 We're going to have a keynote by my friend Elizabeth Littlefield, who is the President and CEO of OPIC, the Overseas Private Investment Corporation. And then we're going to have a response from Mr. Malcolm Brown, who is one of three deputy ministers with whose portfolio is development in the Department of Foreign Affairs, Trade and Development of the Canadian government. CSIS has been working for three years, or four years now, on the role of DFI's in development. We put out a report three years ago, a bipartisan report on strengthening U.S. development finance capabilities. OPIC is the development finance institution for the United States, but there are a number of additional instruments that some other government agencies have that support private investment in a variety of ways. I know that Canada and Australia are in the process of thinking about how to create development finance institutions, or at least there's a little bit of a sense, I think, that both governments are thinking about this. And so I think we'll hear a little bit more about that. And I know that the minister mentioned that this morning. So I think it would be really quite welcome to hear from Elizabeth Littlefield. She's been a friend to CSIS, and I think she's one of the most gifted public servants of the Obama administration, and I think has been a great leader for OPIC, and it's very well regarded here in Washington. She had a past life working at the equivalent of the Major League Baseball Commission for Microfinance and working as well as was a business leader at JPMorgan before that. So has been in the microfinance world, as well as been in actual real finance. So Elizabeth, without further ado, please come on up. Thanks for being here. Thank you. Thanks, Dan, for that very kind introduction, and also for your leadership on this topic. CSIS has really emerged as a leading voice on the role of the private sector and public-private partnerships to advance development objectives. So I'm just going to push this mic away. So I am a super passionate believer in the role of business as a force for good, and I think the world is waking up to that. So I wanted to say a few words about why that is, why I'm such a believer, what the trajectory of the DFI model has been, and then come to a few recommendations that I would have, and then I have actually been given to countries that are thinking of creating their own. The mistakes not to make that have been made by others such as ourselves. So first of all, when you sort of step back and look at what are the huge forces shaping the future of our world in the next decade or so, I see three big forces that are coming together in very powerful ways. One, resource scarcity, whether it be water or forestry or clean air or species, resource scarcity is going to be driving the conflicts, the wars, and a lot of the issues that we worry about in the next decade or so. Two is the growing middle class and the fact that they're consuming those resources at exponentially faster rates than they ever did in previous generations. And then the third coming in there is, of course, climate change. So these three forces, as you see, as they work together to exacerbate each other or to reduce each other, clearly they're not going to be solved, addressed or slowed without the private sector. And the private sector is not going to engage without the public sector. So there at the heart, you have, for me, the explanation as to why organizations like development finance institutions are critical because they are the bridge between private sector investment and development challenges. Because our mandate, all of us, all of the DFIs, is really to catalyze private investment flows in the service of development in the countries in which we operate. So the good news is that this has been happening. If you look at when OPIC, my organization, was carved out of USAID 40 odd years ago, at that time the financial resources flowing towards emerging markets from the U.S. was about 95 percent ODA and only about 5 percent FDI. Do I need to explain those to you? Overseas Development Assistance and Foreign Direct Investment. And now, of course, in the ensuing 40 years, that's completely flipped the other way around. And the vast majority of our engagement in emerging markets is foreign direct investment. In fact, FDI is seven times ODA and growing incredibly rapidly. In fact, just last year, the development finance institution model of doing development, the private sector led model, grew 10 times faster than the ODA model. So it's happening. Emerging markets countries are now attracting $1 trillion a year in FDI every single year. So it's exciting and it's happening and it's powerful. And the DFI model, of course, is growing in step with this increasing engagement of the private sector in development. In the excellent report that you did and authored, that CSS put together, was it last year or year before? You drew a circle around 18 of the development finance institutions. And of course, we're privileged to have Peter Wojcicki, former head of one of them, the IFC, the biggest. But of the 18 development finance institutions that you cited, they went from $10 billion in financing to $40 billion over the last decade. So the growth is tremendous. You look at CDC, who's grown at 260% since 2009. FMO is growing at 67%. And now FMO, the Dutch DFI, is bigger in terms of portfolio than Dutch ODA, which is a big number to start with. The Chinese added 550 staff to the China Development Bank just last year. And of course, we've all heard the announcement of the BRICs getting together and creating their own DFI to be capitalized with squillions of dollars. I don't even know what the number is, but it was big. So this model is working. Then you see other interesting things, such as the growth of the