• home
  •  

    International Matchmaking and Business Partnering

     

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

    In recent decades, industrialized countries have developed a number of direct instruments to help their national companies become active in the developing world.

    In matchmaking and similar business-partnering programmes, the sponsoring organization generally provides technical or financial assistance to private-sector partners in order to foster cooperation and help the companies to develop a profitable relationship.

    What kind of matchmaking? 

    Many linkage programmes directly encourage European companies to invest in developing countries, including LDCs such as Bangladesh, Mozambique, United Republic of Tanzania and Uganda.

    Most of the matchmaking and partnering programmes are aimed at small and medium-sized enterprises (SMEs) in the industrialized and developing countries. Experience in rich as well as poor countries shows that the potential of SMEs to have a substantial impact on the development process is much greater than that of micro-enterprises.

    Some examples 

    Some of the more developed programmes sponsored by European countries include:

    • the Programme for Cooperation with Emerging Markets (PSOM - Programma Samenwerking Opkomende Markten) run by Senter International, an independent agency of the Netherlands Ministry of Economic Affairs under sponsorship of the Netherlands aid ministry;
    • the Public-Private Partnership (PPP) project run by the German technical cooperation agency, GTZ (Gesellschaft für Technische Zusammenarbeit);
    • the Matchmaking Programme of the Norwegian aid agency, NORAD; and
    • the DANIDA Private Sector Development (PSD) programme of the Danish aid agency.


    All of these programmes are relatively new. PSOM started in 1997 in China, Egypt, India and South Africa, but activities in LDCs began only in 1999. PPP was set up in 1999, though it has expanded rapidly, matching more than 100 projects to date. NORAD's Matchmaking Programme, which started in 1995, has focused on only two countries until now, South Africa and Sri Lanka, though NORAD is considering expanding to others soon. The DANIDA programme has existed since 1995 and currently supports cooperation between Danish firms and companies in 11 countries, including Bangladesh, Mozambique, Nepal and Uganda.

    NORAD - a focused approach 

    Norwegian companies which are looking for a partner in a developing country submit a profile to the coordinating centre in Norway, which reviews it and sends it to a corresponding centre in the host country. When a match is found, NORAD can back the Norwegian company with up to US$2,290 as a grant for the first trip. If the parties agree to develop their relationship further, they can apply to NORAD for various types of industrial and commercial support. Developing country companies can also initiate the process.

    In Sri Lanka, for example, the programme has received 120 profiles from Norwegian companies since 1995. Of these, 104 matches were found, 78 of the companies made visits to Sri Lanka and 22 have carried out preliminary studies. In all, 16 companies have signed cooperative agreements and 12 joint ventures have been formed. NORAD has also been contacted directly by 96 Sri Lankan companies. The collaboration encompasses diverse branches including boatbuilding, furniture and mattress production, fishing, data processing and environmental inspections.

    GTZ - rapid expansion 

    The German Public-Private Partnership is aimed at companies that would not, on their own, have the resources to find appropriate partners abroad. The PPP steps in with support when their projects are considered worthwhile from a development perspective, and financial assistance can support the sustainability of the ventures.

    PPP projects are planned, financed and implemented jointly. There are no pre-qualifications by country or sector. The companies submit their proposals directly to GTZ and go through a six-step feedback and approval process.

    Since PPP began in 1999, more than 100 projects have been implemented in many countries, including Bangladesh, Ethiopia, Mali, Senegal, United Republic of Tanzania and Uganda. One example is the cooperation with the Association of German Flower Traders. Increasingly, German consumers want assurances that production follows international environmental and social norms. Flower farms are certified and receive the "Flower Label".

    LDC producers that join the Flower Label partnership agree to respect ecological standards, eliminate child labour, protect mothers and implement minimum wages. Producers in five African countries and 36 German importers have joined the programme.

    The DANIDA concept of business linkages 

    DANIDA's approach is similar to that of GTZ. Danish companies are invited to submit proposals for cooperation with a partner in one of 11 target countries, including Bangladesh, Mozambique, Nepal, Nicaragua, United Republic of Tanzania and Uganda. The LDC company can also submit a proposal and ask for help in finding a suitable Danish partner. The programme provides a combination of advisory services, grants and loans to the partners.

    US efforts 

    In the United States, the US Chamber of Commerce has begun a matchmaking operation with support from the United States Agency for International Development. The operation was initially oriented towards South-East Asia, but the organization is considering expanding its activities to other regions, including LDCs. Its Strategic International Assistance and Matchmaking programme, for example, concerns Thai-US partnerships exclusively, with the objective of providing assistance in finding potential trade and investment partners for long-term relationships and laying out the institutional and financial framework so that the programme can be sustained independently.

    The issue of capital supply 

    Since many of these linkage programmes are quite innovative, the instruments themselves are more or less pilot programmes. One of the issues on which the programmes differ is the need for inclusion of a capital component. Most of the bilateral programmes, such as DANIDA's or the German PPP, concentrate on the 'software', i.e., technical assistance and training, market and feasibility studies or project management. These elements are wholly or partially financed on a grant basis.

    The Dutch programme, PSOM, provides a capital component for machinery, buildings and materials on a grant basis (up to two-thirds of the cost). This approach differs from that of other programmes, which leave this aspect to financial institutions. DANIDA also realized that an investment project might need a capital component and can provide loans within the framework of its programme, but the interest charged is close to market rates.

    PSOM's experience shows that the combination of a capital and technical component within the same programme through a partial grant appeals to many companies. Even in an LDC like Mozambique, the threshold has proved low enough for companies to embark on an investment with local partners on a pilot basis.

    It seems clear that private companies willing to invest in developing countries, where the market is considered highly volatile, are looking for support for the total investment. For SMEs that need only modest investment capital (between US$0.5 and US$ 2 million), there are few alternatives. Financial institutions such as the International Finance Corporation (IFC) or the European Investment Bank (EIB) are interested solely in big loans with a minimum of approximately US$5million. They also usually charge market rates and, in addition, sometimes require payment of administrative fees. Private-sector development schemes such as matchmaking fill that gap.

    For more information, contact Roberto Cordón, ITC Trade Promotion Officer, at cordon@intracen.org 




    Matchmaking programmes - common traits 

    • Identification of target countries.
    • Establishment of country-specific parameters.
    • Call for project proposals. SMEs in the donor country are invited to make proposals for investment on the basis of the parameters decided. An announcement is also made in the recipient country(ies), generally through the local embassy. The call for proposals specifies the maximum assistance budget, partner contribution requirements, minimum scope of activities, etc.
    • The "matchmaking" stage. This may be done in various ways. For example, a donor country enterprise may identify a potential developing country partner on its own; or, in the recipient country, an enterprise with a concrete idea may actively seek a partner in the donor country. The sponsoring institution generally arranges for matchmaking through its local embassy or implementing agent in the LDC, and through its own contacts with the donor-country business community.
    • Project submission, evaluation and selection. Projects are submitted to the sponsoring agency and then evaluated by country and sector experts. A contract is signed with the partners laying out the various responsibilities and setting time frames for implementation.
    • Project implementation and performance reviews. The sponsoring agency supervises the implementation of the project and periodically reviews its performance.




search
UNCTAD WTO