J.7a Diaspora Invest Completion Report, February 2022.pdf

COMPLETION REPORT

USAID DIASPORA INVEST ACTIVITY

This document was produced for review by the United States Agency for International Development. It was prepared by Financial Markets International, Inc. under the Diaspora Invest Activity, contract number AID-168-C-17-00001.

Employees at Roundliner d.o.o. Prijedor, Diaspora Invest beneficiary @DIASPORA INVEST

COMPLETION REPORT

USAID Diaspora Invest Activity

Contract Number: AID-168-C-17-00001

USAID/Bosnia-Herzegovina Contracting Officer: Lidija Kranjec

USAID/Bosnia-Herzegovina COR: Dobrila Vukmanovic

Chief of Party: Sanjin Arifagic

Submitted by:

Financial Markets International, Inc. (FMI)

Submitted to:

USAID/Bosnia Herzegovina

February 2022

DISCLAIMER

This document is made possible by the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of Financial Market International, Inc. and do not necessarily reflect the views of USAID or the United States government.

Diaspora Invest Activity – Annual Report for Year 4 | 3

CONTENTS

Summary of Accomplishments

I. Introduction

Activity Description and Purpose

Intervention context

II. Overview of Implementation and Results

Objective 1: Leveraging Diaspora Input into the Development of an Institutional Policy Framework for Diaspora Investment

Objective 2: Expand Diaspora Direct Investment by Providing Technical Assistance and Grants to Eligible Early-Stage SMES and Start-Ups

Objective 3: Develop a Sustainable Local Platform to Provide Business Services and Facilitation to Potential Diaspora Investors

III. Cross-Cutting Issues

IV. Coordination with USAID and Other Stakeholders

V. Lessons Learned From Implementation

Annex B: Detailed Overview of Diaspora Invest Results

Annex C: Staffing and Organizational Structure

Annex D: List of Diaspora Invest Reports and Deliverables

List of Boxes:

Box 1: Focused, Short-Term Technical Assistance to Support Grant Implementation Box 2: Snapshot of BDM beneficiaries Box 3: Tailor-made technical assistance leads to lasting impacts Box 4: Supporting knowledge transfer from diaspora to the local private sector Box 5: Diaspora Investment driving economic and social growth in small towns across BiH

List of Tables:

Table 1: Results Framework for the Activity with Targets and Results per Each Project Year Table 2: Number of new full time officially registered jobs in each USAID-assisted enterprise Table 3: Beneficiaries receiving grant and technical assistance through the BiH Diaspora Marketplace Table 4: Beneficiaries receiving USAID Diaspora Invest technical assistance Table 5: USAID Diaspora Invest beneficiaries owned, co-owned and/or managed by women Table 6: Direct investment resulting from BiH Diaspora Marketplace (cost share and fixed assets) Table 7: Investment resulting from Diaspora Invest One-Stop Shop Table 8: Diaspora policy recommendations submitted to and adopted by the BiH Governments Table 9: Beneficiaries graduating from the BiH Diaspora Marketplace Table 10: List of potential diaspora investors (firms) who used information and services provided by the DBC

List of Figures:

Figure 1: Diaspora Invest Activity Scorecard at January 31, 2022 – Eight MEL indicators Figure 2: Real GDP Growth in BiH, 2011-2021 Figure 3: Visitors to BiH, Arrivals in millions, 2017-2021 Figure 4: Key statistics on emigration and remittances in Bosnia and Herzegovina Figure 5: Municipalities with USAID-supported diaspora investors Figure 6: Leveraging diaspora investment through the BiH Diaspora Marketplace

Diaspora Invest Activity – Completion Report | 4

Figure 7: Diaspora investment in beneficiary firms in US$ - results vs. targets Figure 8: Models of diaspora engagement in BiH economic development Figure 9: Export performance of Diaspora Invest beneficiary firms at December 31, 2021 Figure 10: Overview of DI beneficiaries’ impact by investment location Figure 11: Interactive map at diasporainvest.ba Figure 12: DI Organizational Structure

List of Acronyms:

APS Annual Program Statement AVE Advertising Value Equivalence B2B Business to Business BAM Bosnian Mark BDM BiH Diaspora Marketplace BHAAAS Bosnian and Herzegovinian-American Academy of Arts and Sciences BPC Business Plan Competition BiH Bosnia and Herzegovina BAS Business Advisory Services COP Chief of Party DBC Diaspora Business Center DBN Diaspora Business Network DCOP Deputy Chief of Party DDI Diaspora Direct Investment DiaBAC Diaspora Business Advisory Council EU European Union FDI Foreign Direct Investment GDP Gross Domestic Product GM Grants Manual ICT Information and Communication Technology IMF International Monetary Fund M&E Monitoring and Evaluation MEL Monitoring, Evaluation and Learning MoU Memorandum of Understanding OSS One Stop Shop PMP Performance Monitoring Plan REC Review and Evaluation Committee RFA Request for Applications SGF Small Grant Fund SME Small and Medium Enterprise STTA Short Term Technical Assistance TA Technical Assistance TAA Technical Assistance Agreement USG United States Government WG Working Group WP Work Plan

Diaspora Invest Activity – Completion Report | 5

SUMMARY OF ACCOMPLISHMENTS

In April 2017, USAID Mission in Bosnia and Herzegovina awarded the Diaspora Invest contract to FMI Inc. and its subcontractors – Nasa Perspektiva, Restart and Pi Consulting. This document – the Completion Report – captures almost five years of results and reflections for the Diaspora Invest Activity stakeholders. The intention of this Report is to present the results and achievements attained under the contract, reflect on the activities implemented, and draw lessons that can inform future actions on diaspora engagement in Bosnia and Herzegovina.