IFC, which has now grown so big and profitable that it's cross-subsidizing the World Bank. So one can start thinking about ecosystems wherein private sector capital flows and the financing of them can actually start cross-subsidizing foreign aid. And so that's something we can explore maybe later on in the discussion. Maybe just a quick word on how is OPIC, the overseas private investment corporation, stacking up against this growth happening elsewhere? Well, we too are growing very quickly, at least in terms of financial resources, but sadly not in terms of human resources. We run about an $18 billion portfolio now, which is about 80% loans in finance and about 20% political risk insurance. Last year we generated $426 million right back to the Treasury to cross-subsidize, actually some of the other development activities of the US government. We're working in about 106 countries and have put a real premium on low income countries, which are now about a third of our total. We've also put a real emphasis in the last few years on renewable resources and are very proud to have seen our portfolio in the renewable resource area, harkening back to what I said in the beginning, because we see resource scarcity as being so crucial. We've seen our portfolio there grow from actually 100 fold from the double digits in 2008 to $100 million in 2009 and $300 million. Now we do about $1 billion a year in renewable resources of the $4 billion that we do on average. So just an idea of the kind of projects that we're talking about that do bring together the private sector and development objectives. And maybe I'll just mention the Francophone ones, because I know that's of particular interest to this group. For example, in Haiti, we're working with a couple of Dominican brothers who are using rubble from the earthquake and turning it into building materials for low-income housing, green low-income housing. In Rwanda, we built the first ever solar, off-grid solar plant. Eventually we'll be grid-connected. We're in South Sudan, believe it or not, we're building a three-star hotel because that country is going to need to have some place for people to stay if they're ever going to invest, which of course won't happen until the conflict's over. And then we're doing some big utility-scale work, like solar in South Africa, like the biggest wind farm in Africa in Lake Turkana, as well as some of the biggest wind farms in Senegal and elsewhere. So those are the kind of projects. Now, so that's where we're coming from. What I wanted to say to this group in particular is over the last 40 years of experience in the development finance institution model, a lot of things have changed and we've learned a lot. And I think it's a seriously exciting opportunity for Canada to have a late-mover advantage and skip all of the steps. You guys were talking about cell phones and breakthroughs and leapfrogging earlier, but this is a great opportunity to really take stock of the lessons learned from other organizations because it's so much harder to fix something when it doesn't work than it is to get it right from the start. So, you know, markets have changed, the bricks have arrived, there's new scrutiny on all of us. Companies are waking up to the opportunities in emerging markets, so a lot of things have changed. So I wanted to just give four thoughts on the four things that if I were starting from a clean slate with the experience now of four years leading, I'll pick what I would do. Now, recognizing that every country has its own political reality and the political reality in this country can be more difficult than some, there's still four things I would absolutely consider and let me mention what they are if I may as we then fold into the conversation that we'll have right now. So first, I would definitely make sure it is run like a business. An independent board insists that it be self-sustaining, allow it to keep some of its own profits to pay for its operations in the ensuing years, allow it to pay its staff competitively with the private markets. You can't run an investment bank that's mandated to work in the most difficult markets in the world, only do deals that no one also do, has to make money every year and do that with civil servant salaries. Make sure it's managing both the asset and the liability side of the balance sheet rather than just the asset side. You need flexibility on both sides to both sell notes to whoever you want to as well as to extend credit. And then of course make sure it's developed, it's measuring its development impact. So for me, all that runs into a bucket of accountability, self-sustaining and being run like a business. The second thing which is controversial but I feel very strongly about it is do not overload it with unrelated mandates. No more tied aid. Do not confuse the export promotion agenda with the development agenda. They're two completely opposite missions and mandates with very different incentives built in. Don't carry out politically motivated lending. Don't let the politicians tell you where to lend with all due respect to the politicians in the room. Oops. But I think the most important thing is this separation of the export promotion agenda from the development agenda. You can't optimize the two objectives at once. In many cases, actually we're the only development finance institution that is required to work with companies of our country of origin. We need to have a US investor involved in every deal we do. But at the same time we're being asked to work in difficult markets and I see some of our colleagues here who work with us in those markets like Afghanistan and South Sudan and Iraq but you gotta find an American investor to a company that's by definition trying to do development with two hands tied behind your back. Most of the other DFI's