BUDGET REQUEST

FISCAL YEAR 2007 

An Agency of the U.S. Government 

www.opic.gov

Overseas Private Investment Corporation

Congressional Budget Justification 

March 2006
Table of Contents

Executive Summary .........................................................................................................i 

Introduction.....................................................................................................................1 

FY 2007 Request.............................................................................................................3 

Administrative Expenses .............................................................................................3 

Credit Funding Request ...............................................................................................5 

Strategies, Goals, and Outcomes......................................................................................6 

Measuring Development and Additionality..................................................................6 

Supporting Small and Medium Sized Enterprise Transactions .....................................7 

Administration Foreign Policy Priorities......................................................................7 

Measuring Mission Performance .................................................................................7 

Program Summary...........................................................................................................9 

Insurance.....................................................................................................................9 

Finance......................................................................................................................10 

Small and Medium Enterprise Finance...................................................................10 

Structured Finance.................................................................................................11 

Investment Funds ......................................................................................................12 

Appendix A: Appropriations Language .........................................................................15 

Non Credit Account...............................................................................................15 

Program Account...................................................................................................15 

OPIC Transfer Authority .......................................................................................16 

Export Financing Transfer Authorities ...................................................................16 

Appendix B: Budget and Analysis Tables......................................................................17 

Table B­1 OPIC’s Budget FY 2005 – 2007............................................................17 

Table B­2A GPRA Annual Performance Plan & Report.........................................18 

Table B­2B Development Score Indicators ............................................................21 

Table B­3 Summary of Insurance Program Activity...............................................24 

Table B­4 Summary of Finance Program Activity & Request ................................25

Executive Summary

OPIC helps mobilize and facilitate the participation of US private capital and skills in the 

economic growth of developing and emerging market countries.  It does so in concert 

with American foreign policy goals and economic development objectives. 

Through the use of targeted loans, guarantees, and political risk insurance, OPIC 

efficiently aligns its programs with projects that are likely to stimulate private sector, 

market­driven economic growth.  Moreover, because OPIC can act much faster than most 

national and multi­national governmental organizations, it is able to respond to the 

demands of the marketplace in a timely fashion and to leverage each dollar of budget 

authority many times over. 

Consistent with the Administration’s budget guidance, OPIC over the last few years has 

made certain that it focuses on companies and countries that cannot access private 

financing or insurance.  As a consequence, OPIC’s programs are truly complementary, 

not competitive, with the private market. 

OPIC has also devoted substantial attention to increasing the number of small and 

medium­sized enterprises (SME’s) it supports.  In FY 2005, 82% of the new projects 

undertaken were with small businesses.  This has resulted in a sizeable increase in the 

number of projects.  While this higher flow of projects has fueled a very positive impact 

on the economic growth and development of host countries, the extensive due diligence 

and analysis required of each project has put a serious strain on the existing resources of 

the agency. 

OPIC realigned its internal resources to enhance efficiency, but this has not been 

sufficient to meet the simultaneous challenges of growth in OPIC’s exposure portfolio, in 

particular in the labor­intensive small business and foreign policy areas, as well as 

ongoing technology efforts.  In this environment, OPIC’s static budget over the last two 

years has progressively undermined its ability to meet market demand for OPIC 

programs, to prudently review and manage projects, and to replace outdated technology. 

The President’s Budget for FY 2007 therefore requests the following appropriations be 

funded from OPIC’s earnings: 

§ $ 45.053 million to administer OPIC’s programs  § $ 20.035 million in credit subsidy, available for three years, and continued 

transfer authority from Title II bilateral assistance accounts

1 

Introduction

OPIC’s mission is to promote development related foreign policy goals by supporting private 

investment in developing countries and transition economies, and the associated transfer of 

technology and skills.  Support of private foreign investment is a cost effective way to 

promote development because it leverages private sector resources and it subjects all 

investments to a rigorous and unforgiving test:  the market test of efficiency.  The market is 

the best mechanism by which investments in economic activity are capable of generating 

economic growth, and therefore development.  When the policy environment is right in a 

developing country, private investment aligns private and social goals. Since OPIC uses the 

market as a guide to which projects are sustainable, OPIC clearly aligns federal resources 

with the best information in the market to support economic growth and jobs. 

OPIC can support private investment led growth by reducing the risks faced by private 

investors.  OPIC reduces private investor risks through political risk insurance, guarantees of 

loans, or direct lending.  Its programs can be of greatest help in countries that have the right 

policies and institutions in place, but lack a long track record of political and economic 

stability that would instill investor confidence.  Countries in humanitarian crisis or with a 

limited government structure require extensive economic assistance in the form of grants and 

other direct aid before private investment, and therefore OPIC programs can become the 

major driver of growth.  On the other end of the spectrum, developing countries with the 

right policies and a good track record can attract private investment without government 

assistance.  In such countries, OPIC’s role in supporting foreign private investment is more 

limited to highly developmental projects that pose higher risks than the private sector is 

willing to accept on its own. 

Experience over the past 50 years has shown that development assistance and private sector 

investment is crucial to stimulating sustainable economic growth.  As the World Bank 

observed:

“Most effective approaches to development will be led by the private sector, but with 

effective government to provide the governance framework, facilitation or provision of 

physical infrastructure, human capital investments, and social cohesion necessary for 

growth  and  poverty  reduction.  The  fundamental  challenge  in  stimulating  economic 

growth is to create the right economic incentives that will encourage local economic 

actors to build capital and to manage it efficiently.”

Goldin, Rodgers, and Stern. 2002. “The Role and Effectiveness of Development Assistance: Lessons 

from World Bank Experience.” World Bank, Washington D.C. 

