On behalf of the National Association of State Development Agencies (NASDA) and the Minnesota Trade Office, I would like to thank you for inviting me to address the U.S. Senate Subcommittee on International Finance. I am Noor Doja and serve as the Executive Director of the Minnesota Export Finance Authority which is a unit of the Minnesota Trade Office. I am here today representing the National Association of State Development Agencies which is the umbrella organization for the state economic development agencies. NASDA and the Minnesota Export Finance Authority would like to express our support for the reauthorization of Ex-Im Bank's charter, so that the agency may continue in full operation beyond September 30, 1997.
National Association of State Development Agencies. NASDA is a Washington-based non-profit association that was formed in 1946 to provide a forum for directors of state economic development agencies to exchange information, compare programs and establish an organizational base from which to approach the federal government concerning issues of mutual interest. Today, NASDA is a full-service trade association, providing a wide range of technical services to its members. Participants in NASDA include state development agencies, numerous development specialists at all levels of government and several dozen private sector interests. NASDA is the sole organization in Washington, DC that focuses on the international needs of state economic development officials and their firms/clients which are small to medium-sized companies.
Export Finance Task Force. A major strength of NASDA has been its ability to coalesce state export finance experts through the NASDA Export Finance Task Force. The Task Force is comprised of the directors of the state export finance authorities. Currently, more than 30 states have export finance functions.
Throughout the year, the directors coordinate issues and send queries to each other through NASDA's on- line system that allows finance directors to discuss activities via the Internet. The group also comes together once per year in Washington to share information and discuss how they can better coordinate their efforts with federal financing agencies. This Annual Meeting is scheduled to coincide with the Annual Conference of Ex-Im Bank so that states may couple their activities with the Bank. In addition, NASDA publishes a quarterly export finance newsletter that reports on the activities of the state financing offices
Minnesota Export Finance Authority. I am here today representing not only NASDA, but the Minnesota Export Finance Authority (MEFA) which is an active member of NASDA. MEFA is an example of the actions that states are taking in financing exports. MEFA, created in 1983, helps Minnesota businesses overcome financial hurdles to exports through counseling, training, technical assistance, loan guarantees and with access to federal programs such as the Export-Import Bank of the U.S., the U.S. Small Business Administration, the U.S. Trade Development Agency and the Overseas Private Investment Corporation. Our loan guarantees alone supported $5.7 million in small business exports from Minnesota in 1996.
In response to feedback from clients, MEFA launched a foreign credit information service in 1996, making it easier and much less expensive for exporters to get timely and accurate credit information on their overseas buyers. This "fee for service" program became operational in April 1996 and except for a very small initial launch cost, the program is self-funding.
Since its creation in 1983, MEFA has guaranteed 117 loans supporting more than $43 million in small business exports. The loan guarantee program continues to have an enviable claim payment record of only 1.2 percent of the dollar value of guarantees approved.
Export-Import Bank of the United States.States such as Minnesota play an integral role in providing technical assistance before the firms actually engage in exporting as well as assisting firms that need financing. For these states, Ex-Im Bank activities have become a very important financing tool for small to medium-sized businesses. The mission of Ex-Im Bank is to create and sustain jobs through exports. They carry out this mission by financing U.S. exports to provide leverage for U.S. businesses to compete for global economic opportunities. They ensure that U.S. exporters can access otherwise unavailable lucrative foreign markets through a range of diverse and innovative loan, guarantee and insurance programs. Ex-Im supports U.S. exports where U.S. exporters face competition from foreign suppliers supported by their government's export financing agencies or to markets where private sector financing is generally unavailable. Ex-Im Bank also has been hailed for creating and sustaining almost 200,000 thousand jobs directly and hundreds of thousands of U.S. jobs indirectly each year.
Ex-Im Bank City/State Partners Program. The area where Ex-Im Bank has made the greatest effort to reach out to smaller businesses is the Ex-Im Bank City/State Partners Program. In the past, many smaller companies were not aware of the Bank's programs or how to use them. To bridge the gap between Ex-Im and smaller companies, the Bank formed partnerships with 33 state and local government offices and private sector organizations to bring its programs to the exporter at the lowest cost to the American taxpayer. Ex-Im-Bank has resources in the form of loans, guarantees and insurance programs. In its Delegated Authority Program, 80 lenders in more than 20 states have the authority to commit Ex-Im Bank's guarantee on a case-by-case basis for pre-export working capital (financing covering the period from building the product to shipping) without prior approval from Washington, D.C..
