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    Helping Small Firms Join a Knowledge-Based Economy

     

     
     
    © International Trade Centre, International Trade Forum - Issue 1/2001 

    At the recent UNCTAD X meeting (Bangkok, February 2000), heads of international organizations presented their views on the challenges of globalization for developing countries, and how their organizations respond. Below are ITC's views, expressed by J. Denis Bélisle, ITC's Executive Director, at the event.

    Q. What are the challenges of globalization facing developing countries in an increasingly knowledge-based economy? 

    A. Globalization brings a number of challenges to people, enterprises and governments in developing countries. One of them is trade liberalization and its corollary: worldwide competition. The implications of these challenges for developing countries - still fighting their way to join the global economy - are far more difficult to manage than for industrialized countries. The potential gains for all people are so enormous, however, that developing countries should not hesitate to meet these challenges head on. In this, they should be able to count on vigorous international support.

    Joining the world economy means buying needed goods and services from world producers offering best price and quality, and selling domestic goods and services to all, without artificial barriers. This is easy to say, more difficult to do. Setting up a rules-based multilateral trading system and eliminating trade barriers are essential.

    Roadblocks 

    Strong action is also needed to speed up the integration of developing countries into the global economy. Four serious roadblocks stand in the way:

    • Supply-side constraints - having production capacity;

    • Lack of competitiveness - having products and know-how to compete on export markets;

    • Limited knowledge of export rules
    - responding to new opportunities and avoiding pitfalls; and

    • Absence of national export strategies - having the drive to export.

    Supply-side constraints. Supply-side constraints are perhaps the most difficult roadblocks to eliminate. Producing something for export often calls for financial and technical means not readily available in many developing countries - perhaps even more so in the knowledge-based, global economy towards which we are moving.

    Investment and technology - essential for plants, equipment and infrastructure - are in high demand everywhere. All countries, industrialized or developing, are competing to attract private capital and technology. They compete based on well-known conditions such as a stable, predictable and transparent environment, including a market-friendly economic regime. I do not know of any magic or instant solutions. Proactive attention to creating a favourable trade environment, leadership, foresight and time all come into play.

    Lack of competitiveness. Enterprise and country competitiveness are the keys to exporting successfully. Here again, exporters of industrialized countries have a considerable advantage over those of the developing world. The latest technologies, best production and quality control methods, sophisticated marketing, best packaging techniques, competitive export financing and other export skills are relatively easy to access in Chicago, Oslo and Tokyo. They are not so in Bamako. Exporting enterprises from developing countries need better access to these trade support services so they can become more competitive.

    Limited knowledge of export rules. No serious game can be played without rules. For exporters and importers, the rules are those of the multilateral trading system. A large and fairly complex set of rules has to be understood by all players for effective national export strategy formulation and for individual exporters to put their products into foreign markets. For many developing countries, where far fewer specialists in trade rules are available, this represents a formidable task.

    Absence of national export strategies. Finally, to develop competitive exports, sharpen export know-how and penetrate foreign markets, there is a need for broad-based, national export strategies, sustained by cooperative efforts of the private and public sectors. This is what I call the drive to export.

    Eliminating these roadblocks is a significant challenge. But this must be achieved in a manner that reduces poverty, which is the "people dimension" of trade liberalization.

    Q. How is ITC responding to these challenges? 

    A. I singled out four areas that present special challenges to the developing world as their firms integrate into the global economy: supply-side constraints, competitiveness, knowledge of export rules and national export strategies. It is in the interest of all to help developing countries and their people to integrate successfully into the world economy, and ITC has specific responses to contribute to this effort.

    Supply-side constraints 

    Adapt or diversify products. ITC helps SMEs (small and medium-sized enterprises) adapt or diversify products, and improve export management. It helps enterprises go up the supply-chain and the value-added ladder by advising on how to adapt products or services to customer preferences, as well as inventing new applications for traditional products and services.

    Take advantage of the Internet. ITC also focuses increasingly on helping exporters and importers to harness information technology for business-to-consumer and business-to-business transactions through the Internet.

