Protect, Promote, Secure: Maximizing the International Technology Security and Innovation Fund
Department of State
The Department of State has several programs that support the key goals of the ITSI Fund and could benefit from additional financing. EB works extensively on promoting ICT innovation and development and a safe, secure, and connected digital economy. The bureau engages with foreign governments, multilateral institutions, U.S. businesses, mobile network operators, and civil society to promote competitive markets and secure 5G wireless telecommunications networks with trusted suppliers. It actively works through the DCCP to provide technical assistance to government officials, emerging leaders, and other stakeholders in more than three dozen countries to promote an open, interoperable, reliable, and secure internet. The DCCP has been tapped to implement efforts in the ICT space and is already positioned to work with global telecommunications providers, network operators, and key government stakeholders.
Also under EB’s purview is the Infrastructure Transaction and Assistance Network (ITAN), which can support the ITSI Fund’s “protect” and “secure” targets. Its mission is to strengthen capacity-building programs to improve partner countries’ project evaluation processes (which can also be financially supported through the Transaction Advisory Fund, which offers legal services for contract negotiation and bid or proposal evaluation) and to coordinate U.S. support for secure ICT infrastructure, including by mobilizing private sector capital. The Transaction Advisory Fund, while small, is impactful; additional contributions from the ITSI Fund could help the ITAN tackle local capacity issues in choosing appropriate vendors and assessing proposals.
As outlined in its Digital Strategy, USAID has programming in a range of digital-related fields, including finance, inclusion, cybersecurity, geospatial technology, and strategy and research. All these initiatives are targeted at low- to lower-middle-income countries as defined by the World Bank. There are also programs, several country-specific, that offer training and capacity building—as well as government-to-government assistance in using regulatory reform and rule of law to create an enabling environment for investment and trade in these areas—that would boost work on the promote and secure pillars of the ITSI Fund.
USAID is hampered by its mandate and limited ability to spend funds, particularly on cybersecurity. It cannot provide grants or programming funds to key agencies working in this field, including military, law enforcement, and intelligence services.
Some examples of work USAID has done that model how the agency can support the ITSI Fund are the Critical Infrastructure Digitalization and Resilience (CIDR) activity—which helps countries in the Western Balkans, Black Sea region, and South Caucasus address cybersecurity vulnerabilities and the legal, workforce, and investment needs that support cybersecurity of infrastructure—and Digital Invest, which mobilizes early-stage private capital for digital connectivity infrastructure and digital financial services that strengthen open, inclusive, and secure digital ecosystems and serve traditionally excluded customers (including women, rural populations, and lower-income households) in developing countries.
EXIM’s financial tools and capabilities support the ITSI Fund’s effort to build secure ICT infrastructure. EXIM supports investments within the 5G sphere, including by helping buyers purchase technology from trusted vendors and facilitating foreign financing for foreign-headquartered entities. Through its China and Transformational Exports Program (CTEP), the bank can offer its clients reduced fees, extended loan tenors, and exceptions from other EXIM policies for eligible projects. EXIM can also provide loans, loan guarantees, and insurance for the purchase of goods and services shipped or invoiced from any country to facilitate U.S. exports for 5G-related transactions. EXIM has lowered its U.S. content threshold in this strategically important area in an attempt to meet overall U.S. policy goals, but creditworthiness of potential in-country private sector partners remains a key challenge in many instances, particularly in countering often opaque PRC lending practices.
The DFC can aid the ITSI Fund by deploying its financial tools to mobilize private sector capital in technology-related investments. The agency supports private sector investments in commercially viable, highly developmental projects that advance foreign policy and national security priorities. It offers debt and equity financing, guarantees, technical assistance (utilized to help projects become more bankable), and political risk insurance.
