[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
             WHAT HAS OPIC DONE FOR SMALL BUSINESS LATELY?

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
                       TAX, FINANCE, AND EXPORTS

                                 of the

                      COMMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                      WASHINGTON, DC, MAY 18, 1999

                               __________

                           Serial No. 106-13

                               __________

         Printed for the use of the Committee on Small Business


                                


                      U.S. GOVERNMENT PRINTING OFFICE
 59-744                      WASHINGTON : 1999
------------------------------------------------------------------------------
                   For sale by the U.S. Government Printing Office
 Superintendent of Documents, Congressional Sales Office, Washington, DC 20402



                      COMMITTEE ON SMALL BUSINESS

                  JAMES M. TALENT, Missouri, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
DONALD A. MANZULLO, Illinois             California
ROSCOE G. BARTLETT, Maryland         DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey        CAROLYN McCARTHY, New York
SUE W. KELLY, New York               BILL PASCRELL, New Jersey
STEVEN J. CHABOT, Ohio               RUBEN HINOJOSA, Texas
PHIL ENGLISH, Pennsylvania           DONNA M. CHRISTIAN-CHRISTENSEN, 
DAVID M. McINTOSH, Indiana               Virgin Islands
RICK HILL, Montana                   ROBERT A. BRADY, Pennsylvania
JOSEPH R. PITTS, Pennsylvania        TOM UDALL, New Mexico
MICHAEL P. FORBES, New York          DENNIS MOORE, Kansas
JOHN E. SWEENEY, New York            STEPHANIE TUBBS JONES, Ohio
PATRICK J. TOOMEY, Pennsylvania      CHARLES A. GONZALEZ, Texas
JIM DeMINT, South Carolina           DAVID D. PHELPS, Illinois
EDWARD PEASE, Indiana                GRACE F. NAPOLITANO, California
JOHN THUNE, South Dakota             BRIAN BAIRD, Washington
MARY BONO, California                JANICE SCHAKOWSKY, Illinois
                     Harry Katrichis, Chief Counsel
                  Michael Day, Minority Staff Director
                                 ------                                

               Subcommittee on Tax, Finance, and Exports

                 DONALD A. MANZULLO, Illinois, Chairman
STEVEN J. CHABOT, Ohio               CAROLYN McCARTHY, New York
PHIL ENGLISH, Pennsylvania           RUBEN HINOJOSA, Texas
PATRICK J. TOOMEY, Pennsylvania      CHARLES A. GONZALEZ, Texas
                                     GRACE F. NAPOLITANO, California
           Philip Eskeland, Senior Professional Staff Member



                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 18, 1999.....................................     1

                               WITNESSES

Munoz, George, Overseas Private Investment Corporation (OPIC)....     2
Dauffenbach, Jane, Aquarius Systems..............................     5
Rajadhyaksha, Vikram V., DLZ Corporation.........................     8
Silverman, William, The First Republic Corporation of America....    10
Herbert, William J., Johnson March Systems, Inc..................    12
Bowe, Peter A., Ellicott International...........................    13

                                APPENDIX

Opening statements:
    Manzullo, Hon. Donald A......................................    27
    McCarthy, Hon. Carolyn.......................................    28
Prepared statements:
    Munoz, George................................................    29
    Dauffenbach, Jane............................................    42
    Rajadhyaksha, Vikram V.......................................    51
    Silverman, William...........................................    54
    Herbert, William J...........................................    56
    Bowe, Peter A................................................    58
Additional material:
    Overseas Private Investment Corporation 1998 Annual Report...    63
    Post-hearing questions submitted to The Honorable George 
      Munoz, President and CEO, OPIC, by Subcommittee Chairman 
      Donald A. Manzullo.........................................   104
    Answers of The Honorable George Munoz, President and CEO, 
      OPIC, to post-hearing questions submitted by Subcommittee 
      Chairman Donald A. Manzullo................................   106
    Letter to Subcommittee Chairman Donald A. Manzullo from J.H. 
      Wertheim, President, Tea Importers, Inc....................   127
    Legislative Text of H.R. 1993, The Export Enhancement Act of 
      1999.......................................................   129



             WHAT HAS OPIC DONE FOR SMALL BUSINESS LATELY?

                              ----------                              


                         TUESDAY, MAY 18, 1999

                  House of Representatives,
         Subcommittee on Tax, Finance, and Exports,
                               Committee on Small Business,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 3:03 p.m., in 
room 311, Cannon House Office Building, Hon. Donald A. Manzullo 
(Chairman of the Subcommittee) presiding.
    Chairman Manzullo. The Subcommittee will come to order. 
Today, the Subcommittee will open its trade agenda by examining 
the Overseas Private Investment Corporation or OPIC. OPIC is 
not an oil cartel, but it is a small specialized agency with a 
narrow focused mission helping to protect U.S. foreign 
investment abroad that contributes to job growth in this 
country. Over the years, OPIC has been unfairly attacked as an 
agency that helps only large Fortune 500 companies. We are here 
today to specifically examine that charge and to learn more of 
the efforts of OPIC to reach out to more small businesses.
    Just a few years ago, only 10 percent of small businesses 
exported. Now, about 25 percent of small businesses have 
entered the export arena. The next step in their growth is 
developing more of an overseas presence. OPIC can play a 
crucial role in protecting foreign investments of small 
business exporters from political risk.
    Unlike larger companies, small business exporters cannot 
pack up their bags and relocate operations overseas to take 
advantage of foreign equivalents to OPIC. There are 36 nations 
that have programs similar to OPIC. Just like OPIC, most of 
these nations have local content requirements. If forced to, 
large U.S. multinational corporations can pick and choose from 
various foreign government export credit insurance programs. 
But the work and the jobs, then, are transferred overseas. 
Small business exporters do not have this luxury. OPIC is 
needed to maintain the competitive edge of these small business 
exporters in the United States. OPIC does all this at no cost 
to the taxpayer. That is good news in light of the vote that is 
coming up in about 2 hours today.
    Last year, OPIC brought in a net of $139 million for the 
U.S. Treasury from insurance premiums and fees charged to 
exporting companies for their services. Next year, OPIC 
projects to bring in $204 million. I wish more U.S. Government 
agencies could copy OPIC's example. This Thursday, I plan to 
introduce the Export Enhancement Act of 1999 along with my good 
friends, Mr. Menendez of New Jersey, and the Chairman and 
Ranking Minority Member of the International Relations 
Committee, Mr. Gilman, and Mr. Gejdenson. This legislation 
would reauthorize OPIC for 4 years.
    After listening to the witnesses here today, I invite all 
of my colleagues on the Subcommittee to consider cosponsoring 
this bipartisan legislation.
    The votes don't start in the House until 6:00 this evening 
so we are hoping that we may be joined by other Members as they 
find their way back to Washington.
    Our first witness is George Munoz who served as president 
and CEO of OPIC since the summer of 1997. Prior to taking that 
position, he was chief financial officer of the U.S. Treasury 
Department from 1993 to 1997. Most of his career has been in 
international law and business as a partner in the law firm of 
Mayer, Brown and Platt in Chicago, and was a principal with 
former senator Adlai Stevenson in an investment banking firm 
focused on international transactions. He also headed his own 
law firm concentrating in corporate and international business. 
He holds several college degrees, including a J.D. and a 
master's in public policy, a master of law and taxation, and a 
business degree from the University of Texas in Austin. In 
addition, he is a CPA.
    We are not only pleased, George, but we are blessed that 
you have taken a leave of absence from the private sector to 
lend your expertise to Overseas Private Investment Corporation. 
It is with pleasure that we ask you to be our first witness 
today.
    [Mr. Manzullo's statement may be found in the appendix.]

