|                                                                                                                                                             |  | EXIM SIGNS AGREEMENTS FOR KYRGYZSTAN, CAUCASUS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|**BISNISHome PageSearchBISNISEmbassyReportsCountryReportsIndustryReportsPublicationsSourcesof FinanceLeadsand EventsExchangeRatesState ExportsOtherSources** |  | October 1997by John CrossonExport financing will become easier for U.S. companies doing business in four smaller NIS
markets as a result of agreements signed this summer by the Export-Import Bank of the United
States (Ex-Im Bank) with the governments of Armenia, Azerbaijan, Georgia, and Kyrgyzstan. 
The new "project incentive agreements" (PIAs) will permit Ex-Im Bank to support U.S. exports
to four NIS countries where its financing had previously been completely unavailable.The agreements are for use in projects for which repayment will be based on export revenues
from the projects themselves.  Repayment is assured via offshore collateral accounts established
for this purpose.  The PIA for Georgia has already led to a major sale for Northrop Grumman,
and is an example for companies wishing to export to these markets.Project Incentive Agreements: What Are They?Under the terms of a PIA, the host country government promises to issue the necessary licences
and provide other assurances and regulatory support in lieu of Ex-Im Bank's requirement for a
sovereign guarantee from the host country government.  Instead, financing is secured on the basis
of export revenues derived from the transaction being financed or from related projects.  Offshore
collateral accounts are established to facilitate repayment.  Ex-Im Bank President and Chairman
James Harmon calls the four new PIAs "an important first step toward opening the door to
emerging market[s] with significant potential for U.S. exporters."Ex-Im Bank signed its first PIA in December 1993 with Russia and has signed PIAs with Belarus,
Turkmenistan, and Kazakstan in addition to the four concluded this summer.  In July 1996, Ex-Im
Bank approved PIA financing to support the sale of $60 million worth of mining equipment by
Caterpillar and other U.S. companies to Almazy Rossii-Sakha, Russia's largest producer of
diamonds.  As is the case with the other PIAs,  in Armenia, Azerbaijan, Georgia, and Kyrgyzstan,
Ex-Im Bank will consider creditworthy projects that have the potential to generate sufficient hard
currency earnings to repay the financing.  U.S. exporters should be aware, however, that if the
buyer is a government-owned entity, it may need to apply for a limited waiver of the World
Bank/EBRD "negative pledge clause" in order for Ex-Im Bank to be able to finance the
project.Already In Use
At the July 18 signing of the agreement with Georgia, Ex-Im Bank announced its approval of
financing for the sale of $15.6 million worth of air traffic control equipment to the Georgian
Government by Northrop Grumman.  Under the deal, the Baltimore, Maryland aerospace
technology firm will provide radar equipment, an airspace management system that provides radar
and flight data processing, microwave communications systems, and other equipment.  The deal
follows a feasibility study funded jointly by the U.S. Trade and Development Agency and the
U.S. company.The financing arrangements are also quite innovative.  An Ex-Im Bank guarantee of a loan to be
made by Citicorp will be repaid from revenues Georgia receives from international aircraft
overflying its airspace.  The revenues will be deposited in an account with the International Air
Transport Association in Switzerland, from which repayments will be made.For the Almazy Rossii-Sakha transaction, repayment of the loan is secured through revenues
generated by a long-term offtake arrangement between Almazy Rossii-Sakha and Lazare Kaplan
Internationale Ltd., of New York.  The Bank of New York is the guaranteed lender.How to Use PIAs
U.S. companies wishing to pursue transactions under the PIA's should contact Ex-Im Bank's
business development staff to make sure the proposed transaction qualifies under the PIA criteria. 
Potential PIA transactions must meet Ex-Im Bank's general legal and regulatory conditions in a
given country and applications for financing individual projects will still require significant
preparation and legwork.  In addition, the exporter must find a bank willing to finance the project
with Ex-Im Bank's guarantee and also locate other financing which may not be guaranteed by
Ex-Im Bank.  James S. Cox, Director of Project and Trade Finance with Northrop Grumman
advises that proposed projects "must work financially," and that exporters need to follow "all the
normal fundamentals" of export financing. For more information on Ex-Im Bank  programs in the
NIS, including contact information, visit BISNIS Online at
www.mac.doc.gov/bisnis/finance/exim.htm., or call The Export Import Bank of the United
States at 1-800-565-EXIM.John Crosson covers finance for BISNIS.This report is provided courtesy of the Business Information Service for the Newly
Independent States (BISNIS)