This testifies to the opportunities that could come from good coordination between OPIC’s 

programs and the grant­based programs of USAID and the Millennium Challenge 

Corporation (MCC), and the lending activities of the multilateral development banks 

(MDB’s).  In each of these cases, grants or lending may pave the way for investment by 

stimulating policy reforms, by improving basic governance, by establishing a platform of 

basic social services, or by supporting the purchase of capital equipment.  By the same token,
2 

OPIC can help the recipient countries to derive immediate economic benefits from the aid­ 

supported policy reforms and institution building efforts by supporting investments that build 

on the reforms.  Visible economic gains create the best time­proven path to encouraging 

countries to undertake further reforms that may prove politically difficult. 

OPIC proposes to build on its current programs by pursuing several new approaches to 

promoting U.S. development and foreign policy objectives in FY 2007:

Foreign Policy:  OPIC will develop a pipeline of projects in countries of 

foreign policy importance to the United States.  OPIC will work through the 

programming process to align project development pipelines with the transfer 

process.

Develop new projects by working with USAID, MCC, EXIM, and other 

agencies at the project level:  OPIC will work with other agencies to identify 

logical follow­ups to USAID, MCC, and other development bank funded 

grant projects.  OPIC could help to stimulate interest by potential investors by 

closely following the work of other agencies and development banks.
3 

FY 2007 Request

OPIC seeks resources to pursue the ideas outlined in the introduction, and to credibly support 

both new projects and the existing portfolio.  OPIC therefore requests the following 

appropriations for FY 2007 from its own resources: 

§ $45.053 million to support OPIC program administration  § $20.035 million in credit subsidy funding 

The proposed increase to OPIC’s administrative budget is necessary to 

§ Sustain the prudent management of OPIC’s growing portfolio  § Continue OPIC’s support of lending priorities 

o  small and medium sized enterprises 

o  foreign policy lending 

Administrative Expenses

In FY 2007 OPIC is requesting a total of $45.053 million for administrative expenses.  This 

request will support core administrative expenses, continued efforts on OPIC’s critical 

technology projects, and implementation of a disaster recovery solution to support OPIC’s 

continuity of operations plan.  See table B­1 for a historical presentation of OPIC’s 

administrative budget. 

These resources will enable OPIC to: 

§ Improve portfolio quality on new transactions, and prudently manage recent 

growth in the portfolio  § Maintain high quality support for U.S. small businesses  § Coordinate development policy with other agencies and develop new 

initiatives  § Continue information technology efforts 

Improve portfolio quality control

OMB Circular A­123 (2005) highlights three objectives for controls integral to OPIC’s 

management of its assets, especially its credit reform and insurance programs:  (1) 

effectiveness and efficiency of operations, (2) reliability of financial reporting, and (3) 

compliance with applicable laws and regulations.   Each of these objectives are supported by 

OPIC’s personnel and technology. 

OPIC’s personnel and technology resources are strained under the growing number and 

complexity of exposures.  It will be very difficult for OPIC to prudently process current or 

future transactions with the current resource base.  In order to ensure adequate origination 

and oversight of OPIC’s portfolio, OPIC must make a long­term resource commitment to
4 

preserving asset quality.  This growth in portfolio without a corresponding personnel and 

technology strategy to supervise the portfolio raises the risks of losses. 

As of September 30, 2005, OPIC’s active portfolio numbered 522 insurance, finance and 

funds projects, not including subprojects and hundreds of fund investments.   This is an 

annual increase of  +23.8 % and +9.2 % in 2004 and 2005 respectively – all within an 

essentially static budget. 

Table 1 Portfolio Statistics for Fiscal Years 2003­2005

2003  2004  2005 

Number  Volume 

($,billions) 

Number  Volume 

($,billions) 

Number  Volume 

($,billions) 

Insurance  232  6.89  257  6.25  242  4.51 

Finance  154  6.37  221  7.71  280  8.42 

Total  386  13.26  478  13.96  522  12.93 

Year on Year  +23.8%  +5.3%  +9.2 %  ­7.4% 

Maintain high quality support of small business transactions

OPIC’s focus on small and medium enterprise (SME) transactions has resulted in much 

higher project volumes.  SME projects increased by 104 % from 48 in FY 2003 to 98 in FY 

2004.  OPIC completed 83 small business projects in FY 2005, and forecasts continued 

demand in FY 2006.  OPIC has now reached its small business capacity under current 

staffing levels.  Furthermore, sustaining the current level of SME activity with present 

resources will be very difficult because the sheer volume has put considerable strain on the 

agency. 

In FY 2003, OPIC realigned its resources to focus on SME transactions.  However, this shift 

did not adequately anticipate the resources needed to carry the increased draw on back­office 

resources such as accounting, monitoring, and technology.  Since SME transactions are more 

labor intensive than large projects with financially sophisticated sponsors, the growth 

disproportionately strains OPIC resources. 

Coordinate development policy with other agencies and develop new 

initiatives

Part of OPIC’s strategy to maximize impact is to coordinate with other development 

institutions such as USAID, MCC, the World Bank, and other development finance 

institutions.  In doing so, OPIC would assure greater alignment with the strategic approach of 

other grant and lending programs.
5 

OPIC is working to: 

§ Expand policy­level dialogue and build relationships with other development 

institutions and think tanks devoted to development studies and practice  § Participate in interagency policy discussions involving private investment and 

development  § Develop forward­thinking, proactive strategies that support foreign policy and 

development mandates 

Continue information technology efforts

OPIC’s FY 2007 technology initiatives will continue the investments OPIC made in the 

deployment of software that integrates various fragmented records and business processes 

maintained by individual units.  These initiatives are major, but not final steps to replace 

OPIC’s legacy WANG based software with a modern data infrastructure. 

In FY 2006, OPIC will also identify a disaster recovery host site that will enable it to meet 

Federal continuity of operation requirements and achieve economies of scale through remote 

access solutions. 

