US development agency could loan billions for reshoring key supply chains, official says

DFC CEO Adam Boehler insisted that its development mission would keep its "foot on the gas" to accelerate projects in poor countries. PHOTO: REUTERS

WASHINGTON (REUTERS) - US government financing for projects to return critical supply chains to the United States as part of coronavirus response efforts could reach tens of billions of dollars and clients may include a US$12-billion (S$16.7 billion) Taiwanese semiconductor plant, the head of the agency managing the funds told Reuters.

The US International Development Finance Corp (DFC) is talking to companies about reshoring the manufacturing of personal protective equipment, generic drugs and pharmaceutical ingredients, DFC chief executive Adam Boehler said in an interview on Monday (June 22).

Mr Boehler said letters of understanding for some initial projects could be signed within the next month. The Trump administration has been pushing for US companies and importers to move manufacturing out of China.

The agency, launched in October to boost US overseas development financing efforts to counter China's massive Belt and Road infrastructure drive, was drafted into domestic service in May, after US President Donald Trump signed an executive order under the Defense Production Act.

DFC and the Defense Department on Monday agreed to jointly administer US$100 million in supply chain reshoring funds from the US$2.3 billion coronavirus legislation passed in March.

Company proposals to reshore are already pouring in, Mr Boehler said.

"The areas that have come on hot right away are on the PPE side and within the pharmaceutical value chains," Mr Boehler said, adding that there was interest in returning some generic drug production - almost all of which is imported - to the United States.

The US$100 million can be leveraged into "tens of billions of dollars" in loans by using it as a pool of capital similar to the US Treasury's backing of Federal Reserve loan facilities, MR Boehler said. At that scale, the agency could participate in the financing of Taiwan Semiconductor Manufacturing Co Ltd's planned new factory in Arizona.

The project is a centerpiece of the push to wrestle global technology supply chains back from China. TSMC, the world's largest contract chipmaker, is a major supplier to Apple, Qualcomm and other major US tech firms.

"We provide loan and investment financing, so could we be relevant there? Absolutely. We're talking tens of billions of dollars in potential here, so that's a possibility, I wouldn't exclude that," MR Boehler said.

A financing package for TSMC would likely include private capital from the state of Arizona and it is too soon to say whether the agency would be able to participate.

DFC was created from the former Overseas Private Investment Corp (OPIC) in October 29 and Congress more than doubled its overall lending capacity to US$60 billion.

MR Boehler insisted that DFC's development mission would not be affected by Trump's executive order and would keep its "foot on the gas" to accelerate projects in poor countries.

The 337-employee DFC - small for a federal agency - is adding about 15 new people to focus solely on the domestic reshoring projects, he said, and the funding for overseas development will be kept separate.

The agency approved USUS$1 billion worth of investments and loans at its June board meeting, including a US$200 million loan to Guatemala's Banco Industrial to expand lending to small and medium-size enterprises. MR Boehler said the bank's board in September will consider a larger slate of projects.

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