Overseas Private Investment Corporation: Additional Actions Could Improve Monitoring Processes
Released: 2016-01-11T00:00:00

Letter

Background

OPIC’s Financing Seeks to Promote Development and Other Policy Goals by Supporting U.S. Investment Abroad

OPIC, a U.S. government agency under the policy guidance of the Secretary of State, provides financing support to promote development and other policy goals by supporting U.S. direct investment in over 150 countries, with a mandate to give priority to low-income and emerging economies. OPIC’s direct loans, loan guaranties, political risk insurance, and private equity investment funds promote U.S. private investment by mitigating risks for U.S. firms making qualified investments overseas, often in difficult business environments. Since it began operating in 1971, OPIC has supported more than $200 billion of U.S. private investment. Examples of OPIC-supported projects include solar and wind power, financing for affordable housing, investments in affordable healthcare, microfinance, agriculture, and manufacturing (see fig. 1).

OPIC is self-sustaining, and is required by law to hold its revenues and income in order to pay OPIC expenses, cover transfers and additions to the insurance and guaranty reserves, and pay dividends. For example, it uses revenues from fees charged to clients, interest, and insurance premiums and interest earned on the U.S. Treasury securities it holds to cover its operating cost and any program losses. OPIC’s maximum spending levels for administrative and program expenses are set annually by Congress. In each of fiscal years 2014 and 2015, Congress authorized approximately $63 million for OPIC’s administrative expenses. OPIC is authorized by law to incur up to $29 billion in maximum contingent liability—the amount OPIC would incur if claims were made on all insurance contracts and borrowers defaulted on all loans.

As of September 30, 2015, OPIC’s outstanding financial commitments— the value of its portfolio—were approximately $19.9 billion, which is slightly more than two-thirds of its legislated limit of $29 billion. The value of OPIC’s portfolio has ranged from about $11.2 billion to about $18 billion in fiscal years 2000 through 2014. OPIC officials stated that the agency’s portfolio size is constrained by its administrative budget, as OPIC’s ability to originate, develop, process, monitor, and execute transactions is directly related to its resources, primarily the number of staff its budget supports. In fiscal year 2015, OPIC employed approximately 230 full-time staff.

OPIC’s Organizational Structure and Operations

OPIC’s investment portfolio is managed by seven staff offices and departments, and the organization is overseen by an individual who serves as both President and Chief Executive Officer (CEO). Five offices and departments are responsible for managing OPIC’s overall operations (see fig. 2).

OPIC’s Office of Investment Policy (OIP) is responsible for ensuring that all projects selected for funding comply with statutory requirements and general OPIC policy requirements, as well as for monitoring projects once they become active. According to OPIC officials, OIP works closely with OPIC’s business lines to conduct a full policy review of all projects. In addition, the Department of Financial and Portfolio Management is responsible for the financial leadership and oversight of OPIC through financial management, controls, and risk and portfolio management.

In response to congressional committee reports encouraging OPIC to adopt an accountability mechanism, OPIC created the Office of Accountability in 2005. The office addresses concerns, complaints, or conflicts about OPIC activities. Project-affected communities, project sponsors, and project workers may approach the Office of Accountability to request that such concerns be reviewed and addressed. The office also provides mediation services. The director of the Office of Accountability is a senior level appointee approved by the OPIC President and CEO, and reports directly to the President and CEO. According to OPIC officials, the director serves one 3-year term, may be reappointed for no more than one additional 3-year term, and may only be removed from office by a resolution of the Board of Directors.

OPIC Committed Over $20 Billion to Projects Worldwide for Fiscal Years 2008 through 2014

For fiscal years 2008 through 2014, OPIC committed approximately $20 billion in financing support to 718 projects worldwide (see fig. 3). As the figure illustrates, the average size of OPIC’s commitments was higher from 2011 through 2014 compared with previous years, with the number of commitments declining while total commitment values were generally higher. This reflects, in part, OPIC’s financing support for several large power generation and financial services projects during that period.

Financial Instruments

OPIC uses four financial instruments to support projects: loan guarantees, direct loans, investment funds, and political risk insurance.

Loan guarantees: OPIC provides loan guarantees to third-party lenders. Loan guarantees provide a guarantee for loans underwritten by participating financial institutions according to agreed credit criteria and are typically provided in amounts up to $250 million.

Direct loans: OPIC provides direct loans to U.S. small businesses.

The loans range from $600,000 to $50 million.

Investment funds: OPIC facilitates equity investment in developing and emerging markets by providing debt financing to privately managed equity investment funds. These funds make direct equity and equity-related investments in portfolio companies, enabling U.S. firms to expand operations in overseas markets where they otherwise could not due to insufficient availability of resources.

Political risk insurance: OPIC provides political risk insurance to cover certain political risks involved in investing in developing countries. According to OPIC officials, the share of insurance in OPIC’s active portfolio has declined over the past 20 years due, in part, to the increasing number of private and public providers of political risk insurance.

In terms of value, the largest share of OPIC’s new commitments worldwide in fiscal years 2008 through 2014 were loan guarantees, representing 57 percent of the approximately $20 billion total value of commitments made during the period (see fig. 4).

Regions

During fiscal years 2008 through 2014, OPIC committed to projects in seven regional categories: Sub-Saharan Africa, Asia and the Pacific, Europe, Latin America and the Caribbean, the Middle East and Northern Africa, and New Independent States, as well as investments designated for projects encompassing multiple countries and regions (cross- regional). Figure 5 shows commitment values and numbers by region. In fiscal years 2008 through 2014, OPIC committed the majority of its new financing support to projects in two regions: Latin America and the Caribbean and Sub-Saharan Africa. For example, OPIC is participating in the Power Africa initiative, which aims to support energy projects in Sub- Saharan Africa. In 2013, OPIC pledged to provide $1.5 billion for energy projects in Africa by 2018 and as of September 25, 2015, OPIC had already committed approximately $1.3 billion for Power Africa projects.

Country Income Levels

OPIC is required by law to give preferential consideration to investment projects in less developed countries that have per capita incomes of $984 or less in 1986 U.S. dollars, and restrict its activities in higher income countries with per capita incomes of $4,269 or more in 1986 U.S. dollars. Based on these statutory definitions, OPIC categorizes countries’ per capita incomes as low, middle, and high. The per capita income categories equate to the following in 2014 dollars: per capita incomes not greater than $1,836 for low income countries; between $1,836 and $7,964 for middle income countries; and greater than $7,964 for high income countries. In fiscal years 2008 through 2014, OPIC’s new commitments for projects in low per capita income countries represented 34 percent of the total number of new commitments and 25 percent of the total value. According to OPIC officials, based on legislative history, OPIC interprets the statutory requirement as allowing it to support projects in higher income countries that are highly developmental, focus on underserved areas or populations, or support U.S. small businesses. See figure 6 for the composition of OPIC’s fiscal years 2008 through 2014 commitments according to country per capita income level.

Sectors

In fiscal years 2008 through 2014, OPIC committed the majority of its total new financing support to projects in the financial services sector—over half by value—and power generation sector—almost one quarter by value (see fig.7). However, the majority of financing support OPIC provides to the financial services sector, primarily banks, is then lent to others for specified purposes, such as the lending to microfinance institutions or companies in other sectors. Nonfinancial services and manufacturing are other key sectors OPIC supported, followed by agriculture, communications, construction, oil and gas, mining, tourism and hotels, and transportation. OPIC increased its commitments in power generation projects from about $1.4 million in fiscal year 2008 to approximately $1.2 billion in fiscal year 2014. Approximately 82 percent of OPIC’s power generation commitments in fiscal years 2008 through 2014 were for renewable energy projects, reflecting OPIC’s strategic focus on promoting renewable energy options in the developing world.