  STATEMENT OF THE HONORABLE GEORGE MUNOZ, PRESIDENT AND CEO, 
    OVERSEAS PRIVATE INVESTMENT CORPORATION, WASHINGTON, DC

    Mr. Munoz. Thank you, Mr. Chairman.
    Thank you very much for allowing me to come and testify 
today. I would like to applaud your leadership and the work of 
this whole Subcommittee, especially as it focuses on small 
business. I am especially pleased to see a stellar group of 
small businesses represented here, Mr. Chairman, that are 
cutting the path into the international arena that all 
businesses are leading into.
    OPIC, as you know, Mr. Chairman, was established 28 years 
ago by President Richard Nixon and Congress to mobilize 
American private capital and to support the growth of 
developing countries and economies that are in transition to 
democracies and free markets. In today's global economy, OPIC's 
mission is more important than ever. OPIC is an investment in 
helping America compete, supporting development and stability 
in strategic regions around the world, and encouraging 
government that operates at no net cost to the American 
taxpayer.
    To continue OPIC's work, Mr. Chairman, we are very pleased 
that you as well as other leaders of this Congress are 
introducing the Export Enhancement Act of 1999, which we 
certainly hope will receive broad bipartisan support.
    A key to the growth of our economy is because of small 
business. The commitment of this Subcommittee to small business 
is one I strongly share. When I became president of the 
Overseas Private Investment Corporation, I said that helping 
small business would be one of my top priorities. I made this 
pledge for one simple reason: the growth of the U.S. economy 
and the growth of individual businesses are increasingly linked 
to their ability to expand overseas in emerging markets. Our 
competitive strength is directly connected to our ability to 
compete in the global marketplace.
    I also made this commitment because I share your concern 
that America's small businesses must not be left behind in this 
globalization process. Although small businesses are the 
backbone of the American economy, the overseas investment 
potential for this small business sector remains relatively 
untapped.
    According to the 1998 National Export Strategy Report, for 
example, less than 13 percent of small- and medium-sized 
manufacturers are active exporters, and even fewer make 
profitable investments overseas. The report cited the lack of 
access to financing and the lack of information as the two 
principal reasons for this gap.
    I am pleased to report to you today that OPIC is not just 
talking about small businesses, but we are acting to ensure 
that small businesses have the information and the resources 
they need to compete. We are building on OPIC's excellent track 
record in promoting U.S. interests, creating American jobs, and 
operating on a self-sustaining basis at no net cost to the 
taxpayer.
    How can we help small businesses? First, our political risk 
insurance offers three types of coverages for overseas 
investment:
    Inconvertibility insurance, for example, covers the 
inability to convert local currency into U.S. dollars and 
assures the transfer of currency out of a host country.
    Our expropriation insurance covers the uncompensated taking 
of insured investments by a foreign government.
    And our political violence insurance covers damages to 
physical assets as well as lost income due to interruption of 
operations.
    For a small business looking to invest overseas, political 
risk insurance helps to ease the uncertainty of this challenge; 
or it may be a critical step in the process of securing project 
financing. OPIC also offers financing through direct loans for 
small businesses.
    I am pleased to let you know that we have declared 1999 the 
``Year Of Small Business'' at OPIC. This designation will help 
us focus OPIC's attention on building on our solid record of 
helping small businesses. This determination to help small 
businesses is reflected throughout OPIC.
    Let me highlight some of the ways OPIC has changed to meet 
the needs of small business. We have reduced our loan size from 
$2 million to $250,000 to better address the needs of small 
businesses and created a new loan structure that is more user 
friendly. OPIC's Contractors' and Exporters' Insurance Program 
is available for small businesses acting as contractors in 
international construction, sales, or service contracts.
    Our Contractor's Finance Program provides an OPIC guarantee 
for bid bonds, performance bonds and other guarantees issued by 
U.S. financial institutions on behalf of U.S. contractors.
    We streamline the application process for small businesses 
and reduce red tape. For example, our insurance application 
went from 20 pages down to 5 pages for small businesses.
    We are increasing the number of our small business 
insurance customers by launching a small business incentive 
program to encourage insurance brokers to bring small 
businesses to OPIC.
    We have refocused our educational efforts to increase 
OPIC's outreach activities. Last year, approximately 30 percent 
of OPIC-assisted projects were with small businesses, and we 
are working hard to increase this percentage.
    We have created a small business advocacy team which is 
composed of knowledgeable OPIC staff--some of whom are here 
with me today, Mr. Chairman. This team will help small 
businesses to take advantage of OPIC products and services.
    We have also established a hotline that offers a direct 
telephone number for small- and medium-sized enterprises 
interested in obtaining more information about OPIC's special 
services.
    Furthermore, OPIC's award-winning Internet web site 
contains a user-friendly small business page that is accessible 
to small businesses throughout the country.
    We have also created new educational materials targeted to 
small businesses. Some of this material has been provided to 
you, Mr. Chairman, and to the rest of the Committee.
    In addition, we are working with State and local officials, 
because they provide a key link to small businesses interested 
in overseas investment. We have held small business meetings 
and seminars in 11 states.
    OPIC is also working with other trade agencies, small 
business organizations, and State and local trade commerce 
officials to ensure that small businesses are aware of the 
products and services that are available at OPIC. I would like 
to add Mr. Chairman, that this week I will be visiting the 
district of one of your Subcommittee colleagues, Mrs. 
Napolitano, to promote our activities in the small business 
area.
    Finding the financial and personnel resources to make an 
overseas investment on their own is a challenge for many small 
businesses, but many can benefit from investment by larger U.S. 
firms supported by OPIC. For example, larger companies often 
turn to U.S. small businesses for products and services to 
support an overseas project.
    We are very impressed, Mr. Chairman, that you have found it 
important to invite to this panel one such supplier to one of 
our projects. An important component of OPIC's small businesses 
outreach program is to identify the small business suppliers 
which are contributing to OPIC-assisted projects throughout the 
world. This outreach provides suppliers with an opportunity to 
learn more about their contribution to OPIC projects and to 
utilize this opportunity to provide information about OPIC 
products.
    Doing business in today's global economy can be challenging 
for small businesses. But done right, taking advantage of 
promising opportunities in international trade and investment 
offers tremendous opportunities for growth.
    OPIC is ready, willing, and able to help America's small 
businesses.
    Thank you, Mr. Chairman, for helping us get that word out 
through this hearing. I would be happy to answer any questions 
after the conclusion of the panel.
    [Mr. Munoz' statement may be found in the appendix.]
    Chairman Manzullo. Thank you, Mr. Munoz.
    We are joined by Congresswoman Napolitano and Congressman 
Toomey.
    Do you have an opening statement or any opening remarks you 
wanted to make?
     Ms. Napolitano. Thank you.
    Just that I am very happy that OPIC is joining us in the 
trade conference. This is our fifth trade conference, and 
certainly, we want California to have the benefit of OPIC's 
financial assistance in the risk insurance. I intend to do my 
best to help put the information to small business that OPIC 
exists.
    Chairman Manzullo. Mr. Toomey.
    Mr. Toomey. Thank you, Mr. Chairman.
    I just had a question on just reading through some of the 
narrative introduction.
    Chairman Manzullo. Just for opening statements.
    Mr. Toomey. Oh, okay. I have no opening statement.
    Chairman Manzullo. That is okay.
    Our next witness is Jane Marie Dauffenbach. She is 
president of Aquarius Systems in North Prairie, Wisconsin. This 
company has been involved in designing and manufacturing of 
surface water management equipment including aquatic plant 
harvesters, vegetation cutters, floating excavators, et cetera. 
You have to excuse me.
    I have glasses with four different types of lenses and I 
still can't read. Just forgive me. Once I get the right 
alignment here, I will be fine. She is responsible for 
directing operations, planning, and general management of 
corporation and, particularly, the aquarius division with the 
completion of a new plant last year that provided a top quality 
facility to manufacture some new special equipment.
    And we welcome you here to Washington. Please proceed.

