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    LDC Export Successes - How to Make the Exception the Rule

     

     
     
    © International Trade Centre, International Trade Forum - Issue 3/2001

    How can LDC firms take greater advantage of the rapid growth in world trade? What can be done to make LDC export successes more the rule than the exception?

    As ITC's Executive Director J. Denis Bélisle told the World Conference of Trade Promotion Organizations in Marrakech, Morocco, last year (see Trade Forum issue 4/2000, p. 4), trade promotion in the absence of a national environment that is internationally competitive will be pointless. Likewise, lack of international market access is what stops firms in least developed countries (LDCs) from being players in the export game, according to some analysts, but it is not the only issue. In many policy matters LDCs lag behind the more successful developing nations.

    Despite the problems facing least developed nations, LDC governments, industry associations and other trade development institutions can play a crucial role in putting into place an export-friendly 'enabling environment', and the Third UN Conference on the LDCs set out an Action Plan for authorities to take up the challenge in the coming decade. Countries such as Norway, which helped finance ITC's Business Sector Round Table, have taken the lead in bringing the question of an enabling environment into the development debate.

    What is an enabling environment? It comprises sound domestic policies and export strategies, adequate infrastructure, provision of effective trade support services and targeted firm-level support. These aspects are, of course, interrelated. At the policy level, the enabling factors include a stable macroeconomic environment, outward-oriented trade and industrial rules, a proactive foreign investment strategy, sustained investment in human capital, comprehensive technology support for small and medium-sized enterprises (SMEs), access to industrial finance at competitive interest rates, and an efficient and cost-competitive infrastructure covering everything from cargo services to Internet access.

    In other words, LDCs need to address 'supply-side constraints' to improving competitiveness. They need to take steps that can help firms improve productivity, quality, compliance with international standards, saleable designs, environmentally acceptable packaging and so forth.

    Export strategies

    Views on the importance of export strat-egies vary, but there is growing consensus that export strategies need to focus on:

    - identifying priority sectors;

    - addressing firm-level constraints for priority sectors; and

    - coordinating actions among a national network of government departments, firms, associations, universities and others who can improve the policy environment and trade-related business services. (This onshore coordination work, say many, has become more important than traditional offshore trade promotion activities.)

    In LDCs, where the private sector is underdeveloped, a conscious effort needs to be made to identify priority sectors, formulate sector strategies and subsequently, a national export strategy. Such strategies need to be prepared by stakeholders from the private and public sectors by engaging in a participatory and interactive process.

    Infrastructure weakness

    In many developing countries, weaknesses in the basic national infrastructure (transport, utilities, telecommunications) are major constraints on investment and operations. They clearly affect the cost and continuity of production and the quality of products. LDCs and their development partners need to identify critical trade-related infrastructure requirements and address them on a priority basis.

    Trade support services

    Trade support services are an indispensable component of the enabling environment. They ensure efficient delivery of business support services to exporters.

    Trade support institutions these days are understood to go well beyond dedicated trade promotion organizations and are more effective if they network the whole range of business services available to support export development. They include services relating to market information, training, quality management and standards, export finance, packaging, improvement of industry structure, FDI (foreign direct investment) promotion and cluster development, benchmarking and other promotional services. Recent years have seen a move away from offshore-focused activity to a more balanced and responsive programme of onshore facilities which maximize synergies through networking. Measures include support to SMEs.

    In LDCs, trade support service institutions are weak and unable to respond to new challenges and evolving needs of exporters. Technical assistance should address critical trade support service requirements for exporters and contribute to institutional capacity building.

    Building firms' export competitiveness

    There is also debate whether programmes should be designed to address constraints within the firm. Factors within local enterprises clearly have an important bearing on export success. But will firm-level interventions distort markets? Are they sustainable? Cost-effective?

    In LDCs, the overwhelming reason to intervene at the firm level is to serve as a catalyst and an enabler in accelerating the development of competence and competitiveness. Firms should not be alone in developing export competitiveness measures.

    Left to themselves, some LDC firms are already developing competence and competitiveness. But for the majority, the time required to do so would be very long, given their current level of development. To accelerate LDC export growth in today's fast-changing trade environment, these firms need not only export-friendly policies and an enabling trading environment but also systematic firm-level support, all of which aim to enhance competitiveness.

    LDCs score high on commitment

    Are LDCs ready to change? In fact, they have no choice. But in terms of commitment, many LDC Trade Support Institutions (TSIs) have made the adjustment already. A newly developed TSI Index developed by ITC - designed to help TSIs to analyse their performance on 12 factors identified as critical to success - showed that the least developed nations scored higher than average among developing countries (64.2 out of 100 for LDCs, compared to 62.8 for the average) with regard to commitment. A major problem has been financing that commitment. The TSIs in the eight LDCs out of 28 total respondents scored lowest in funding, 19.2 compared with 39.3 overall.

    This article was prepared by Peter Hulm and Natalie Domeisen. It is based on the results of ITC's Executive Forum debates on Redefining Trade Promotion (1999) and Export Development in the Digital Economy (2000); and on the results of ITC's Business Sector Round Table at the Third United Nations Conference on the Least Developed Countries (2001).


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