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Report Contents
	Introduction
	Government Support

1. INTRODUCTION

The African Growth and Opportunity Act (AGOA), recently extended until 2015 and include a 3-year extension of the 3rd Country Fabric provision until 2007, afford AGOA-eligible countries (like Ethiopia) a unique opportunity to access the U.S. market through duty-free and quota-free terms. Whereas it is also meant to assist such countries in utilizing the preferences to build capacity and competitiveness, Ethiopia is yet to take full and significant advantage of AGOA because it does not have a strategy in place to capitalize on AGOA's benefits.

Ethiopia is one of the 1st five Common Market for Eastern and Southern Africa (COMESA) member countries to benefit from the USAID funded program, the AGOA Linkage to COMESA (ALINC) that was designated to increase awareness of AGOA among key stakeholders within AGOA-eligible COMESA countries and encourage them to realize their potential to use AGAO opportunities. Under this program a number of activities have been held in Ethiopia.

USAID/Ethiopia in its 1st year SOW intends to provide direct support to Ethiopian businesses (with a view to increasing the number of women owned enterprises that participate in USAID activities) and assist Ethiopian enterprises meet market requirements (i.e. product development, manufacturing process improvements, etc.) targeting textiles and garments, leather and leather products, and handicrafts.

In collaboration with the U.S. Embassy and the different Chambers of Commerce and Associations in Ethiopia, USAID has carried out a number of workshops to increase Ethiopian enterprises' awareness and knowledge of AGOA and major U.S. buyers. Towards the end of 2003, USAID/Ethiopia financed a trade delegation of representatives of AGOA-eligible textile and garment factories who visited U.S.A. and consulted with potential partners.

A number of AGOA-related activities have been carried out in 2004 in Ethiopia. On May 13, 2004, U.S. Ambassador Aurelia E. Brazeal delivered a speech on AGOA opportunities and challenges at the Ethio-American Forum luncheon. The Embassy's Economic/Commercial Officer gave a presentation on AGOA at the June 1 - 2, 2004 National Workshop on Opportunities and Challenges in International Trade organized by the Ethiopian Chamber of Commerce. The Assistant USTR for Africa, Florizelle Liser and the USTR Director for Africa Affairs, William Jackson, visited Ethiopia during June 10 - 11, 2004 to promote trade and investment between the two countries. They met and held discussions on AGOA and WTO issues with several high-ranking government officials, including the Honorable Prime Minister and representatives of the private sector. They addressed the private sector on June 11, 2004 at the Ethiopian Chamber of Commerce. Two AGOA experts from the regional East and Central Africa Global Competitiveness Hub (ECA Hub) located in Nairobi, Kenya, visited Ethiopia during June 21 - 25, 2004 to promote AGOA. They also held AGOA-related discussions with senior level private sector representatives and government officials and expressed U.S.' willingness to collaborate in specific high opportunity sectors such as textiles and apparel, leather and leather products, agro-processing and hand-loomed arts and crafts. The U.S. Embassy is planning a mid-October 2004 Catalog Show for Ethiopia for the apparel and leather sectors.

The World Bank, in collaboration with the United Nations Development Program (UNDP), has funded a study on the capabilities of the Ethiopian Chamber of Commerce and the other 14 City Chambers of Commerce and recommended specific intervention to strengthen them so that they can effectively deliver services to their members in Ethiopia. The Manchester Trade has also just completed a study on textiles, apparel and garment industries and reviewed policy issues affecting them - this report is expected in October 2004.

The Consultant was contracted during September 14 - 25, 2004 to review materials on AGOA, Ethiopia national trade statistics, country specific trade papers, existing AGOA or U.S. trade strategy papers and other relevant information. He met and held discussions with relevant government, public and private sector officials, entrepreneurs and officials from both the U.S. Embassy and USAID. This report therefore presents his findings and proposes a draft National AGOA Export Strategy and Action Plan.

