SUPPORTED PROJECTS, FY 2007 (Projections)

(All Dollar Figures are in Thousands)

Number U.S. Effect on Effect on

Industry of Exports Final Destination of Project Output 2/ U.S. Effect on U.S. Employment 1/ 3/ U.S. Trade

Sector Projects Generated 1/ Host Country U.S. 3rd Country Production 1/ Initial Operating Total Balance 1/

A. Projects with Positive Effects on Employment 4/

Agribusiness 5/ 1

Manufacturing 4 $153,959 $137,906 $0 $0 $142,605 497 1,209 1,706 $153,959

Minerals/Energy 5 $403,140 $283,257 $3,400 $71,900 $335,118 4,126 183 4,310 $386,140

Services 13 $198,201 $535,776 $870 $16,433 $220,330 906 962 1868 $193,851

Positive Total 23 $755,301 6/ $956,939 $4,270 $88,333 $698,054 5,529 2,354 7,884 $733,951

B. Projects with Neutral Effects on Employment 7/

Agribusiness 5/ 1

Manufacturing 16 $570 $301,282 $11,000 $34,360 $313 0 4 4 ($54,430)

Minerals/Energy 7 $565 $7,627 $0 $0 $565 4 2 5 $565

Services 92 $10,748 $972,767 $3,000 $23,500 $3,102 21 6 28 ($4,120)

Neutral Total 116 $11,883 $1,281,676 $14,000 $57,860 $3,979 25 11 37 ($57,985)

C. Projects with Negative Effects on Employment 8/

Negative Total 0 $0 $0 $0 $0 $0 0 0 0 $0

Net FY Total 139 $767,184 $2,238,615 $18,270 $146,193 $702,033 5,554 2,365 7,920 $675,966

1/ Total effect during first five years of project operation.

2/ Average annual effect during first five years of project operation.

3/ Person years of employment.

4/ Projects with a U.S. employment effect of 2 or more jobs (10 person years or more of employment during the first 5 years of project operation).

5/ There is one project within the Agribusiness sector in Section A (positive effects) and one project in Section B (neutral effects). To protect business confidentiality,

the data for these projects is included in the data for the Manufacturing sector.

6/ Totals may differ slightly from the sum of individual sectors due to rounding.

7/ Projects with a U.S. employment effect of plus or minus 2 jobs (plus/minus 10 person years of employment during the first 5 years of project operation).

8/ There were no projects supported in fiscal 2007 that resulted in the loss of any U.S. employment.
OPIC Annual Policy Report FY 2007 32

Exhibit 2

BREAKOUT OF FINAL THIRD COUNTRY DESTINATION OF

THE OUTPUT OF OPIC-SUPPORTED PROJECTS, FY 2007 (Projections)

PROJECTS WITH POSITIVE EFFECTS ON U.S. EMPLOYMENT 1/

Agribusiness

Sector Total $0

Manufacturing

Sector Total $0 2/

Services

China $1,740,000

EU/Russia $2,610,000

India $1,740,000

Iran $870,000

Kazakhstan $383,333

Turkey $2,610,000

UAE/Saudi Arabia $6,090,000

Ukraine $390,000

Sector Total $16,433,333 2/

Minerals and Energy

Canada $4,500,000

France $10,130,000

Israel $1,970,000

Italy $39,500,000

Netherlands $4,200,000

Other $11,600,000

Sector Total $71,900,000 2/

TOTAL POSITIVE

EFFECTS $88,333,333

Continued on next page
OPIC Annual Policy Report FY 2007 33

PROJECTS WITH NEUTRAL EFFECTS ON U.S. EMPLOYMENT 3/

Agribusiness

Sector Total $0

Manufacturing

England $590,000

France $520,000

Germany $90,000

Iraq $6,146,341

Israel $70,000

Lebanon $4,682,927

Netherlands $445,000

Spain $590,000

Ukraine $445,000

Others (Syria, Egypt, Libya, Kuwait) $20,780,488

$34,359,756 2/

Services

Azerbaijan $3,000,000

Holland $1,500,000

Kazakhstan $10,000,000

Uzbekistan $9,000,000

Sector Total $23,500,000 2/

Minerals and Energy

Sector Total $0

TOTAL NEUTRAL

EFFECTS $57,859,756

FY TOTAL $146,193,089

1/ Represents projects with a U.S. employment effect of 2 or more jobs (10 person years or

more of employment during the first 5 years of project operation). There were no projects

supported in fiscal 2007 that resulted in the loss of any U.S. employment.

2/

3/ Represents projects with a U.S. employment effect of plus or minus 2 jobs (plus/minus 10 person years of

employment during the first 5 years of project operation). There were no projects supported

in fiscal 2007 that resulted in the loss of any U.S. employment.