Ex-Im recognized early on that state and local representatives have the knowledge of the local market and how to reach it. By pooling strengths in a local-federal partnership, both the federal government and state and locals now can help create high-quality U.S. jobs and expand the local tax base through exports.
City/State has been so successful because Ex-Im Bank trains the staff of the states to market Bank programs to local businesses and commercial banks, teach seminars, counsel exporters and banks and package transactions. Some of the programs the states market are the Working Capital Guarantee Program that helps small and medium-sized businesses obtain financing from commercial lenders and the Export Credit Insurance Program that offers insurance coverage against political and commercial risks.
The expense of packaging a small deal is often prohibitive for a bank. By packaging transactions for the banks, states facilitate many commercial loans that otherwise would not go forward.
To join the City/State Partners Program, the Minnesota Export Finance Authority, like other City/State Partners simply had to: 1) prepare a one-year budget and marketing plan and 2) send two individuals from Minnesota to Washington for a five-day seminar on Ex-Im Bank programs and an additional week of advanced training.
The City/State Partners Program presently are operating in 26 states, two counties, a chamber of commerce and the Commonwealth of Puerto Rico. The Partners are: Alaska, Arkansas, California, Florida, Georgia, Indiana, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nevada, New Hampshire, North Carolina, Ohio, Oklahoma, Pennsylvania, Puerto Rico, South Carolina, South Dakota, Texas, Utah, Vermont, Virginia, Washington, the Dallas, Texas Chamber of Commerce, the Erie County Industrial Development Agency of New York, Jefferson Parish Economic Development Commission of Louisiana.
The City/State Partners Program has been important to states. Through Ex-Im's program, the Minnesota Export Finance Authority has assisted our exporters obtain one working capital guarantee, eight receivable insurance policies and attend four training programs in the last year.
In July 1996, the Minnesota Export Finance Authority was selected by the Export-Import Bank to be one of only six state programs nationwide to participate in a pilot project for delegated authority; the other states included California, Florida, Georgia, Maryland and Massachusetts. This program became operational in October and allows Minnesota exporters to access larger export working capital loans through a state-federal co-guarantee. Ex-Im Bank notes in its Annual Report that between fiscal year 1992 and fiscal year 1996, 79 Minnesota companies were supported by the Bank's programs and the total value of exports sustained during that period for Minnesota companies was $491 million.
Other states have been equally active with the assistance of Ex-Im Bank. For example, the state of Arkansas administers the Ex-Im Bank Umbrella Insurance Policy and packages working capital guarantees. The Bank reports that between FY 1992 and FY 1996, 32 companies were supported by Ex-Im programs and $49 million in exports were contributed toward the Arkansas economy.
The California Export Finance Authority administers the Umbrella policy for providing foreign credit insurance to small businesses. From fiscal year 1992 to fiscal year 1996, 739 companies were supported by Ex-Im Bank programs with a value of nearly $4 billion in exports.
The Florida Export Finance Corporation offers exporters easy access to, and expedited processing of, applications to export assistance programs offered by Ex-Im Bank. Services include packaging of Ex-Im working capital guarantees. Florida also is the holder of an Ex-Im Bank Umbrella Policy which allows Florida exporters to obtain political and credit risk insurance. Between FY 1992 and FY 1996, Ex-Im supported 487 companies in Florida for a total of $2.1 billion in exports.
Since the City/State program was initiated in Georgia, the state has been successful in obtaining financial assistance in the form of foreign credit insurance and loan guarantees for a wide range of Georgia exporters. From fiscal year 1992 to fiscal year 1996, 131 Georgia companies were supported by Ex-Im programs for a total value of $400 million in exports.
The Missouri Export Finance Partnership markets programs offered by the Export-Import Bank of the U.S. and packages applications for working capital guarantees. From fiscal year 1992 to fiscal year 96, 92 companies were supported by Ex-Im programs and $265 million in exports were contributed to Missouri's economy.