2. PRESENT SITUATION

In October 2000 Ethiopia was designated as one of the 35 Sub-Saharan African countries eligible to receive AGOA benefits. Ethiopia was certified for textiles and apparel benefits under AGOA in August 2001. With the assistance of the U.S. Embassy, it has also applied for Certification (under Category 9) for hand-loomed, handmade, folkloric items and ethnic printed fabrics.

Textiles, Garments and Apparels

Ethiopia's textiles and apparel exports to U.S.A. has significantly increased from US$163,717 in 2001, US$834,058 in 2002, US$368,209 in 2004, to US$770,399 up to May 2004. About 7 firms were reportedly exporting to U.S.A. by the beginning of 2004 - 4 Government owned garment firms started exporting shirts, shorts and overalls to U.S.A. in February 2004. The government has reported 14 new private apparel enterprises that have the potential to export to U.S.A.

The Government of Ethiopia owns 17 textile industries - 7 integrated textile mills, 4 garment factories, 2 knitting and yarn-making firms, 1 thread-making enterprise, 2 sacks-making firms and 1 blanket factory. Most of the gray fabrics and yarn from its enterprises is exported to Europe (Belgium, U.K., Italy, Turkey and Germany) as the buyers prefer to carry out the finishing operations themselves. The textile mills are underutilized and there is need to improve on the quality and standards of the output by replacing some of the capital equipment that is too old. Some private sector investors (local and foreign) have indicated their interest in taking over some of the Government firms through Joint Venture, outright purchase, leasing and management contracts, etc.

Hides and Skins, Leather Garments and Goods

Even though the duty advantage for the leather garments and goods sector may not be significant, Ethiopia has not yet made any impact on the U.S. market. The Government of Ethiopia owns 4 tanneries (1 for cow hides, 1 for hides & skins and 2 for skins) and 3 shoe factories (1 for synthetic and 2 for leather). The government tanneries export most of the wet blue and crust to Europe and produce some finished leather for the domestic market. That the quality of the raw hides and skins is low due to ages of animals, slaughter process, etc. The government shoe factories sell their products to the local market but have sent some sample to Canada and Europe to test the market. The Government has also secured 8 Million Euro to rehabilitate its textile and garment enterprises.

Leather garmenting is mostly done by the private sector. The President of the Ethiopian Manufacturing Industries Association, who also owns Genuine Leather Crafts, says that his company is the 2nd biggest private sector enterprise in Ethiopia and exported leather garments and goods worth about US$100,000 in 2003/2004 - that some of them to U.S. (this is yet to be verified by the U.S. Embassy). That two other companies could be assisted to export to U.S.A.

The COMESA/LLPI (Leather and Leather Products Institute) believes that the greatest impediment for the leather garment and goods sector is lack of proper designers and trained production manpower in addition to not knowing the potential buyers and their requirements in U.S.A. In collaboration with the ECA Hub, it has organized a training workshop for 30 CEOs of tanneries as well as leather garments and goods enterprises on September 28, 2004 - a trainer from U.K will facilitate the training and also brief the participants on the access requirements for the U.S. market. In the June 2004 workshop the ECA Hub AGOA Advisor also promised technical assistance to the Ethiopian leather sector in the near future.

Chambers of Commerce

The Ethiopian Chamber of Commerce is the apex body and has membership from 14 other city Chambers of Commerce spread through the country, of which the Addis Ababa Chamber of Commerce appears to be the strongest. The Chambers, in collaboration with the U.S. Embassy, organize functions to inform their members of the benefits of AGOA - the Addis Ababa Chamber of Commerce also airs such information on its twice-a-week Radio programs. Though limited in their capacities, the Chambers endeavor to identify (a) products that can be marketed abroad, (b) products' pricing in outside markets, and (c) the possible companies that could manufacture for exports and the kind of support they need and who could provide the support. The Chambers of Commerce believe that they need training of their staff in export marketing.