Totals may differ slightly from the sum of individual countries due to rounding.
Annual Policy Report 2007 34

Exhibit 3 -- U.S. EMPLOYMENT EFFECTS AND HOST-COUNTRY LOCATION OF OPIC-SUPPORTED PROJECTS, FY 2007

A. PROJECTS WITH POSITIVE EFFECTS ON EMPLOYMENT 1/

COUNTRY/REGION AGRICULTURE MANUFACTURING SERVICES MINERALS & ENERGY TOTAL

Multi-Regional 1 1

Total Multi-Regional 0 0 1 0 1

Poland 1 1 2

Russia 1 4 5

Ukraine 1 1

Total Europe 0 2 5 1 8

Iraq 2 2

Egypt 1 1

Jordan 2 2

Lebanon 1 1

Total Middle East & N. Africa 0 0 3 3 6

Afghanistan 1 1 2

Pakistan 1 1

India 1 1

Total South Asia 1 1 2 0 4

Africa Regional 0

Cameroon 1 1

Congo, DRC 1 1

Liberia 1 1

Togo 1 1

Total Africa 1 0 2 1 4

TOTAL POSITIVE 2 3 13 5 23

1/ Projects with a U.S. employment effect of 2 or more jobs (10 person years or more of employment during the first 5 years of project operation).

There were no projects supported in fiscal year 2007 that resulted in the loss of any U.S. employment.

Continued on next page
Annual Policy Report 2007 35

Exhibit 3 -- U.S. EMPLOYMENT EFFECTS AND HOST COUNTRY LOCATION OF OPIC-SUPPORTED PROJECTS, FY 2007 (continued)

B. PROJECTS WITH NEUTRAL EFFECTS ON EMPLOYMENT 1/

COUNTRY/REGION AGRICULTURE MANUFACTURING SERVICES MINERALS & ENERGY TOTAL

Armenia 1 1

Azerbaijan 1 1

Bulgaria 1 1

Georgia 1 1 2

Kazakhstan 1 1

Kyrgyz Republic 1 1

Russia 11 11

Serbia and Montenegro 3 3

Tajikistan 1 1

Turkey 2 4 6

Ukraine 2 2

Uzbekistan 1 1

Total Europe 0 3 28 0 31

Multi-Regional 1 1

Total Multi-Regional 0 0 1 0 1

Egypt 1 1

Iraq 1 6 1 1 9

Jordan 1 1

Lebanon 7 7

West Bank and Gaza 1 1

Total Middle East & N. Africa 1 8 9 1 19

Afghanistan 3 3

Bangladesh 2 2

India 2 2

Nepal 1 1

Pakistan 1 5 6

Sri Lanka 1 1 2

Total South Asia 0 1 12 3 16

Continued on next page
Annual Policy Report 2007 36

Exhibit 3 -- U.S. EMPLOYMENT EFFECTS AND HOST COUNTRY LOCATION OF OPIC-SUPPORTED PROJECTS, FY 2007 (continued)

COUNTRY/REGION AGRICULTURE MANUFACTURING SERVICES MINERALS & ENERGY TOTAL

Cambodia 1 1

East Timor 1 1

Fiji 1 1

Indonesia 2 2

Mongolia 1 1

Philippines 1 1

South Korea 1 1

Thailand 1 1

Vietnam 1 1

Total East Asia 0 0 10 0 10

Brazil 1 1 2

Colombia 1 1

Costa Rica 1 1

Guatemala 2 2

Haiti 1 1

Honduras 4 4

Latin America Regional 1 1

Mexico 1 5 6

Nicaragua 3 3

Panama 1 1

Total Latin America 1 1 20 0 22

Africa Regional 3 3

Liberia 1 2 3

Nigeria 3 3

Somalia 1 1

South Africa 1 3 4

Tanzania 2 2

Uganda 1 1

Total Africa 0 2 15 0 17

TOTAL NEUTRAL 2 15 95 4 116

Continued on next page
Annual Policy Report 2007 37

Exhibit 3 -- U.S. EMPLOYMENT EFFECTS AND HOST COUNTRY LOCATION OF OPIC-SUPPORTED PROJECTS, FY 2007 (continued)

C. PROJECTS WITH NEGATIVE EFFECTS ON EMPLOYMENT

COUNTRY/REGION AGRICULTURE MANUFACTURING SERVICES MINERALS & ENERGY TOTAL

TOTAL NEGATIVE 0 0 0 0 0

D. TOTAL PROJECT EFFECTS ON EMPLOYMENT

TOTAL EFFECTS:

Positive, Neutral

& Negative

ALL OPIC COUNTRIES 4

1/ Projects with a U.S. employment effect of plus or minus 2 jobs (plus/minus 10 person years of employment during the first 5 years of

project operation).