DFC-supported projects on critical ICT infrastructure demonstrate how it can support the ITSI Fund’s goals. For example, in 2021 the DFC committed $300 million in debt financing to help Africa Data Centres Holdings Limited acquire and expand data centers in South Africa and Kenya, as well as enter into new African markets. The project expects to address the digital infrastructure gap, create jobs, address poverty, facilitate the delivery of goods and services, and contribute directly to the African Union’s Digital Transformation Strategy.
USTDA provides training and financing for project preparation, including feasibility studies and technical assistance. Its tools go a long way in making a project commercially viable from the start and setting it up for success once it is ready for financing.
In line with the goals of the ITSI Fund, USTDA awarded a grant to NOW Telecom Company Inc. to conduct a feasibility study and pilot project to support the development of a nationwide 5G mobile and fixed-wireless network in the Philippines. NOW Telecom chose New Jersey–based Bell Labs Consulting, part of the research arm of Nokia, to conduct the study. It also awarded a grant to Malawian internet service provider Converged Technology Networks Limited (CTN) to conduct a feasibility study on expanding digital connectivity to underserved communities in the country. CTN selected California-based Connectivity Capital LLC to conduct the study.
Each of these departments and agencies have experience, funding, projects, and expertise in the ICT sector and can bring those resources to bear to amplify the ITSI Fund’s minimal pot of money. Some of the smaller programs, such as the Transaction Advisory Fund and DFC’s technical assistance program, can benefit from additional funding to do the necessary preparation to get more viable projects in its pipeline and accomplish the ITSI Fund’s mission of protecting, promoting, and securing critical technology and networks.
Vector Two: Working with Partners and Allies
Countries in the Group of Seven (G7)—as well as South Korea, Singapore, Australia, and Taiwan—share concerns regarding secure and open networks and supply chains and are active players in semiconductor manufacturing and ICT development.
In a foreign press briefing on March 15, 2023, the Department of State’s EB assistant secretary Ramin Toloui and CDP ambassador at large Nathaniel Fick outlined how the department intends to coordinate with partners and allies. For the ICT sector, the ITSI Fund will support governments in creating enabling environments for investment in secure ICT ecosystems and preparing for and defending against malicious cyber activities. The Department of State will also push for collaboration among sovereign financing agencies to provide funding and de-risking products for investments in deploying ICT systems such as Open Radio Access Networks (ORAN). The department expects to coordinate with like-minded countries on policy and regulatory frameworks that protect the entire ecosystem through export controls, licensing, and procurement procedures.
In addition to the work of DCCP, as well as ongoing diplomatic efforts between the Department of State and U.S. partners and allies, the ITSI Fund can build upon work being done in the U.S.-EU Trade and Technology Council (TTC). In December 2022, the council held its third ministerial meeting, during which members agreed (among other things) to the following:
Each of these actions align with the ITSI Fund’s mission. As a significant part of the fund is engagement with like-minded partners, the TTC and the new National Cybersecurity Strategy offer platforms that can be utilized for discussing and working on semiconductor supply chains, coordinating policy on export controls and licensing, and building and promoting safe and secure digital networks.
In terms of financing the building of digital infrastructure itself, the United States and its allies can draw upon their respective development finance institutions (DFIs) and export credit agencies, such as DFC and EXIM, the Japan Bank for International Cooperation (JBIC), the Australian Department of Foreign Affairs and Trade (DFAT), Export Finance Australia (EFA), the Export-Import Bank of Korea (KEXIM), Korea Development Bank (KDB), and the Association of European Development Finance Institutions (EDFI). Many of these institutions support international partnerships and include pillars related to digital infrastructure, such as
Despite the desire for partners and allies to work together, jointly financing projects is challenging. Each of these institutions has its own mandate, statutory requirements, and due diligence processes, some of which can slow project approvals and disbursement of funds. For example, the DFC cannot coinvest with state-owned enterprises (SOEs), but JBIC can. The DFC does not require a U.S. component or nexus in its investments, but its Japanese and Korean counterparts require some percentage of the investment to have Japanese or Korean content or engagement in a project.