Credit Funding Request

OPIC is requesting $20.035 million in credit subsidy resources for FY 2007 to enable OPIC 

to address riskier classes of transactions, in particular small and medium sized enterprise 

projects (SME’s), and foreign policy lending.  Combined with the transfer authority request, 

OPIC will seek to support SME’s and more highly developmental projects. 

For foreign policy reasons, OPIC has placed priority on developmental projects in Iraq, 

Pakistan, and Afghanistan; broadly consistent with the Administration’s Middle East / North 

Africa emphasis.  OPIC coordinates closely with the State Department and other agencies to 

ensure alignment with foreign policy.
6 

Strategies, Goals, and Outcomes

The Government Performance and Results Act (GPRA) and the Program Assessment Rating 

Tool (PART) have helped OPIC in recent years to draw clearer alignment between OPIC’s 

strategic goals and the ways in which it achieves those goals.  OPIC’s FY 2007 budget builds 

on these efforts by drawing a clearer connection between OPIC’s program goals and resource 

request.  In FY 2007, OPIC plans to continue to refine its focus on: 

§ Methodology for measuring development and additionality  § Systems for supporting small and medium sized enterprise transactions  § Aligning projects with administration foreign policy priorities 

OPIC is committed to work closely with the Administration to continue the PART 

methodology to maximize OPIC’s contribution to efficient support of development and 

foreign policy. 

Measuring Development and Additionality

OPIC has established a Development Matrix that measures the contribution of OPIC­ 

supported projects to economic development in its eligible countries.  OPIC has identified 25 

development parameters and objective criteria for calculating how an individual project 

contributes to development in each of these 25 areas.  Each project is scored for its 

development contribution on the basis of these criteria, and management uses the resulting 

scores to determine whether OPIC should support a project. 

Because of OPIC’s relatively small size, this metric is used by managers and staff throughout 

the agency.  For example, this means that the same development metric used by the 

Administration to evaluate OPIC’s performance is the same metric used internally at OPIC. 

This enables OPIC to cleanly align its internal decisions with the metrics OPIC reports to its 

stakeholders. 

OPIC has also established a process for assessing additionality.  Additionality measures 

OPIC’s value added:  whether and to what extent OPIC’s support is necessary for an 

investment to be implemented by its private sector sponsors.  OPIC uses rigorous objective 

criteria such as country risk, sector risk, project size, country investment climate, and private 

sector capacity to determine additionality of OPIC support for particular projects.  These 

criteria enable OPIC to identify countries, sectors and projects where the risk is too high for 

the private sector and the mitigation of risk by OPIC would likely result in additional 

investment flows. 

For its insurance product, OPIC implemented a formal mechanism that verifies whether 

private sector political risk insurance is available for every OPIC project.  Accordingly, 

private insurers have the opportunity to participate in virtually every OPIC insurance
7 

transaction above $5 million 1 .  In other words, OPIC is able to either insure smaller projects 

that the private market does not want to insure, or partner with the private sector on larger or 

riskier transactions. 

Supporting Small and Medium Sized Enterprise Transactions

OPIC’s initiatives with regard to small and medium sized enterprises has yielded a 

substantial number of SME transactions beginning in FY 2004/2005.  Much of this is the 

result of OPIC having focused human resources in these areas.  OPIC will expand efforts to 

reach out to small businesses by: 

§ Developing a network of intermediaries to expand transaction capacity  § Establishing a program to reach out to SMEs owned by women and minorities 

Administration Foreign Policy Priorities

OPIC is planning to continue its efforts to mobilize private investments for foreign policy 

priority countries such as Iraq, Pakistan, and Afghanistan.  In order to align OPIC’s projects 

in these countries with the President’s policies, OPIC must coordinate effectively with other 

policy and development organizations.  To achieve this, OPIC plans to: 

§ Regularly engage OMB, NSC, and NEC on ongoing policy issues  § Work with USAID, State, and Treasury on country strategy  § Deepen working relationships with multilateral financial institutions 

Measuring Mission Performance

As previously mentioned, OPIC has developed a means for evaluating the development 

contribution of individual OPIC projects, and the agency as a whole.  This Development 

Matrix was introduced in FY 2003, refined in FY 2004, and efforts are currently under way 

to develop a Matrix to evaluate the development contributions of framework agreements and 

investment funds. 

As a development agency, OPIC has a long history of evaluating development impact as 

required by its authorizing legislation.  Even prior to the implementation of the Development 

Matrix, OPIC tracked its performance on the basis of a set of disaggregated development 

parameters such as jobs created. 

In the FY 2006 budget, OPIC merged the goals from its GPRA strategic plan with the criteria 

established by the Development Matrix.  Table B­2 presents the results and initiatives under 

an aligned GPRA and PART framework. 

1 $5 million is the minimum level at which projects become commercially viable for insurers.
8 

In the future, OPIC proposes to use a number of indices derived from the development scores 

established for each project to evaluate OPIC’s overall performance: 

§ Average development score of projects committed each Fiscal Year  § Program Dollars representing the total investment financed or insured by OPIC  § Weighted average development score of projects (weighted by dollars invested)  § Development “dollars” (total project investment multiplied by its development score 

divided by 100)  § Development dollars per administrative dollar 

The average development score for FY 2005 is 93.2.  OPIC is setting a target of 95 in FY 

2006 and in 2007.  Estimates and targets for Development Dollar impacts and ratio of 

development dollars to administrative expenses are summarized below. 

Table 2 Development Score

Actual  Target  Actual  Target 

2004  2005 2  2005  2006 2  2007 

Un­weighted average  87.4  90  93.2  95  95 

Weighted by dollars 

invested 

86.8  90  92.1  95  95 

Program Dollars  5.9 B  5.9 B  1.88 B  1.97 B  2.1 B 

Per administrative 

dollar 

141:1  139:1  44:1  47:1  46:1 

Development Dollars  5.14 B  5.33 B  1.75 B  1.88 B  1.9 B 

Per administrative 

dollar 

124:1  129:1  41:1  45:1  44:1

These metrics compare OPIC’s overall impact, the development resources mobilized by 

OPIC’s programs (development dollars), and the mobilization of resources associated with 

OPIC’s overhead (program and development dollars per administrative dollar). 