encourage the engagement of their companies of their country of origin but don't require it. Third, I would definitely give it the tools that it needs to do the job. And here Dan and many others around town in the think tank community and academia have been hugely supportive of OPIC recognizing that we actually lack the tools we need to do the job we need to do. But those tools, of course, include equity, authority, it includes long-term debt, it can include insurance. In some cases, people recommend it, it includes the ability to do technical assistance. And then fourth, I would say it is crucially important that the development architecture of a country clearly distinguished between the non-commercial aid related business that doesn't have to make money because it's doing things that investment can't do and the commercially run, run it like a business, banking business, which is private sector driven. It's very important to have clear lanes and to stay in those lanes. Dan has recommended in a couple of, as have many others around town that OPIC be given the ability to make grants. I've actually come back and said, I'd rather not have the ability to do grants. I'd like to have a clear, bright line around our commercial activities but have preferred access to those grant resources that are available elsewhere in the US government. So those would be the things I would mention in terms of the four pieces of advice, run it like a business, don't overload it with unrelated mandates, give it the tools it needs and establish clear lines between the commercial and the aid business. And with that, I would just close by saying it's been an incredible privilege and one of the greatest excitements of my career to be have spent the last four years working with a terrific team of people who work under tremendous constraints but are doing a fabulous job at doing deals no one else will do in incredibly difficult markets and making money at the same time for the taxpayer. So it's been a great privilege and I thank you for inviting me here to talk about it. Thanks, Elizabeth. Thank you very much. Have a seat. Yes, yeah, yeah. Malcolm Brown, please come on up to the podium and I hope you'll provide a response or you could do it, you can do it from there, either way, however you'd like to do it. I'll do it from here. So, we're gonna begin. I have these carefully prepared remarks that can start with me being ad-libbing and all that kind of stuff. And there's some people in the room, I think, who've helped contribute to them and I'm gonna kind of ignore them. And we'll let the record show that I read them and all that sort of stuff. Because I think it'll be a more interesting conversation. A couple of things. One, and this is actually what's reflected in these remarks is the role of the private sector. I think that's the, from a development perspective, that's the big sea change. And that's why I think we're interested generally in events like this and it, you know, I'm new to this business started in May, but one of the things that struck me early on is the general consensus that if you look at, you know, Africa as a case in point, well, it's not a straight line or anything like that. And you look at the last 10 or 20 years compared to the previous 60, that the, it's a different way of saying what Elizabeth said, but you control for, you look at sources of economic growth and the role of official development assistance pales in comparison to the role of private sector investment. We have issues around distribution of rents or income and all that kind of thing, but everyone in the business I'm struck by, and I spent a lot of time in the last four or five months talking to people because I'm in a sponge mode. And across the full spectrum, there's a real acknowledgement about the actual, the absolute essential role that the private sector needs to play. So that's one thing and it also is a priority of the government and all that kind of thing. So, you know, Robert, anybody asks, I read the speaking words. But more interestingly, I think the conversation around DFI is a, and Canada's approach to that is an example of the kinds of conversations that are taking place. We can, I mean, a nice way of putting it is the advantage of being a late mover. In other circles, it's we're late to the party. And some have said, why bother? Everybody else's got one, does Canada need one? You can partner. There's no, most DFI's will partner with almost anybody. There are, some of them have varying constraints as Elizabeth's described, but it's a pretty open field. So there has been a conversation led by some about in Canada, why bother? That's a minority view, I'd say. This is a very timely conversation and I have to be careful because of our cabinet process. There are deliberations that are going on that I have to be careful I don't go too far or successors to Mr. Brody here will have a conversation with me. So I have to tread carefully around some conversations, but I can, I think, talk about some of the issues that are at play and still, we can still have I think a good exchange. I think one of the, starting off, Elizabeth's four areas, it's almost like you've been in our conversations in terms of the kinds of issues. There are a few others that we've been focused on, but I think in terms of the questions around, run it like a business and assuring that it's actually got a market focus, recognizing, you described it as swim lanes, Elizabeth, the space that a DFI occupies. We've done a lot around tables with the private sector in Canada and it's interesting that for many people, it occupies a very big space, everything from trade promotion as in trade commercial officers would be part of this through to high level finance that is the traditional space of pension funds. And so it's really important to be