The Philippines
Since the Asian financial crisis in 1997, Philippine export growth
has been among the highest in the region. The most recently
completed Export Development Plan (1993-98) exceeded the overall
foreign exchange earnings target.
The Export Development Plan achieved its target, however,
primarily because of the exceptional performance in only one of the
14 sectors on which the plan focused: electronics.
The current strategy - the 1999-2001 Philippine Export
Development Plan - has consequently shifted from developing export
promotion programmes for specific export winners to a clustering
approach. Firms are clustered on the basis of supply chain
relations and on similarity of their markets. Export development
assistance focuses on common needs for each cluster.
The national effort in the Philippines to generate export-led
economic growth began in the late 1960s. A Board of Investments was
created in 1967. The Department of Trade (now the Department of
Trade and Industry) launched an institutional development programme
to design and support an export development strategy.
Since that time, Philippine national strategy-makers have
experimented with a variety of innovative trade promotion
programmes. Each successive national export strategy has shared the
same three guiding principles:
• Address wider economic development challenges, such as rural
development, employment creation and technology development. Export
promotion strategies should not be limited to increasing foreign
exchange earnings.
• Focus on the small-to-medium scale enterprise sector,
analyzing international supply and demand of specific sectors.
• Emphasize the public-private sector partnership, with the
public sector as catalyst and the private sector as leader and
implementer of national strategy.
The Philippine strategic approach
Legal foundation makes export development a
priority.
The single biggest public policy achievement was the signing
into law of the Export Development Act (1994) which sought to
"evolve export development into a national effort".
The Act elevates strategic planning for export development to
the highest government levels and ensures that all relevant
government agencies are involved. Macroeconomic policy is
structured to support the national export effort.
Exports as part of economic development.
The 1999-2001 Export Development Plan has been incorporated
directly into the 1999-2004 Philippine Medium-Term Development
Plan. The strategy agenda of the current Export Development Plan
covers financing; investments and incentives; costs of doing
business; agricultural policies; a technology agenda; education and
training; employment policies; labour and productivity; competition
policy; liberalization and international commitments; and the
institutional framework.
This comprehensive approach helps reflect export development as
a priority in all economic portfolios.
Export Development Council sustains public-private sector
partnerships.
The Export Development Council oversees implementation of
national export strategy. Chaired by the Secretary of the
Department of Trade and Industry, it includes eight cabinet-level
government representatives responsible for macroeconomic policies
and programmes.
Nine private sector representatives also sit on the Export
Development Council, consolidating the public-private sector
partnership at the highest level of strategy development.
The Council meets monthly, which keeps export development
strategy in the minds of senior policy makers and business leaders.
The president of the Philippines presides over quarterly Council
meetings.
Networking committees on policy areas identified in the Export
Development Act support the Export Development Council. Chaired by
the private sector, the committees are composed of representatives
from government agencies and private sector organizations.
An umbrella organization for private sector
concerns.
To build consensus within the private sector on export
development and policy advocacy, the Export Development Act
specifies that an "Accredited Export Organization" should be the
"single voice" of the private sector in export-related consultation
with government. Accreditation, based on a set of specific
criteria, is for three years - the duration of any given Philippine
Export Development Plan.
The Philippine Exporters' Confederation (PHILEXPORT) has been
the accredited organization since 1994, when the Act was
passed.
Exports, industrial development and investment promotion are
linked.
Linking export, industry and investment strategies has been a
hallmark of the Philippines approach. The merging of the
Departments of Trade and Industry in 1980 established and maintains
these links. The links help achieve several export strategy
objectives:
• Shift emphasis from a labour-intensive to a skill-intensive
export mix and from high-volume standardized products to high-value
customized products;
• Foster industries that will generate a self-sufficient raw
material base for export industries;
• Acquire technology to develop and consolidate global
competitiveness.
The national strategy is to use foreign direct investment to
develop an industrial base for exports. The Philippine Economic
Zone Authority, created in 1995, provides fiscal incentives to
foreign investors and authorizes the establishment of special
economic zones in suitable locations.
The Investment Priorities Plan grants incentives to industries
that produce "non-traditional exports", thus broadening the range
of Philippine export products available. In the past, the plan has
given incentives to producers of supplies used in export products
and services. Producers of supplies for exports were also given
priority in tariff reforms in the 1990s. This initiative has proven
successful, as non-traditional exports have grown from less than
10% of total exports in the 1960s to over 80% today.