The development dollars per administrative dollar supported by OPIC has declined since FY 

2004 as a result of OPIC’s increasing focus on small business transactions which, by their 

nature, are more labor intensive and require the same or greater amount of administrative 

support than larger projects.  Nevertheless, OPIC’s efficiency as measured by program 

dollars to administrative expenses compares favorably to other development institutions. 

2  Target and Actual data for FY 2005, are heavily influenced by two very large infrastructure projects in FY 

2004 that heavily influenced the baseline target for FY 2005 and FY 2006.  As a result, FY 2006 Targets are 

revised here.
9 

Program Summary

Insurance

OPIC provides political risk insurance to mitigate the risks faced by U.S. investors in 

emerging markets and developing economies.  Insurance is available for up to twenty years 

for new investments in new projects or expansions of existing projects.  OPIC protects 

against the risks of currency inconvertibility, expropriation, and political violence, and 

insures different types of investments such as equity, third party and related party debt, 

technical assistance, and covered property.  OPIC also has specialized programs for 

investments made by contractors and exporters, investments in the oil and gas industry, 

infrastructure projects, small business projects, and capital markets transactions.  OPIC’s 

Insurance activity is summarized at table B­3. 

Several OPIC insurance projects demonstrate OPIC’s contribution to development and to 

foreign policy:

· International Rescue Committee (IRC) – OPIC insurance of $5 million supports the 

IRC’s efforts to provide sanctuary and lifesaving assistance, as well as skill building 

programs to victims of violent conflicts in 17 countries around the world.  As part of 

this contract, for example, OPIC insured $130,000 of IRC property and equipment 

such as vehicles, computers, radios, generators, and pumps, and inventory including 

food, fuel, wood, office supplies, tools, and medicines.  This supports the IRC’s 

emergency assistance to refugees fleeing violence in the Darfur region of Sudan.

· West African Gas Pipeline ­ $45 million in OPIC insurance will enable the West 

African nations of Benin, Ghana and Togo to meet their demand for natural gas for 

the next two decades.  The project represents the largest single foreign investment to 

date in those countries.  The pipeline will have sufficient capacity to satisfy projected 

demand for natural gas in Benin, Ghana, and Togo through the year 2025.  The 

project will contribute meaningfully to West Africa’s environment, foremost by using 

natural gas that would otherwise be flared.

· Russian Healthcare Infrastructure – OPIC issued $46.7 million of insurance for ACD 

Research, Inc., of Staten Island, New York, for the supply of high­tech medical 

equipment and technical training to the Samara Oncology Center, about 600 miles 

southeast of Moscow.  Construction of the 550­bed oncology center was completed in 

2004; installation of the equipment will enable the facility to provide advanced 

treatment options in a densely populated region home to 13 percent of Russia’s total 

population.
10 

Finance

OPIC supports finance projects through its direct loan program and its investment guaranty 

program.  Direct loans are provided to OPIC’s small business clients by the Small and 

Medium Enterprise Finance Department.  OPIC’s Structured Finance Department generally 

supports large­scale projects with investment guaranties. 

Small and Medium Enterprise Finance

OPIC established the Small and Medium Enterprise Finance Department (or SME Finance) 

in order to better meet the unique needs of small and medium sized enterprises (SME’s) that 

want to invest in developing countries.  Congress strongly encourages OPIC’s new focus on 

small business.  Over the past year, OPIC has succeeded in significantly increasing the 

number of loans to SME’s, which has been a longstanding goal and a natural outcome of the 

Administration’s guidance that OPIC should focus more closely on companies and countries 

that cannot access private financing. 

Supporting SME’s, however, is more labor intensive than supporting large projects with 

financially sophisticated sponsors.  In order to become a truly effective player in the delivery 

of longer­term financing to smaller enterprises, OPIC needed to change its lending process to 

meet the needs of smaller organizations, in particular the need for simpler, less costly, more 

efficient and more predictable application and underwriting processes, such as lending based 

on a solid business plan. 

The following projects provide an example of the types of projects the SME finance 

department supported in FY 2005:

· Housing in Zambia – A $46.3 million loan for a housing development in Zambia will 

leverage $80 million of new housing construction, generate 5,000 new homes and 

serve as a model for future housing projects in sub­Saharan Africa.  The project also 

advances the Administration’s African Mortgage Market Initiative, established in July 

2003 to encourage the development of mortgage markets in sub­Saharan Africa. 

OPIC will provide the loan to Houses for Africa Mortgage Finance Zambia, to 

facilitate financing for 5,000 new homes to be built in the Lilayi Housing Estate near 

Lusaka, the capital.  The company is a joint venture between Nevada­based Houses 

for Africa Inc.; Pangaea Holdings LLC of Wisconsin; and City Investments Ltd, a 

Lusaka, Zambia­based agricultural and real estate development company.  The Lilayi 

estate will provide electricity, water and sewage, telephone, trash removal and 

parking services, stations for bus and taxi services and a separate commercial and 

retail area with banking services on site, a school, clinic, green areas for recreation 

and a police post.  In addition, USAID will provide technical assistance in the 

enhancement of the title deeds registry system with the Zambian Ministry of Lands.
*

* Information has been Redacted in accordance with the two principled exceptions of the Foreign Aid Transparency and Accountability 

Act (FATAA) of 2016; including the health and security of implementing partners, as well as national interest of the United States.
12 

Facility, which will lend to mid­sized Iraqi companies that have struggled during the war and 

now hope to ramp up their services and products.  In FY 2005, OPIC supported a finance 

facility for the Trade Bank of Iraq. 