really clear about, I think, mandate and that's got to be a very clear conversation. I think you can land in different places on it. I don't think there's a one size fits all and the government will come to its conclusions on, but I think there's no dispute. Whatever you pick, you need to be very clear about where you're trying to fit. I do think DFI's, it's a one across the spectrum, it's quite a narrow spot, but it's very deep in terms of the potential. I mean, everyone knows the infrastructure potential in Africa, for example, trillion plus dollars hydro, you can go down the list. So it's a huge potential there, but blurring of mandates in terms of where concessional grants, which is what I'm responsible for, and the gray zone of potentially concessional financing, which is different, lower than the rates of return that pension funds would be looking for, there's a zone there and I think it will be the subject of lots of conversation. Partnerships will be very clear, I think this is about finding ways, there's a view about a gap in the sort of capital stream in terms of risk and who can tolerate risk and there's a particular gap that DFI's can fill and one of our views is what's the most effective way to fill that gap for developing countries, but also for the private sector in Canada to take advantage of that, I think it would be perfect, need to be perfectly clear on that point. I think one of the bigger, there are two issues that I think we're also, that I've been interested in talking about and exploring, one is, Elizabeth said early on by citing the growth of FDI and DFI's generally and that kind of thing, the model's working. I actually think the jury's out on that. I think we have evidence that the market is moving in that direction, but we've seen market failures before and I think we need to demonstrate the role that DFI's can play in actually advancing both a private sector agenda, but also a development agenda and there'll be some of you these are mutually exclusive, I actually don't think they are, but I think we have to do a better job of, when I was doing my parish visits this summer, I was at the World Bank talking to people, IFC and that kind of thing and I sort of said, so tell me about the results and so there are individual projects, but in terms of actually drawing, I'm a social scientist I guess by training and the kind of the level of the ability to attribute is really important in terms of coming to conclusions to often social scientists forget that bit. I think that's true in the private sector in the capital markets in terms of saying DFI's are this great solution. There's no question things are going on, but I think we have to do a better job of articulating that so that is one place where I might quibble a bit. The other question and it's one around which I've heard differing views and do not, people's position depends on where they're sitting, it's the question of crowding out and there are those in the development finance world who view frankly the role of the World Bank and other organizations as essentially skimming the cream and not leaving much left over for anyone else and approaching their zone where they're prepared to tolerate higher risk but rates of return are such that they're being pushed out. Clearly IFC, anybody else in the zone I think recognizes it's an issue but I think there's a dispute on this point and I think just in our own conversations in Canada we're gonna have to have a point of view about this question and how to address crowding out because you are using public money to play in a zone that's more traditionally because Canada's not been involved more traditionally been the however well or badly the purview of the private sector and that's a really important conversation and you've got to bring evidence to that discussion. The final thing and I think this is actually gonna be a tough one, I was gonna make a crack about your point about remuneration. I think that's actually gonna be in Canada a challenge and we'll have to figure that out. We've managed it with our export development bank and that kind of thing so I think we can manage that. People are gonna do this not because they're gonna wanna make a ton of money. Many of whom will have already been successful in the private sector and are coming over to this conversation as a second career and so I think we can manage that without getting drawn into a really ugly conversation around salary levels, we see it too often and I think it ends up being a distraction. So by way of just starting a conversation I'll stop there and we can go from it. Elizabeth why don't I give you a chance to respond because I think those are some very interesting points that Malcolm's put on the table and he's certainly, he's going there to use the idiomatic expression in terms of some of the hotter topics on this in the world of VFIs. I'm gonna also use my privilege as the chair and I'm gonna just put on notice if Harold Rosen is here who was at ISE for a long time and I'm gonna wanna hear from him as well in terms of his views about this conversation and I think I'm not sure if Peter's still here but he just left, he's coming back in a little bit but I wanted to make sure that put Harold on notice that I'm gonna be calling on him. Okay sorry Elizabeth go ahead. Thank you for those comments and certainly that's how we, on the pay issue that's how we handle it too. People work there because they believe in what they're doing and they're not financially constrained but it's definitely, it's a challenge and most people are there as a second career too. But I wanted to touch on two big areas that you focused on. One is the whole notion of what is it concessional or not and the other is the whole question about are we being catalytic or are we crowding out and I guess that's best wrapped