Several innovative programmes strengthen trade and investment
links. A National Communication Plan for Export Promotion, for
example, is being developed to project a coherent and positive
image of the Philippines, its products and its investment
environment. Domestically, the plan promotes awareness among
special target markets - youth, entrepreneurs and labour - on
global competitiveness issues and the role of exports in national
development.
In another example of an interesting programme, the Department
of Science and Technology is using the clustering approach to
identify technology gaps and direct foreign investment to fill
these gaps.
A new focus on clusters.
The Philippine approach in the 1993-98 Plan was to focus on
sectors with broad export potential (known as "export winners") and
on specific markets.
Strategy makers applied product sector selection criteria of
market share, global potential, vulnerability to protectionism,
infrastructure support requirements, intensity in use of
high-skilled labour, indigenous raw material content, value-added
contribution and extent of backward linkages.
Fourteen product sub-sectors, many of them in the SME category,
were included in the 1993-98 Export Development Plan. Most of these
sub-sectors remained the starting point for the 1999-2001 Plan,
underlining one crucial aspect of the Philippines strategic
approach: long-term commitment to sector-specific capacity
development and global competitiveness.
The latest plan adjusts the focus on export winners to a
clustering approach - investment-driven clusters, technology-driven
clusters, resource-driven clusters and others. The cluster approach
focuses assistance on common priority needs for each of these
groups of firms. This refocusing is expected to lead to more
"on-shore" export capacity development activities, as opposed to
"off-shore" marketing and promotional activities.
A new programme, Developing Rural Industries and Village
Enterprises, is designed to reinforce the cluster approach to
industry and export-capacity development. It aims to expand rural
export projects and foster commercial relationships between small
suppliers and large firms.
The Philippine approach also calls for market development
efforts to be directed to markets in which the country's exports
already have established footholds and non-traditional markets with
high purchasing power.
From strategy to action
Line agencies of the Department of Trade and Industry's
International Trade Group coordinate national strategy once the
Export Development Council has approved the Plan.
Monitoring and updating strategy
The Philippine plan is a "rolling" strategy. A Plan Management
Committee assesses implementation, continued relevance and
effectiveness. The committee applies performance indicators.
The Export Development Act provides for semi-annual review,
update and validation of the strategy. The Plan Management
Committee is expected to prepare semi-annual performance reports
and to recommend appropriate adjustments. Monthly and quarterly
monitoring reports and sectorial consultations provide the basis
for the Committee's semi-annual performance reports. Adjustments
approved by the Export Development Council are appended to the
original Plan and communicated to all relevant agencies,
institutions and private sector groups.
Finland
Finland was comparatively late in "globalizing" its economy. In
fact, Finland ranked last in terms of internationalization among
developed countries surveyed in the World Economic Forum/IMD 1993
World Competitiveness Report. Yet, in less than ten years, Finland
has established itself as a model of international business
effectiveness, diversified its export mix in composition and
destination and has become a major player in the export of high
technology products and services.
Finland now ranks third in terms of overall competitiveness,
despite losing two of its key competitive advantages:
• its special trading relationship with the former Soviet Union
and other east European countries, due to economic and political
changes in Russia and neighbouring countries.
• its network of industry-level cooperative export associations,
abolished as a condition for joining the European Union.
How did this previously resource-based economy with high labour
costs, a small domestic market and a traditional strong focus on
the single export market of the former Soviet Union become a
successful "value-added" exporter in such a short time?
Privatization and corporate restructuring, reform of the banking
sector, devaluation of the Finish markka, public and private sector
cost-cutting and entry into the European Union all made a
significant contribution to Finland's successful repositioning.
Finland's strategic approach
Emphasize internationalization of the firm.
The internationalization strategy:
• promotes Finland as the business centre of a "New Northern
Europe" (with some 60 million people within 24-hour travelling
distance of the Finnish capital, Helsinki). It seeks involvement
(both financial and technical) in economic and industrial
development projects in the transition economies of eastern and
central Europe;
• ensures internal competition, so that Finnish firms operate to
internationally competitive standards of quality and
efficiency;
• provides firms with a full range of internationalization
consultancy services - trade, investment, joint venturing and
technology - through market-based trade centres (for a fee);
• promotes inward and outward foreign investment;
• encourages technology contacts between Finnish and foreign
companies; and
• positions Finnish companies as partners in international
"chain corporations" with a more sophisticated role than pure
subcontracting.