  STATEMENT OF JANE DAUFFENBACH, PRESIDENT, AQUARIUS SYSTEMS, 
                       NORTH PRAIRIE, WI

    Ms. Dauffenbach. Mr. Chairman and Members of the Committee, 
thank you for inviting me to appear before you today.
    I understand that there are larger issues to be considered, 
but I am going to speak to you from a personal perspective on 
OPIC's success with a small exporting company.
    As you said, for 35 years our company has designed, 
manufactured, and sold aquatic plant management equipment used 
for weed control in lakes, rivers, ports, harbors and even 
oceans where kelp is harvested as a commercial crop. Weed 
control is necessary to make an infested water body usable for 
transportation and recreation. Excessive weed growth also 
negatively impacts fisheries and the natural balance of the 
waterway.
    The water management equipment line includes, as you 
mentioned, aquatic plant harvesters and shredding boats that 
chop up dense overgrown areas. We also have machines that pick 
up floating trash and garbage, and a floating excavator. 
Although our primary business is to manufacture and sell 
equipment, we have occasionally taken on contract service 
projects.
    Last July we were awarded a World Bank contract which is a 
turnkey project in Kenyan Lake Victoria. We are to supply the 
equipment, personnel, and management to chop 3,700 acres of the 
exotic weed called water hyacinth. The weed floats around in 
giant masses and closes off entire harbors for weeks, months, 
or years at a time. Its presence has severely impacted the 
fishing that the locals depend on for food and employment. 
Because it is an exotic weed, it is also impacting the natural 
environment of the lake.
    There is no question that exporting is important to our 
business. Between 15 and 45 percent of our annual sales in any 
given year might be for exports. And this could be in Europe, 
Asia, Latin America, the Middle East, or Africa. We go wherever 
our equipment is needed.
    We have dealt with some difficult issues that have impeded 
our ability to export. This includes financial assistance that 
was provided to our foreign competitors by their own 
governments. This assistance wasn't equal to programs like 
export financing or OPIC political risk insurance but far 
exceeded these trading tools.
    For example, when competing for business a few years ago in 
the Middle East, the Dutch government ruined one deal by 
providing free equipment to the customer that was copied from 
us and built by a Dutch company. More recently, in the Far 
East, we were out-competed on a large equipment sale when the 
Canadian government supplied a free harvesting machine as a 
gift to the king, which was built by a Canadian competitor.
    Our company is in no position to give away free equipment 
in the hopes of getting an order. Yet not only are our foreign 
competitors well supported in their export efforts, they are 
being fully subsidized by their governments.
    Another example occurred within the last 12 months on our 
Kenya project. Negotiations had been moving slowly and with a 
lot of frustrations on both sides. In the meantime, an Asian 
government came and viewed the lake and offered equipment and 
financing for the whole program. And there have been overtures 
from other foreign governments. Situations like this are not 
uncommon, and occur almost annually. Simply put, Aquarius 
Systems is not competing with foreign companies; we are 
competing with foreign governments.
    It is difficult out there, and especially before we found 
out about the commercial services offered by the Department of 
Commerce, the International Trade Administration and the 
products and services from OPIC and the Ex-Im Bank. It was only 
about 2 years ago that we became aware of the activities of 
these agencies and started using them in our efforts to promote 
our export sales.
    Up until then, the way we used to do things was 
reactionary. A representative from another country would come 
to us with a potential job. Now with the tools provided by OPIC 
and the Ex-Im Bank, the International Trade Administration, et 
cetera, we are in a better position to go out and initiate 
business than ever before. And we are always trying to think of 
new ways to use these programs.
    We learned about OPIC during a visit to the Department of 
Commerce in Washington. We were already aware of the Export-
Import Bank, but we did not know that OPIC had insurance and 
financing products available until then. We came to discuss an 
Asian project that did not come to fruition. But a year later 
when the Kenyan tender came out, we immediately contacted OPIC 
to inquire about their political risk insurance so that we 
could budget the premium into our quotation.
    We would never have considered trying for this business in 
Africa without the participation of OPIC. American banks in 
general are conservative but even more so in the Midwest. When 
we told our bankers we won the Kenyan bid, they were very 
pleased; but they were also very uncomfortable about the idea 
of our sending equipment over to an African country for 12 
months or longer. It was certainly not a typical transaction 
for us or our bank. Although they were unfamiliar with OPIC at 
first, once they understood the political risk coverages we 
intended to purchase, they proceeded to finance our needs.
    Another factor with using OPIC on this transaction is that 
we had the security that our government is behind us. This is 
going to be very helpful should a dispute arise. It also will 
help us to maintain proper transparency and give us some muscle 
to push through the bureaucratic impediments that might arise. 
We are sure if an issue comes up in the next 12 months, our 
position is going to be taken more seriously now that it is 
known that our government is watching and ready to assist.
    OPIC is an excellent example of a government initiative 
that works well. It provides real value to clients and is a 
fiscally responsible entity that returns income to the 
Treasury. It also is a bit of a secret to many exporters. I 
would suggest more promotional efforts going forward, not only 
to small- and medium-size businesses, but to the small- and 
medium-size banks who service these exporters.
    Every day we are down there working in the trenches trying 
to make good business around the world. We don't ask for much, 
but we need a level playing field. If companies like ours are 
given half a chance, we will continue to successfully 
manufacture and export our American-built equipment.
    It is imperative that the financing and insurance programs 
from OPIC exist so that we have the necessary tools available 
to accomplish this. I am sure I speak for most exporters when I 
say we will gladly continue to pay the premiums and interest 
for these financial products and services.
    In conclusion, some of the benefits to Aquarius Systems 
from working with OPIC include:
    One, the political-risk protection so we can get the 
financing for our contract.
    Two, the perception from our client that the U.S. 
Government is behind us.
    Three, a more level playing field to compete.
    Fourth, while we aren't supplying free equipment and money 
like some other countries have offered, we have secured the 
chance to perform and prove to the customer the best decision 
was made.
    And if all goes well, we expect to increase our export 
sales in all tropical countries from the positive exposure that 
the single contract will bring to us.
    Thank you.
    Chairman Manzullo. Thank you. I am going to, unless there 
is any objection from members of the panel, make all of the 
statements a part of the record, including these photographs.
    Ms. Dauffenbach. Okay.
    Chairman Manzullo. When you are talking about weeds, you 
are talking about weeds. That is on top of a body of water; 
isn't it?
    Ms. Dauffenbach. It is amazing. That is the Florida 
Everglades. We were testing that machine there last week, and I 
do have some Kenyan pictures I can give you that will really 
stun you.
    Chairman Manzullo. We can get to that in the question and 
answer period shortly. Thank you.
    [Ms. Dauffenbach's statement may be found in the appendix.]
    Chairman Manzullo. Our next witness is V.V. Raj--I am going 
to call you Raj, if that is okay.
    Mr. Rajadhyaksha. That is good enough.
    Chairman Manzullo. That is going to have to be good enough.
    Chairman and CEO of Dodson-Lindblom International out of 
Columbus, Ohio. Raj received his bachelor's degree in civil 
engineering from the Indian Institute of Technology in Bombay 
in 1967. He came to the United States on a scholarship from the 
University of Cincinnati where he received his master's degree 
in civil engineering.
    He is a registered professional engineer in several states. 
He began his career with G.K. Jewell and Associates, the 
geotechnical engineering consulting firm, and has been involved 
in all types of projects in various areas of the world.
    Under his direction Dodson-Lindblom grew with the 
acquisition of Mason-de Verteuil Geotechnical Services in 
January of 1984, and now is chairman and CEO. He is currently 
involved in buying small hydroelectric power projects in India 
with the governments of various provinces within India itself.
    It is with pleasure that we welcome you here to Washington. 
When the red light goes on, that is the point where we would 
like you to wind up your testimony.
    Raj, thank you for coming here.

