Cape Verde : export development services project review under policy determination (PD) 20 -- final report

The evaluation focuses on project compliance with Section 547 of Public Law 103-87, which prohibits funding of activities that might cause loss of U.S. jobs, and with USAID's related Policy Determination 20 (PD-20). The primary focus of the project has been institution building; PROMEX is fully staffed, with 17 employees, and functions well as an investment and export promotion agency. Institution building has been supplemented by studies and specialized TA in areas which required expertise not available in-house. In coming years, PROMEX will continue institutional strengthening while increasing direct promotional activities. PROMEX has identified three target sectors -- light manufacturing, tourism, and fisheries -- and two target regions, Europe (primarily Portugal) and Asia (primarily Hong Kong). PROMEX will also continue efforts to raise awareness among local businesses, and provide training to local entrepreneurs in such areas as joint ventures, investment appraisal, and other basic techniques to encourage export development. Section 547 prohibits the use of U.S. funds to (1) provide financial incentives to U.S. enterprises to relocate abroad, (2) establish or develop export processing zones (EPZs), if such activities are likely to result in the loss of U.S. jobs, or (3) provide assistance which would contribute to the violation of internationally recognized workers' rights. PD-20 expands on Section 547 by making it USAID policy to terminate any activity that would lead to the loss of U.S. jobs through any action, not only through financial incentives. The evaluation found that there is no reasonable likelihood of relocation of U.S. jobs as a result of the project. The EPZ feasibility study originally planned would have violated Section 547 and PD-20; however, as the EPZ study component has already been canceled to avoid conflict with other U.S. laws, this is no longer an issue. Also, internationally recognized workers rights are guaranteed by the Cape Verdean Labor Code and the project does not support any activity that would violate those rights. In fact, Cape Verde does not present an attractive investment location for U.S. enterprises due to poor international transportation capacities (e.g., shipping and air freight connections), lack of adequate industrial space, high cost of basic utilities, and distance from the United States. Further, historical investment patterns indicate that there is no interest from U.S. investors at this time. Lastly, PROMEX's planned promotional efforts do not include any promotion to U.S. investors. It is recommended that USAID/Cape Verde (1) reiterate that support for EPZ development is not allowed under the project, (2) inform PROMEX and the institutional contractor of the relevant provisions of Section 547 and the contents of PD-20, (3) develop a monitoring system that periodically reviews the project in light of Section 547, and (4) prepare a compliance report stating that the project is not in violation of 547 and PD-20.