Diaspora Invest’s primary purpose was to create linkages between domestic investment opportunities and diaspora capital and knowledge and provide diaspora with financial and technical assistance to start and grow their businesses in BiH, increasing their investment and stimulating job creation.

The Activity was divided into three components: Component 1 aimed to identify obstacles to the business-enabling environment in the country and devise policy recommendations to address them.

Component 2 was a grant scheme combined with technical assistance (TA), provided to eligible early-stage micro, small and medium enterprises (MSMEs). Under Component 3, the Activity was expected to develop a sustainable local platform to provide business services and facilitation to potential diaspora investors. The main implementation mechanisms used by DI included a small grants fund, which awards grants to eligible diaspora investors (grantees), a web portal (an online business matchmaking network), investment conferences and business-to-business (B2B) events, the diaspora business center (DBC)/one-stop-shop (OSS), and a pool of experts and consultants who, together with the Activity’s staff, provide TA to eligible diaspora investors.

A review of the results presented below (Figure 1) reveals that the Diaspora Invest Activity has achieved and, in most cases, exceeded the life-of-activity targets for all eight indicators set under its MEL plan. Given that the Activity’s closeout is planned for April 2, 2022, the final results achieved, particularly on investment and employment, are expected to be even slightly higher. These results were achieved despite the difficulties imposed by the ongoing Covid-19 pandemic during the last two years of Activity.

Figure 1: Diaspora Invest Activity Scorecard at January 31, 2022 – Eight MEL indicators

1. Number of new full time officially registered jobs in USAID-assisted enterprises

Y1-Y5 target: 250 Completion rate: 198%

2. Number of firms receiving USG-funded technical assistance

Y1-Y5 target: 140

Completion rate: 117%

3. Percentage of female participants in USAID-assisted programs

30% Y1-Y5 target: 25%

Completion rate: 120%

4. Value of investment in assisted private enterprises

$24.2m Y1-Y5 target: $22m Completion rate: 110%

8. Number of potential diaspora investors who used OSS information and services

Y1-Y5 target: 100

Completion rate: 111%

7. Number of BiH diaspora organizations registered on the Diaspora Map

Y1-Y5 target: 100

Completion rate: 113%

5. Percent of policy recommendations adopted

71% Y1-Y5 target: 50%

Completion rate: 142%

6. Number of diaspora early-stage SMEs and startups that graduated from BDM

Y1-Y5 target: 70

Completion rate: 111% *projected at close

Diaspora Invest Activity – Completion Report | 6

In terms of the key results, deliverables and outputs, the Activity has met with success in all three key areas of engagement:

Objective 1: Leveraging diaspora inputs into the policy-making process

• The Activity conducted an Assessment of Diaspora Investment in Bosnia and Herzegovina early on and provided recommendations on policy actions to expand diaspora direct investment (DDI) and improve the environment for diaspora engagement. Key recommendations included providing technical assistance and support to the diaspora strategy development process and establishing a structured dialogue with diaspora investors. The recommendations were adopted by the USAID/BiH Mission during June 2017, providing a clear roadmap for Diaspora Invest actions under the policy component.

• Strategies for Cooperation with Diaspora have been adopted by the Federation of BiH1 and the Brcko District2 Governments following extensive technical assistance and capacity development efforts implemented by the Activity. The strategies’ adoption followed the endorsement of the Diaspora Investment Sections of the Strategies (“Pillar 3: Enhancing diaspora contribution to economic development”), completed during the third year of activities together with the BiH, FBiH and Brcko District Governments’ Working Groups. Policy recommendations provided by the Activity and incorporated into the Strategies were developed through a structured dialogue with diaspora investors. The strategies’ adoption at these two levels has opened up an avenue for USAID Diaspora Invest to work with these and other authorities in the country, particularly at the local level, and assist them in implementing the strategy measures going forward.

• Local approaches in diaspora engagement were piloted during the final year of the project. The total number of municipalities concluding a Memorandum of Understanding with the Diaspora Business Center (DBC) has increased to 16 during the final year of operations and workshops on local diaspora engagement were organized with four municipalities during the same period.

Diaspora Invest, in cooperation with the municipality of Lopare, implemented a pilot that included:

(i) local diaspora mapping, (ii) preparing an overview of investment and commercial opportunities in the municipality for diaspora engagement, (iii) joint organization of a diaspora B2B event, and

(iv) development of a diaspora engagement toolkit for local authorities. Finally, a roundtable with mayors and representatives of 15 municipalities was organized to reflect on the work done at the local level, present the municipal toolkit for diaspora engagement and establish a Network of local communities for diaspora engagement. The Network will be managed by the DBC beyond the scope of the Diaspora Invest Activity.