OPIC’s Commitments in Selected Countries Differed in Size and Industry Focus

OPIC commitments during fiscal years 2008 through 2014 varied for the four focus countries in our review—Honduras, Kenya, Pakistan, and Peru (see app. II for a list of all OPIC commitments made in the four countries during that period and app. III for brief descriptions of each of the 21 projects we selected for this review). Of the four countries, Pakistan and Peru received the largest amount of new OPIC commitments with $646 million for 17 projects in Pakistan, and $625 million for 18 projects in Peru. New commitments in Honduras totaled $246 million for 11 projects, and in Kenya totaled $399 million for 11 projects. Kenya, Pakistan, and Peru each had OPIC investments in large-scale energy projects (see fig. 8).

OPIC Policies Guide Project Selection, and OPIC Recently Adopted Additional Guidance to Enhance the Policy Clearance Process

OPIC’s Policies Guide the Project Selection Process

OPIC has established policies that guide its project selection process, which includes a review of projects’ eligibility against OPIC policy and statutory requirements and due diligence reviews, among other evaluations. The process OPIC follows when reviewing potential projects is generally the same, with some modifications for projects that are supported through framework agreements between OPIC and large financial institutions. This process has seven steps:

Prescreening—informal review of proposals or discussions with potential applicants.

Application intake—formal acceptance of application materials.

Screening—initial review of a project against eligibility, financial, and legal requirements.

Credit and legal due diligence reviews—formal evaluation of the risks to which a project may expose OPIC.

Policy clearances—review of a project’s impact on the U.S. economy, development in the host country, environmental and social issues, worker rights, and human rights.

Final commitment review and approval—final approvals based on the project’s level of financial risk.

First disbursement—release of committed funds once an agreement is finalized.

A small percentage of project proposals and applications ultimately obtain financing support. According to OPIC, during fiscal years 2000 through 2012, officials prescreened about 20,000 project proposals and formally accepted 3,175 applications. About 37 percent of the 3,175 applications completed the full review process and reached disbursement (see fig. 9), which is about 6 percent of the approximately 20,000 project proposals reviewed.

Prior to formally accepting an application, OPIC staff may prescreen projects that they identify through several means. According to OPIC officials, OPIC relies on clients and partners, interagency contacts, and business development efforts to identify potential opportunities. For example, OPIC identifies opportunities through repeat clients, referrals, and large partner banks. OPIC also collaborates with several U.S. agencies to identify projects. For example, it is coordinating with State and the Trade Development Agency on the U.S.-Africa Clean Energy Finance Initiative, a 4-year, $15 million program to stimulate private sector investment in the African clean energy sector. In addition, embassy officials in Honduras and Pakistan said they try to identify potential projects for OPIC that support the embassy’s strategic goals. Further, OPIC officials organize or participate in activities—such as workshops, conferences, and trade shows—to educate potential clients about OPIC. For example, OPIC organizes workshops, called Expanding Horizons, in several major cities each year.

OPIC staff prescreen projects through informal discussions with potential applicants by phone, email, and at events. This includes informally reviewing projects against OPIC’s eligibility, financial, and policy requirements (discussed below). Applicants that successfully meet these requirements may formally submit their application and other required documents.

OPIC Screens Projects for Eligibility and Other Requirements

OPIC policy requires officials to screen accepted applications to identify flaws that may prevent an applicant’s ultimate selection. This screening includes, among other things, the review of projects against OPIC policy and statutory requirements concerning eligibility restrictions and an initial review of the project’s additionality—whether OPIC’s support of a project “adds value” because it is a project that a private lender would not otherwise support given country risk or other factors.

Connection to the United States OPIC policy requires that there be a meaningful connection between an OPIC-supported project and the U.S. private sector. OPIC’s guidance concerning the U.S. connection requirement outlines which entities are considered to be U.S. private sector entities and what constitutes sufficient U.S. involvement. The U.S. connection requirement can be met by the applicant, the project company, or some other supporting entity, such as a services provider. Projects must meet both aspects of the U.S. connections policy requirement to obtain OPIC financing support, unless the President and CEO of OPIC approves a waiver or exception.

OPIC’s policies allow for substantial flexibility in implementing the U.S. connection requirement. For example, the U.S. connections requirement specifies that various entities can qualify as U.S. private sector entities, including a U.S. citizen or a nonprofit organized in the United States that may or may not have a U.S. board member. Similarly, the requirement can be met through a U.S. entity’s direct equity investment of at least 25 percent in the project or through subcontracting with a U.S. company for services, such as maintenance services, that equate to at least 25 percent of the project equity. Table 1 outlines OPIC’s current criteria with respect to determining U.S. connections.

The 21 OPIC-sponsored projects we reviewed met the U.S. connection definition of an eligible U.S. entity in a number of ways. Two projects were sponsored by a U.S. citizen; 12 were sponsored by a U.S. for-profit entity; 4 were sponsored by a U.S. nonprofit, 1 of which did not have any U.S. board members; and 3 met more than one of the criteria.

Applicants also met the U.S. involvement requirement in a number of ways. For example, for a school building project in Kenya the applicant provided over 25 percent of the equity for the project. In another case, a wind power project in Pakistan met the requirement by contracting with a large U.S. company to purchase wind turbine generators and operation and maintenance services worth more than 25 percent of the equity in the project. One OPIC client told us that he thought the U.S. sponsor needed to fund 25 percent of the project equity to obtain OPIC support. He later learned that similar projects in that country successfully met this requirement by contracting with or purchasing equipment from large U.S. companies, which he said was an easier way for project companies to meet OPIC’s U.S. connection requirement. According to OPIC officials, OPIC may determine that a project company should meet specific criteria for the eligibility requirements due to credit-related factors.

Small Business Requirement for Direct Loans OPIC’s governing statute restricts the types of projects eligible for direct loans, and all the direct loan projects we reviewed met OPIC’s small business requirement. OPIC can only provide direct loans to projects sponsored by or significantly involving U.S. small businesses or cooperatives. OPIC defines small businesses as any business with annual revenues of less than $400 million in the last fiscal year, 500 or fewer employees, or any newly formed entity or individual owner that has a net worth of less than $100 million. Eight of the 21 projects we reviewed received a direct loan from OPIC, and all of these projects met OPIC’s small business requirement.

Screening also includes an initial review of the project’s additionality. Additionality in the OPIC context refers to whether or not OPIC’s support of a project “adds value” because it is a project that a private lender would not otherwise support given country risk or other factors. We found that OPIC documented how all the projects in our sample met the additionality requirement. For example, 18 of the 21 projects met the additionality requirement because the host country had high country risk ratings (see table 2).

U.S. embassy officials and OPIC clients we met with in Honduras and Pakistan stressed that high levels of country risk severely inhibited private sector financing. For example, one client noted that it was not willing to assume the risk of financing a project in Honduras without a loan guarantee from OPIC or another development finance institution. In addition, two OPIC clients in Pakistan said that local banks offer shorter term loans and one client noted that other development finance institutions offered financing options at high interest rates that were unreasonable for nonprofit organizations. Lastly, three OPIC clients we interviewed in Honduras and Pakistan said that they could not fund their project without OPIC due to a lack of private sector funding.

Based on the completed screening, OPIC either rejects the project, suggests changes to the applicant to improve the likelihood of acceptance, or moves the project forward. For projects deemed ready to advance, an OPIC official concurrently initiates credit and legal due diligence reviews and the policy clearance process.

OPIC Conducts Credit and Legal Due Diligence Reviews

OPIC conducts credit and legal due diligence reviews to identify and evaluate risks to which OPIC may be exposed. According to OPIC policy, the credit due diligence review includes, in part, evaluation of the financial condition of key project participants; markets and marketing strategy; project management quality and structure; financial projections; project country political and economic analysis; and credit checks for key project participants. OPIC policy states that the legal due diligence review consists of legal and regulatory evaluations concerning, for example, the complexity of the legal framework in the host country and the jurisdiction of the governing law for various project agreements. OPIC is also to conduct character risk due diligence on the project company, the borrower, and other relevant entities in accordance with OPIC policy, to uncover any derogatory information about an OPIC project, its sponsors, investors, or key personnel to minimize risks to OPIC’s portfolio and reputation. Satisfactory completion of the character risk due diligence is a non-waivable condition of any binding OPIC commitment. When issues of concern are identified, OPIC staff are required to provide a detailed analysis of such issues and related recommendations to upper management and, potentially, the President and CEO of OPIC.