 STATEMENT OF VIKRAM V. RAJADHYAKSHA, CHAIRMAN, DLZ, COLUMBUS, 
                               OH

    Mr. Rajadhyaksha. Mr. Chairman, thank you for giving me the 
opportunity and Members of the Subcommittee.
    My name is Vikram V. Rajadhyaksha better known as Raj, and 
I am the chairman of the DLZ based in Columbus, which is the 
parent of Dodson-Lindblom.
    I am an immigrant from India. I arrived in this country 
with a scholarship while getting a master's degree in civil 
engineering at the University of Cincinnati in 1967. I have 
lived--I became a U.S. citizen in 1972. I have lived in this 
country for the past 32 years and have been chairman and chief 
executive officer of DLZ or its subsidiary company, Dodson-
Lindblom Associates for the past 20 years.
    I bought Dodson-Lindblom Associates in 1979 when it had 
five employees. I currently employ 670 in the States of Ohio, 
Michigan, and Indiana. My businesses are a product of one of 
your congressional programs, the Small Business 
Administration's Section 8(a) Program. I was admitted to the 
Small Business Administration's Section 8(a) Program in 1980 
and graduated from the program in 1984. But that small stint 
laid the groundwork for what is now the DLZ corporation. So 
thank you very much.
    Five years ago, I started looking into international 
ventures and very quickly concluded that simply providing the 
type of consulting engineering and architectural services that 
we provide in the United States would get us nowhere in the 
international market. Thereafter, I decided to enter into the 
Indian market as a developer of hydroelectric energy projects. 
At this point in time, the Indian government had opened the 
market for private firms to develop hydroprojects.
    Since entering the field, it was obvious to me that the 
hydroelectric business was a very capital-intensive business, 
and I would have to raise a substantial amount of funds both in 
the form of equity in the project and in the form of debt. 
After much research, it quickly became apparent that the 
Overseas Private Investment Corporation was the only agency 
that was active in the financing of energy projects, and more 
importantly, they seemed to have at least a small portion of 
the debt in every energy project that was done by a U.S. 
developer everywhere in the world.
    It did not take much analysis to understand the reason for 
this simple fact, energy projects are obviously long-term 
investments in areas of the world that are politically 
unstable, and OPIC being present in these projects provides the 
good faith and the facilities of the U.S. Government on every 
project. This not only provides a great deal of comfort to 
other leaders on the project but also to the equity providers.
    Having done this homework, we approached OPIC concerning 
our work in India. Ms. Ruth Harkin was president of OPIC at the 
time, and low and behold, she advised me that there was some 
grant money available for businesses such as ours as seed money 
for our India venture. Subsequently, we were granted a $100,000 
grant by OPIC through their EPA grants program to get started 
on our India venture.
    Just recently, on May 6, after completing all the 
formalities required, we closed on our OPIC loan of $5 million 
for our first hydroelectric project in India. The project, 
known as the Bhandardara hydroelectric Power Project, is 
located about 150 kilometers north and east of Bombay at the 
toe of an irrigation dam that produces power when water is 
released for irrigation purposes.
    The total project is $13.3 million, out of which OPIC is 
lending $5 million. The Indian Renewable Energy Development 
Agency is lending another $5 million and the City of Detroit 
Policemen and Firemen Retirement System is providing $3.3 
million in equity funding.
    The project will generate 47 million units of power 
annually. This will serve about--this will be adequate to serve 
a city of about 10,000 in India.
    OPIC will also provide risk insurance that will protect the 
equity funding and this is provided by Detroit Policemen and 
Firemen Retirement System. I can assure the Subcommittee that 
this venture would not have occurred without OPIC's 
participation in the project.
    We have been awarded 22 small hydroelectric projects that 
we expect to be working concurrently. While it has been obvious 
to us that this project would not have happened without OPIC 
being a participant in it, this does not mean that working with 
OPIC has been easy. My experience with OPIC has taught me that 
OPIC's mindset is focused on large energy developers, such as 
Enron, and working with large international contractors such as 
Bechtel.
    I have found their tolerance level is low for working with 
small businesses such as ours. Oneof the biggest problems I 
have had in working with OPIC has been the amount of legal 
documentation that is required for our project financing. To give you 
some idea, a $10 million debt financing has cost us over $1 million in 
legal fees, not counting our internal corporate counsel's time and 
effort.
    Here are a few suggestions I would like to make to this 
Subcommittee so that OPIC and small businesses can work 
together:
    One, OPIC should advise the small business of what 
documents are required for them to be able to make the loan and 
also be aware ahead of time how long it will take to put these 
documents together and most importantly the cost involved.
    OPIC should have more grant money that can be made 
available to small businessmen to investigate international 
projects.
    In conclusion, I can assure you, as a small businessman who 
has come through the Small Business Administration's 8(a) 
Program, that OPIC is a very needed agency that it is not 
corporate welfare. And it is one that provides the good faith 
and the credit of the U.S. Government in international projects 
done by Americans.
    Without such backing of the U.S. Government, no projects 
would be occurring; and certainly not the project in which I am 
involved. I would suggest that OPIC and the SBA, two great 
organizations in my mind, work together so that the small 
businessman is given every opportunity to succeed and project 
financing is made readily available.
    Thank you.
    Chairman Manzullo. Thank you very much.
    [Mr. Rajadhyaksha's statement may be found in the 
appendix.]
    Chairman Manzullo. Our next witness is William Silverman 
who is director of the First Republic Corporation and a member 
of the law firm of Otterbourg, Steindler, Houston & Rosen P.C. 
in New York City.
    Mr. Silverman comes from New York and was admitted to the 
bar in 1966. He went to Brown University and New York 
University Law School. He is a member of the U.S. Office of 
Personnel Management Panel for Interviewing Candidates for 
Federal Administrative Law Judges; a member of the Panel of the 
American Arbitration Association; and a member of the 
Association of the Bar of the City Of New York, Committee on 
Bankruptcy and Corporate Reorganization.
    It is with pleasure that we welcome you to Washington this 
afternoon, Mr. Silverman. Please.

 STATEMENT OF WILLIAM M. SILVERMAN, FIRST REPUBLIC CORPORATION 
                    OF AMERICA, NEW YORK, NY

    Mr. Silverman. Thank you, Mr. Chairman. It is a pleasure to 
be before this Subcommittee on such a beautiful day.
    I hope the sun isn't glinting too much off the top of my 
head and affecting the vision of the Members of the Committee.
    Chairman Manzullo. We can close the curtains if----
    Mr. Silverman. It is affecting you then.
    Chairman Manzullo. But you really are quite splendid with 
that sunshine. That is very encouraging for us.
    Mr. Silverman. Many are called, but few are chosen, Mr. 
Chairman.
    I wanted to thank you and the Members of the Committee for 
the opportunity to evaluate the very significant benefits of 
OPIC for small business. I think, frankly, OPIC is a success 
story. And it is a story that is part of the really greatness 
of our system, the free enterprise system. And the fact that a 
small business or series of small businesses can come in and 
speak to this Subcommittee says a great deal about our process, 
and I know that we are all thankful for that.
    The First Republic Corporation of America has a 5.6 million 
loan from the Overseas Private Investment Corporation. We knew 
of OPIC's overseas work on behalf of U.S. business, and we 
contacted OPIC because First Republic is a public company with 
real estate, textile and seafood interests.
    Our seafood interest, which we have spoken to OPIC about, 
involve clamming in the Great South Bay in Long Island where we 
have 13,000 acres of land under cultivation, and we ship clams 
all over the United States. If you have clams on Fisherman's 
Wharf, they probably come at, least some of them, from our 
clamming grounds in the Great South Bay.
    We also have a very large scallop farming and production 
business in the State of Florida, in southern Florida. And we 
have a business that grows and distributes shrimp. And that 
business is primarily based in Ecuador where we have 
approximately 1,250 acres of land under cultivation.
    Ecuador basically has three cash crops. They have 
petroleum, bananas, and seafood and the runoff of pesticides 
and herbicides from the banana growers impacted the shrimp 
growers. It impacted our shrimp farm, and the shrimp became ill 
and developed something called Taura Syndrome which is now all 
over Latin America. It is in Texas and it really is a worldwide 
problem and, in part, it is caused by pollution.
    What our system did was find a response to the pollution by 
enclosing our shrimp farm in a way that is environmentally 
friendly. And, actually to the extent that we put anything back 
into the environment, it is cleaner and purer than when it went 
into the system.
    OPIC has been our partner in developing and perfecting the 
system. They have given us the benefits of access to government 
and nongovernmental aquaculture agencies in Ecuador, in 
Thailand, and in other Third World nations. We found our 
reception at OPI--although we are a small company, they treated 
us, frankly, as if we were a Fortune 500 company.
    We had a tremendous success in helping our colleagues in 
Ecuador understand our system. OPIC opened the doors for us. It 
helped us--OPIC helped us make the system work more efficiently 
and introduced us to expertise that, frankly, was of tremendous 
benefit to us. We found the people that we worked with at OPIC 
courteous, professional, and a treat to deal with.
    Jim Polan and Elena Gonzalez were particularly good to work 
with. We found them to be extremely efficient, and I think 
without OPIC, we would not have the success that we do. We are 
in the process now of exporting this technology which is 
environmental technology to the Third World, to Thailand, to 
Ecuador, and we hope to be able to do that with our colleagues 
from OPIC.
    And again, thank you for the opportunity of speaking with 
you.
    Chairman Manzullo. Thank you.
    [Mr. Silverman's statement may be found in the appendix.]
    Chairman Manzullo. Our next witness is Bill Herbert, who is 
a sales manager with Johnson March Systems, Inc., out of 
Warminster, Pennsylvania, and we want to thank you for coming 
this afternoon and welcome you to Washington, Bill.