Objective 2: Establishment of a BiH Diaspora Marketplace

• The Activity established a BiH Diaspora Marketplace, designed as a business plan competition whereby prospective diaspora investors pitched their business ideas for financial and technical assistance from USAID’s Small Grants Fund. The Marketplace was implemented through eight rounds of public calls, attracting 336 applications from prospective diaspora investors. Following the successful completion of the business plan competition, USAID Diaspora Invest awarded 78 grant agreements to diaspora applicants with each applicant company also concluding a technical assistance agreement with the project. By January 31, 2022, a total of 77 grant agreements have been closed out, with one agreement still under implementation. While the program required grant beneficiaries to provide at least a 1:1 match in terms of investment committed, the actual

1 http://fbihvlada.gov.ba/bosanski/sjednica_v2.php?sjed_id=802&col=sjed_saopcenje 2 http://vlada.bdcentral.net/Publication/Read/nastavljena-72-redovna-sjednica http://fbihvlada.gov.ba/bosanski/sjednica_v2.php?sjed_id=802&col=sjed_saopcenje http://vlada.bdcentral.net/Publication/Read/nastavljena-72-redovna-sjednica

Diaspora Invest Activity – Completion Report | 7 beneficiary investment far exceeded that requirement. The total investment generated by the grantee companies stands at $15.6 million3 as of January 31, 2021, far exceeding the $7 million life-of-activity target. Having in mind that USAID grant awards amounted to $1.6 million, the program has leveraged approximately $10 dollars from BiH diaspora for each USAID dollar invested. A total of 494 new jobs have been created through grant assistance, almost doubling the target of 250 new jobs.

Objective 3: Development of a sustainable local platform

• Diasporainvest.ba Diaspora Business Network Platform (BNP), a web portal launched in 2017, has since established itself as leading source of information for diaspora investors. The statistics show that 74,206 unique website users recorded 115,488 sessions with the total number of pageviews reaching 305,214. A total of 511 news articles were posted on the site, 24 video stories were produced and published, and 54 newsletters were developed and distributed to close to 2,000 subscribers. The number of registered platform users with established B2B connections has grown steadily over the period, reaching 1,335 registered users at the end of December 2021. Diaspora Invest has also registered 113 diaspora organizations on the site, exceeding the contractual target.

• The Diaspora Business Center has provided 111 potential diaspora investors with information and investment facilitation support since its establishment in late 2017. Standalone technical assistance (TA) was provided through DBC to 86 diaspora firms encompassing a wide range of services, such as business set up support, introduction of technical standards and regulations, supply chain management, operational efficiency, branding, sales and marketing interventions, and others. The standalone TA interventions have yielded more than $8.5 million in new diaspora fixed asset investment by the end of 2021. Furthermore, the DBC has expanded its outreach and developed a network of local partner institutions, including 16 local authorities that have signed Memoranda of Understanding (MoU) with the DBC to jointly work on attracting and facilitating diaspora investments into these communities. Furthermore, the DBC has implemented a series of “DiaWorks” physical workshops and “DBC Online” webinars with experts positioning DBC as a platform for knowledge exchange. In total, DiaWorks workshops and DBC Online webinars have brought together more than 160 participants, demonstrating the demand for diaspora knowledge transfer and sharing of good practices.

• During the fifth and final year of Activity, Diaspora Invest also successfully implemented a pilot DiaWorks internship program for five young diaspora interns, a pilot diaspora mentorship program with five diaspora mentors and five local SMES, and the pilot diaspora export agent program with 23 local SMEs taking part in the diaspora sourcing initiative.

• The Activity organized or co-organized a total of 94 events, conferences and meetings with participation of over 5,000 diaspora members and local counterparts. Communications and outreach effort to raise awareness on diaspora investment opportunities among the diaspora business community, the local private sector, and the general public was conducted systemically throughout the program. This has been particularly important as the Activity targeted potential beneficiaries residing outside of the country, unlike most development assistance programs that deal solely with country’s residents. To reach this audience, the Activity engaged closely with local media which proved to be receptive to the type of content produced by the project. Overall, at least 2,000 media articles dealing with Diaspora Invest activities were published during the

3 The figure includes fixed asset investment estimates for 2021 based on Activity records, as the official FIA/APIF data has not yet been made available at the time this document was prepared.

Diaspora Invest Activity – Completion Report | 8 implementation, with the advertising value equivalent of BAM 381,290, and engaging with an audience of hundreds of thousands of citizens residing both in the country and abroad. To complement the media work, the Activity has set up its own social media presence that is growing organically with followers on Facebook (7,568), LinkedIn (1,699), Twitter (1,100), Instagram (670) and YouTube (30,919 views). These and other communication tools will be transferred to local partners before the contract’s closeout as part of the effort to ensure overall sustainability of diaspora engagement effort.

https://www.facebook.com/bihdiasporainvest https://www.linkedin.com/company/bihdiasporainvest/?viewAsMember=true https://twitter.com/diasporainv https://www.instagram.com/bihdiasporainvest/ https://www.youtube.com/channel/UCpOc_7c4Q7sPL9Fgw1-465A

Diaspora Invest Activity – Completion Report | 9

I. INTRODUCTION

This document is the Completion Report for the USAID Diaspora Invest Activity, implemented by Financial Markets International Inc. (FMI) under USAID Contract No. 168-C-17-0001-00. The Activity commenced on April 3, 2017 and is expected to complete on April 2, 2022.

This Completion Report covers the entire period of the Activity and addresses the key requirements listed under Section F.7.10 of the Contract, including the final status of benchmarks and tangible results and lessons learned during the implementation.

