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    Keys to Export Success
    © International Trade Centre, International Trade Forum - Issue 4/1999

    Experts from six countries prepared export development strategies for the ITC Executive Forum. Fuller versions are available on the ITC Executive Forum web site.

    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