    STATEMENT OF BILL HERBERT, SALES MANAGER, JOHNSON MARCH 
                 SYSTEMS, INC., WARMINSTER, PA

    Mr. Herbert. Mr. Chairman, Committee Members, thank you 
very much for the opportunity to appear before you.
    My role today is a little bit different than some of the 
other attendees in the sense that whereas Johnson March does 
not have a direct contract or direct assistance from OPIC, we 
are a contractor and a supplier to many companies that do enjoy 
the benefits of your programs and that are able to secure 
contracts as a result of your efforts.
    Just very briefly, our company is approximately 50 
employees. Our annual sales are approximately $12 million. All 
of our facilities, manufacturing plant and office, are located 
in Bucks County, Pennsylvania. It is a suburb of Philadelphia.
    Our company designs and manufactures custom engineered 
products for electric power plants and petrochemical plants. 
The products are utilized for water treatment and chemical 
process dosing and for air pollution control. In the late 
1970s, Johnson March concentrated its selling efforts in the 
domestic market, building a customer base and reputation with 
clients and the engineering firms that design their plants.
    In the early 1990s, the domestic market for Johnson March 
products began to change very significantly as a result of 
lower increase in demand for electrical power and the fact that 
we have not built a new refinery in the United States in 20 
years. So prospects for growth in our particular products in 
the domestic market were not very bright. But the opportunity 
for our products overseas was growing very rapidly due to the 
large demand for electric power and for the consequential 
demand for petroleum products.
    Within a matter of 6 to 7 years, the percentage of our 
sales to the international market went from 20 percent up to 
about 75 to 80 percent last year. And during this time period, 
Johnson March has shipped millions of dollars worth of products 
overseas every year.
    A major factor in the transition from the domestic market 
to the international market was the success of U.S. plant 
developers, U.S. engineering firms, and U.S. contractors in 
securing international projects.
    The success of the U.S. firms is directly related to the 
support provided by OPIC and Ex-Im Bank agencies. Contracts won 
by U.S. companies provide a direct benefit for small companies 
like Johnson March.
    As a systems manufacturer, we in turn purchase millions of 
dollars worth of U.S. manufactured products that are the 
subcomponents of our systems. These include computers, 
electronic analyzers, structural steel, valves, piping, pumps, 
et cetera. When U.S. companies secure large international 
contracts through the support of OPIC, the benefits are 
realized by many small companies that otherwise would not be 
able to survive and grow.
    Johnson March has had experiences with foreign companies 
where they wanted to buy our products and our design and 
technology. But they could not do so because that project was 
financed by the governments of their country, and they were 
contractually obligated to buy from suppliers in their country. 
U.S. companies benefit when the U.S. Government supports U.S. 
company efforts.
    There is no doubt that without the success of OPIC 
supporting U.S. developers, engineering firms, and contractors, 
Johnson March would have fewer employees; and this would also 
be true for our suppliers. All indications are that the 
electric power generation and the refinery petrochemical 
markets outside of the U.S. will grow at substantially higher 
rates than the U.S. markets for many years to come.
    Developing countries require increased electrical 
generation capacity and, as they develop, these countries 
increase their demand for oil, gas, coal, and hydrocarbon-based 
products. U.S. manufacturers are respected worldwide for their 
superior technology, their high efficiency, and their 
competitive pricing.
    The international market is there ready for participation 
by small business, but most small companies rely upon U.S. 
developers as a key to the market. OPIC and Ex-Im Bank support 
is vital to the success of U.S. companies and the huge number 
of small firms that are dependent upon them.
    Johnson March completely supports the efforts of OPIC and 
hopes that those involved in OPIC's reauthorization realize how 
very important it is for the strength of the economy, the U.S. 
balance of payments and American jobs.
    Thank you again for your time and continued support. I will 
be pleased to answer questions if you have some. Thank you.
    Chairman Manzullo. We appreciate your statement.
    [Mr. Herbert's statement may be found in the appendix.]
    Chairman Manzullo. At the same time, we are joined by 
Congressman Phil English from the State of Pennsylvania.
    Our next witness is Peter Bowe, president of Ellicott 
International out of Baltimore, speaking on behalf of Small 
Business Exporters Association. Peter.

STATEMENT OF PETER A. BOWE, PRESIDENT, ELLICOTT INTERNATIONAL, 
   BALTIMORE, MD, ON BEHALF OF THE SMALL BUSINESS EXPORTERS 
                          ASSOCIATION