in the word additionality. So on the concessionality I think. I just want to explain what is additionality for those. Okay I'll do that when I come to that. So on the question is it concessional or not? I think the key thing is to figure out what are the unique and complementary risks and appetites and capabilities that we have versus the other financing parties. So for example we find sometimes that even though we lack an equity authority we can do really long tenors and we can do very large size. So in our partnerships with other entities they bring the equity we do the long tenors and the thing works. But I think this notion of concessional versus non-concessional can manifest itself in not just price. So it's tenor where we'll do 25 years but nobody else will do 25 years where we'll take risks that by definition nobody else will take. Some of which we've come to regret. And patience. One of the ways I think the patience of a DFI at least in our case has manifested itself is in a very interesting comparison of two numbers. Our NPLs, our non-performing loans are actually pretty high sort of six, seven percent but the write-offs are consistently less than one percent like less than a half or one percent. So the gap between those two means a lot of work and a lot of patience to make sure that deals that struggle or trip or fall get back up on their feet and end up working out. That's the kind of work that a bank wouldn't do. So I think there's some interesting ways of measuring that additionality. The second thing I want to mention on this question of are we catalytic to a private sector investment or are we crowding it out? And the word additionality of course means are we actually doing work that is additional to what would happen without our existence? And I think on that it's very interesting. The OPIC zone experience is kind of interesting. You know, political risk insurance used to be 80, 90 percent of what we did. And what we found in the last 20 years is it shrunk a lot and we're left only with the riskiest places on the earth because the private market, OPIC having invented the product, the private market is now doing it. So we're squeezed back appropriately to the places that no private insurer would ever go, which I think is exactly how it should be. And now PRI is only say 10 percent of what we do and we're having to invent interesting twists and turns of what political risk insurance means. You know, for example, we're providing insurance to cover the changes in feed-in tariffs for renewable energy developers, for example, or other things that I won't go into. In India, the Indian banks weren't touching the solar industry, solar power industry because they didn't believe in the sustainability of the subsidies. So we went in there with very long-term financing even though it wasn't a perfect regulatory environment and now the Indian banks are coming along so we're no longer doing it in solar industry. So I think you can do that. A lot of people often talk about measuring the leverage that you're getting from the private sector as an indicator of how effective you are at catalyzing private sector capital. I would just highlight on that. It's a very dangerous number to use because what we find is the easier the deal, the bigger number you can get in terms of leverage. So deals in geothermal in Mexico, yeah, I can do $1 of open money for seven of the private market, but I'm telling you that hotel in Juba, I'm not getting $5 of private money for everyone. We're getting much lower leverage. I've heard it's lovely in October. Yeah, exactly. So those are the two things I would just nuance a little bit about the whole question of the DFI's role and whether it's concession or not and the question of what's our added value. Okay, Harold, I'm gonna give them a microphone to Harold Rosenherald was at IFC for 25 years and he spun off something called the Grassroots Business Fund which blends investment capital and technical assistance. And so I know you have views about the roles of DFI's and so you might just comment a little bit about what you've heard, but also if you would just spend a minute commenting on if you were starting a Greenfield's DFI in a country like Canada or Australia, what would you do? I see Elizabeth snickering up there. I'll try to be- I'm snickering nervously when you take the microphone as what it is. May not be the only one in the room, but no, first of all, thank you actually. Two of my largest funders in my current setup are there on the stage. Some of us say if a meteor were to hit the stage I would be out of business. So really, we have a dual structure which has a non-profit that builds capacity and social impact in the businesses into which the for-profit fund invests. Canada is our biggest funder in the non-profit. Elizabeth's organization is the biggest funder or investor in our fund. So while of course there's creaking and groaning in this blending world, these are about the class acts of the development field and I've been around it long enough that I don't drop such compliments easily. We are still a pretty scary organization breaking lots of traditional molds and these two organizations, the Canadian government and OPIC really have stepped out front and held their breath and joined up with GBF so that deserves a lot of credit. I always say everyone's dollars or euros are the same color but let's say the ethos of the people and the organizations behind them are different so that's a long-winded thank you to both of you. When we say creaking and groaning I've been a student and observer of this for a long time that they're trying to blend different sorts of capital. We all focus on just the funding side. So of course putting debt, mezzanine and first loss equity into a capital stack like we have is already creaking and groaning