ACTIVITY DESCRIPTION AND PURPOSE

More than 2 million people originating from BiH currently reside outside of the country. This diaspora is well integrated and better off than most other migrant communities in their host countries, with ample potential and willingness to contribute to the development of BiH. This is evidenced by substantial diaspora remittances, estimated at 11% of Bosnian GDP in 2017, which greatly exceed the FDI flows into the country. However, engagement with the diaspora has been largely unstructured, with little systemic efforts and no incentives provided to help channel the investment potential of diaspora towards productive uses in the home country.

The purpose of USAID’s Diaspora Invest Activity, a five-year, $6.6 million intervention, is to catalyze the economic contribution of BiH diaspora to BiH’s socio-economic development by engaging with diaspora investors in a structured manner, thereby providing incentives for diaspora investment and establishing local platforms for business services and investment facilitation.

The Activity is achieving the above purpose through focused efforts aimed at:

(a) Leveraging diaspora input into the development of an institutional policy framework for diaspora investment by supporting diaspora investors and entrepreneurs in formulating reform recommendations to promote an enabling environment for diaspora investment, and providing assistance to relevant institutions in Bosnia and Herzegovina in developing a Diaspora Investment Document;

(b) Expanding diaspora direct investment by providing technical assistance and grants to eligible early-stage SMEs and start-ups through (i) implementation of a Bosnian Diaspora Marketplace (BDM) and business plan competition (BPC) to source innovative and high-growth oriented business ideas, linked to (ii) business advisory services and technical assistance provision, and (iii) grant funds. Successful investors and startups will be also eligible for DCA-backed loans provided through a complementary program outside of the scope of this Activity; and

(c) Developing a sustainable local platform to provide business services and facilitation to potential diaspora investors through the establishment of (i) a One-Stop- Shop for diaspora investors, (ii) creation of an online diaspora business network, and (iii) outreach activities, including diaspora investment conferences and B2B events.

The Activity will result in:

• At least 70 diaspora firms graduated from the BDM program with at least 250 jobs created and direct investment of $7 million;

• Increased BiH diaspora investment by $15 million evidenced by a comparative analysis of data on investment levels via the amount of equity contributed by diaspora entrepreneurs and other

Diaspora Invest Activity – Completion Report | 10 metrics established to capture qualitative impacts such as diaspora knowledge transfer, introduction to new technologies, investment in job generation etc.

• Cohesion among diaspora business networks improved through an online BiH Diaspora Map built into the web portal, which collects and visualizes BiH diaspora business organizations’ presence and influence. Map users will be able to view diaspora organizations by sector, countries of registration and other characteristics. The Map registered at least a 100 BiH diaspora organizations worldwide by the end of year 2; and

• A fully self-sustaining one-stop center and web-portal, providing fee-based services and information to BiH Diaspora Investors and associations.

INTERVENTION CONTEXT

The environment in which the Diaspora Invest Activity took place was shaped by several major trends and developments over the past five years. Political situation in the country has remained volatile throughout the period, with further deterioration during 2021/22, increasing the real and perceived risks of doing business in the country for both local and international investors. The onset of the novel coronavirus (Covid-19) has pushed the country’s economy into a deep recession in 2020, after a period of already lackluster growth, with a quicker than expected economic rebound in 2021.

The Activity was profoundly impacted by the Covid outbreak that has led to a major health crisis and immense disruptions to the economy. As a result of the outbreak, the country’s output has contracted by 3.2 percent in 20204, the largest drop in output this century (Figure 2). All key economic indicators, including employment, have seen a sharp reduction in 2020 as well. Some limited gains observed in the latter part of 2020 have transformed into a full recovery during 2021, mostly due to strength in both domestic and external demand. A sharp rebound in domestic consumption and in travel across Europe helped boost remittances (Figure 4) as well as tourism inflows (Figure 3) during the 2021 peak summer season. A strong recovery in advanced economies also provided a boost to demand for BiH exports. With the worsening Covid 19 conditions in the last quarter of 2021, the travel restrictions were again reimposed in many European countries, bringing also some decrease in demand.

These developments had a significant negative impact on Diaspora Invest work. While the existing incorporated beneficiaries had, to a large extent, proceeded with their investment and hiring plans, although more conservatively than originally planned, most of the new diaspora investment projects that were in the pipeline at the beginning of the 2020 were either cancelled or pushed forward to mid- 2021. The travel restrictions have had a particularly dire effect on incoming diaspora investment. As

4Central bank of Bosnia and Herzegovina

Figure 2: Real GDP Growth in BiH, 2011-2021

Source: Central Bank of Bosnia and Herzegovina, World Bank (2021 estimate)

1.0

-1.0

2.5

1.2

3.1 3.2 3.2 3.7

2.8

-3.2

4.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021e

Diaspora Invest Activity – Completion Report | 11 the potential diaspora investors faced either prolonged quarantine upon their return to the host country or were prevented altogether from visiting Bosnia during 2020 (depending on whether they still held BiH citizenship), the number of incoming investors plummeted in 2020. There was a notable recovery during 2021 however, as illustrated also by overall arrivals in the country doubling compared to 2020 (although still less than 60% of arrivals recorded during 2019) (Figure 3).

Emigration has continued largely unabated, accelerating in the period leading up to 2020 when the Covid-19 pandemic temporarily dampened outward migration (Figure 4).

The EU continues to rank high among the preferred destinations for Bosnia and Herzegovina emigrants.