    Mr. Bowe. Thank you, Mr. Chairman.
    I have submitted some written remarks which are slightly 
different from my oral comments in terms of what I am going to 
emphasize. I am also speaking on behalf of my company, Ellicott 
Machine directly.
    Ellicott International has exported dredging equipment for 
over a hundred years to dozens of countries worldwide for 
ports, harbors, mining and everywhere that marine construction 
is involved. Over half of our business every year is exported.
    The Small Business Exporters Association represents a wide 
segment of American exporters. We believe that exports are 
essential to our economy, essential to the jobs of millions of 
American workers, and a prerequisite to a healthy economic 
growth rate.
    We stand together in support of OPIC. At least one quarter 
of our net job growth over the last 6 years can be directly 
attributed to exports. At Ellicott, our employment was up over 
25 percent during that period, all attributable to exports.
    All industrialized nations, especially the OECD member 
countries, are looking to exports for their economic growth. 
Our principal competitors all provide substantial assistance to 
their exporters--far more than the U.S., according to almost 
any measurement.
    The Small Business Exporters Association has compiled 
several analyses showing how much more our competitors support 
exports than we do. I am speaking for companies and workers who 
compete in the real world of global competition, not as we 
might like it to be, not according to economic models, but as 
it really is. In the real world, we need programs like OPIC, 
Ex-Im Bank, the Trade Development Agency, and the Advocacy 
Center of the Commerce Department to compete and win.
    Before I turn to the story of how Ellicott has used OPIC, 
let me make three general points about OPIC. First, it is 
essential to developing countries and especially the big 
emerging markets designated by the Commerce Department. Prudent 
investment is facilitated by guarantees and insurance to 
provide some protection to overseas assets, especially when 
private insurance is often not available or available only with 
unacceptable conditions.
    Second, when American companies invest overseas, they rely 
substantially on American exporters for their equipment needs. 
As much as one-fourth of all U.S. exports go to foreign 
subsidiaries of U.S. companies, so it is in our interest to 
increase foreign investment. Americans used to complain the 
Japanese auto assembly plants in the U.S. relied on parts 
exports from Japanese suppliers to the detriment of local 
American suppliers. The same phenomenon is true in reverse to 
our benefit with U.S. companies' foreign subsidiaries.
    Third, OPIC is financially self-sufficient and does not 
rely on taxes. It is investors like--it is exporters like 
Ellicott and investors, not the taxpayers, who pay for OPIC.
    Now let me take a moment to describe several specific ways 
that OPIC has helped Ellicott sell dredges worldwide in 
competition with some of Europe's biggest industrial 
conglomerates. One of our competitors is a German company 
called Krupp which is still known for having built battleships 
and munitions in World War I and World War II. This helps to 
remind me that the global marketplace commercially is still a 
lot like warfare. Krupp today, despite its $15 billion size, 
gets all kinds of financing, support, and subsidies from the 
German Government, not to mention trade advocacy directly by 
their Chancellor.
    OPIC has a special program which is of great interest to 
small exporters and the members of the SBEA. Sales to foreign 
governments usually require bank guarantees as performance 
bonds. These bank guarantees are subject to arbitrary treatment 
by the buying country.
    As Mr. Munoz has mentioned, OPIC has a program to insure 
such bank guarantees against wrongful taking. The comfort which 
comes from this insurance induces many American exporters, 
small or large, to bid on projects they would otherwise avoid.
    OPIC's prestige goes a long way towards assuring that 
foreign governments treat American exporters fairly. Thus the 
status of OPIC as a U.S. government agency, in many cases, 
prevents any loss at all to OPIC from inappropriate foreign 
government actions where a private insurance company would have 
no such political standing. We have used this program in 
several countries.
    Recently OPIC intervened to help solve a problem in Egypt. 
We had been unsuccessful through 3 years of negotiation in 
getting a performance bond returned. When OPIC decided to 
attend a TDA investor conference in Cairo last fall, we asked 
OPIC to get involved. And they jumped in with both feet.
    OPIC's Sr. Vice President, Kirk Robertson, took a personal 
interest to see that a fair and proper resolution was achieved. 
OPIC contacted the Egyptian entity and let them know the 
importance of returning the bank guarantee and that failure to 
do so could affect U.S. investment in Egypt. The Egyptian 
government and our customer responded immediately.
    The bottom line is that Ellicott reached an acceptable 
agreement because of OPIC and that OPIC earned tens of 
thousands of dollars of premiums insuring our guarantees during 
the life of the project. The results were achieved with just a 
couple of letters delivered by the U.S. Embassy to indicate 
their official status. It was a textbook example of how 
wrongful call insurance was supposed to work.
    I strongly doubt that a private sector insurer could have 
had the clout with the Egyptian government to achieve the same 
result. In the interest of time, I will mention that we also 
have been successful in selling to American investors overseas.
    Here is a picture of a dredge that went to Venezuela for 
Guardian Industries of Michigan which is building a sand mining 
plant.
    I think I will just conclude there, and I would be happy to 
answer any further questions you might have.
    Chairman Manzullo. Thank you very much.
    [Mr. Bowe's statement may be found in the appendix.]
    Chairman Manzullo. What an interesting group of witnesses 
and real life stories of what is going on in international 
business geared toward small business.
    Mr. Toomey, I want to start the questions with you. If we 
could watch the five minute clock here.
    Mr. Toomey. Mr. Munoz, thank you.
    I was wondering could you just explain to me briefly the 
difference between the mission of OPIC versus Ex-Im Bank?
    Mr. Munoz. Yes, sir. I would be more than happy to.
    We are both sister agencies and we work hand-in-hand. Where 
Ex-Im leaves off, OPIC takes over. Most U.S. companies can be 
quick to export as long as there is a demand for those exports.
    History has shown that once you have been good at 
international business by exporting, the next logical step may 
very well be to make an investment in the country. Once a 
company goes from exporting to investing in a country, the 
rules of the game change. Assessments of risk and of the 
political situation change completely. Even the financing 
structures for that investment take on a whole different 
aspect.
    This is when OPIC takes over for a company which is 
investing in a foreign country. OPIC and Ex-Im Bank 
relationships continue, however. Once they have made an 
investment overseas, many of the companies will continue to 
export repeatedly to that same foreign investment.
    So we work together, but we really deal in entirely 
different kinds of risk assessment, financing structures, and 
collateral. I would like to give you an example. I come from 
Chicago, and there are many, many companies there that are very 
good at exporting. And they have very good, strong 
relationships with their banks. But once they decide to cross 
the border and go overseas, their banks may draw the line, 
saying, since we cannot take over the plant as collateral--the 
power plant in India is one example--we are not interested in 
financing such a transaction. This creates a difficult 
financing situation.
    Not all those banks they deal with domestically, for 
example, may be available for an investment in a foreign 
country. Therefore that same small business would need a 
different line of players from the financing-side and from the 
political assessment-side.
    Mr. Toomey. As I understand it, the primary services you 
provide are long-term financing and political-risk insurance.
    Mr. Munoz. That is correct.
    Mr. Toomey. I was just wondering if you could comment 
briefly perhaps on the criteria you used before getting 
involved in either of those activities.
    For instance and specifically, maybe you could answer 
whether a corporation needs to be turned down by a private 
sector institution first before you will approach, or whether 
that is not necessarily part of the criterion. And if--whether 
or not it is, how do you price risks that the private sector 
refuses to take?
    Mr. Munoz. Yes, sir.
    Let me just add to my previous response that Ex-Im in any 
one year can do over a thousand, ifnot thousands of 
transactions, and OPIC, in any one year, may do something in the 
vicinity of 50 to 60 projects because OPIC and Ex-Im have entirely 
different missions.
    When a request for insurance comes to OPIC, for example, we 
distribute information to let the client know who the private 
insurers are in a particular industry so that if there is 
private insurance available, the company can tap the private 
sector first. Because our products are very different from 
private sector services, many investments require long-term 
insurance--sometimes 15 years, sometimes as long as 20 years of 
coverage.
    When OPIC issues an insurance contract, that contract is 
issued with full assurances that it will not be terminated at 
any time during the insurance period. The same cannot be said 
of the private sector; but we do point to the private sector 
first. While they are not required to submit exact letters of 
refusal, our standard procedure requests that clients tap the 
private sector first.
    With respect to our criteria that we use, we apply criteria 
mandated by Congress covering four areas.
    Number one, we want to make sure the project does not do 
substantial harm to the environment. This is mandated by 
statute and we make sure that the project will not do that.
    Number two, we want to make sure the project does not 
violate international worker rights according to our statute.
    Number three, we want to make sure the project will not 
harm the U.S. economy. We have an internal working guideline at 
OPIC that if a project were to take jobs away from the United 
States, such as a plant which closes down in the U.S. and opens 
up elsewhere, we would not support that.
    And then lastly, an OPIC-supported project must be a 
project that is only done by the private sector and is 
commercially viable. That is, it is not a government project 
but a private-sector-driven project that has commercial 
viability behind it.
    Mr. Toomey. I noticed that there is a summary of an income 
statement provided in the package.
    [OPIC's 1998 Annual Report may be found in the appendix.]
    Mr. Toomey. I didn't--I didn't notice a balance sheet. I 
noticed somewhere there was a reference to about $18 billion in 
financing and political risk insurance. I am just wondering 
approximately what's the size of the reserve fund?
    Mr. Munoz. OPIC maintains approximately $3.3 billion of 
reserves.
    Mr. Toomey. Thank you very much.
    Chairman Manzullo. Congresswoman Napolitano.
    Ms. Napolitano. Thank you, Mr. Chairman.
    Mr. Munoz, there is a slew of questions that I would love 