and then you combine that with grant-funded capacity building which is where Canada is helping us. That's a lot of things to get right and the combination of that takes a lot of patience outside of the microfinance world which Elizabeth and I know well. There's I would say precious few examples of well-functioning sidecar facilities. So Desjardins, OPIC, sorry Action Procredit dozens of them in microfinance but to put capacity building and capital stack blending into agriculture for the poor in Africa for instance I don't want to say unheard of but there aren't too many others doing that and really the Canadians being willing to experiment with first loss in the capital stack for instance or use their capacity building money be used flexibly that in my view is far more important than how much money and just what kind it's a model. We have 30 angel investors who are thrilled to death. I haven't even told them which one but when I mentioned the G7 countries in the process of setting up some new money and as Elizabeth said learning from all the lessons of experience these are some pretty accomplished business people are thrilled at the idea that well they're already in partnership with it and maybe through things like us or there was another transaction with Elizabeth where the Canadians were involved. That's a thrill for the private sector to say someone who can cut through the morass and hasn't been at it for 50 years in this area that's exciting. The private sector I'd emphasize also there's room for them to invest in capital funds like ours. There's also a ton of opportunities to co-invest. I think the ways in which we combine with the private sector they can also be investors in the DFIs and some of us have been around long enough that we remember cases like CDC in the UK which privatize that's one model is to bring in private capital. Those of us who like agriculture and I guess we can say it within this room I go back long enough that I remember when if you wanted to do an agricultural estate and PNG and have someone who could both manage it invest into it and put a little capacity building and that was CDC. That's been long gone and a lot of us feel that that was in a case of bringing private capital into a DFI let's say and not really thinking through what did they want the thing to do. Some would say a little bit like that on the funds business there's been some privatizing on that side. My point to the Canadians that Dan asked me a pretty open question is what would I do if I were starting from scratch just to challenge my friend Elizabeth a little bit how separate and how independent and commercial would somebody want that DFI to be? I think we have lots of cases in the world where it sounds good but let's say the organization can often take on a head of its own and I have seen a number of cases of that screeching and groaning actually happening when the shareholder governments let's say try to pull the organization back to what it's about. This is perhaps what Malcolm was referring to far more diplomatically than I would. I would just say my experience if you were saying how long was the Canadian government going to look at if it sets up a proper DFI maybe two, three years just to get the organization up and running probably another two or three years making sure it'll do sort of what you want it to do and then maybe making adjustments. I always go back to look at the different challenge funds takes two months, you hire a consulting firm you say this is exactly what we want it to do you be a world leader in whatever field you want it to be and you can learn enough, meet people, set up your DFI whenever you want but to start I've seen so many cases where people set up DFIs and they say couldn't we have just done challenge funds or I mean I got my money from Canada and I'll wrap this up I have two and a half million dollars we got that from the G20 SME challenge and this is not a criticism but I wouldn't have even known which door to walk in at any large donor agency to get that except we got lucky there was a contest and even with all my connections it's a little bit of a lesson if you set up a DFM you're gonna be putting large wholesale blocks of money into an intermediate organization and trying through government governance to let's say affect it in the direction you'd like so that's a little bit too absolutist but I would just throw that out as a bit of being a provocateur and thank you all very much though both of you have done a great job you can send the check for the advertising to 1616 Rhode Island but thank you, no Harold, thank you I really am a big believer in what Harold is doing at the grassroots business fund so I think thank you for that question and those comments do you wanna just respond a little bit to that do I give you a chance to respond both of you to just what Harold had to say because I think he was being provocative constructively so yeah no I think those are excellent points I mean I think when I speak about the independence I'm trying to be independent from government priorities and foreign policy of being telling it what to do and directed lending and that kind of thing but I think you can also be independent with people that are committed to the development mission pretty readily too, right? Harold you've it's a second time in two weeks I've seen you because I was at the W the WEF function you did with Minister Parity and the margins of UNGA so I've heard more from you on this issue on DFIs generally and so I do think this question it's not I think the question is how you do it there are always a series of trade-offs I think if I were this isn't Chatham House rule but if I were I better stop, I'm advising the government I am advising the government but I think the questions are you can design an organization that's independent