OPIC has deepened its impact by expanding its partnership with banks that have well known 

and reputable credit departments, as well as worldwide presence.  These financial 

institutions, which have credit risk sharing arrangements with OPIC, have access to local 

business opportunities that OPIC would not otherwise be able to identify given its single 

location.  OPIC’s partners are familiar with small entrepreneurs who have demonstrated their 

ability to spur local economic growth, yet who require additional financing. 

The following projects provide an example of the types of projects the Structured Finance 

department supported in FY 2005, and demonstrate OPIC’s contribution to development and 

foreign policy:

· Potable Water in Algiers – OPIC’s financing of up to $200 million for a desalination 

project in Algeria will support the supply of urgently needed potable water to its 

capital city.  Currently many residents of Algiers are supplied with water only one out 

of every three days, and existing water resources are being depleted at an 

unsustainable rate.  OPIC’s loan to Hamma Water Desalination SpA, sponsored by 

GE Ionics through a joint venture with the state­owned Algerian Energy Company, 

will provide financing for the construction and operation of a reverse osmosis 

seawater desalination facility that will deliver 200,000 cubic meters of potable water 

daily, equivalent to approximately 25% of daily water demand in Algiers.  The 

project will be the first private potable water desalination plant in Algeria and the first 

Algerian private infrastructure project to be financed on a limited recourse basis.

· Cellphone Service in Ghana – OPIC guaranteed a $15 million loan to a cellular 

telephone company, Millicom Ghana, in its efforts to provide private telephone 

services to the underserved population in Ghana.  With this new infusion of funds, 

Millicom will be able to support an additional 140,000 new mobile GSM subscribers 

in Ghana via an increase in network capacity. 

In FY 2006 and 2007, OPIC expects to see continued activity in airport and road 

infrastructure, natural resource processing, clean energy, financial services, and housing. 

Investment Funds

OPIC’s Investment Funds are designed to mobilize private sector capital and management 

skills to facilitate economic development in emerging markets around the world.  OPIC’s 

Investment Funds also stimulate additional private sector investment in various regions by 

paving the way for emerging market private equity to grow as an attractive asset class. 

OPIC­supported funds catalyze private sector economic activity by providing companies 

with long­term growth capital, and by facilitating the development of critically needed 

management skills and technology.
13 

To accomplish these goals, OPIC provides loan guarantees to qualified investment fund 

managers in the private sector.  These managers in turn raise risk capital in the form of equity 

and equity­like investments to companies in emerging markets.  Since inception, OPIC­ 

supported funds have contributed $2.5 billion in private equity capital invested in emerging 

markets.  Over the past few years, OPIC restructured the Funds program, with an increased 

focus on top quality managers, reduced leverage and market­oriented terms. 

In FY 2006, OPIC will be guided by its current Asset Allocation Plan, which provides for 

diversification across regions, sectors, styles, and fund life cycles.  At the same time, the plan 

provides OPIC with the flexibility to respond to and support U.S. government foreign policy 

initiatives.  OPIC is midstream in executing its FY 2005/6 Asset Allocation Plan and has 

completed calls for proposals for Mexico, the Middle East/North Africa, and Global 

Technology.  OPIC has also issued a call for proposals for one or more funds in Eurasia, 

including Central Asia. 

In FY 2007, OPIC intends to revise its Asset Allocation Plan.  Subject to identification of top 

fund managers, OPIC plans to provide approximately $350 million in guaranties to 

approximately eight funds each year.  OPIC mitigates risk through increased diversification 

and lower average exposure per fund.  In addition, OPIC will draw on a wider range of tools 

provided by its statutory authority to enhance the ability of its products to respond to market 

needs.  Such tools may include the ability to guarantee local currency loans, and customize 

the terms of OPIC’s participation in fund capital structures to adjust risk­reward ratios and 

attract private capital to difficult markets. 

Table B­4 presents an overview of OPIC’s combined finance and investment funds credit 

activity.
14
15 

Appendix A: Appropriations Language 

Non Credit Account

OVERSEAS PRIVATE INVESTMENT CORPORATION 

NONCREDIT ACCOUNT 

The Overseas Private Investment Corporation is authorized to make, 

without regard to fiscal year limitations, as provided by 31 U.S.C. 9104, 

such expenditures and commitments within the limits of funds available to 

it and in accordance with law as may be necessary: Provided, That the 

amount available for administrative expenses to carry out the credit and 

insurance programs (including an amount for official reception and 

representation expenses which shall not exceed $35,000) shall not exceed 

[$42,274,000] $45,453,000: Provided further, That project­specific 

transaction costs, including direct and indirect costs incurred in claims 

settlements, and other direct costs associated with services provided to 

specific investors or potential investors pursuant to section 234 of the 

Foreign Assistance Act of 1961, shall not be considered administrative 

expenses for the purposes of this heading. 