There were no projects supported in fiscal year 2007 that resulted in the loss of any U.S. employment.

18 108 9 139
Annual Policy Report 2007 38

EXHIBIT 4. METHODOLOGY FOR CALCULATING U.S.

EMPLOYMENT EFFECTS

Each project seeking OPIC support is reviewed on a case-by-case basis to estimate its U.S. employment

effects. OPIC obtains estimates from the investor of the projected initial and operational procurement

from the United States by value and specific type of good or service. The U.S. employment generated by

aproject’sinitialandfive-year operational procurement of goods and services is estimated by considering

the direct and indirect employment necessary to produce those goods and services. That is, the

employment effects incorporate the direct employment necessary to produce the procured goods and

services, as well as the indirect employment required for the production of the associated intermediate

inputs.

OPIC details each type of U.S. good or service procured for each project and calculates the employment

effect in that industrial sector as well as in the sectors that supply necessary components or inputs. By

using this methodology, OPIC is able to ascertain employment-generation levels with greater precision

than if it used an across-the-board average for all U.S. exports. By including indirect effects, OPIC's

employment figures present a more accurate picture of the benefits accruing to U.S. workers from the

procurement of goods and services. Finally, to confirm its estimates, OPIC monitors actual economic

effects after project start-up and throughout the life of the OPIC’sinvolvement with the project.OPIC’s

monitoring is described in further detail in the Monitoring section.
Annual Policy Report 2007 39

EXHIBIT5.OPIC’sDEVELOPMENTMATRIXEXPLAINED

OPIC supports projects that are likely to serve as foundations for long-term economic growth, especially

thosethatimproveuponthehostcountry’sinfrastructureandprovidethebasichumannecessitiesof

shelter, food, water and health care –thesetypesofprojectsareassessedonOPIC’sstandard

development matrix. Through this development impact assessment, OPIC evaluates and scores every

proposed project in 26 key areas across three broad categories that objectively quantify its expected

contribution to host-country development.

 Category I covers job creation, training, local procurement, corporate social responsibility, and

equal employment opportunity –five highly-weighted impacts that should be demonstrated by any

project, regardless of sector or the level of economic development within the host country.

 Category II covers 20 additional development indicators within such broad areas as human

capacity building (degree of training), private sector development, resource leveraging, social

effects, infrastructure improvements, macroeconomic and institutional effects, and

technology/knowledge transfer. The degree to which projects demonstrate these additional

developmental benefits depends significantly on the features of a given project.

 CategoryIIIadjustsforthehostcountry’spercapitaGNP,reflectingbothOPIC’sprioritytosteer

investment into the poorest countries and the reality that nations most in need often lack the

capacity to support more developmentally sophisticated investments.

A project must score at least 50 on the matrix to be considered developmental and clearly eligible for

OPIC support. A score of 100 or more qualifies a project as highly developmental.
Annual Policy Report 2007 40

EXHIBIT 6. OPIC’sFINANCIALSERVICESDEVELOPMENT

MATRIX EXPLAINED

AsmoreofOPIC’sprojects focus on financial services, it became evident that in many cases the

developmentmatrix,originallycreated fortraditional“bricksand mortar”projects,did notcapture

accurately the developmental impact of these projects. A new model was developed tailored to

assessing the development impacts of financial services projects. The general structure of the financial

services matrix is similar to the standard development matrix, but includes core indicators that are specific

to financial services-related projects. These core indicators result in a development matrix that is a more

comprehensive and accurate measurement of the developmental impact of financial services projects.

The types of projects that are scored on the financial services matrix include framework agreements,

investment funds, mortgage finance and securitization projects, microfinance facilities, and general bank

lending.

To support its developmental mission, OPIC evaluates and scores every proposed project in 11 key areas

across three broad categories that objectively quantify its expected contribution to host-country

development.

 Category I covers financial instrument innovation or augmentation, multiplier/spillover effects,

corporate governance, and capital mobilization and complementarity –four highly-weighted

impacts that should be demonstrated by any project, regardless of sector or the level of economic

development within the host country.

 Category II covers six additional development indicators within such broad areas as sustainability,

economic diversification, human capacity building (job creation and training), social effects,

macroeconomic and institutional effects, and technology/knowledge transfer. The degree to

which projects demonstrate these additional developmental benefits depends significantly on the

features of a given project.

 Category III adjustsforthehostcountry’spercapitaGNP,reflectingbothOPIC’sprioritytosteer

investment into the poorest countries and the reality that nations most in need often lack the

capacity to support more developmentally sophisticated investments.