and check that box and design it really badly and it will go rogue on you some of that is who you have lead it choices about people matter you can also do the model you described in terms of using challenge funds and that sort of thing to get some things done right away I think personally and this is a personal view if you're gonna do the DFI you're doing it for a generation you're not doing it for the next four or five years because to actually I think your timeline that you described I think is pretty accurate you're gonna take time to get it right and you're not gonna pour a truckload of money in at the front end that gives you some flexibility in terms of the kinds of things you'll do because the nature of the market you'll be participating in in terms of your capitalization path is gonna dictate the kinds of probably not gonna start with a billion dollars so but I do think a lot of care a lot of thought has to go in at the very beginning you gotta make some choices and how you structure the deal like any deal how you're structured up front is absolutely essential and you've got a sort of poke and prod and to be frank there is I think a balance while I'm a public servant I actually do sort of subscribe to the guys in the corner office the political level does actually get to provide direction that's the way our system operates we have been very lucky I would say in the development sphere there's been some noise which is frankly a distraction but the actual fundamentals of development in Canada have been remarkably free of the kind of unconstructive politics and full of actually very thoughtful political leadership and one of the reasons why we're having conversations about DFI is because of political leadership so I think there's a balance there it's not you know all politics is bad and or it's all good but it goes to how you structure it from the beginning and you've got a poke and prod and and test it you gotta look at examples of what's worked and not work and then design the model that works best for your own domestic circumstance which is one of the things Elizabeth said at the beginning so maybe I just come in on the money part because I do think you have to start big enough to matter when we were created back in 1961 we were, OPIC was established with about four billion dollars from the government in capital and because Richard Nixon felt that the private sector needed its own investment banking kind of thing to support the private sector's role in in development and it was quite prescient as it turns out and we were able to generate enough income because of that size that we were able to present to Ronald Reagan a huge check paying back all that capital which we were able to pay back from their avenues we'd earned and then for the last 36 years straight we've been earning money every year consistently so I think on the money front I think you have to start big enough to matter is all I would say and then you create a business model such as the one we have now which is every dollar you put in in terms of operating expenses it's taking off eight that somebody else can spend so the first thing I'd say the second thing is in terms of how profitable the model is it's going to depend not only on some of the risk appetites that Harold mentioned earlier which are incredibly important but what we've found is it's actually less about the risks that we take because we're able to get paid back by being the US government by working hard by being patient by visiting the client whatever the key is the instruments by fellow development finance institution heads in the community that we operate in because we meet regularly say they could never in a million years break even without the equity instrument they're making all their money on the private equity portfolio and yet we're struggling because we're having to break even every year with the debt instrument which is tricky so I think the tools matter more than the risk appetite when it comes to the financial sustainability of the model I just want to take advantage of your presence here just to I'll play devil's advocate and just push a couple more I want to come back to this criticism of is OPIC or IFC crowding out large money-sitter banks when you hear that what's your response to that that's the first the criticism that's sort of out there in the system and it's been alluded to in this conversation the second is you'll hear this from some of my colleagues and other think tanks they'll say well OPIC is somehow rewarding bad policies by providing capital I have a different view but I at least want to hear what you have to say about those if you could just speak to those two because I'm sure they're going to come up whether we're in whether we're in Canberra whether we're in Ottawa these are going to be questions that are going to come up so on the crowding out question we require every one of our transactions the sponsor to represent that financing was not available in the private markets now it's true the financing may be available but it's too short term to make sense because they're building an infrastructure project and the local markets will only provide two or three year financing or it may be there may be a myriad of other reasons why the financing is not available but we do require that they represent that the second piece that is actually with the private markets we're because of our absurdly small size we have almost as many countries that were responsible for covering as we do staff which is kind of a crazy place to be we work very closely with those very banks so for example we have a two billion dollar relationship with city group with Wells Fargo with a number of other organizations where in there originating deals through their network but risk that they can't possibly underwrite themselves so they're