Program Account

OVERSEAS PRIVATE INVESTMENT CORPORATION 

PROGRAM ACCOUNT 

For the cost of direct and guaranteed loans, [$20,276,000] $20,035,000, as 

authorized by section 234 of the Foreign Assistance Act of 1961, to be 

derived by transfer from the Overseas Private Investment Corporation 

Non­Credit Account: Provided, That such costs, including the cost of 

modifying such loans, shall be as defined in section 502 of the 

Congressional Budget Act of 1974: Provided further, That such sums shall 

be available for direct loan obligations and loan guaranty commitments 

incurred or made during fiscal years [2006 and] 2007, 2008, and 2009:

Provided further, [That such sums shall remain available through fiscal 

year 2014 for the disbursement of direct and guaranteed loans obligated in 

fiscal year 2006 and through fiscal year 2015 for the disbursement of 

direct and guaranteed loans obligated in fiscal year 2007] That funds so 

obligated in fiscal year 2007 remain available for disbursement through 

2015; funds obligated in fiscal year 2008 remain available for 

disbursement through 2016;  funds obligated in fiscal year 2009 remain 

available for disbursement through 2017: Provided further, That 

notwithstanding any provision of the Foreign Assistance Act of 1961, the 

Overseas Private Investment Corporation is authorized to undertake any
16 

program authorized by title IV of the Foreign Assistance Act of 1961 in 

Iraq: Provided further, That funds made available pursuant to the authority 

of the previous proviso shall be subject to the regular notification 

procedures of the Committees on Appropriations.  In addition, such sums 

as may be necessary for administrative expenses to carry out the credit 

program may be derived from amounts available for administrative 

expenses to carry out the credit and insurance programs in the Overseas 

Private Investment Corporation Noncredit Account and merged with said 

account. 

OPIC Transfer Authority

Whenever the President determines that it is in furtherance of the purposes 

of the Foreign Assistance Act of 1961, up to a total of [$20,000,000]

$30,000,000 of the funds appropriated under title II of this Act may be 

transferred to and merged with funds appropriated by this Act for the 

Overseas Private Investment Corporation Program Account, to be subject 

to the terms and conditions of that account: Provided, That such funds 

shall not be available for administrative expenses of the Overseas Private 

Investment Corporation: Provided further, That funds earmarked by this 

Act shall not be transferred pursuant to this section: Provided further, That 

the exercise of such authority shall be subject to the regular notification 

procedures of the Committees on Appropriations. 

Export Financing Transfer Authorities

Not to exceed 5 percent of any appropriation other than for administrative 

expenses made available for fiscal year [2006] 2007, for programs under 

title I of this Act may be transferred between such appropriations for use 

for any of the purposes, programs, and activities for which the funds in 

such receiving account may be used, but no such appropriation, except as 

otherwise specifically provided, shall be increased by more than 25 

percent by any such transfer: Provided, That the exercise of such authority 

shall be subject to the regular notification procedures of the Committees 

on Appropriations.
17 

Appendix B: Budget and Analysis Tables 

Table B­1 OPIC’s Budget FY 2005 – 2007

Appropriated Resources  2005  2006  2007 

(dollars, thousands)  Actual  Enacted  Request 

ADMINISTRATIVE EXPENSES 

Appropriated by Congress  42,885  42,274  45,453 

Rescission  (343)  (423)  ­  Net Administrative Expenses  42,542  41,851  45,453 

CREDIT REFORM SUBSIDY 

Appropriated by Congress  24,000  20,276  20,035 

Rescission  (192)  (203)  ­  Net Subsidy  23,808  20,073  20,035 

Transfer Authority  ­  20,000  30,000 

Net Negative Budget Authority, OPIC  (185,910)  (161,076)  (159,512) 

Totals may not add due to rounding. 

Net negative budget authority and outlays are subject to change depending on outlay rates.
18 

Table B­2A GPRA Annual Performance Plan & Report

Alignment of GPRA and Part Goals, Measures, and Targets 

2005  2006  2007  General Goals  Performance Indicators 

Measure  Target  Actual 3  Target  Target

DEVELOPMENT GOALS

Overall Development Matrix Score 90  O  93.2  95  100

Human capacity 

building 

Job Creation: Number of 

jobs per $1,000,000 

invested 

28  O  41 

I  50.4 

F  28.7 

>24  See 

Table 

B­2B 4 

Job Complexity: Managerial 

or Professional jobs as 

Average proportion of total 

jobs created per project 

50%  O  50% 

I  36.0 

F  62.9 

50% 

Training: Average per 

project percentage of staff 

that will receive formal 

training 

50%  O  74% 

I  70.0 

F  74.4 

50% 

Private sector 

development 

Local Project Ownership: 

Average percentage of 

local private ownership of 

project 

30%  O  19% 

I  17.0 

F  21.2 

30% 

Host country small and 

medium enterprises (SME) 

development: % of Projects 

with over 15% SME local 

Ownership 

15%  O  21% 

I  15 

F  24 

15% 

Leveraging of 

foreign direct 

investment into 

the developing 

world 

Mobilization of the 

maximum amount of capital 

into a host country per 

dollar of OPIC support 

(Increased levels of Small 

Business support may 

impact this goal): The ratio 

of non­OPIC contribution to 

total project cost 

>40%  O  40%  >40% 

3  Where available, data are broken down by: (O)verall, (I)nsurance, and (F)inance  4 All Development Measures and targets for FY 2006 are succeeded by the Development Score 

beginning in Fiscal Year 2007.  See Table B­2B.
19 

2005  2006  2007  General Goals  Performance Indicators 

Measure  Target  Actual 3  Target  Target 

SECONDARY GOALS 

Social effects  Promote equal opportunity 

policies, encourage 

corporate social 

responsibility initiatives, 

and preserve the 

environment 

15/30  O  26.7 

/ 41 

I  26.8 

F  26.5 

20.5/41 5  See 

Table 

B­2B 

Development 

Infrastructure 

Improvements 

Contribute to the 

improvement of the 

physical, financial, and 

social infrastructure of the 

developing world 

9/15  O  1.8 

/ 3 

I  1.7 

F  2.0 

1.8 / 3 

Macroeconomic 

and Institutional 

Effects 

Matrix Score: Promote 

investments in less 

developed countries and 

generate host country 

government revenues 

9/15  O  4.4 / 

12 

I  4.2 

F  4.5 

7.2 / 12 

Technology & 

Knowledge 

Transfer 

Matrix Score:  Encourage 

the transfer of technology 

and know­how to the 

developing world 

9/15  O  5.1 

/15 

I  4.0 

F  6.2 

9 / 15

OPERATIONAL GOALS

Maximum variance of 

actual from projected risk 

Mitigate risk  <5%  <5%  <5%  <5% 

through sound 

portfolio 

management 

practices, and 

by encouraging 

good corporate 

citizenship. 