Focus on industrial clusters.
Finland's National Industrial Strategy, launched in 1993
following a period of unparalleled economic recession, identifies
key clusters in the Finnish economy with conditions for long-term
competitive expansion and progressive export growth. Economic and
export development and internationalization strategies focus on
these sectors, using a 20-year time frame.
Ensure institutional networking.
Finland's current export strategy is based on the conviction
that export promotion should be a joint venture between government
and the private sector that should be implemented with consensus
among government, industry and labour.
Emphasize public-private sector research
partnerships.
Finland has the fastest growth rate in the Organisation for
Economic Co-operation and Development (OECD) for research and
development expenditure.
Link export strategy directly to industrial
strategy.
To better link industrial and export strategies, the main
organization handling export strategy has been structured along the
lines of the priority industrial clusters.
Treat export support as a business.
Finland's trade support services are delivered on a
cost-recovery or fee basis. This business approach to serving the
export sector characterizes, in particular, Finland's network of
trade offices.
Ireland
Over the past 15 years, Ireland has become a highly successful
export-oriented economy, capable of competing to the highest
international technical standards in manufacturing and services.
Total merchandise export earnings exceeded US$ 64.8 billion in 1998
as compared with US$ 7.9 billion in 1983. Sizeable and growing
annual trade surpluses (an estimated US$ 20.8 billion in 1998) have
replaced the chronic deficits of the 1970s and early 1980s.
During this period, the country's export base has shifted from
agriculture to manufacturing, agro-business and services. What's
more, the exports concentrate on "value-added." Ireland's service
sector, for example, focuses on high value-added,
knowledge-intensive niches in financial services,
telecommunications and software development.
Ireland's export markets are also more diverse. Continental
Europe now accounts for over 40% of merchandise exports, up from
12% in 1970. Reliance on the United Kingdom as an export market has
been greatly reduced, down from 65% in 1970 to 22% in 1998. In
addition, one third of exports now go to markets outside the
European Union.
Ireland's strategic approach
Make trade a central element in national development
policy.
The policy framework is established by Ireland's Department of
Enterprise, Trade and Employment. Forfas, the policy advisory board
for industrial development and technology, advises on coordination
of trade and investment promotion strategies within this policy
framework. Enterprise Ireland and the Industrial Development
Authority are, in turn, responsible for strategy design and
implementation.
Introduce flexibility in national planning.
The government commissions major studies of the economy. These
offer a basis for decision-making within the context of national
programmes and provide an additional forum for debate on the future
orientation of the economy and the export development effort.
Pursue regional economic integration.
Building its markets through full regional integration has been
a principal factor behind Ireland's export success.
Attract export-oriented foreign direct investment.
Programmes to strengthen physical and technical infrastructure,
with particular emphasis on education and skills training,
communications and financial incentives, have been designed to
establish Ireland as a preferred host country for export-oriented
foreign investment.
Bring social partners into the export initiative.
The Government involves trade unions and the business community
in preparation of national development programmes.
Continuously emphasize competitiveness.
Ireland's export development strategy is based on two
principles. First, the only effective protection for firms is to
foster international standards of efficiency at all levels in the
economy. Second, the government is ultimately responsible for
creating many of the essential competitive assets required for an
internationally competitive economy.
Support indigenous enterprises through a consolidated
network of trade support institutions.
Enterprise Ireland provides a comprehensive "one-stop shop"
service to indigenous enterprises.
Regularly assess performance against key benchmarked
criteria.
Measurement criteria are both quantitative and qualitative
(efficiency, quality and impact).
New Zeland
Despite comparative advantages in growing and harvesting animals,
fish, crops and trees, New Zealand faces two competitive
disadvantages: its distance from major markets, and the scale of
its small domestic market. Marketing and distribution costs
represent major constraints to broad-based export success.
To counter these built-in disadvantages and to protect local
producers from international competition, New Zealand maintained a
highly regulated economy up to the mid-1980s.
A balance-of-payments and currency crisis in the mid-1980s led,
however, to a major turning point in New Zealand's trade
performance approach. The Government embarked on a programme to
liberalize the economy to make it more competitive. Import controls
were substantially reduced, industries and the labour market were
deregulated and the Government's participation in many industries
was sold. Costs fell, and an aggressive monetary policy ensured
that inflation was almost eliminated, further helping
competitiveness.