providing the origination and then we're wrapping it with a guarantee but we require them to have some skin in the game so they'll take 25% of the risk and we'll take 75% so I think it's partnership and again I would harken back to what I said earlier partnership between a number of financial institutions each of whom brings whatever their unique appetites and abilities are to the table whether it be equity coming to support a debt deal whether it be long-term tenors supporting a long-term financing need whether it be origination capabilities in local offices supporting an organization that has a greater risk appetite but no local presence so that's what I would say around that question you know the second question I've heard this I've heard this from a couple of folks on the hill the question of whether or not by investing in a market that is difficult where the risks are high and the policies aren't right is effectively moral hazard and I thought it was an interesting question I thought provoking one but the experience that we've had is that by having in this case often an American investor coming into a market you're automatically introducing just by by modeling higher labor standards higher environmental standards you know higher job training and as well as an engagement on the policy and regulatory framework that's required to make that business succeed so we find more often than not we're actually having a positive effect with our sponsors and our partners on the local environment let me just push a little bit further we had a conversation with the head of strategy for the African Development Bank and he asked us to convene a number of companies because he's interested in trying to get more American companies to go to Africa I would think Canada is also particularly interested in this especially in the francophone part of Africa could you talk a little bit about how OPIC works in Africa and how sort of these issues play out in terms of both issues such as standards as well as perceptions of risk as well as in terms of are you crowding out if you could just kind of just take this conversation and put it take those lenses and put it on the African continent for a minute and just reflect on that so we'd love to hear your views on this as well Malcolm so we made Africa a major priority for us because we want to be focusing on lower and lower income countries in a part to address exactly what you're talking about you know going to markets where there is no banking there's no financial flows at all and we're very proud that Africa is now almost this year for the first time ever will be a full third of our portfolio and that's up from single digits only you know a decade or so ago so we've seen a huge growth in our business in Africa that is reflective of the effort we've made on the continent but is also reflective of demand because we do follow demand and what we've seen in actually in market after market when we combine our resources with for example under Power Africa the president's initiative for doubling the access of Africans to power we've seen that a partnership between AID and ourselves is actually been very effective because they have the ability to provide technical assistance to do things like help us work with the country to make a power purchase agreement long enough to be you know financeable and then we come in with financing or providing TA or expenses to cover legal fees so these have been very effective partnerships under the Power Africa work Jody we're very excited to see our portfolio now you know in the seven, eight hundred million every year Is it the largest part of your portfolio now in Africa? It's the largest part of our portfolio Okay well that's different than say ten years ago Yes it was only eight or nine percent ten years ago I'm not going to give you the last word because then we're going to wrap it up Sure I mean the short answer to your question is yes the longer answer is we're spending a lot of time the government is spending a lot of time actually thinking about improving the presence of the Canadian private sector throughout Africa we've just had two weeks ago three weeks ago a Canada Africa business conference in Toronto where very senior leaders from all over Africa and senior business leaders came together to have a two or three days worth of conversation about how to access those markets I think we there are a few sectors mining as an obvious one extractives as an obvious one where I think we are relatively well represented but hydroelectric you can go down the list financial services there are all sorts of sectors where we think we are coming nowhere close to meeting the potential and part of the reason we've amalgamated the department we used to be I used to would have been the president of CEDA 18 months ago one of the reasons we amalgamated the department was actually to lever a better link between trade and development and it reflects his perspective about the role the private sector can play to the benefit of both host and not donor but sending countries in the context of the private sector so there is a whole bunch of ambition and we are nowhere near close to meeting that great okay Elizabeth thanks for being here I really appreciate it Malcolm Brown thank you for being here I think this was an absolutely fascinating discussion we definitely went there in terms of talking about some of the hotter button issues that I think are complex complicated as you think about setting up a DFI and the challenges and opportunities for DFI's but I really appreciate you both being here and we're going to make a set change so people can stay in their chairs we're going to go now to the final panel and we're going to hear from the minister as well so please join me in thanking Elizabeth Littlefield and Malcolm Brown thank you