Number of on­going OPIC 

projects monitored for 

compliance with OPIC’s 

U.S. effects, environmental, 

and worker rights standards 

All active projects will be 

self­monitored each year, 

and all sensitive projects 

will be site monitored by 

3rd year of operation.  Due 

diligence will occur before 

project approval for 

environmentally sensitive 

projects. 

Yes  Yes 

259 

projects 

Yes  Yes 

5 FY 2006 Targets have been redenominated for changes to the methodology.
20 

2005  2006  2007  General Goals  Performance Indicators 

Measure  Target  Actual 3  Target  Target 

Number of monitored on­ 

going projects that meet 

OPIC’s U.S. effects, 

environmental, and worker 

rights standards 

100%  99.2% 1  100%  100% 

Additionality  Evaluate new projects to 

ensure that they would not 

have gone forward but for 

OPIC’s participation. 

Develop methodology in FY 

2003; Establish baseline in 

FY 2004; Improve baseline 

score by 10% in FY 2005. 

100%  100%  100%  100% 

Number of small business 

projects resulting from the 

SBC 

Complete 60 SBC Finance 

Deals and 60 SBC 

insurance contracts in FY 

2005.  Total: 120 SBC 

deals 

Small U.S.  60  81  65  65 

Business: 

Ensure that 

OPIC support is 

provided to 

small U.S. 

businesses. 

Efficiency: Reduce SBC 

small business cycle time 

75

days 2 

F  68 

I  35 

70 days  70 days 

Operate in a self 

sustaining, 

businesslike 

manner. 

Operating revenue is equal 

to or greater than operating 

expenses 

Yes  Yes  Yes  Yes 

Number of executed loan 

agreements and insurance 

contracts that occur as a 

result of Moscow Office 

10  13  10  10 

1  Monitoring discovered issues with two investments which, as a result, were divested or 

removed from OPIC’s portfolio.  2  This target was revised in the most recent PART.
21 

Table B­2B Development Score Indicators

OPIC’s Development Score methodology outlined below will be the metric used for OPIC’s development performance beginning in Fiscal Year 

2007.  See “Overall Development Matrix Score” in Table B­2A.

DEVELOPMENT CATEGORY 

Indicator  Negative Impact  No Impact  Some Impact  Strong Impact 

I.  GNP PER CAPITA

GNP per capita Level  High Income Country  Medium Income Country  N/A  Low Income Country

II.  CORE DEVELOPMENT 

INDICATORS

Job Creation  Causes a loss of local jobs  No jobs created  Creates fewer than 28 jobs per 

$1,000,000 of total project 

investment 

Creates 28 or more jobs per 

$1,000,000 of total project 

investment 

Training  N/A  No  Greater than zero but less than 

50% receive formal training 

Proportion of receiving formal 

training is 50% or higher 

Local procurement  N/A  No local procurement  At least 1% but less than 50% 

total project procurement is 

sourced locally 

50% or greater total project 

procurement sourced locally 

Corporate Social Responsibility  Project causes a negative social 

impact 

No employee, social or 

community benefits 

Benefits limited to company 

employees (e.g., company­paid 

meals, transportation) 

Social investment directly 

benefiting local community (e.g., 

building community centers, 

clinics, roads, etc.) 

Equal Employment Policy  Discriminatory policy or practice  No formal or informal EEO policy  Informal policy prohibiting 

discrimination or follows local 

law 

Formal, written EEO policy that 

is communicated to all 

employees and supervisors or 

surpasses local law

III.  SUPPLEMENTAL 

DEVELOPMENT INDICATORS 

HUMAN CAPACITY BUILDING

Job Complexity  N/A  No local managerial or 

professional jobs created 

Managerial and professional jobs 

as a proportion of total jobs 

created exceeds 1% (but does 

not reach 50%) 

Managerial and professional jobs 

as a proportion of total jobs is 

50% or higher 

Training Abroad  N/A  No training abroad  Training in another developing 

country 

Training in a developed country
22 

DEVELOPMENT CATEGORY 

Indicator  Negative Impact  No Impact  Some Impact  Strong Impact 

PRIVATE SECTOR DEVELOPMENT

Local ownership stake  N/A  No  local  ownership  Greater than 0%  (but less than 

30%) local private ownership 

30% or greater local private 

ownership of project resources 

Benefits to local Small & Medium 

Enterprises (SME) 

N/A  No local SME project ownership  At least 1% but less than 15% 

local project ownership by SME 

15% or greater local project 

ownership by SME

LEVERAGING IMPACTS

Insurance, Leveraging other 

investments 

N/A  N/A  Any Insurance project  Reinsurance, co­insurance, or 

non­honoring sovereign guaranty 

Finance, Leveraging other 

investments 

N/A  OPIC finances 67%­ 100% of 

total project investment 

OPIC finances 51% to 66% of 

total project investment 

OPIC finances 50% or less of 

total project investment 

Complementing other development 

institutions 

N/A  None  Project involves a development 

institution 

Project involves multiple 

development institutions 

Public­Private Partnerships  N/A  None  N/A  Local government, development 

bank, ministry, or NGO

SOCIAL EFFECTS

Benefits for Women in the 

Workplace 

Discriminatory policy or practice  No relevant policies  Maternity leave or child care  Policies for maternity leave and 

childcare 

Benefit to Poor (Rural) Region  N/A  No rural benefit  Indirect benefit to rural 

communities through 

procurement or other linkage 

Direct investment in a rural area 

Environmental Preservation  Project cannot go forward 

because fails to meet statutory 

conditions on environmental 

impact 

Project takes steps to mitigate an 

identified negative environmental 

impact 

Project generates a moderate 

environmental benefit 

Project focus is to preserve, 

enhance or restore the local 

environment ("Category E" 

projects e.g., eco­tourism, 

reforestation, water treatment)