Based on our review of project file documentation, we found that OPIC conducted credit and character risk due diligence reviews when required. For example, for one project we reviewed, OPIC identified a potential character risk due diligence issue concerning one of the project’s contractors. OPIC staff conducted additional due diligence reviews related to these issues, appropriately documented the concerns and resolution, and alerted management to the potential issue.

OPIC Requires the Completion of Four Policy Clearances for Each Project

OPIC policy requires officials to document the completion of four distinct policy clearances for each project: (1) U.S. economic effect and host- country developmental impact, (2) environmental and social impacts, (3) worker rights, and (4) human rights. OIP officials are to conduct these reviews, based on applications, responses to questionnaires, other client- provided documentation, and other information. We found that OIP completed the four policy clearances for all 21 projects in our sample. In addition, according to OIP officials, they participate in screening discussions and attend other credit-related project meetings to learn more about the financial structure of the potential project and to share any potential policy-related risks with other OPIC officials. The specific review processes are outlined in OPIC policies, which have evolved over time. Figure 10 outlines the policy clearance structure.

U.S. Economic and Host Country Development Clearance This clearance has two distinct reviews—the project’s expected impact on the U.S. economy and on development in the host country.

U.S. economic impact. Congress directed OPIC to seek to support projects that have positive trade benefits for the United States and to decline projects expected to cause any significant reduction in U.S employment if the reduction is occurring because the investment involves substantially the same product for the same market. OPIC has guidelines for conducting U.S. economic impact analysis, and relies largely on applicant-provided project information. In some cases, OPIC policy requires the development of an industry analysis to assess the health of the U.S. industry to determine whether the project’s output could potentially harm U.S. jobs.

Host-country development impacts. OPIC is required by law to prepare and maintain statistics on each project’s impact on development in the host country, and to report its assessment of the development impact to Congress each year. According to OPIC officials, OPIC conducted qualitative assessments of each project’s expected development impact prior to 2000. OPIC also collected and reported on quantitative information such as host-country job creation and tax payments. OPIC officials stated that they sought to make the estimated development impact more quantifiable with the creation of its Development Impact Matrix, which uses both qualitative and quantitative measures to establish a development impact score that enables comparison across projects. The matrix includes specific indicators for physical investments and financial services projects. This matrix has been updated twice since 2007, and according to officials the updates have been based on site visits, feedback from USAID, and best practices, and OPIC is currently in the process of updating it for a third time (see app. IV for an example of OPIC’s development impact scoring).

OPIC reports each year on the estimated development impact of new projects committed in that year in its Annual Report on Development Impact, in accordance with statutory requirements. For example, in its 2013 report, OPIC estimated that new projects committed in fiscal year 2013 would result in $8.9 billion in investments in developing and emerging markets and create almost 18,000 jobs in host countries. According to officials, OPIC determines the estimated development impact by evaluating estimates provided by the client and scoring the relevant indicators for a project during the policy clearance process.

However, estimating meaningful information on development impacts is inherently difficult. Officials from OPIC and IFC—the World Bank’s development finance institution—stated that demonstration effects and spillover effects of projects can be critical to development but are difficult to identify and measure. For example, IFC officials said that it is difficult to measure the ability of a successful new project to spur similar projects in a country.

Environmental and Social Impacts, Worker Rights, and Human Rights Clearances Congress directed OPIC to issue a comprehensive set of environmental, transparency, worker rights, and human rights guidelines that are binding on OPIC, consistently applied to all projects, and at least as rigorous as the environmental and social policies developed by the IFC in 2009. According to officials, OPIC’s Environmental and Social Policy Statement, effective in 2010, addresses this requirement. OPIC’s Environmental and Social Policy Statement describes its standards and assessment and monitoring requirements for environmental and social, worker rights, and human rights impacts. The statement also adopts the IFC’s Performance Standards on Environmental and Social Sustainability. According to OPIC officials, OPIC’s OIP Procedures Manual guides officials’ implementation of the Environmental and Social Policy Statement.

Environmental and social impacts clearance. OPIC, as required by policy, categorizes projects as A, B, C, or D based on environmental and social risk factors, and this categorization determines the level of review and monitoring a project receives. Further, OPIC is to consider direct, indirect, induced, regional, trans-boundary and cumulative environmental and social impacts when categorizing projects during the environmental and social clearance process. According to officials, OIP also reviews and documents human rights issues, such as community health and safety, land ownership, and indigenous peoples, as part of the environmental and social clearance process.

Category A projects represent the highest risk for environmental and social impacts, with the categorization based on the inherent risk of the project before any mitigation measures are taken. Category A projects represented 3 percent of OPIC’s active projects as of June 30, 2015. OPIC’s Environmental and Social Policy Statement provides qualitative definitions for the four environmental and social categories, and it includes a list of sensitive sectors and project factors that may lead to a Category A categorization.

OPIC’s Environmental and Social Policy Statement and OPIC’s governing statute requires that Category A projects undergo additional review during the selection and monitoring phases, including review of an applicant-provided environmental and social impact assessment, including a 60-day public comment period; additional post-selection monitoring, such as third-party audits; at least one monitoring site visit to each project within 3 years of finalizing the agreement, to the extent feasible.

According to officials, OPIC has visited every Category A project as required, except for two projects that officials were unable to visit due to security concerns.

OPIC’s Environmental and Social Policy Statement also specifies categorical prohibitions, which are projects that OPIC will not fund.

For example, OPIC will not fund the construction of certain large dams.

Worker rights clearance. In accordance with its governing legislation, OPIC will only support projects in countries that have, or are taking steps to adopt, laws that uphold internationally recognized worker rights. The Environmental and Social Policy Statement includes guidance for determining if a country meets labor eligibility requirements. OPIC considers as eligible any country on the Generalized System of Preferences list, because that status indicates they meet certain internationally recognized worker rights. According to officials, OIP also reviews and documents human rights issues that specifically concern labor rights, such as forced and child labor issues, as part of the worker rights clearance process.

In 2010, OPIC introduced the Special Consideration classification for projects with a higher risk of violating labor rights. OPIC may classify projects as Special Consideration based on an assessment of the likelihood, severity, and degree of possible labor rights violations, and their relevance to a project. OPIC has designated 10 projects as Special Consideration since that time. OPIC requires all Special Consideration projects to submit an annual labor report summarizing workplace conditions and to conduct one third-party audit within the first 3 years of operations. In addition, OPIC policy states that it will endeavor to conduct at least one OPIC site visit within 3 years of the execution of the OPIC agreement.

Human rights clearance. OPIC’s governing legislation directs it to consult with the Secretary of State and take into account all available information concerning the effect of a project on human rights and fundamental freedoms in the host country. OPIC’s policies require that it screen projects using a process mutually agreed upon by OPIC and State, which State documented in a 2006 memorandum. The memorandum designates which agency is responsible for providing human rights reviews, depending on the current status of human rights violations in a country and project characteristics such as sector and degree of host government involvement. This status is documented in the human rights sensitivity list maintained by OPIC and reviewed quarterly by State. The list includes all the countries in which OPIC is authorized to conduct activities and is divided into three categories based on the human rights situation in each country. The responsibility for conducting the review is based on the project country categorization and other information.

OPIC documents when a human rights clearance has been conducted for each project, regardless of which agency provides the clearance. OPIC officials said that the purpose of this human rights clearance document is only to confirm that a clearance occurred, in accordance with the statutory requirement to consult with State on the effect of a project on human rights in the host country.