The geographical proximity of the EU, its higher wages, high-quality educational and health systems and better living standards, along with a more stable political environment have been some of the key pull factors for outward migration from Bosnia and Herzegovina. On the other hand, lacklustre growth in Bosnia and Herzegovina following the 2007 global financial crisis, combined with fragile institutions at home and high levels of perceived corruption, have all combined to form strong push factors for emigration. All in all, more than 297,000 BiH citizens have sought and received their first visas for residence in one of the EU/EFTA5 member states over the past decade.

This level of emigration would not be possible without a relatively liberal attitude of the EU when it comes to labour migration. Germany in particular welcomes extraordinarily high numbers of migrants from the country (as well as the wider Western Balkans region). In fact, more than 27% of first permits issued to BiH citizens by EU member states over the past decade (2011-2020), were originated by Germany (Figure 4). As a favoured destination country for BiH emigrants, Germany is followed by Slovenia, Croatia and Austria which together make up around 83% of all BiH outward migration. While these numbers reflect only the emigration trends relating to the EU and omit data from other overseas destination countries, they are still indicative of the overall emigration trends. Finally, some of the BiH citizens receiving permits to reside, study and work in the EU have since returned home, but many have stayed. According to the World Bank, the overall population of Bosnia and Herzegovina has shrunk by more than 424 thousand since 2010 and currently stands at 3.2 million. While some of this negative population growth in BiH can be attributed to natural demographic decline of low birth and fertility rates, emigration still remains the single largest contributor to this trend.

5 European Free Trade Association member states are Iceland, Liechtenstein, Norway and Switzerland.

Figure 3: Visitors to BiH, Arrivals in millions, 2017-2021

Source: Agency for Statistics of BiH

1.31 1.47

1.64

0.50

0.96

0.2

0.4

0.6

0.8

1.2

1.4

1.6

1.8

2017 2018 2019 2020 2021 M ill io ns

Diaspora Invest Activity – Completion Report | 12

While this recent spike in emigration did not affect the Diaspora Invest Activity, as the project worked with diaspora members that have been living and working abroad for at least three years, it is indicative of the need to double down on efforts to stem emigration and improving diaspora engagement.

Decelerating emigration, countering its negative effects, and seizing diaspora’s potential is a long and complex process. It requires both BiH and the destination countries to acknowledge their roles in existing migration patterns and it demands coordination of their efforts in designing and implementing targeted and effective policies to address the challenge. Diaspora engagement alone will not be able to counter these negative trends. BiH will need to improve domestic political, economic, and natural environments to encourage those who would like to stay as well as those who would like to return to see a future in their home country. Finally, the governments of destination countries need to put in place credible instruments for coordination and cooperation on migration and embed demographic considerations across their policy to help reduce, rather than increase, the disparities between the origin and the destination countries.

Figure 4: Key statistics on emigration and remittances in Bosnia and Herzegovina

Source: Eurostat

Emigration flows as per first permits issued to BiH citizens by EU member states total persons, 2011-2020

Source: Central Bank of Bosnia and Herzegovina

11.9

15.7 17.4

19.6 20.8

27.3

37.3

54.7 57.0

35.3

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Th ou sa nd s

First permits issued to BiH citizens by EU member states per year thousand persons, 2011-2020

0.36 0.31 0.21

0.41

0.33 0.32

0.44 0.49

0.31 0.35

0.59

1.03 1.07 1.11 1.18 1.22 1.25 1.35

1.46 1.54

1.29 1.48

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021e

Bi lli on s

Diaspora remittances/private transfers vs. FDI in BiH EUR billion, 2011-2021

FDI Private transfers

Diaspora Invest Activity – Completion Report | 13

II. OVERVIEW OF IMPLEMENTATION AND RESULTS

Diaspora Invest has completed all work planned under the three main components – (i) Leverage diaspora input into the development of an institutional policy framework for diaspora development, (ii) Expand diaspora direct investment by providing technical assistance and grants to eligible early-stage SMEs and start-ups, and (iii) Develop a sustainable local platform to provide business services and facilitation to potential diaspora investors.

In addition to the work planned under the original work streams, the Contract Modification 11 granted by USAID on March 22, 2021 added some new actions for the final year of the project. These included support to the implementation of diaspora strategies and piloting new initiatives for engagement of business diaspora.

The following sections outline activities, outputs, deliverables, and results stemming from the actions carried out during the fifth year of the project.

OBJECTIVE 1: LEVERAGING DIASPORA INPUT INTO THE DEVELOPMENT OF AN

INSTITUTIONAL POLICY FRAMEWORK FOR DIASPORA INVESTMENT

ACTIVITY HIGHLIGHTS

Diaspora Invest conducted an Assessment of Diaspora Investment in Bosnia and provided recommendations for action that were approved by USAID/BiH during 2017

Technical assistance and capacity building provided to the three Governments to support development of the Diaspora Cooperation Strategies during 2018-19, with the Strategies adopted by the Federation of BiH and Brcko District Governments during 2019-20

Pilot project with local authorities on local diaspora engagement implemented throughout 2021

A network of 16 local authorities established during 2021 to help with diaspora engagement

Following the Assessment of Diaspora Investment in Bosnia and Herzegovina and the approval of its recommendations by USAID/BiH during the first project year, the Activity was engaged in providing technical assistance and capacity building to institutions on all levels in designing diaspora engagement policies and practices.

