AGOA Plus Program Profile

1. USAID/VEGA-Ethiopia AGOAPlus Program Profile

Signed into law in 2000, the African Growth and Opportunity Act (AGOA) was designed to open up the United States’ $14 trillion market to African exports. AGOA enables more than 6,000 items to be exported from eligible countries into the U.S. duty free. With the addition of Togo and Comoros in 2008, 41 sub-Saharan African countries are eligible to trade under AGOA.

AGOA⁺ focuses on delivering: business linkage services; informational services related to the opportunities afforded by, as well as the technical requirements to trade under AGOA; and technical assistance to enterprises, including firm-level expert volunteers to help firms overcome capacity and quality constraints, and intermediaries such as business associations.

The design of AGOA⁺ was informed by the conclusions of the 2004 AGOA strategy. Among the major issues AGOA⁺ and other USAID/Ethiopia trade competitiveness programs were designed to address are:

Lack of information on market opportunities in U.S., including under AGOA;
Low industrial capacity and base;
Relatively low skilled and inadequately trained labor force;
Lack proper production management skills; and
Existence of a lot of bureaucratic challenges in order to benefit from the various government incentives, such as the different lines of credit.

AGOA⁺ has had an impact on these issues through a mix of information dissemination about AGOA, firm-level, export-related capacity building, and support for advocacy organizations. Typical project activities include:

· Holding AGOA awareness raising events for firms, chambers of commerce, and sectoral business associations

· Developing corporate profiles for exporting companies

· Facilitating the participation of Ethiopian firms in U.S. trade shows

· Delivering technical assistance to Ethiopian firms to improve competitiveness in the global market place

· Organizing reverse trade missions and similar events between Ethiopian firms and the diaspora community in the U.S. as well as U.S. buyers

Providing training on international marketing in general and how to trade under AGOA specifically
Providing demand driven business counseling to companies
Help companies and associations develop websites as well as standard marketing materials.

Measurable impact results of AGOA⁺:

AGOA/GSP exports have gone up steadily year after year since the baseline year, 2005, representing an increase of by $8.4 million. The year-to-date total AGOA/GSP exports from Ethiopia to the U.S. (updated November 2008) grew from USD 5.423 million in 2007 to USD 13.6 million in 2008. And as of December 31^st, 2008 the AGOA/GSP export value has reached USD 18.087 million, which is an increase of more than 100% from year 2007.
The project has trained over 400 SMEs nationwide on AGOA and the opportunities under AGOA. Other support services included firm-level assistance using experts from the U.S. in the spices, textile/garments, and handicrafts sectors.
The project has brought to Ethiopia over 10 buyers in textiles and apparel and handicrafts from the U.S. to explore market linkages with Ethiopian firms.
The project has opened an AGOA service center in partnership with the Ethiopian Chamber of Commerce and sectoral associations to provide hands on service to the private sector in Ethiopia.

Some of the Success Factors included:

Appropriate sectoral selection
Targeted focus
Targeting significant technical assistance to “export-ready” firms
Ensuring burden sharing for trade shows (cooperation with other donor programs)
Actively engaging the Ethiopian diaspora
Ensuring local stakeholder buy-in (business associations and government)
Successfully leveraging outside resources
Working toward sustainability.

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II. USAID/VEGA-Ethiopia - Profile of the DDI Credit Facility for Ethiopia

Diaspora Direct Investment (DDI) Credit Facility for Ethiopia

USAID is interested in using its Development Credit Authority (DCA) to create a DDI Credit Facility for Ethiopia that would help mitigate the perceived risk of lending to Diaspora investors. Under this arrangement, USAID provides partial credit guarantees to selected private sector banks in Ethiopia, covering up to 50 percent of their risk in providing financing to Diaspora investors. While USAID already has guarantees in place for lending to small and medium enterprises (SMEs) in the manufacturing, service (i.e. tourism) and agricultural sectors, up-market DDI is a sector that remains underserved and has the potential to create jobs, open up new markets, and have a transformative effect on the broader economy.

The goal of the Facility is to encourage lenders to view Diaspora investors as a distinctive clientele with a unique profile and methodology for underwriting loans. For example, lenders could take advantage of international credit bureaus like Equifax to efficiently sort good Diaspora borrowers from bad, price loans appropriately, decrease processing times and reduce other transaction costs. Lenders could also make use of tax returns, pay stubs, bank statements and other reliable documents from developed countries that would similarly assist them in making smart decisions about the ability of Diaspora borrowers to repay debt. By lowering the risk of lending to Diaspora borrowers, these USAID-backed guarantees will allow lenders to better serve Diaspora. In the long run, it is expected that the guarantee program will effectively demonstrate that Diaspora investors are viable and profitable customers and, that upon seeing this success, other financial institutions will follow. The facility also provides assistance to local women Entreprenures suffering from lack of access to bank credit because of stringent collateral requirements.

The technical support to accompany USAID’s DCA for DDI should be designed to provide assistance and support in several ways:

· Raise profile of Diaspora Direct Investment (DDI) in Ethiopia;

· Assist Diaspora Investors in taking advantage of the DCA for DDI Facility for Ethiopia;

· Provide technical assistance to the DCA participating banks on how to conduct transnational lending;

· Identify companies for targeted technical assistance and trade facilitation activities; and

· Arrange events and conferences that will promote the flow of DDI into Ethiopia.

Participating Financial Institutions

Bank of Abyssinia was a past DCA partner in a guarantee for lending to agricultural SMEs. Abyssinia is willing to use alternative forms of collateral which is an important need for lending to Diaspora.

Nib International Bank S.C. - focuses mostly on medium and large-sized women owned businesses and are a good fit with the proposed guarantee because Nib is willing to accept non-traditional forms of collateral.

III. USAID/VEGA-Ethiopia AGOAPlus - Profile of the American Chamber of Commerce in Ethiopia

Implementation of the African Growth and Opportunity Act (AGOA) in Ethiopia offered additional opportunities for the initiation of two additional projects: (1) the American Chamber of Commerce (AmCham) and (2) the Diaspora Direct Investment (DDI).

AmCham has opened its office in Ethiopia in 2008 and established its

Possible services may include the following components:

Business Networking
- Monthly luncheons, seminars and social event
- Membership Directory
- Networking and market linkage facilitation
- Host conferences/breakfasts with visiting dignitaries on issues related to international business and trade facilitation
Doing Business Assistance
- Direct marketing and export promotion assistance
- Strategic marketing and economic research
- Job banks
- Assistance with official procedures, government relations, arbitration and legal support
Information and Training Services

One-stop shop website providing all practical information and services to be offered by the main AmCham office
Monthly AmCham Magazine
Business Briefs and alerts to members via electronic media
Electronic tender alert
How to “Export to the US Market” and “Importing from the United States” Guides, with complementary business training courses.

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