Private Sector Associations

The Ethiopian Manufacturing Industries Association, though lacking the proper infrastructure, tries to assist its members in areas of technology transfer and investment. In addition, it encourages its members to collaborate through sub-contracting arrangements when one of its members has big orders.

The Addis Ababa Women Enterprises Association was established in 2000 with about 70 members and its membership has now reached over 150 women-owned enterprises. That the Ethiopian Ministry of Trade and Industry (MOTI) has provided them office space and a Secretary. It has received technical assistance from Germany (GTZ) and expects additional funding soon from EU and Italy. Some of its members (e.g. Sara Garments, Mambi Designers, etc.) are already taking advantage of AGOA. It believes that to properly benefit from AGOA, additional assistance needs to be given to eligible women enterprises with regards to: (a) American tastes (designs/fashions/colors), (b) production skills (especially finishing operations), (c) selection of appropriate production technology, (d) exposure to U.S. markets, and (e) concessional access to various lines of credit as most would-be eligible exporters do not own their own property to offer as collateral to banks.

Government Initiatives

The Government of Ethiopia does not have a strategy in place to take advantage of AGOA. Instead through the Ministry of Trade and Industry (MOTI) in 2002, it established a joint Public-Private Sector Forum for purposes of enhancing (a) investments in the country, and (b) exports from the country (and not specifically to U.S.A.). This Forum is coordinated by the Manufacturing Export Incentive Department within MOTI. The Forum meets every 3 months and is targeting to increase exports in the following sectors: textile and garment, leather and leather products, horticulture and floriculture, coffee (particularly organic coffee to Europe) and hand-loomed products (already applied for certification under Category 9).

In order to boost exports, the Government has put in place a number of incentives such as:

a) 1.5 billion Birr Credit Facility with 7.5-9% interest rates, 3-year grace period, 30/70 equity/loan ratio, business itself as collateral - only 30-40% has been utilized;

b) Provision of serviced land;

c) Development of industrial zones in every major cities - more than 1500 hectares has been designated so far in 2004;

d) 5 - 7 years tax breaks for exporters, duty-free capital goods and spares importation, exemption from income tax for expatriates for 2 years, export-credit guarantees worth the last 12 months' export without collateral;

e) Negotiated with government-owned transport companies to offer a 30% reduction in inland transport charges to exporting enterprises;

f) Looking into the possible imports it can bring in by air so that it can organize with exporting enterprises to charter planes for their exports.

3. CONCLUSIONS AND RECOMMENDED ETHIOPIA NATIONAL AGOA STRATEGY

In general, most would-be eligible enterprises can not take full advantage of AGOA because they:

a) Lack information on market opportunities in USA;

b) Have low industrial capacity and base;

c) Have relatively a low skilled and trained labor force;

d) Lack proper production management skills; and

e) Face a lot of bureaucratic challenges in order to benefit from the various government incentives, such as the different lines of credit.

However, a lot of work and development has already taken place in the textile garments and apparels sector since 2001 and there is considerable evidence to warrant USAID's intervention at this stage to take full advantage of AGOA. A 2-year strategic intervention is therefore proposed for REDSO, through USAID/Ethiopia to implement in collaboration with its Ethiopian public and private partners.

A. USAID SUPPORT

There should be a Coordinating Unit in U.S.A. - probably the same one coordinating the ALINC Program there. This Unit should identify in consultation with the ECA Hub, USAID/ Ethiopia and the AGOA National Desk Officer, volunteer experts - IESC has a big database of various volunteer specialists that could assist and facilitate Ethiopian enterprises export to U.S.A.

A.1. National AGOA Desk

A national AGOA Desk should be established within the Manufacturing Export Incentive Department, within the Ministry of Trade and Industry (MOTI) that is ready to offer office space and facilities. A qualified Ethiopian national with some marketing background and international exposure should man the Desk. Remuneration for the National AGOA Desk officer should be born by USAID.