Diaspora Invest worked with the state-level, Federation of BiH and Brcko District authorities on the development of new Strategies for cooperation with diaspora6. This process, implemented during 2018 and 2019, included representatives of three governments in Bosnia and Herzegovina with more than 40 participating ministries and institutions, 2 donor-funded projects and consultations with the private sector. More than a dozen meetings were organized with individual working groups as well as joint working group sessions to ensure coordinated approaches.

USAID Diaspora Invest led the work on the investment and economic development segment of the strategy (Pillar 3), with the remaining three pillars (Legal and normative issues, Education, science, culture and sport and Diaspora youth engagement) being supported by UNDP/IOM Diaspora for Development (D4D) project’s team of consultants. Working with the Ministry of Human Rights and

6 Republika Srpska (RS) Government withdrew from the joint process of diaspora strategy development during March 2018.

The RS Government developed a Diaspora Cooperation Strategy through a separate process and adopted the document during May 2020. An action plan for the implementation of this strategy was adopted during 2021.

Diaspora Invest Activity – Completion Report | 14

Refugees (MHRR) as its key counterpart, USAID Diaspora Invest implemented a comprehensive work program that included:

(i) development of analysis, discussion papers, and working materials for working group sessions, including several versions of the situation analysis on diaspora investment and engagement and the working material on the Pillar 3, as well as presentations and other supporting materials delivered to the WG members;

(ii) capacity development to familiarize WG participants with global trends in diaspora engagement and measures and instruments deployed by other governments that have proven to be successful in increasing direct diaspora investment in other countries;

(iii) facilitation at the working groups meetings, where the Activity took a leading role in facilitating discussions and follow up on all issues related to Pillar 3;

(iv) consultations with the diaspora investors in BiH (qualitative interviews and a quantitative survey) on the key obstacles and proposed measures to facilitate investment, as well as consultations with participating institutions to address and clarify various issues raised by the WG participants; and

(v) support to the adoption procedure, including providing inputs for the regulatory impact assessment of the Strategies.

This complex process was managed with a high level of coordination and efficiency, leading to the development and the adoption of the Federation of BiH Strategy for Cooperation with Diaspora7 and Brcko District Strategy for Cooperation with Diaspora8, marking a major milestone in Diaspora Invest policy work. The entire process was implemented within a 12-month period, an extremely fast turnaround time for the policy environment in BiH.

The strategies’ adoption at these two levels has created avenues for USAID Diaspora Invest to assist these and other authorities in the country in implementing the strategy measures going forward. To follow up on this work, Diaspora Invest has prepared a Post-Evaluation Action Plan submitted to

7 http://fbihvlada.gov.ba/bosanski/sjednica_v2.php?sjed_id=802&col=sjed_saopcenje 8 http://vlada.bdcentral.net/Publication/Read/nastavljena-72-redovna-sjednica

Diaspora engagement training for the Strategy Development Working Groups, Teslic, January 21, 2019

@DIASPORA INVEST

http://fbihvlada.gov.ba/bosanski/sjednica_v2.php?sjed_id=802&col=sjed_saopcenje http://vlada.bdcentral.net/Publication/Read/nastavljena-72-redovna-sjednica

Diaspora Invest Activity – Completion Report | 15

USAID/BiH on December 24, 2019 containing a detailed proposal for engagement under this Objective with further specifics on the intended scope. The Action Plan was followed up by a Request for Contract Modification sent to USAID on April 22, 2020, with the Modification granted by USAID on March 22, 2021.

This enabled the Activity to continue working on diaspora policy in its final year of operation, albeit turning the focus from the state-level and entity institutions to those on the local level. The key reason for this focus on local authorities was the fact that USAID-supported diaspora investments were located in more than 60 municipalities throughout the country (Figure 5), defying initial expectation that they would locate mostly in larger urban and industrial areas. This strong bias of diaspora investors

Figure 5: Municipalities with USAID-supported diaspora investors

1. Banja Luka

2. Banovići

3. Bihać

4. Bijeljina

5. Bosanska Krupa

6. Bosanski Petrovac

7. Brčko

8. Breza

9. Bugojno

10. Cazin

11. Centar

12. Derventa

13. Doboj

14. Donji Vakuf

15. Goražde

16. Gradačac

17. Gradiška

18. Hadžići

19. Ilidža

20. Ilijaš

21. Istočna Ilidža

22. Jajce

23. Kalesija

24. Kiseljak

25. Konjic

26. Kotor Varoš

27. Kupres (FBIH)

28. Livno

29. Lopare

30. Maglaj

31. Modriča

32. Mostar

33. Novi Grad

34. Novi Travnik

35. Novo Sarajevo

36. Olovo

37. Prijedor

38. Prozor-Rama

39. Ravno

40. Šamac

41. Sanski Most

42. Stari Grad

43. Široki Brijeg

44. Srbac

45. Srebrenica

46. Stolac

47. Tešanj

48. Teslić

49. Travnik

50. Trebinje

51. Trnovo

52. Tuzla

53. Usora

54. Velika Kladuša

55. Višegrad

56. Visoko

57. Vitez

58. Vlasenica

59. Vogošća

60. Zavidovići

61. Zenica

62. Žepče

63. Živinice

64. Zvornik

Diaspora Invest Activity – Completion Report | 16 for their hometowns revealed a clear need to address capacities for diaspora engagement at the local level.