    Competitiveness 

    Training. ITC has been heavily involved for many years in developing cost-effective training for importers and exporters. It also advises developing country exporters on marketing techniques and on collecting and using trade information effectively.

    Matchmaking. We have been a catalyst in bringing together buyers and sellers to stimulate South-South interregional trade. On the occasion of UNCTAD X, for example, ITC organized one such buyers-sellers meeting on pharmaceutical products. The meeting brought together 60 manufacturers, exporters, importers, distributors and government buying agencies from 13 Asian countries (see ITC News).

    Transparency. Putting a premium on transparency in the marketplace, ITC's 12 weekly and monthly Market News Service bulletins provide price and other key market indicators on eight commodities - information not otherwise available to developing country traders.

    Benchmarking. We have developed easy-to-use benchmarking tools for SME exporters to measure their level of competitiveness and identify their major weaknesses. ITC's International Competitiveness Gauge, for example, is used by exporters of automotive parts in 14 countries in Africa, Asia and Latin America. The Export Fitness Checker, recently launched, is a diagnostic tool that allows companies to assess their export readiness.

    Local partnerships. We work closely with exporting enterprises and industry associations to develop tools, which are adapted on a country basis by national business consultants. This process contributes directly to national capacity building while making available practical, customized and easy-to-follow advice of the type more readily available to exporters from the North. Two examples of this process are the guides Trade Secrets: The Export Answer Book and How To Approach Banks, which are being adapted in over 50 countries.

    Export rules 

    Training and networking events, both live and "virtual". Since 1996 ITC has disseminated information on WTO rules among business communities in over 70 developing and transition economies through nearly 200 training events, as well as virtual Internet conferences. Our guides, reference materials, training packs and case studies on the business implications of the WTO rules have been used by ITC and WTO experts to support these events. ITC's Business Guide to the Uruguay Round, published jointly with the Commonwealth Secretariat, was translated into seven languages (French, Spanish, Arabic, Chinese, Russian, Romanian and Greek). An updated version Business Guide to the World Trading System and its companion the Business Guide to the GATS will follow a similar route.

    Over the past year, we have worked to build national networks of trainers and experts in WTO rules from academia, the business community and government - in 14 countries through our World Tr@de Net programme, and in seven African countries through our Joint Integrated Programme with WTO and UNCTAD. We are now cooperating with the World Bank Institute's Global Distance Learning Network to give national networks additional training support and access to expertise.

    National export strategies 

    Fora for strategy development. ITC works with developing country stake-holders and partner agencies to arrive at effective national export development strategies, based on real and sustained public-private sector collaboration. Representatives of 22 countries and several international organizations including UNCTAD, WTO, the World Bank, the Commonwealth Secretariat and OECD joined us in Annecy, France, last October to brainstorm the subject and share best practices (see also Forum 4/99). A publication containing its conclusions, Redefining Trade Promotion: The Need for a Strategic Response, will soon be available.

    Trade performance analysis. Our work in trade-flow analysis provides a basis to identify products with export potential, feeding into decisions on export strategies. Such analysis, along with supply-demand surveys, allows us to identify sectors presenting special potential for South-South trade and to organize buyers-sellers meetings to capitalize on these opportunities. New trends and success stories on exports from developing countries, including LDCs, can be identified from these ITC qualitative tools for benchmarking national and sectoral trade performance. Specific African success stories were presented at UNCTAD X.

    These are a selection of ITC's many responses to the challenges of globalization and trade liberalization. Our efforts aim to raise living standards by harnessing the entrepreneurial drive and creativity of exporting enterprises. Broad-based, export-led growth - spearheaded by SMEs or with backward linkages to SMEs and micro-producers - is an engine to generate employment where jobs are needed most. This is the main focus of ITC's work and our contribution to poverty reduction.

    This article was adapted from the remarks of ITC Executive Director J. Denis Bélisle on the occasion of UNCTAD X.