New Hampshire provides a full range of Ex-Im Bank programs. The state packages working capital and medium & long-term foreign buyer credit applications. Between fiscal years 1992-96, 37 New Hampshire companies were supported for a total of $125 million in exports.
The core of the Ohio Export Finance Initiative is a partnership between the state of Ohio and Ex-Im Bank. The program began in January of 1993 and the first half of the year was spent marketing the program to exporters, banks and economic development organizations. Since that time, Ohio has packaged applications on behalf of the state's companies for the Ex-Im Bank Working Capital Guarantee program. In addition, Ohio has consulted with many exporters on Ex-Im Bank's export credit insurance and medium-term financing programs. Between fiscal year 1992 and fiscal year 1996, Ex-Im supported 278 Ohio companies for a total value of exports of $936 million.
Ex-Im Bank regularly provides export financing services to Utah businesses. These services include working capital guarantees, export credit insurance and direct and intermediary loans. From fiscal year 1992 to fiscal year 1996, 30 Utah companies were supported with Ex-Im Bank programs as well as $47 million in exports.
The Virginia Small Business Financing Authority enrolled in the Ex-Im Bank City/State program in 1992. The state has assisted companies with Ex-Im guaranteed financing and administered the Ex-Im Bank Export Credit Insurance Umbrella Program. Between fiscal year 1992 and fiscal year 1996, 81 companies were supported and $361 million in export sales created.
The state of Washington secured membership in the Ex-Im Bank City/State Partners program in 1989 and packages working capital guarantees. From FY 1992 to FY 1996, 53 companies were supported in Washington and $4 billion in exports were generated.
History of the City/State Program. The City/State Partners Program was initiated in 1988 as a test program and initially included only three states. The underlying concept of the program was to combine the states' knowledge of the local market with Ex-Im Bank's financial programs. The goal was to help small and medium-sized firms overcome the many obstacles that prevent them from exporting their goods abroad.
City/State has increased its capacity tremendously since that time. It now encompasses more than 30 partnerships around the country. This is a reflection of the strong interest in the program by state and local entities and Ex-Im Bank's enthusiasm about partnering with these jurisdictions.
Another reason behind this upsurge in interest is that is that economic development is commanding greater attention at the state level and this attention is being increasingly concentrated on the issue of export promotion. The City/State Partners Program when coupled with a state's own export promotion program for smaller businesses, represents a low-cost technique that can create the type of high-wage jobs that most states covet.
Conclusion. The Export-Import Bank of the U.S. is key in sustaining and increasing jobs in this country by financing exports that would otherwise not happen. While America's major trading competitors are working to increase their market share overseas, Ex-Im Bank remains an essential tool in the U.S. arsenal, helping to ensure that U.S. firms can compete on equal footing. The export financing instruments of the Bank (direct loans, loan guarantees and insurance), enable American exporters to make creditworthy sales when other sources of financing are not available or not adequate. Without Ex-Im, the U.S. could lose major opportunities to foreign competitors in the fastest growing markets in the world.
We urge you to reauthorize the Charter of the Export-Import Bank of the United States. The Bank's record speaks for itself; over the last five years, Ex-Im has supported over $76.3 billion in exports, which in turn supported almost 200,000 jobs directly and over 1 million indirectly each year. Moreover, for fiscal year 1996, 1,934 small business transactions took place; this is 81 percent of the total transactions. In addition, 411 small businesses received first time assistance from the Bank in FY 1996.
Very importantly, Ex-Im Bank does not compete with private capital. Ex-Im Bank's mandate is to supplement and encourage private capital. The Bank only provides financing that the private sector cannot or where foreign governments are providing subsidized financing for their exporters, thereby placing U.S. exporters at an unfair disadvantage. This financing is crucial to smaller firms that often cannot get commercial bank financing. It also is vital to the American economy, because small business represents the economic segment where the greatest potential for U.S. job and export growth lies.
Again, we urge the reauthorization of the Ex-Im Bank
Charter. Thank you for the opportunity to present testimony before the U.S.
Senate Subcommittee on International Finance.
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