As a first step, the Diaspora Business Center operating under the Activity concluded Memoranda of Understanding (MoU) with 16 municipalities across the country, including with: Bosanski Petrovac, Bosanska Krupa, Bužim, Cazin, Maglaj, Ključ, Sanski Most, Istočna Ilidža, Teslić, Goražde, Lopare, Vlasenica, Prozor Rama, Zivinice, Siroki Brijeg, and Gradačac. These MOUs were meant to extend DBC’s network beyond the largest urban centers and have stipulated mutual efforts on promotion of diaspora investment, referrals of diaspora investors to the DBC, and joint organization of diaspora engagement activities. Resulting from this cooperation, the Activity has co-organized or supported diaspora engagement events throughout the country and has directly assisted a total of 31 diaspora companies locating in these 16 municipalities. These diaspora firms have invested a total of BAM 13.3 million and currently employ 391 workers at these locations.

Diaspora Invest raised awareness about the importance of local policies, practices and approaches concerning diaspora investors. In addition to local diaspora events, such as those organized in Bosanski Petrovac, Bihac, Zivinice, Tuzla and others, the Activity also organized a BHDiaFor conference dedicated to localized approaches to diaspora investment with diaspora investors and local authorities in Prijedor, Lopare and Canton Sarajevo.

Furthermore, Diaspora Invest has implemented a pilot project with the municipality of Lopare that included: (i) local diaspora mapping, (ii) preparing an overview of investment and commercial opportunities in the municipality for diaspora engagement, (iii) joint organization of a diaspora B2B event, and (iv) development of a diaspora engagement toolkit for local authorities. The project was successfully completed during 2021, with the local partner equipped with sufficient information and tools for diaspora engagement and empowered to execute diaspora engagement activities independently from external donor support.

Finally, a Network of Local Authorities on Diaspora Engagement was established at a roundtable held during November 2021 with mayors and representatives of partner municipalities. The roundtable was also used to reflect on the work done so far at the local level, discuss the Lopare pilot project and present the municipal toolkit for diaspora engagement. The Network will be managed by the DBC beyond the scope of the Diaspora Invest Activity.

Lopare Diaspora Business Forum and Diaspora Investment Brochure developed with Diaspora Invest

Diaspora Invest Activity – Completion Report | 17

Diaspora Invest has also initiated activities on supporting the establishment of the Diaspora Business Advisory Council (DiaBAC), a consultative body composed of high-level diaspora businesspeople.

DiaBAC was intended to represent the voice of diaspora businesspeople in creating an enabling environment for doing business in BiH and establishing links between the local private sector and the international markets through diaspora engagement. The Activity developed a shortlist of prospective DiaBAC members and prepared draft Terms of Reference to help scope the work of the group and guide the proceedings of DiaBAC. However, this line of work was discontinued in accordance with the direction received from the USAID/BiH CoR on November 15, 2021 as the implementation of such high-level effort was deemed to require additional resources and follow-up, as well as further clarity in terms of DiaBAC composition and scope.

OBJECTIVE 2: EXPAND DIASPORA DIRECT INVESTMENT BY PROVIDING TECHNICAL

ASSISTANCE AND GRANTS TO ELIGIBLE EARLY-STAGE SMES AND START-UPS

ACTIVITY HIGHLIGHTS:

Eight Business Plan Competitions held with 336 applications arriving from prospective investors in 29 countries

A total of 78 grant agreements concluded with diaspora investors, all scheduled to successfully close out by project’s end

Grantees invested a total of $15,634,439 and created 494 new jobs during grant agreements implementation, with USAID’s disbursed co-financing of $1,6 million

Municipal roundtable hosted by USAID/BiH Mission Director

@DIASPORAINVEST

Diaspora Invest Activity – Completion Report | 18

The success of the Diaspora Invest Activity’s Component 2 is measured against contractually set targets related to the value of new direct investments ($7 million) and direct new job creation (250 new jobs created). The achievements of these targets greatly relied on the identification of eligible beneficiary companies. Unlike other private sector development activities with broader demographic or sectoral focuses, the Activity’s specific focus on the diaspora greatly reduced the pool of potential beneficiary firms. Explicit eligibility criteria (definition of diaspora status, company age, sectoral focus) shrunk the pool of beneficiaries even further, making the implementation of Diaspora Invest more challenging than most private sector development actions.

In spite of this impediment, Diaspora Invest has achieved and far exceeded the life of activity targets related to this component of work. The Activity established a BiH Diaspora Marketplace, designed as a business plan competition whereby prospective diaspora investors pitched their business ideas for financial and technical assistance from USAID’s Small Grants Fund. The Marketplace was implemented through eight rounds of public calls, attracting 336 applications from prospective diaspora investors. Following the successful completion of business plan competitions, USAID awarded 78 grant agreements to diaspora applicants with each applicant company also concluding a technical assistance agreement with the project. By January 31, 2022, a total of 77 grant agreements have been closed out, with one agreement still under implementation.

While the program required grant beneficiaries to provide at least a 1:1 match to USAID funding in terms of investment committed, the actual beneficiary investment has greatly surpassed that requirement (Figure 6). The total investment generated by the grantee companies stands at $15.6 million9 as of January 31, 2021, far exceeding the $7 million life-of-activity target. Mindful that USAID grant awards amounted to $1.6 million, the program has leveraged approximately $10 dollars from BiH diaspora for each USAID dollar invested. A total of 494 new jobs have been created through grant assistance, almost doubling the target of 250 new jobs.