According to OPIC officials, when OPIC conducts the human rights review, it bases the clearance approval on a review of human rights issues and the documentation of that review in other clearance documents. As discussed above, OPIC conducts the review and documentation of relevant human rights issues during the environmental and social and worker rights clearance processes, according to OPIC officials. In reviewing the clearances for 21 projects, we identified 2 projects for which OPIC did not document its review of human rights issues in the environmental and social clearance or the worker rights clearance. However, the clearances for these two projects did include human rights-related conditions that the project companies would need to meet to obtain OPIC financing support. In addition, OPIC completed the clearances for these two projects in 2006 and 2007, which, according to OPIC officials, predate newer policies concerning policy clearance documentation.

Approval for Commitment and First Disbursement Is Based on Project’s Level of Financial Risk

After completion of the credit and legal due diligence reviews and the four policy clearances, OPIC management reviews projects based on the financial level of risk each project poses, with the largest projects—those valued at more than $50 million—requiring approval from OPIC’s Board of Directors. OPIC’s board reviewed and approved sixteen percent of the number of commitments OPIC made in fiscal years 2008 through 2014, which constitutes 72 percent of the total dollar value of these commitments. Thirteen percent of the number of commitments OPIC made during this period—representing 67 percent of the total dollar value—were for amounts greater than $50 million. Several commitments were approved by the board for reasons other than monetary value.

For commitments requiring board approval, OPIC is to solicit input from its board members—eight members from the private sector and seven from the federal government, including OPIC, the Departments of Commerce, Labor, State, Treasury, USAID, and USTR. Prior to board meetings, OPIC provides board members with key project documents. According to officials from OPIC, State, Treasury, USAID, and USTR, it is routine for board members to discuss specific issues regarding the projects among themselves and with OPIC prior to the meetings. For example, USTR officials stated that USTR provides guidance and oversight on project selection concerning a proposed project’s impact on U.S. trade policy. According to State officials, the agency provides guidance with respect to foreign policy considerations, such as whether OPIC should support projects in a particular country because of current political considerations, or the reputations of sponsors and investors. A State official said that they generally raise concerns with OPIC earlier in the vetting process, but occasionally contentious issues arise for projects presented for board approval. These issues have in some cases been resolved through the inclusion of mitigation measures such as conditions to the loan agreements.

A project reaches commitment when it receives final management approval and a legally binding document is signed. At commitment, OPIC creates the budgetary or financial obligation for the project. As shown in figure 9 above, about 16 percent of applications that reached commitment during the fiscal year 2000 through 2012 period did not reach disbursement. According to OPIC officials, OPIC may, for example, be unable to reach a final agreement with the client concerning loan terms. After the initial disbursement, OPIC’s monitoring functions assume responsibility for the projects in accordance with OPIC policy.

OPIC Recently Developed Additional Guidance for Conducting Human Rights Reviews

OPIC recently developed additional guidance to identify responsibilities concerning the review of specific human rights issues and enhance human rights due diligence procedures. Although OPIC had established policies for the project selection process, we found during the course of our work that these policies did not provide comprehensive guidance for reviewing and documenting human rights information that is required to be considered for assistance. OPIC officials said that the review of human rights issues is done as part of its environmental and social and worker rights clearances, consistent with the IFC Performance Standards. However, we found that neither OPIC’s Environmental and Social Policy Statement nor the OIP Procedures Manual provided comprehensive guidance on the human rights issues that OPIC officials should consider during the clearance process, or how these reviews should be carried out and documented.

We further found that OPIC’s policies did not clearly identify the requirements and delineate responsibilities for considering human rights information. OPIC’s Environmental and Social Policy Statement requires all projects to meet applicable IFC Performance Standards. The IFC Performance Standards do not explicitly address human rights but, rather, the standards state that human rights issues are addressed throughout the standards. Although OPIC’s policies require the Environmental and Social Group and the Labor and Human Rights Group to identify those IFC Performance Standards relevant to their review of a project in the clearance document, the policies did not dictate which performance standards each team is responsible for addressing.

When we discussed our concerns with OPIC officials, they agreed that the documentation of their human rights reviews was not clear. In response, OPIC developed additional guidance establishing roles and responsibilities for human rights reviews. This new guidance outlines how specific human rights issues covered in the Universal Declaration of Human Rights correspond to the IFC Performance Standards and assigns responsibility within OIP for reviewing and documenting each issue.

OPIC has also taken steps to strengthen its human rights reviews in response to a 2014 report by its Office of Accountability, which recommended that OPIC establish enhanced human rights due diligence procedures. In February 2014, OPIC’s senior management requested the Office of Accountability to conduct an independent review of OPIC’s experience with two related projects in Liberia for which they received a number of complaints. In 2008, OPIC approved the two projects, a biofuel project and a 35-megawatt power plant project owned by the same parent company. The report found that OPIC’s human rights policies did not state when enhanced human rights due diligence should be triggered during project selection.

In a March 2015 congressionally mandated response to the Office of Accountability’s report, OPIC reported that it had, among other things, (1) developed enhanced screening procedures to better identify factors contributing to higher human rights related risks and (2) deployed specialized social consultants to project sites as part of the human rights due diligence review. OPIC is currently following draft guidance for enhanced screening procedures developed in response to the Office of Accountability recommendation. Under these procedures, projects with heightened risk may be required to undergo additional third party audits based on the draft guidance. However, the draft guidance does not describe who is responsible for conducting this review or how it is to be documented. According to officials, OPIC identified five new projects as higher risk in 2015 and will require these projects to participate in third party audits once the projects are operational. OPIC also hired three specialized social consultants, and has identified a number of additional social consultants with whom the agency can contract with when necessary. According to OPIC officials, the agency plans to finalize the draft screening procedures for the enhanced human rights due diligence reviews in coordination with its update of the Environmental and Social Policy Statement and OIP Procedures Manual.

OPIC Recently Adopted Additional Guidelines for Conducting Cumulative Impact Assessments

OPIC recently adopted additional guidelines for conducting cumulative impact assessments that may support more systematic analyses. According to OPIC policy, OPIC is to categorize projects based, in part, on its preliminary assessment of the potential environmental and social risks and impacts—including cumulative impacts—of a project in the absence of any required mitigation. Cumulative impacts are those that result from the successive, incremental, or combined effects of an action, project, or activity in combination with other existing, planned, or reasonably anticipated future projects or activities. Cumulative impact assessments are conducted to analyze the potential impacts and risks that proposed projects and activities—including projects supported by other organizations or companies—will have on valued environmental and social components, such as biodiversity, water supply, and cultural heritage. Cumulative impact assessments can be challenging to conduct, because cumulative impacts can depend on factors for which complete information, such as details of other companies’ project designs, is not available or is difficult to obtain. According to the IFC’s 2013 handbook for conducting cumulative impact assessments, a comprehensive assessment requires the participation of many parties and is best led by local governments or regional planners because effectively designing and implementing the assessment is often beyond the capacity of a single developer.

OPIC committed to supporting four wind power projects in one region in Pakistan before the completion of an OPIC-contracted cumulative impact assessment. However, OPIC officials told us that they approved the projects because available evidence indicated that the wind power projects would not cause significant cumulative impacts. In the environmental and social clearances for the two wind power projects in Pakistan we reviewed, OPIC noted that there were 14 proposed wind power projects in the region and that each planned to produce 50 megawatts of energy. The clearances stated that as a result, there is the potential for cumulative impacts to the community, biodiversity, and resource availability. Although the United Nations Development Program commissioned a regional environmental assessment of the region in 2009 that considered cumulative impacts, the analysis was qualitative and only provided general guidelines for future studies. OPIC stated in its environmental and social clearances for the two projects we reviewed that it would hire an independent consultant to conduct a cumulative impact analysis. However, OPIC committed to these two wind power projects in 2013 and another two in the same region in 2014 before the completion of the OPIC-contracted cumulative impact assessment.