to ask. It would take all afternoon to ask. But I will start 
off with one of the statements that was made here by one of the 
panel members was, that it takes a long time and it is very 
intricate for small business and it is very expensive to be 
able to go through the whole process.
    Could you tell me what can be done to assist small business 
through that myriad. Can you cut the time down? Are you 
tailoring more to small business rather than to the large 
business? I say that tongue in cheek because big business can 
take care of themselves. They can afford the lawyers. They can 
have all kinds of things at their disposal where small business 
has to pay for them with funds that they don't have and makes 
it a little harder.
    And the legal documentation, of course, is a necessity, and 
I am certain that part of it has to do with the fact that you 
have to have an agreement with the country that you are doing 
business in.
    Mr. Munoz. Madam Congresswoman, I think you stated exactly 
the right reasons as to why things can take a longer time.
    Let me first say that we are making progress. Every new 
small business transaction that we do we learn from. We try to 
streamline the process the next time around, and I have to say 
that all of the employees at OPIC are very energized and very 
desirous of working closely with small businesses. But having 
said that, many countries do not have a clear rule of law, do 
not have processes and procedures that are always easy to work 
with, and we must work within these restrictions.
    At the end of the day while we may be financing or insuring 
a project, we have to make sure that if something goes wrong 
with the project and OPIC is required to step in to help 
salvage the project, we must have all the rights under local 
country laws that are consistent with our treaty with that 
country, as well as their laws. This, unfortunately, is more 
complicated than any domestic business transaction.
    Ms. Napolitano. Is that the main reason?
    Mr. Munoz. That is one of the primary reasons, 
Congresswoman.
    I would say, however, that we do learn in every project 
that we process and I think that we are getting better at it. I 
would have to say that there are many banks in this country who 
just throw up their hands and they just refuse to get involved 
because of the complications, but we will be there standing 
beside small business.
    Ms. Napolitano. Which brings me to that second question and 
that is to the marketing of your services to small business and 
to education of the bank's services for assistance in doing 
their work, how is that coming? Are you having success? What 
outreach are you doing?
    Mr. Munoz. We are doing some outreach. I would like to 
remind this Subcommittee that we have only about 215 employees 
at OPIC, of whom I am very proud, because the performance level 
is beyond belief----
    Ms. Napolitano. With a budget of?
    Mr. Munoz [continuing]. That 215 employees can do as good a 
job as they do monitoring all the programs and doing all the 
projects that we have. And given the limited number of people 
we employ, we still do outreach programs. We do try to go to 
different seminars and conferences that take place in the 
international business arena.
    I think that the advent of the Internet has helped us 
tremendously. We have a web site which has been recognized as 
one of the best web sites on the Internet, whether private or 
public. And we have a specific page there for small businesses. 
We are getting a lot of good responses from that.
    We also have teamed up with Ex-Im and the Department of 
Commerce and other agencies that are working with small 
business. And we have reached out to the SBA. I think those are 
the best ways to do our outreach.
    Ms. Napolitano. I may suggest you might try doing some 
video work for cable as informational, so you may be able to 
get that out. We used that effectively in California.
    The fact that everybody indicates a job growth potential 
because of the assistance in reaching other international 
markets, I have been involved with that for several years. So I 
know the real value in that. What would you say would be the 
job growth wage range for these new job potentials?
    Anybody?
    Because we hear a lot from labor we are losing jobs because 
of NAFTA and all the other agreements, yet we hear from 
business that there are jobs potential that are reaching.
    Mr. Bowe. Madam Congresswoman, my company is unionized with 
a steelworkers. It issomewhat unusual. Our steelworkers 
endorsed NAFTA because they know that virtually all of our products are 
exported. I don't know how much NAFTA has affected us in particular, 
but certainly exports are generating middle-class jobs, jobs----
    Ms. Napolitano. Wage range?
    Mr. Bowe. Our guys make up in the mid-50s in the thousands 
of dollars a year with overtime. Right now, we have got 
vacancies, and people are working 6 and 7 days a week. And I 
don't think there is anybody that feels threatened by our 
export activities in terms of job loss.
    Ms. Napolitano. Anybody else?
    Mr. Rajadhyaksha. Congresswoman, we are in the engineering 
business and we--all these projects that we have in India, we 
are designing them in Columbus, Ohio. And that has created 
about 20 jobs in my company in Columbus, all in the range of 
$50,000 to $100,000 a year, specifically geared up to this 
international effort that we are going.
    Ms. Napolitano. Thank you, gentlemen. You have made my 
point.
    And I wish that you would talk to Labor and talk to them 
about how important it is for them to understand the reality of 
some of those jobs. Thank you.
    Chairman Manzullo. Thank you. Mr. English?
    Mr. English. Mr. Chairman, thank you for the opportunity.
    I simply wanted to follow up on something Mr. Bowe had said 
and would like to have the president comment on it. I find that 
any of the people who criticize OPIC as corporate welfare, know 
comparatively little about what American companies are up 
against in terms of the incentives provided to their 
competitors to encourage purchase, incentives provided in the 
form of lines of credit provided by competing governments to 
potential customers.
    I wonder if the panel would comment on that in a little 
more detail than Mr. Bowe provided. How many of our competitors 
provide similar or more expansive programs and incentives to 
encourage the purchase of their domestic goods?
    Mr. Bowe. Let me give you sort of a brief survey of some 
things I am aware of. Dredges can be considered, in some cases, 
vessels, in smaller cases not.
    Our two primary competitors are Dutch and German. The 
Germans have spent a lot of money to support what they consider 
to be shipbuilding. There are special financing programs which 
include a subsidized low interest rate loan. By low, I mean, 
zero, 3 percent, stuff like that, to developing market 
countries like India and China, Indonesia, and then so they are 
giving the money cheaply to the buyer to buy. And then on the 
seller's side, there are special subsidies. There is a general 
shipbuilding subsidy up to 9 percent of vessel cost throughout 
Europe. The Germans have a 30 percent subsidy for yards in the 
former eastern Europe.
    In the case of Holland, they have special financing, sort 
of an AID type program, they call it ORET. To give you an 
example, our Dutch competitor on a trade mission in China last 
month led by a Dutch minister signed $100 million worth of 
deals all of which involve special financing from the Dutch 
government. So it is pretty heavy duty support.
    And within that, the trickle stuff like, you know, special 
grants for training, technological orientation, it is very 
extensive, and it is both for heavy industry and for things 
that would be considered to have a technological component.
    Mr. Munoz. I would like to add we have made our own survey, 
and all of our counterparts from the G-7 have programs that go 
beyond what the United States provides to its private sector. 
And this makes it very difficult for the business community 
from what we know.
    What OPIC does is to try to promote transparent rules of 
fair play. The fact of the matter is that there are not always 
transparent rules of fair play. In our private sector 
community, I am sure that once the rules come even close to 
being level, we will win in any competition.
    OPIC's support for many of these overseas investments tries 
to at least advocate from the American side that these rules of 
fair play be put in place. It is not an easy job. Many of our 
private sector companies are not involved in international 
business precisely because of the disadvantages which still 
exist.
    Mr. English. Would you be willing to make your survey 
available to the Subcommittee.
    Mr. Munoz. Yes, sir.
    Mr. English. So that it can be included in our report.
    And, Mr. Chairman, I would like it to be included in the 
testimony today if possible when we receive it.
    [The information may be found in the appendix.]
    Chairman Manzullo. Without objection, of course.
    Mr. English. Thank you. And I yield back the balance of my 
time.
    Chairman Manzullo. Thank you.
    I am intrigued with this dredging going on here. Now, we 
have Miss Dauffenbach who is big into eliminating weeds.
    Ms. Dauffenbach. Right. That is different from dredging, 
yes.
    Chairman Manzullo. And Mr. Bowe, you actually make the 
vessels that are used for dredging. But as I went through your 
CV, Miss Dauffenbach, you are a member of the Bass Angler 
Sportsman Society. Now there is somebody who really likes 
water.
    Ms. Dauffenbach. Oh, yes. Yes. They suddenly are getting 
political. A lot of people use our equipment instead of using 
aquatic herbicides. They find that herbicides are not 
environmentally friendly. So the Bass Angler's Sportsmen's 
Society is suddenly putting their weight behind the mechanical 
approach to weed control.
    Chairman Manzullo. That really leads into my question 
because as I listen to your testimony, a couple of things came 
out. Number one is that you created a market that did not exist 
before.
    Ms. Dauffenbach.That is right.
    Chairman Manzullo. And the second thing is that the brutal 
competition from the Dutch and other of our allies----
    Ms. Dauffenbach. Canadians, yeah.
    Chairman Manzullo. Could you explain the mechanics of the 
insurance that you got with OPIC. Walk us through it.
    Ms. Dauffenbach. As Peter mentioned before, we had to put 
up guarantees, unconditional bank guarantees, one to cover the 
down payment that the Kenyans are paying us and one as a 
performance bond. And we were concerned about wrongful calling.
    Depending on what the political situation in the country 
you are working in may be, you don't know if something doesn't 
go right if they are going to make a wrongful call on that 
unconditional bank guaranty. Because it is unconditional, there 
are no questions asked. They call on it, and they get paid.
    Our bank was quite concerned about that; as were we. So we 
knew from the start that we needed to have some sort of 
insurance or something to protect us in case there was a 
wrongful calling made.
    As I understand, OPIC will go in and argue and demand lots 
of----
    Chairman Manzullo. Assurances.
    Ms. Dauffenbach. Support, yes, as to why that calling was 
made. And that gave us agreat amount of security knowing that 
someone is going to advocate for us.
    Chairman Manzullo. How did you find out about OPIC?
    Ms. Dauffenbach. Two years ago, I was working on a project 