The national AGOA Desk officer will:

• Identify and work with AGOA eligible enterprises to compile their (short) business and products' profiles as well as select suitable samples to forward to potential U.S. buyers;

• Disseminate relevant information on AGOA requirements to the identified Ethiopian enterprises, Chambers of Commerce, Public and Private sector organizations/associations;

• Prepare officials of the enterprises, Government and private sector associations to participate in trade fairs, tours and exhibitions in U.S.A. (identified by U.S. volunteer experts);

• Work with Ethiopian enterprises and officials to be ready to receive inward missions of potential buyers from U.S.A.;

• Coordinate specific technical assistance (TA) projects of intervention in selected Ethiopian enterprises;

• Organize national AGOA workshops/exhibitions and inward missions in collaboration with the relevant stakeholders;

• Attend regularly the Private-Public Sector Fora and lobby for Government support with respect to financing, technology requirements, etc. for the worthy enterprises;

• Coordinate through the REDSO's ECA Hub, with similar AGOA national Desks in the COMESA region the possibility for joint collaboration in manufacturing (for export to U.S.A.) by specific enterprises in the region; and

• Liaise with officials of USAID/Ethiopia, ECA Hub, US Embassy, Ethiopian Manufacturing Industries Association, Ethiopian Chamber of Commerce and other Chambers, and Women Associations/Organizations on ongoing AGOA activities and suggest areas for improvements and further intervention.

FY 2005 (OCTOBER 2004 - SEPTEMBER 2005)

A.2. Textile Garments and Apparels

A garment and apparel volunteer expert should be available to work on two (2) outward missions to U.S.A. In addition he/ she will lead one (1) inward mission, be the lead consultant for one national AGOA textile garment and apparel national workshop, and offer on-spot technical advice (on designs/ fashions, knitting, stitching, etc) to selected enterprises, including those making hand loomed articles and garments.

A.2.1. Outward Missions/Exhibitions

Two outward missions for Ethiopian officials and entrepreneurs are envisaged in the 1st and 3rd Quarters of 2005. Therefore the volunteer expert will:

• Work with the AGOA National Desk Officer to compile acceptable business and product profiles of selected Ethiopian enterprises;

• Receive suitable product samples and circulate these, together with the business and product profiles of selected Ethiopian enterprises, to potential U.S. buyers he/she will have identified;

• Link the Ethiopian enterprises with potential and interested U.S. buyers (including those from ethnic minority groups) identified so that they can start business dialogue/communication;

• Identify suitable target trade fairs and exhibitions, which the Ethiopian firms can participate in;

• Make the necessary logistical arrangements and bookings, in collaboration with the U.S. Coordinating Office and the National AGOA Desk Officer, for the selected Ethiopian enterprises', Associations' and government officials to participate in the chosen trade fair/exhibition in the 1st Quarter of 2005;

• Organize in the 3rd Quarter of 2005, in collaboration with the U.S. AGOA Coordinating Unit, a special "solo" exhibition for selected Ethiopian firms in a suitable U.S. City and invite potential U.S. buyers to the exhibition.

• Make the necessary logistical arrangements and bookings for the selected Ethiopian Government, Associations' and enterprises' officials to tour selected U.S. enterprises' facilities (including those of the ethnic minority groups) and "free" markets after the trade fairs/exhibitions;

• Make one-to-one appointments for the Ethiopian entrepreneurs to meet and discuss with potential buyers, including those supplying the "free" and Sunday markets;

• Accompany and assist the Ethiopian officials and entrepreneurs to and during the trade fairs/exhibitions and meetings;

• Identify possible funding sources (e.g. OPIC, EXIM, etc) that potential U.S. buyers could utilize to purchase their imports from Ethiopia and pass this information to the potential U.S. buyers; and