According to OPIC officials, they approved the four wind power projects because they did not believe that the projects would result in significant cumulative impacts. OPIC officials told us that the three cumulative impact issues typically associated with wind power projects are threats to biodiversity, increased noise levels, and shadow flicker. OPIC made a determination that the projects posed no significant impact to birds based on an analysis conducted by the World Wildlife Foundation. OPIC officials said that noise and shadow flicker could be more easily mitigated and, because the area is not heavily populated, potential noise and shadow flicker impacts would not impact a significant number of people. Based on this information, OPIC issued the final environmental and social clearances with conditions that were incorporated into the contracts for the four wind power projects.

OPIC adopted the IFC handbook for conducting cumulative impact assessments and plans to provide the guidelines to potential clients. OPIC required the contractor that conducted the 2015 cumulative impact assessment of wind power projects in Pakistan to follow these guidelines when conducting the assessment. According to officials, they did not have adequate information from the government of Pakistan or other organizations about the design of other planned wind farms to conduct an analytical assessment of the potential impact on noise levels and shadow flicker until 2015. OPIC officials said they plan to provide clients with the IFC handbook to support their environmental and social assessments. However, OPIC officials noted that they will not be able to require clients to use the IFC handbook because it may be too difficult for clients to collect all the necessary information for conducting such a cumulative impact assessment.

OPIC Monitors Projects, but Site Visit Reports Are Not Always Timely, and Use of Client- Reported Data Involves Risks OPIC Uses Several Tools to Monitor Policy Compliance and Development Impacts of Its Projects

OPIC is required to monitor ongoing projects’ compliance with environmental, social, labor, and human rights requirements, and assesses U.S. economic impact and host-country development impact. OPIC uses several tools to monitor policy compliance and development impacts: (1) annual self-monitoring questionnaires (SMQs), (2) site visits by OPIC staff, and (3) other independent and client-provided reports, such as reports from independent engineers or third-party audits or project-specific environmental or labor reports. On the basis of our document review, we found that three sections of OIP—the Environmental and Social Group, the Labor and Human Rights Group, and the Economic Impact Analysis Group—participate in OPIC’s integrated monitoring and assessment process in accordance with OPIC policy. The Environmental and Social Group and Labor and Human Rights Group conduct compliance monitoring while the Economic Impact Analysis Group assesses U.S. economic and host-country development impacts. According to OPIC policy, these groups may conduct site visits separately or concurrently. Other groups within OPIC are also required to monitor projects. For example, according to OPIC officials, its Department of Financial and Portfolio Management and Investment Funds Department monitor the financial performance of OPIC projects at least annually.

Site Visit Reports Were Not Always Prepared in a Timely Manner

OPIC did not document the results of the 3 project site visits in our sample in a timely manner, which may limit their usefulness. Two of the 3 site visit reports we reviewed were written several years after the site visits occurred. According to OPIC officials, staff who made the site visit orally present findings in internal meetings shortly after each visit. OPIC policy does not require that site visit reports be completed and submitted to management in a designated period of time. According to OPIC officials, OIP staff document and submit site visit monitoring reports when time permits. However, federal internal control standards dictate that agencies develop controls that ensure that actions are taken to address risk, such as the accurate and timely recording of events. In addition to using site visits for project monitoring, OPIC uses information collected during site visits when reviewing similar projects for clearance to help predict potential development impacts and refine development indicators, according to OPIC officials. Thus, the lack of timely documentation of site visits may limit the value of this information for reviewing and estimating the impact of potential future projects. OPIC officials told us that they are in the process of creating a standardized process for documenting site visits, which they expect will make it faster for teams to complete trip reports.

OPIC May Not Have Adequate Information on Some Projects’ Status

OPIC’s use of client-reported data from SMQs, combined with limited site visits, may not provide OPIC adequate information on project’s policy compliance and development impact status in some cases. OPIC is required by law to monitor and report on the economic and social development impacts of its projects. Federal internal control standards call for management to obtain relevant and accurate data and to identify risks related to meeting defined objectives. According to OPIC officials, OPIC reviews and uses data that are submitted by the client in SMQs for monitoring the majority of its projects on an annual basis; however, the data are not validated by OPIC’s staff or an independent reviewer. OPIC officials noted that the client is responsible for ensuring that the data it provides in the SMQs are accurate and clients must attest to the accuracy of the data they provide. In our analysis of 21 OPIC projects from Honduras, Kenya, Pakistan, and Peru, clients for 14 of the projects were required to complete SMQs because the projects had been active and operational. Of these 14 projects, all but one of the clients submitted the required annual SMQ. In addition, clients for 11 of these 14 projects fully completed the SMQs they submitted. The clients for the remaining 3 projects left sections of the SMQs unanswered. Specifically, we found that one client did not report employment numbers; a second client did not report the date that a project became operational; and a third client did not report remittances and revenue amounts.

In fulfilling its requirement to report on social and economic development impacts, OPIC faces risks related to the accuracy of client-reported data because self-reported statements may not reflect actual project conditions. OPIC officials told us that limited staff resources constrain its ability to verify the accuracy of data in the SMQs and that they rely on a contractor to conduct a high-level review of SMQs to identify blank, incomplete, or obviously incorrect responses.

Further, because OIP officials only visit a small number of projects each year, OIP largely relies on the SMQs for updated annual information about some projects’ compliance with project requirements. OPIC’s 2013 Annual Report on Development Impact, submitted to Congress, omitted data for 34 out of 315 SMQs because, according to the report, the data did not meet the agency’s data quality standards. Also, as previously discussed, we found several noncompliance issues in the site visit reports we reviewed, which clients had not identified or described in detail in the SMQs. During the 291 site visits conducted by OPIC in fiscal years 2008 through 2014, it identified 49 project sites with environmental and social noncompliance issues and 9 project sites with labor and human rights noncompliance issues. Of these, clients had reported noncompliance issues for only 18 projects in SMQs. Common issues identified by OPIC included late or missing required quarterly and annual reports, safety issues such as cluttered hallways, and missing documentation such as company human resource policies. However, more serious environmental and social risks were identified during a 2013 monitoring visit, where corrective actions for meeting environmental and social compliance requirements were needed that the client did not have sufficient resources to implement. As a result, OPIC terminated its support of the project.

A 2014 OPIC Office of Accountability Report stated that during the selection process, when the agency is considering whether to support a project that may have high development risks, OPIC should confirm that its staff capacity and other resources are sufficient for needed client engagement and monitoring. In addition, the report found that OPIC needs “monitoring systems…which are proportionate to the risks that could adversely affect the achievement of desired development outcomes.” In response to these findings, OPIC said it has taken steps to ensure that it has sufficient capacity and resources to review and monitor projects. Without analyzing the risk to information quality inherent in its project monitoring process, OPIC cannot be assured that risk from using client-reported data is within an appropriate risk tolerance to achieve OPIC’s monitoring objectives.

According to officials, OPIC, in some cases, also uses independent and client-provided reports to verify some projects’ compliance with policies. For example, according to OPIC officials, OPIC requires certain large projects to allow an independent engineer to conduct environmental compliance site visits on a quarterly or semi-annual basis. In addition, all Category A projects and those categorized as Special Consideration are required to undergo a third party audit within 3 years of becoming operational. Further, officials said OPIC includes a condition in some clients’ contracts that requires them to provide annual reports concerning, for example, pollutant level measurements and worker safety information (e.g., number of accidents). Officials stated that these reports provide additional information on policy compliance.

Although IFC, like OPIC, relies on client-reported data for some monitoring, unlike OPIC, IFC conducts site visits to all projects in its portfolio on a regular basis. IFC officials told us that using client-reported data for monitoring projects is a standard practice, but they underlined the difficulty in validating such data. According to IFC officials, its Environmental and Social team visits all projects once every 2 years. IFC also undertakes a limited number of post-completion evaluations to assess project impact. However, IFC employs a significantly larger staff than OPIC, including some in overseas field offices. For example, in 2012, IFC employed 3,763 people and managed a portfolio worth $45.8 billion, using about 17 times more human resources than OPIC to manage a portfolio that is about three times the size of OPIC’s.