As a consequence, New Zealand became and remains one of the
world's most open economies. Liberalization bred competition,
which, in turn, stimulated manufacturers to develop specialist
skills and products. Investment in new machinery and technology
enabled New Zealand enterprises to compete successfully with larger
overseas producers on short production runs requiring rapid
re-tooling. This has now become one of New Zealand's major
competitive advantages.
It was initially assumed that if macro-economic conditions were
put right, New Zealand companies would become more competitive.
This did not happen immediately, however, and it was determined
that trade promotion strategies should be reviewed to ensure a
quick and sustained improvement in export performance.
New Zealand's strategic approach
Create a public-private sector partnership for strategy
development.
The public sector initially assumed the lead role in the
strategy development and implementation process. Once defined,
however, New Zealand has maintained the view that the private
sector must drive the strategy.
Establish an institutional structure to facilitate the
strategy.
In the early stage of defining its approach, New Zealand
strategists concluded that the establishment of a public sector
focal point was needed to ensure a comprehensive response to the
export development objective.
Build national strategy from the ground up.
When building New Zealand's first national export strategy,
Stretching for Growth (1993-2000), the country adapted the
industry-sector "bottom-up" approach - which had been applied
during the creation of the industry Joint Action Groups - to the
economy as a whole.
Promote broad-based awareness of the export
strategy.
A "strategic trilogy" was professionally published and widely
disseminated, to track potential export development by sectors.
Maintain institutional networks.
Regular liaison among organizations associated with long-term
trade performance is a key feature of the process.
Tailor trade promotion support services to the specifics of
the strategy.
In addition to off-shore work, New Zealand introduced on-shore
programmes to encourage strategic alliances between groups of
companies; to encourage business clusters; and to motivate local
development agencies to assume more responsibility to promote the
clustering concept.
Trade New Zealand then focused more on off-shore market
development, through its on-shore and off-shore services.
Adopt a client orientation in services delivery.
On-shore account managers have responsibility for assisting
particular companies or export networks within defined sectors.
They coordinate market research and offer a comprehensive line of
services, designed to assist in the various aspects of exporting.
Offshore posts focus on delivery of services to these exporters
offshore, and on seeking out opportunities to match New Zealand
exporters' capabilities.
Treat strategy development as an ongoing process, with
regular monitoring.
Performance measures were established to quantify exactly where
Trade New Zealand was making a positive contribution to exporters'
foreign exchange earnings.
Measure performance.
Trade New Zealand's account managers are required to state each
month the amount of foreign exchange earnings they believe each
client has earned as a result of assistance. These estimates are
then verified by an independent survey company every six
months.
Mauritius
Mauritius is an economic development success story. Success has
been due largely to the effective planning and management of a
series of national export strategies. Over the past 30 years, these
strategies have moved Mauritius from a high-unemployment, mono-crop
economy to one that is broad-based and characterized by nearly full
employment, a significant manufacturing sector and a growing,
internationally-oriented service sector.
The export success of Mauritius has been fuelled by foreign
direct investment attracted by the country's political and social
stability; a highly literate labour force; and preferential access
to European Union and United States markets for sugar and textile
exports. Circumstances are, nevertheless, changing. From
experience, Mauritian planners have learned that an export strategy
must be flexible and its development an ongoing process.
Mauritius's strategic approach
Support enterprise development.
An import substitution strategy produced entrepreneurs with
skills and industrial experience. It exposed the labour force to a
new working environment and business culture. It encouraged
Mauritian consumers to buy more locally-produced goods.
Anticipate shifting circumstances and competitive
advantages.
Mauritius is now focusing on obtaining greater efficiency in
traditional foreign exchange earning industries: sugar, textiles
and tourism. In parallel, it is developing the export-earning
capacities of manufacturing and non-sugar agriculture, as well as
financial, commercial and maritime services that can be exported
regionally.
Build an institutional base that facilitates
competitiveness.
The Ministry of Industry and Commerce's "One-Stop-Shop" was
established in 1990 to provide information on investment
incentives, as well as to help domestic and international
businesses acquire clearances and permits from other ministries. It
maintains a system of links with liaison officers in other
ministries to simplify administrative formalities.
Emphasize government-business-labour partnerships.
Public and private sector representatives are on the boards of
all specialized national organizations involved in trade promotion.