One of the key reasons for success of the program was the strong response of prospective diaspora investors. A total of 336 diaspora investors that applied their business plans (approximately 42 applications per each call, on average) towards the program came from 29 different countries. The Covid-19 pandemic slowed down the implementation momentum during 2020, with supply chain disruptions and some delays in beneficiary investment plans, but this was reversed already during 2021, with a continued strong showing of interest.

Outreach to the diaspora communities abroad and communications with prospective investors has been a crucial part of the program’s success. Success stories were developed for the majority of BDM beneficiaries and their narratives were promoted through well-established partnerships with the local

9 The figure includes fixed asset investment estimates for 2021 based on Activity records and inputs received from beneficiaries as the official FIA/APIF data has not yet been made available at the time this document was prepared.

Figure 6: Leveraging diaspora investment through the BiH Diaspora Marketplace

15.6

1.6

0 2 4 6 8 10 12 14 16

Investment by grant beneficiaries

Direct USAID investment

Millions

Total direct investment by USAID DI and its 78 grant beneficiaries, in million USD, January 2022

10x

Diaspora Invest Activity – Completion Report | 19 media widely read by BiH communities abroad, as well as through social networks. This was seen as an integral part of diaspora investment promotion, as BiH diaspora members living abroad can more easily identify with other diaspora entrepreneurs than with typical local investors, which are often perceived abroad as part of the local system of political rents and state capture. The grantees featured in these success stories were carefully curated to showcase the diaspora back story and human interest aspects, along with the investment and/or employment impact in the local communities, innovation and knowledge transfer and, crucially, investor satisfaction. In addition to formal distribution channels, the Activity has also strived for wider organic media-stories (whereby media create their own content about grantees based on the Activity’s inputs and facilitated contacts).

Furthermore, the BDM had greatly benefited Activity’s work in other areas, beyond the direct outcomes captured by new diaspora investment and employment. The program has helped the Activity and USAID raise awareness on diaspora investment, its impacts, and the US Government’s support, both in the country, as well as among the diaspora communities abroad. This has been particularly important during the Covid-19 outbreak, when the USG support to DI beneficiaries helped counter some of the negative impacts of the pandemic. The instrument also proved its value in helping advance other Activity offerings through the Diaspora Business Center (DBC) and the diasporainvest.ba platform, as it brought potential investors to the platforms and guided them through the different outreach channels. The results of the BDM program have also helped persuade the policy makers on the importance of supporting diaspora investment by presenting concrete experiences, examples of diaspora investment support and the results that proved the overall feasibility of the model. Thus, the two diaspora strategies adopted by the FBiH and Brcko District both include financial incentive measures for potential diaspora investors.

Sample success story on BDM beneficiary carried by USAID global website

@USAID

Diaspora Invest Activity – Completion Report | 20

The performance of grant beneficiary companies has been outstanding. These startups and early-stage firms (average age at the start of assistance was 12 months) have displayed astounding growth over the past five years – the compound average growth rate (CAGR) of sales has exceeded 80% over the past four years. Furthermore, two thirds of those sales were generated in export markets, mostly in countries where the diaspora owner used to live or currently resides. Employment generation in these 78 grant companies has also been strong – just over the past year, 12 companies have more than doubled their employment numbers.

Finally, the grant applicants have overwhelmingly assessed the grant application process and the award decision-making as fair and transparent, confirmed by 88% of the applicants surveyed during the mid-term performance evaluation10 carried out by USAID/BiH. This evaluation also revealed that more than three quarters of grant beneficiaries would have not invested at all or would have invested a smaller amount or at a later period had it not been for Diaspora Invest support.

Details on all BDM beneficiaries and the results achieved during the implementation of grant agreements are included in this report under Annex B: Detailed Overview of Diaspora Invest Results.

10 https://www.measurebih.com/uimages/DIASPORA20INVEST20EVALUATION20Final20Report.pdf

Box 1: Focused, Short-Term Technical Assistance to Support Grant Implementation

Each grant beneficiary has also concluded a separate technical assistance agreement with Diaspora Invest with a scope of work jointly defined by the company and the Diaspora Invest team. In most cases, the companies were receiving technical assistance designed to directly support the implementation of grant agreements.

A good example of this is technical assistance provided to BMT Engineering (now TurnMill BH), a machining firm from Mostar engaged in highly customized, low volume manufacturing of metal products and components. A beneficiary of a grant for the procurement of machinery and equipment, BMT also received advisory services by the Diaspora Invest team focused on two particular aspects of the new investment that the company was undertaking – (i) advisory on aspects of accounting, tax and customs treatment of the investment in fixed assets undertaken during the year, and (ii) business matchmaking with software developers to help optimize the production through enterprise resource planning.

As a result of these interventions, BMT Engineering successfully imported new CNC equipment from Sweden and got connected with a local IT company (another grant and TA beneficiary of the Activity) that provided the necessary assistance in improving business operations. The technical assistance intervention was designed and implemented with a view of supporting both grant implementation as well as direct investment facilitation for the firm.

BMT Engineering - CNC equipment imported from Sweden and ready to be installed onsite https://www.measurebih.com/uimages/DIASPORA20INVEST20EVALUATION20Final20Report.pdf

Diaspora Invest Activity – Completion Report | 21

Box 2: Snapshot of BDM beneficiaries

The 78 companies that have received grant awards came from a range of 5 sectors including manufacturing, agribusiness, energy, ICT and tourism.