Conclusions

Given the difficult business climates in which many OPIC-supported projects operate, it is important that OPIC establish and follow robust selection and monitoring policies to ensure that it appropriately addresses project risks and can continue financing higher risk projects. OPIC has established policies and processes for reviewing, selecting, and monitoring projects, and in our review of a sample of projects we found that OPIC generally followed these policies. However, we found that in some cases project selection policies for human rights reviews needed to be accompanied by clearer guidance to ensure that decision makers had adequate information. With respect to its review of human rights issues, OPIC has recently issued guidance to clarify review responsibilities within OPIC, developed enhanced human rights due diligence processes, and hired additional specialized staff. In addition, OPIC has recently sought to enhance its process for assessing cumulative environmental and social impacts by adopting new guidelines that may support more systematic analyses.

Project monitoring is central to OPIC fulfilling its goals, particularly in difficult environments. OPIC’s lack of requirements for timely documentation of site monitoring visits by OIP staff has resulted in site visit reports written several years after the visits occur. This can limit the usefulness of site visit findings for informing development impact projections and other decisions regarding ongoing and potential future projects. OPIC largely relies on client-reported data for annual updates for some projects, due in part to resource limitations that limit policy compliance site visits. This increases the potential that OPIC is relying on inaccurate or incomplete data. Thus, OPIC’s current monitoring processes may not provide adequate information on projects’ annual policy compliance and development impact status to support program goals.

Recommendations for Executive Action

To further improve OPIC’s monitoring processes, we recommend that the President and CEO of OPIC take the following actions:

Establish specific time frames, deadlines, or both for submission of site visit reports to OPIC’s Executive Committee.

Assess the current monitoring processes to ensure that the risk associated with the use of client-reported data and limited site visits for monitoring is acceptable for meeting OPIC’s program goals.

Agency Comments and Our Evaluation

We provided a draft of this report to OPIC, State, Treasury, USTR, and USAID for comment. State, Treasury, USTR, and USAID did not provide any comments. In its written comments, reproduced in appendix V, OPIC stated that it concurred with our two recommendations. With respect to our recommendation on ensuring timely completion of site visit reports, OPIC noted that its staff make presentations following site visits but that OPIC will incorporate our recommendation and the presentations into its monitoring policies. Regarding our recommendation on assessing its processes to ensure that current monitoring processes are acceptable for managing risks, OPIC stated that it has revised its development impact assessment process during the past year, and that it will use the input from this GAO audit in reviewing its monitoring process more generally over the coming year. In addition, OPIC provided technical comments on the draft report, and also provided us with additional information on how it conducts assessments of potential cumulative environmental and social impacts. Based on this information, we made revisions to the report as appropriate.

As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies to the appropriate congressional committees, the President and CEO of OPIC, the Secretary of State, the Secretary of the Treasury, the Administrator of USAID, the U.S. Trade Representative, and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-8612 or gianopoulosk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VI.

Appendix I: Objectives, Scope, and Methodology

This report examines (1) the amounts and types of Overseas Private Investment Corporation’s (OPIC) global financing support from fiscal year 2008 through fiscal year 2014, (2) how OPIC selects projects, and (3) how OPIC monitors projects.

To analyze the amounts and types of OPIC’s global financing support, we reviewed data provided by OPIC about its new commitments for fiscal years 2008 through 2014 to reflect recent activity. We used these data to characterize OPIC’s new commitments for the period by financial instrument type, sector, and region, among other characteristics, for both the total value of and number of commitments. In addition to analyzing information about OPIC’s overall new commitments for the period, we characterized and compared the projects committed during the fiscal year 2008 through 2014 period in four countries chosen for more in-depth analysis—Honduras, Kenya, Pakistan, and Peru. (For a description of our method for selecting these four countries, see below.) We also reviewed OPIC annual reports, developmental impact reports, and congressional budget justifications to obtain details about the agency’s outstanding commitments, as well as information about its strategic priorities and actions during the period of analysis. To verify the accuracy of the OPIC- provided data and to better understand the classifications and sources used in its compilation we interviewed OPIC officials to discuss the collection and maintenance of these data. We also performed electronic data testing. Based on these activities, we determined that the data were reliable for our purpose of using them to analyze OPIC’s new commitments for background and context, without impact on material findings in this report.

We also compiled data from World Bank sources to generate graphics and statements concerning OPIC commitment levels to countries based on the host countries’ gross national per capita income and the ease of doing business ranking. We used the World Bank’s per capita income data from the World Development Indicators database to categorize OPIC’s commitments in fiscal years 2008 through 2014 to low, middle, or high income countries based on the World Bank’s gross national income per capita for the project’s host country in the year the OPIC commitment was made. To verify the reliability of these data, we reviewed publicly available documents regarding their collection, computation, and use. We determined the data were sufficiently reliable for the purpose described above.

We also used the World Bank’s ease of doing business index rankings to determine the extent to which OPIC supported projects in countries with difficult business environments. This index is an annual ranking of the relative distance of countries from a best practices frontier score. The index is formed from observable components such as value added tax, gross domestic product deflators, and the number of procedures required to obtain permits or start a business. Because the index is a relative ranking, movements in the index must be interpreted in a relative context; we avoid interpretation errors by only using the index from a single year (2014). We also performed electronic data testing. We determined the data were sufficiently reliable for the purpose described above.

We selected a nongeneralizable sample of 21 projects that obtained OPIC financing support in four focus countries between fiscal years 2008 through 2014 to assess whether OPIC followed its policies and procedures for project selection and monitoring efforts. To select the four focus countries we limited ourselves to the 30 countries that are not members of the Organisation for Economic Co-operation and Development, whose total OPIC commitments were greater than $100 million. We further cut the list of countries to exclude two countries where either OPIC or the U.S. Agency for International Development (USAID) Inspector General had recently conducted audits. We cut an additional 14 countries from the list because they received a relatively small amount of OPIC funding or had a relatively high gross per capita income. Finally, we selected the four countries from the remaining list based on geographical dispersion, risk—including security risks, country governance and development indicators, and characteristics of the projects such as sector, development impact, and type of OPIC financial instrument. To select the 21 projects for our review, we considered several factors, including the project’s (1) size relative to the total OPIC commitments in the country, (2) sector, (3) type of financing instrument, (4) age of the commitment, and (5) whether any disbursements had been made. In addition, in order to assure broad coverage of each country’s committed projects, the team sought to achieve 40 percent coverage of both the number of projects in each selected country and the overall committed dollars.

To examine how OPIC selects projects for financing support, we met with officials from OPIC, Department of State (State), Department of the Treasury (Treasury), the Office of the U.S. Trade Representative (USTR), and USAID in Washington D.C.; the USAID Office of Inspector General, responsible for auditing OPIC; the former Director of OPIC’s Office of Accountability; and nongovernmental organizations, including Friends of the Earth and the Accountability Counsel. In addition we obtained and reviewed OPIC policy documents, such as the finance policies and procedures and policies guiding the U.S. economic and host-country development impact, environmental and social, human rights, and worker rights clearances processes. We interviewed OPIC staff to discuss how they administer OPIC selection policies and procedures, including internal controls. We also interviewed State, Treasury, USTR, and USAID officials to discuss each agency’s role on OPIC’s Board of Directors, which is required to approve projects that exceed $50 million.

For our review of OPIC’s project selection process, we developed a data collection instrument based on OPIC’s project selection policies and conducted a review of the 21 projects based on OPIC-provided project documentation, such as project applications and policy clearance documents. Based on the questions in the data collection instrument we developed a method for analyzing the data against OPIC policies to develop our findings. Specifically, with the use of the data collection instrument, we reviewed how each project met eligibility requirements, including U.S. connections and additionality requirements; verified that OPIC finalized the four policy clearances for each project and reviewed the clearances for content; and reviewed applicable credit due diligence and character risk due diligence documentation. We did not review the sufficiency of OPIC’s credit and legal due diligence processes while reviewing project documentation as this was outside the scope of our review.