The chairpersons come from the private sector. The Government of
Mauritius meets twice yearly with the Joint Economic Council, the
leading business sector organization.
Exploit geographic position.
Mauritius's current strategy targets the regional marketplace,
with 300 million consumers and imports equivalent to US$ 17 billion
annually.
Encouage small firms to export.
Export support services are directly available to small and
medium-sized firms. A related initiative involves creating a
"beehive" structure where subcontracting and out-sourcing linkages
are promoted between established enterprises and small firms.
Promote a specialized export services industry.
As early as 1981, the Export Service Zone Act was introduced to
stimulate re-export of manufactured goods by establishing firms to
engage in entrepôt services and re-export, and to provide
specialized export marketing services to the domestic manufacturing
sector.
Chile
Over the past 25 years, Chile has transformed its export sector
through an economic strategy highlighting liberalization, openness
and internationalization. In 1975, just prior to implementation of
the strategy, 200 firms were exporting 200 products to 50
countries. In 1998, nearly 6,000 firms were exporting more than
3,800 products to a total of 172 countries. The value of exports
over the period grew tenfold to a value in 1998 of approximately
US$ 15 billion.
Yet copper continues to dominate Chile's "export mix",
accounting for nearly four out of every ten dollars earned through
export. At the enterprise level, export activity is highly
concentrated, with 4% of exporting companies accounting for 80% of
the country's total export value. Moreover, one third of
enterprises involved in export have irregular exporting patterns,
entering and exiting foreign markets from one year to the next.
Performance in individual markets has accordingly been erratic.
Finding solutions to these export development issues is the focus
of Chile's current export strategy.
Chile's Strategic Approach
Encourage an internationally competitive
environment.
The protection afforded local enterprises was comprehensively
reduced.
Balance unilateral trade liberalization with open
regionalism.
The concept of open regionalism was introduced into the
country's trade development strategy in 1990. This involves
negotiation of bilateral and regional preferential treaties.
Lower export transaction costs.
From its inception, Chile's strategy has been to minimize export
transaction costs. In the initial stage, export procedures were
simplified.
Take a long-term view of enterprise-level support.
The majority of firms that had started an export business in the
late 1970s had stopped exporting by the early 1980s. This was
particularly the case in the small-scale industrial sector. It
became obvious that a national export strategy must include
long-term incentives and export support programmes if it is to be
successful.
Coordinate export support programmes through a central
technical agency.
The Trade Promotion Institute (ProChile) was established in 1974
to develop the country's non-traditional exports. Initial work
focused on the design and introduction of export incentives and
modernization of related administrative procedures. ProChile also
coordinates Chile's commercial presence in foreign markets.
Facilitate foreign direct investment.
The international investor is extended non-discriminatory
treatment.
Promote private sector involvement in infrastructure
development.
Extension and upgrading of road, air, port and communications
infrastructure are prerequisites to the improvement of Chile's
trade performance. In all cases, private sector investment is seen
as the key to future development.
Encourage innovation.
Under the Government's Technological Innovation Programme
(1996-2000) a number of technology funds have been established to
support innovation and technical advancement within private
businesses, universities and technological centres which are
associated with the business sector.
For More Information
The six national examples of export strategies outlined in this
magazine are excerpts from case studies prepared for the ITC
Executive Forum by Brian Barclay, Executive Forum coordinator, with
Peter Hulm, an independent editor. These case studies are available
on ITC's Executive Forum web site (http://www.intracen.
org/execforum) and will appear in a forthcoming publication on
the topic of redefining trade promotion.
The studies are based on reports provided by national experts.
They can be contacted at the e-mail addresses below:
Chile: Gaston Galleguillos and Maricel Moraga,
Valparaiso Business School, Universidad Adolfo Ibañez: ggallegu@uai.cl
Finland: Klaus Arni, Director, Strategy Analysis
International: saifin@pcl.pp.fi
Ireland: Arthur Deeny and Michael Moynihan,
Consultants: agm@iol.ie
Mauritius: Atma Beeharry Panray, Export and Industrial
Development Consultant: neeru@intnet.mu
New Zealand: Michael Hannah, Strategic Development
Manager, Trade New Zealand: Michael.Hannah@tradenz.govt.nz
Philippines: Maria Rosario Franco, Trade Strategy
Consultant: mrqf@i-manila.com.ph