DEVELOPMENTAL 

INFRASTRUCTURE 

IMPROVEMENTS:  Physical (communication, 

transportation, energy, water), 

Financial (banking, mortgage, 

microfinance), or Social (shelter, 

nutrition, education, healthcare) 

Not an infrastructure project  Lower income levels of the 

population have limited access 

to the infrastructure 

Infrastructure is accessible and 

affordable to all segments of the 

population
23 

DEVELOPMENT CATEGORY 

Indicator  Negative Impact  No Impact  Some Impact  Strong Impact 

MACROECONOMIC & 

INSTITUTIONAL EFFECTS

Project resulting from or causing 

government reform 

Government concessions tied to 

project have anti­competitive 

impact on macro­economy 

No project relationship to 

government reform 

Project investment directly 

resulting from or causing a 

government regulatory, judicial, 

or other institutional reform 

applicable only to the project 

Project investment directly 

resulting from or causing a 

government regulatory, judicial, 

or other institutional reform 

applicable to the entire sector or 

economy 

Export Earnings  N/A  No exports  Partial sales are from exports  All sales are from exports 

Economic Diversification  N/A  Project is in saturated sector  Project involves an 

underdeveloped sector of the 

local economy or project 

produces a product or service 

that is not widely available in the 

local market 

Project involves an economic 

sector that is essentially 

nonexistent in the local economy 

or project produces a product or 

service that is not at all available 

in the local market 

Fiscal Impacts  N/A  Project pays no taxes over the 

first 5 years of operations 

N/A  Project pays taxes, duties, and 

fees to the government over the 

first 5 years of operations

TECHNOLOGY & KNOWLEDGE TRANSFER

New Production Technologies  N/A  None  Implements technologies that 

are relatively uncommon in the 

local economy or project sector 

Introduces technologies that are 

new to the local economy or 

project sector 

Innovative Management Practices  N/A  None  Implements managerial practices 

that are relatively uncommon in 

the local economy 

Introduces managerial practices 

that are new to the local 

economy 

Marketing & Distribution Expertise  N/A  None  Implements marketing and 

distribution strategies that are 

relatively uncommon in the local 

economy or project sector 

Introduces marketing and 

distribution strategies that are 

new to the local economy or 

project sector 

Lower local prices  Project increases local prices  No reduction to local prices  Product may have some impact 

on lowering local prices due to 

increased supply in market 

Product planned for introduction 

at a substantially lower price 

than competition 

New product/service  N/A  None  Produces a product/service that 

is not widely available in the 

local market 

Produces a product/service that 

is not at all available in the local 

market
24 

Table B­3 Summary of Insurance Program Activity

(dollars, millions) 

2005 

Actual 

2006 

Estimate 

2007 

Projection 

Aggregate Maximum 

Insured Amount 

Start of year  $  10,833  $  8,125  $  7,125 

Issuance during the year  1,128  2,000  1,200 

Reductions/Cancellations  (3,866)  (2,000)  (1,100) 

Outstanding end of year  $  8,125  $  7,125  $  7,225 

Maximum Contingent 

Liability 

Statutory limitation*  $  29,000  $  29,000  $  29,000 

End of year  $  4,512  $  4,700  $  4,800 

Current exposure to 

claims (CEC), end of 

year 

$  3,845  $  3,100  $  3,100 

Insurance Premium 

Revenue 

$  28  $  29  $  27 

* This is a combined insurance and finance limitation; OPIC monitors issuance and runoff to 

stay within this limitation on an aggregate basis.

Definitions

Aggregate Maximum Insured Amounts (MIA): Aggregate MIA is OPIC’s primary 

measurement of issuance.  It reflects the face value of all coverage issued. 

Premiums are generally computed based on this amount. 

Maximum Contingent Liability (MCL): MCL is the basis used to measure the 

maximum amount of compensation for which OPIC would be liable, which is limited 

by the statutory authorization in the Foreign Assistance Act.  Under most active OPIC 

contracts, investors may obtain all three coverages ­­ inconvertibility, expropriation, 

and political violence ­­ but aggregate claim payments may not exceed the single 

highest maximum insured amount for each contract. 

Current Exposure to Claims (CEC): Actual exposure to claim payments is less than 

total outstanding insurance as measured by MCL, because insured investors elect 

"current" coverage levels that reflect the current value of their investment, which may 

be significantly below their maximum insured amount.  Current exposure to claims is 

based on the assumption that the coverage under which a claim would be brought 

would be the coverage with the highest amount of current insurance in force.
25 

Table B­4 Summary of Finance Program Activity & Request

(dollars, millions) 

2005 

Actual 

2006 

Estimate 

2007 

Request 

New Appropriations  $  24.0  $  20.3  $  20.0 

Carry­forward from 

Prior Year  0.0  0.5 

Total Resources  $  24.0  $  20.8  $  20.0 

Projected Activity 

Finance  $  1,694.0  $  1,600.0  $  1,350.0 

Investment Funds  335.0  400.0  600.0 

New Commitments  $  2029.0  $  2000.0  $  2,150.0 

Uses of Credit 

Funding 

24.0  20.3  20.0 

Memorandum* 

Direct Loans  + 6.56 %  + 14.64 %  + 13.18 % 

Guarantees  + 0.92 %  + 0.80 %  + 0.50 % 

OPIC’s Finance programs include Small and Medium Enterprise Finance, Structured 

Finance, and Investment Funds. 

* Because subsidy rates are estimated transaction by transaction, they may vary 

widely from the rates printed above and from rates published in the in the President’s

Credit Supplement.