We also visited two of the four focus countries, Honduras and Pakistan, to augment information we obtained from OPIC and other sources. In each country, we met with U.S. embassy and host-government officials, recipients of OPIC loans and loan guarantees, and officials from other development finance institutions. In addition, we visited some project sites.

To examine how OPIC monitors active projects’ compliance with environmental and social, worker rights, and human rights policies and the U.S. economic and host-country development impact of these projects, we met with OPIC’s Office of Investment Policy (OIP) to discuss its procedures for monitoring projects, collecting data, and validating data provided by its clients. As part of this review, we also discussed the procedures OPIC follows in case of missing or incomplete self-monitoring questionnaires (SMQs), which is the source for client-reported monitoring data. In addition, we met with OPIC officials to discuss OIP’s monitoring site visit policies and methodology for selecting projects for site visits. We also examined the development impact profiles that OPIC develops prior to approving projects, which aim to assess each project’s anticipated contribution to the development of the host country. We obtained OPICs development impact profile guidelines for scoring projects as developmental, highly developmental, or indeterminate. We interviewed the USAID Office of Inspector General and OPIC’s Office of Accountability to discuss OPIC monitoring methodology and reports both offices had issued on specific audits of OPIC projects in Turkey, Jordan, and Liberia. In addition we interviewed World Bank and International Finance Corporation officials about their monitoring procedures for similar activities, their indicators for assessing development outcomes, and the new harmonized indicators that several development finance institutions, including OPIC, are developing to standardize development impact information collection from clients.

We also developed a data collection instrument to review OPIC’s compliance and impact monitoring efforts for the selected 21 projects. We focused on the following monitoring related issues: the presence of SMQs in project files, date of submission, and completeness of responses, including client responses regarding compliance with OPIC covenants and local laws and regulations; the presence of site visit reports and trip notes in project files, and the extent to which corrective actions or risks were identified during the course of site visits; and pre-selection development impact scores that project development impact outcomes for OPIC projects, and the re-scoring analyses conducted during a site visit, which measure the extent to which these projections have been achieved.

We used the data collection instrument to analyze changes in development impact scores for OPIC projects from initial to final estimates following site visits, if any, as well as to classify qualitative findings from OPIC clients’ SMQs and site visit reports into broad categories. We did not review OPIC’s processes for monitoring projects’ financial performance.

The documentation we obtained for the 21 projects we reviewed supported our work for the second and third reporting objectives. These documents covered the topics and issues listed above, including OPIC’s project selection and monitoring processes. To ensure completeness of our document files, we met with OPIC officials to discuss documentation for selected case study projects and changes to OPIC’s requirements for project screening and monitoring documentation over time. When necessary we followed up with OPIC when the project files did not contain expected or required documents.

Appendix II: Overseas Private Investment Corporation (OPIC) Project Commitments in Selected Countries for Fiscal Years 2008 through 2014

To provide detailed information on all OPIC projects for our selected focus countries, the tables below list the commitments OPIC made in fiscal years 2008 through 2014 in Honduras, Kenya, Pakistan, and Peru. For more information about our country selection methodology, see appendix I.

Appendix III: Descriptions of Select Overseas Private Investment Corporation (OPIC) Commitments in Four Countries, Fiscal Years 2008 through 2014

Below are summaries for 21 OPIC projects from 4 selected countries— Honduras, Kenya, Pakistan, and Peru—based on information we obtained from OPIC, as well as from our fieldwork.

Honduras

1. Project: CCA2 Digicel Honduras Purpose/Description: Loan guarantee through OPIC’s Framework Guarantee Facility Agreement with Citibank to establish a cellular telecommunications network, with 990 cell tower sites and the capacity to service 1.4 million subscribers.

Fiscal Year of Commitment: 2009 Commitment Amount: $15 million Environmental Risk Category: B Expected Development Impact: Expand telecommunications infrastructure, create local jobs, and lower prices for cellular service, as well as support primary schools and mobile health clinics.

U.S. Connection: Citibank N.A.

Status: Not active. The borrower paid off the loan in 2011. 2. Project: Banco del Pais Purpose/Description: Loan and loan guarantee through OPIC’s Framework Guarantee Facility Agreement with Citibank to expand the facilities’ small and medium sized enterprises lending portfolio, primarily in the areas of commercial, retail, real estate, services, and manufacturing.

Fiscal Year of Commitment: 2013 Commitment Amount: $30 million Environmental Risk Category: C Expected Development Impact: Support the provision of loans to small and medium sized enterprises for overlooked sectors and support charitable activities in the host country including scholarships, clinics, orphanages, and schools.

U.S. Connection: Citibank N.A.

Sector: Financial services 3. Project: Inter-Mac International Inc.

Purpose/Description: Support development of affordable housing and an affordable lease purchase payment program for low-income families.

Fiscal Year of Commitment: 2008 Commitment Amount: $70 million Environmental Risk Category: B Expected Development Impact: Provide affordable housing to an underserved portion of the Honduran population by encouraging the development of planned communities.

U.S. Connection: Clark Enterprises, Inc. a U.S.-based realty company.

Status: Active. As of April 2015, the project had built housing units inhabited by 500 residents, as well as schools and playgrounds. Delays in a planned government subsidy program have limited credit availability, slowing progress. 4. Project: Groupo Jaremar Purpose/Description: Loan guarantee through OPIC’s South America Framework Facility Agreement with Citibank to refinance existing indebtedness and undertake capital expenditures related to expanding a palm oil plantation area, replacing boilers at two manufacturing facilities, and adding a bean processing production line along with other actions.

Fiscal Year of Commitment: 2010 Commitment Amount: $15 million Environmental Risk Category: B Expected Development Impact: Support the creation of local jobs with training and benefits, and the use of renewable fuels through the project company’s production of biogas and biodiesel. In addition, generate foreign exchange earnings through exports to countries in Central and North America.

U.S. Connection: Citibank N.A.

Sector: Manufacturing 5. Project: Groupo Jaremar Purpose/Description: Two loans under OPIC’s Global Framework Guarantee Facility Agreement with Citibank to expand the company’s existing operations in the country, including production of soap, oils, shortening, and margarine.

Fiscal Year of Commitment: 2014 Commitment Amount: $20.6 million Environmental Risk Category: B Expected Development Impact: Contribute to improved food security by increasing production and sale of a number of staple items.

U.S. Connection: Citibank N.A.

Kenya

6. Project: International School of Kenya Limited Purpose/Description: A campus expansion of the International School of Kenya, involving construction of a new elementary school, library, dining facility, faculty housing units, and infrastructure improvements.

Fiscal Year of Commitment: 2013 Commitment Amount: $12 million Environmental Risk Category: B Expected Development Impact: Support improvements in education infrastructure.

U.S. Connection: U.S. directors and governors of The International School of Kenya Limited and the International School of Kenya Foundation. 7. Project: Citibank Global Microfinance Framework Facility–K-Rep Bank Purpose/Description: Loan guarantee through OPIC’s Global Framework Guarantee Facility Agreement with Citibank to raise the visibility of the microfinance sector among mainstream investors and encourage the use of best practices and more sophisticated financing techniques in microfinance more widely.

Fiscal year of Commitment: 2008 Commitment Amount: $7.2 million Environmental Risk Category: C Expected Development Impact: Provide capital to microfinance institutions, benefitting income and quality of life for micro- entrepreneurs and their families.

U.S. Connection: Citibank N.A. 8. Project: Bridge International Academies Limited Purpose/Description: A loan for the development and operation of 237 low-cost private schools, expanding facilities at 133 Bridge International Academies schools already operating in the country.

Fiscal Year of Commitment: 2013 Commitment Amount: $10 million Environmental Risk Category: B Expected Development Impact: Expand low cost preprimary and primary education, utilizing new technologies and management techniques.

U.S. Connection: New Globe School Inc. 9. Project: Orpower 4 Geothermal Purpose/Description: A loan to add up to 52 megawatts of additional generating capacity to an existing geothermal facility, through the installation of additional turbine units.