A project must score at least 50 on the matrix to be considered developmental and clearly eligible for

OPIC support. A score of 100 or more qualifies a project as highly developmental.
Annual Policy Report 2007 41

EXHIBIT 7. OPIC SITE MONITORING METHODOLOGY

(Statutory Disciplines: Environment, U.S. Economic Impact,

Labor and Human Rights, Host Country Developmental

Impact)

OPIC performs comprehensive and integrated monitoring to evaluate the U.S. and host-country economic

effects as well as the environmental, health and safety (EHS) and labor and human rights impacts of its

projects. OPIC’sintegratedprojectmonitoringisdesignedtoensurethateachprojectcomplieswith

statutory and contractual requirements in these areas. Project monitoring consists of site visits to

projects, in addition to the analysis of information submitted annually by investors in the form of an online

“SelfMonitoringQuestionnaire.”Asof1993, Self Monitoring Questionnaires are required of all investors

per the OPIC finance agreement or insurance contract.

Using sampling theory, OPIC identifies investment projects that OIP staff across all disciplines will site

monitor during a three-year period, drawing active projects that exhibit specific characteristics within the

portfolio. OPIC currently is site monitoring projects that were supported by OPIC during fiscal years 2003

through 2005. The sample of projects selected for site monitoring includes: (1) a random sample of

projects supported by the agency during a three-yearperiodor“monitoringround”; (2) projects supported

during this period that are sensitive with respect to U.S. economic effects, labor and human rights or

environment, health and safety issues; and (3) projects from other years that have either not been sitemonitored in the past or that fit in logistically with randomly sampled project in similar regions or countries.

This“sensitiveproject”sampleultimatelyprovidesaconservativebiastothemonitoredresults.

Labor and Human Rights

OPIC monitors projects for compliance with contractual worker rights requirements through a combination

of annual reporting by companies as well as site visits to both random and selected samples of projects.

OPIC targets its worker rights monitoring efforts toward countries and sectors with a higher potential for

possible worker rights violations.

Because certain areas of worker rights violations may be difficult to identify from a typical project site

monitoring visit, in instances when OPIC determines further investigation is warranted for a project, OPIC

employs trained and certified labor rights auditors, usually recruited from the NGO community with

reputations for impartiality and credibility among both the labor and business communities, to perform a

full project audit. The auditors spend as much time as necessary to investigate thoroughly potential

violations. At a minimum, an audit would include independent and confidential interviews with

employees, management, government officials and knowledgeable local NGOs and organized labor

groups.

In order to improve its monitoring process, the Labor and Human Rights Group continues to review and

refine its on-site monitoring strategies, as well as its contractual instruments to communicate better to

potentialinvestorsOPIC’sexpectationswith respect to worker rights and how worker rights best can be

protected under diverse project and corporate structures, particularly projects involving contractors and

subcontractors.

Environment, Health, and Safety (EHS)

With respect to EHS issues, projects selected for site monitoring in a given year are prioritized based on

an environmental and social risk rating. Environmental and social risk ratings are based on several

factors including project sensitivity, host country context, project-level environmental and social

management system, and investor experience in implementing projects of similar complexity. OPIC

assesses the EHS and social performance of a project against applicable benchmarks including contract

conditions, international standards and guidelines, and industry best practices. Factors included in the
Annual Policy Report 2007 42

performanceassessmentincludeanevaluationoftheproject’senvironmentalandsocialmanagement

systems, the effectiveness of mitigation, including pollution controls in risk reduction, and the efficiency of

the operations, including energy efficiency.

U.S. Economic Impact

All projects visited are evaluated for their actual impact on the United States and host country economies,

including the employment generation effects of the investments. Those projects deemed sensitive with

respect to U.S. economic effects are visited to ensure that they are not negatively impacting the U.S.

economy. This exercise includes verifying export levels to the U.S. (if any) or to other countries,

calculating the U.S. balance of payments impact, and verifying compliance with any restrictions put

forward in the OPIC loan agreement or insurance contract (e.g. restrictions on exporting to the U.S. or

significant U.S. export markets).

Developmental Impact

Regarding host country economic impact, projects are reviewed across the same criteria as used at the

time ofprojectapproval. Thus,an “apples-to-apples”comparison can be made between original

estimates and actual operations. For example, if a project originally expects to hire 100 local workers,

actual employment numbers are verified and compared to the forecast. Additionally, if a project is

expected to build a school for the children of its employees, this will be verified. Other developmental

impacts not identified or anticipated at the time of application also are evaluated and quantified during site

monitoring. Finally, the project is scored using actual findings against the initial developmental impact

evaluation using the same criteria projected intheproject’soriginalOPICclearance.