The outward delegations should comprise of about 20 people whose composition should be: one from MOTI/ Manufacturing Export Incentive Department, the National AGOA Desk Officer, one from USAID/ BEAT, one from the Ethiopian Chamber of Commerce, one from the Addis Ababa Chamber of Commerce, one from the Ethiopian Manufacturing Industries Association, one from the Addis Ababa Women Enterprises Association, 3 women entrepreneurs (including at least one from the hand loomed garments and crafts sector), 5 private sector entrepreneurs or their factory managers, and 5 Government enterprises' managers (including 2 from the textile mills). It is hoped that for each private and public enterprise's participation in the mission, at least 5 new contacts will be made and, overall at least 10 transactions/ deals will be concluded in 2005

To show their seriousness, both the participants from the public and private sector enterprises should meet the costs of their travel to/from U.S.A. However, special consideration should be given to the participants of women owned enterprises and associations - USAID could meet part of their travel costs to/from U.S.A. USAID will cater from all other costs involved in the mission to U.S.A such as freighting of products samples, lodging, meals and internal travel in U.S.A.

A.2.2. Inward Mission

The same volunteer expert will identify, work with, prepare and accompany suitable and potential U.S. buyers (including those from ethnic minority groups) to a 7-day inward mission to Ethiopia, in the 2nd Quarter of 2005, to attend a 2-day National AGOA Workshop and Exhibition and thereafter visit a few selected Ethiopian enterprises' facilities to gauge their capacities, styles, etc. In addition, the volunteer expert in his/her travel to Ethiopia for 2 months will:

(a) be the lead consultant in the 2-day National AGOA Workshop and brief the Ethiopian textile garment and apparel manufacturers on the designs/fashions/styles, quality and standards requirements of the U.S. market.

(b) Work with and assist, individually, identified worthy enterprises on:

• improving their designs, patterns and styles as well as finishing (knitting, stitching, etc) requirements by the American consumers;

• identifying additional machinery, equipment, attachments, fixtures and tools that they can invest in, to improve the quality of their products; and

• work methods and scheduling techniques in order to meet the demand targets, especially delivery dates.

As an incentive USAID should pay all the travel costs for the inward mission to Ethiopia for 5 to 10 serious potential U.S. buyers selected by the volunteer expert in collaboration with the U.S. Coordinating Unit.

A.2.3 National Workshops and Exhibition

At least 2 national workshops be held in Addis Ababa in 2005 to sensitize the Ethiopian officials and entrepreneurs on the benefits of AGOA. The first such workshop should be general and held in the 1st Quarter of 2005 targeting the textile, leather and crafts sectors. Officials from the ECA Hub, USAID/BEAT, U.S. Embassy and the National AGOA Desk Officer should address this workshop.

The 2nd 2-day national workshop/ exhibition should be held in Addis Ababa in the 2nd Quarter of 2005 after the 1st outward mission to U.S.A. It should be facilitated by the U.S. volunteer expert and coincide with the inward mission of potential U.S. buyers of textile garments and apparels as well as hand loomed articles and products.

A.3. Weaving and Spinning - Technical Assistance

Because the most favored nation (MFN) status is expected to end in a few years' time, USAID should start putting in some effort in selected public and private sector weaving and spinning enterprises to improve their production output quality. Therefore, it is recommended that another volunteer expert, specialized in weaving and spinning, should be availed for 3 months in the 3rd Quarter of 2005 to work with selected firms, including those making hand loomed fabrics - the firms will be identified and selected by the National AGOA Desk Officer in collaboration with relevant stakeholders.

FY2006 (OCTOBER 2005 - SEPTEMBER 2006)

A.4. Leather Garments and Goods

USAID's assistance should also be offered to selected enterprises in the leather garments and goods sector to find markets in USA. This assistance should be in close collaboration with the COMESA/LLPI since it has already identified some of the Ethiopian enterprises that could take advantage of AGOA. This assistance should focus on in-company training of the production workers and designers and thereafter on increasing the awareness of the firms' executives about the opportunities AGOA. Such training should be held in the COMESA/LLPI facilities.

A detailed program should be drawn up by the National AGOA officer in close collaboration with the COMESA/ LLPI.