Fiscal Year of Commitment: 2011 Commitment Amount: $310 million Environmental Risk Category: B Expected Development Impact: Bring new capacity for supplying electricity through the national grid and provide newly hired staff with specialized training.

U.S. Connection: Ormat Technologies Inc.

Pakistan

10. Project: Aga Khan Hospital and Medical College Foundation Purpose/Description: A loan to expand and renovate existing spaces at the Aga Khan medical health care facilities in Karachi by building an ambulatory care building, center for innovation in medical education, child care center, and a new private wing.

Fiscal Year of Commitment: 2012 Commitment Amount: $30 million Environmental Risk Category: B Expected Development Impact: Provide multiple health services under one roof, and bring free health care to poor patients by using the health service revenues from wealthier paying customers.

U.S. Connection: Aga Khan Foundation U.S.A. 11. Project: Dewan Energy Limited Purpose/Description: To operate a 50 megawatt wind power project in Pakistan’s Jhimpir wind corridor.

Fiscal Year of Commitment: 2013 Commitment Amount: $101.5 million Environmental Risk Category: B Expected Development Impact: Help alleviate an acute shortage of electricity in Pakistan and increase the diversification of power away from high-priced imported fuel oil.

U.S. Connection: General Electric International Inc.

Status: Active. The project was originally expected to be operational in 2015 but was delayed by a lengthy approval process with the government of Pakistan. The project’s requests to extend the period for government approval of tariff conditions were denied by the government, as were subsequent appeals. According to OPIC, the project sponsor must evaluate whether it wishes to move ahead and whether it wishes to pursue further financing with OPIC; if so, OPIC would need to underwrite the project again. 12. Project: Pakistan Mobil Communications Ltd.

Purpose/Description: Loan guarantee to Citibank under the Citibank Global Framework Agreement for its loan to Pakistan Mobil Communications Ltd., to maintain and expand telecommunications coverage in Pakistan and install 3G equipment at existing cell towers.

Fiscal Year of Commitment: 2012 Commitment Amount: $33.3 million Environmental Risk Category: B Expected Development Impact: Support an expansion of telecommunications networks, with benefits including employment, training, local procurement and human capacity building.

U.S. Connection: Citibank N.A. 13. Project: Tameer Microfinance Bank Purpose/Description: Loan to reimburse Citibank supporting Tameer’s loan portfolio growth plans and improving its asset liability. In addition, the loan is to extend Tameer’s microfinance lending to support people affected by flooding in 2010.

Fiscal Year of Commitment: 2011 Commitment Amount: $21.5 million Environmental Risk Category: C Expected Development Impact: Support extension of microfinance loans to clients in the country, with a specific program for those affected by 2010 floods.

U.S. Connection: Cooperative Housing Foundation 14. Project: Sapphire Wind Power Company Ltd.

Purpose/Description: Loan guarantee to finance a 50 megawatt wind power project in Pakistan’s Jhimpir wind corridor.

Commitment Fiscal Year: 2013 Commitment Amount: $95 million Environmental Risk Category: B Expected Development Impact: Expand renewable energy to the country’s national grid, supporting the government’s goal of diversifying power away from fuel oil, increase electricity supply, and bring advanced wind turbine equipment into the country.

U.S. Connection: General Electric Inc. 15. Project: TPL Properties, Ltd.

Purpose/Description: Loan to complete construction of an office tower building in Karachi.

Fiscal Year of Commitment: 2011 Commitment Amount: $20 million Environmental Risk Category: B Expected Development Impact: Introduce higher building standards and more sophisticated technology into Karachi’s real estate market and attract national and international businesses as tenants.

U.S. Connection: A private U.S. citizen Status: Active. According to OPIC, the borrower intends to prepay the loan and has applied for required approvals.

Peru

16. Project: Banco Financiero del Peru Purpose/Description: Loan guarantee through OPIC’s Global Framework Facilities Agreement with Wachovia Bank to expand small and medium enterprise lending throughout the country.

FY of Commitment: 2008 Commitment Amount: $10 million Environmental Risk Category: C Expected Development Impact: Expand lending to small and medium enterprises throughout the country.

U.S. Connection: Wachovia Bank 17. Project: Small Enterprise Assistance Fund SME Debt Facility LLC (Sunshine Exports)

Purpose/Description: Loan to help company finance working capital needs; complete the acquisition and lease repayment of recently added dehydration, freezing, and power equipment; and refinance the company’s existing short-term debt.

Fiscal Year of Commitment: 2010 Commitment Amount: $3 million Environmental Risk Category: B Expected Development Impact: Provide employment opportunities in rural, high poverty areas in the north of the country and introduce new production technologies to the local industry that will increase product lines and increase foreign exchange earnings through exports.

U.S. Connection: Small Enterprise Assistance Fund Status: Active 18. Project: Small Enterprise Assistance Fund SME Debt Facility LLC (Outsourcing Peru S.A.C.)

Purpose/Description: Loan to purchase the land and support the reconfiguration of space in an existing warehouse in Lima, including purchase of new racks, roofs, and office equipment. Proceeds will also be used to purchase a small fleet of trucks and special trailers to handle increased business volume.

Fiscal year of Commitment: 2010 Commitment Amount: $3 million Environment Risk Category: B Expected Development Impact: Provide warehouse and storage facilities for processing, distribution, and logistics services for freight and cargo.

U.S. Connection: Small Enterprise Assistance Fund 19. Project: Tacna Solar S.A.C. and Panamericana Solar S.A.C.

Purpose/Description: Loan guarantee to support Conduit Capital Partners’ investment to build two solar electricity generation plants in Peru. Electricity generated to be sold to Peru’s national grid and support diversification of electrical generation in a poor rural area of Peru.

Fiscal Year of Commitment: 2012 Commitment Amount: $185 million Environmental Risk Category: B Expected Development Impact: Improve local capacity by providing worker training and by expanding logistics services for local companies.

U.S. Connection: Conduit Capital Partners LLC 20. Project: GTS Majes S.A.C. and GTS Reparticion S.A.C.

Purpose/Description: Loan guarantee to support the development, construction and operation of two 20-megawatt solar power projects in the country.

Fiscal Year of Commitment: 2011 Commitment Amount: $123 million Environmental Risk Category: B Expected Development Impact: Expand capacity of the national grid through the generation of two new solar electric plants. In addition, expand employment and human capacity through the installation of advanced solar panel equipment in rural areas.

U.S. Connection: Assured Guaranty Municipal Corp. 21. Project: Gamma Knife Peru Purpose/Description: Operation of a Gamma Knife center at the Peruvian Air Force Hospital in Lima that will provide detection and treatment of tumors in military personnel and the general public.

Commitment Amount: $2.1 million Environmental Risk Category: B Expected Development Impact: Transfer technology by utilizing new medical technologies and offering new services in the host country, and promote private sector development through local procurement.

Appendix IV: Overseas Private Investment Corporation (OPIC) Development Impact Scoring

OPIC officials score projects using applicant-provided data, which include both quantitative information (e.g., expected number of jobs) and qualitative information (e.g., new technique introduced). OPIC currently characterizes projects’ development impact as indeterminate (1-24), developmental (25-59), and highly developmental (60-100). Table 9 illustrates the development impact scoring for a wind power project in Pakistan that was scored as highly developmental.

Appendix V: Comments from the Overseas Private Investment Corporation

Appendix VI: GAO Contact and Staff Acknowledgments

GAO Contact

Kimberly M. Gianopoulos, (202) 512-8612 or gianopoulosk@gao.gov.

Staff Acknowledgments

In addition to the contact named above, Celia Thomas (Assistant Director), Tom Zingale (Analyst-in-Charge), Amanda Bartine, Benjamin L. Sponholtz, John O’Trakoun, Seyda Wentworth, Jeff Isaacs, Maia Draper, Karen Deans, Brandon Hunt, Sushmita Srikanth, and Tina Cheng made key contributions to this report. Ashley Alley, David Dornisch, and Ernie Jackson provided technical assistance.