in Asia. We were trying to develop something before the economy 
there went to pieces. And we were looking to offer some 
financing through Ex-Im Bank to our customer. It was a large 
project, so the Department of Commerce also sent us to OPIC to 
see what financing products were available.
    As a result, we originally were working with OPIC on an 
Asian project that never developed. A year later when the 
opportunity to quote in Kenya came up, I remembered our 
discussions with the OPIC people. We called them up right away 
to see what sort of insurance they had.
    Another insurance product that we are getting is dispute 
insurance. If we have a dispute with our client in Kenya, and 
if we can prove that we are right and they are wrong, then the 
insurance will kick in.
    Chairman Manzullo. So OPIC doesn't just sit around and wait 
for a loss to occur.
    Ms. Dauffenbach. No, they fight hard.
    Chairman Manzullo. They fight the battles with you right on 
the scene with the foreign government.
    Ms. Dauffenbach. It probably is why they have such a great 
record in losses.
    I imagine they don't give up much.
    Mr. Munoz. Mr. Chairman, if I could just add to that: our 
recovery rate for expropriation, for example, is approximately 
100 percent. Over time, we will recover the losses, even if we 
had to pay claims to an American investor. This is because we 
have the staying power and we have the ability to call on 
foreign governments.
    Mr. Chairman, you may remember one of your Committee 
hearings about a year and a half to 2 years ago where you had 
Monique Maddy present, and she gave a stellar presentation of 
how a small business went to Tanzania and brought 
telecommunications to that country.
    OPIC not only sells insurance and financing, but equally 
important, OPIC stands by these investments. That is why, 
unlike the thousands of purely export transactions that Ex-Im 
does, we are partners in many ways with our projects and 
investments.
    For the record, I would like to submit an update on Ms. 
Maddy's presentation, which I know, Mr. Chairman, you were very 
interested in. Monique Maddy continues to be a small business 
investor in Tanzania, and is looking at other opportunities. 
The project that she had in Tanzania has run into some 
governmental difficulties. Although our insurance doesn't 
require that we step in and try to help them resolve their 
disputes, it is OPIC's practice, as has been stated here, to 
come in and advocate on our client's behalf. As we are 
currently working through those difficulties, Ms. Maddy stays 
very much optimistic about opportunities overseas.
    Ms. Maddy's investment offers an example of something that 
can look good on one day and cloudy the next, but in the long 
term, it is in America's best interest to be involved in the 
international business arena. And our agency is determined to 
make this a positive experience for American investors.
    Chairman Manzullo. I don't mean to pick on you, but one 
other person mentioned about the foreign competition. Who else 
did that on the panel?
    You did. Peter, did you want to comment on that? And also 
Miss Dauffenbach.
    Well, tell us what the foreign companies did when they 
found out you were interested in this project.
    Ms. Dauffenbach. Each situation is different. We really 
have troubles with the Canadians. That has been a pain for----
    Chairman Manzullo. I am going to Canada on Thursday as part 
of the U.S.-Canadian parliamentary exchange.
    Ms. Dauffenbach. They do a lot to help their companies. 
And, like I said, they actually gave free equipment away. They 
bought it from our competitor and gave it away as a gift. I 
know it has happened more than one time.
    Another thing the Canadian government does is make 
allowances for prototype and development or something along 
those lines, where they actually subsidize their manufacturers 
for making engineering changes. So if we are fortunate enough 
to find ourselves specified in a tender, and the Canadians have 
to meet our specs, they can come in cheaper than us because 
they get a kickback from their government to make up the 
difference of what they call research and development. And that 
is very frustrating.
    Chairman Manzullo. Peter, did you want to follow up on 
that?
    Mr. Bowe. I think the biggest challenge we have is special 
financing that is initiated by our foreign competition. This is 
more along the lines of Ex-Im Bank-type competitors rather than 
OPIC activity. As I mentioned, the case of the Germans and the 
Dutch, the Japanese do the same thing where they come in with 
long-term, 30-, 40-year type financing with very low interest 
rate.
    I was just in China a month ago with Secretary Daley on his 
trade mission. And we had the opportunity to hear a number of 
ministers, and their first comments to Secretary Daley were 
always that if Ex-Im was more aggressive, American companies 
would sell more in China.
    And, of course, with respect to OPIC, there is, you know, 
the sanctions question. But, I mean, we see that around the 
world that our competition initiates special financing, and Ex-
Im Bank is playing a game of matching with the end objective of 
trying to eliminate this policy all together.
    Whereas, our competition considers it to be acceptable that 
in the normal course of business,that you are supposed to buy 
business with cheap financing, and then you gain market share and that 
enables you, essentially, to subsidize the competition in the free-
market areas like in the United States, for example.
    Chairman Manzullo. Peter, I was intrigued with your 
statement that approximately one-third of U.S. exports go to 
U.S. companies that have an overseas presence. Could you 
elaborate on that?
    Mr. Bowe. I don't know, off hand, the source of where I 
read this. I could find it for you. But the theory is that you 
have American multinationals, whether it is Ford, Chrysler, 
IBM, people like that, FMC Corporation, have operations around 
the world. I can tell you about our example, this company 
Guardian is a glass-making company.
    They have a glass manufacturing plant in Venezuela. And 
glass uses sand; sand is mined with a dredge. Kerr-McGee 
Corporation, Oklahoma, makes paint pigment in Australia. They 
bought our equipment for a plant in Australia. They go where 
the natural resource is located. And they bought from us. That 
is a type of examples as it relates to us.
    Chairman Manzullo. And that is really what, Bill, you were 
talking about. You don't directly deal with OPIC, but a lot of 
larger companies to which you supply your product deal with 
OPIC.
    Mr. Herbert. Yes, it is----
    Chairman Manzullo. Small and large companies.
    Mr. Herbert. It is really hard to imagine how extensive the 
ramifications are. But, for example, a large developer, I heard 
Enron's name mentioned today, they have been a customer of ours 
for a long time, but as a general rule if they are developing a 
power plant, we don't deal directly with Enron. The first thing 
they have to do is hire an architectural engineering company in 
the United States. That is several hundreds of people whose 
salaries are being paid by the project. And those engineering 
companies provide services such as issuing the request for 
quotes and evaluating the bids, issuing the purchase orders.
    And we are only one subsupplier on the project. But they 
are buying equipment. Now, it is true that they source--the 
larger these companies get, the more they have the ability to 
source from an international standpoint. But we have found that 
we have no trouble with that in the sense that we are price 
competitive. Our technology is good. And we can provide the 
after-market service for them and everything because I have 
agents in many foreign countries. But the fact that an American 
developer can win the contract starts a whole series of events, 
all of which generate jobs and income and balance of trade 
benefits to the United States.
    So when you hear about a company getting an award, it is 
not even the tip of the iceberg if you are trying to figure out 
or you are trying to see, at that moment, how important that 
contract award is to an American company. It is very, very 
important. And the ramifications go in a lot of different 
directions, not just equipment people, but bank people and 
computer people and a lot of areas, multitiered.
    Chairman Manzullo. Go ahead. I am sorry.
    Your company is only 50 employees. Is that correct?
    Mr. Herbert. Yes.
    Chairman Manzullo. And how many of those employees are 
directly related to exports now?
    Mr. Herbert. Well, virtually all of us. Because what 
happens is, I mean, we have our own manufacturing shop. And so 
our people that are in that area are working on projects. They 
may be domestic or they may be international projects. It 
depends on what their particular skill is, whether it is 
welding or wiring or calibration or that sort of thing.
    Every one of our projects is assigned a project engineering 
manager. So that means we have mechanical, chemical, 
electrical, civil engineers on our staff. They run their 
contracts. Then we have designer drafting people because we 
have to do all the detail engineering and submit all the 
documentation.
    We happen to have an ISO 9001 Q A program, which means we 
have a lot of forms and documents that we have to follow to 
meet the requirements of the international community as far as 
quality assurance is concerned.
    So when you are a company of 50 people, we all interrelate, 
we are all in the same building. And we work on various 
projects. And a particular person may not know, for example, 
out in our shop whether he is welding something for a project 
in Turkey or whether he is welding it for somebody in another 
part of our state.
    So it is really not possible. All of us work on 
international, whether you are in sales or you are in 
fabrication or engineering.
    Chairman Manzullo. Well, we appreciate all of you 
testifying this afternoon. OPIC is, as you know, it is a very 
unique government agency. There are over 10,000 government 
programs.
    Peter is shaking his head over there. He probably knows 
every single one. But one of those that we have found that has 
a very close working relationship with its customers is OPIC 
based upon, I believe, the integrity of Mr. Munoz who has been 
in charge of the program for the last couple of years. But also 
based upon the fact that this government program really doesn't 
just write a check for or on behalf of companies but actually 
goes to battle with them, first to secure the agreements, then, 
second, to protect them.
    And, one of the unknown stories, that would be appropriate 
for another hearing, is how Mr. Munoz eventually gets all of 
his money back, especially from countries that broke off 
relations with the United States, such as Vietnam, but then 
when they come back into wanting our good graces again, 
somebody shows up with a bill and the country has to pay the 
bill. That is why OPIC gets paid back nearly 100 percent.
    And that is why really there is not an opportunity to 
answer Mr. Toomey's question for the private sector to get 
involved to the extent, not only in the amount of money that is 
being capitalized but also in the power and the strength of the 
U.S. Government standing behind our exporters.
    So, again, we thank you for spending this afternoon with us 
in Washington. This meeting is adjourned.
    [Whereupon, at 4:24 p.m., the subcommittee was adjourned.]

                                APPENDIX

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