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    Have TPOs Changed?

     

     
     
    © International Trade Centre, International Trade Forum - Issue 1/2005 
     

    Photo: photos.com "Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime."

    National institutions are essential to increase trade in a sustainable way. The best trade promotion organizations continue to evolve in a fast-changing trade environment. This is the message in the first of three viewpoints about TPOs.
     

    This well known Chinese proverb is most relevant for any type of sustainable development. Amazingly, it is often ignored by technical assistance providers who, in their haste to do good and be seen to be doing good, often support the "quick fi x" or the "quick win". Many proceed on the basis that if the man is hungry, give him some fi sh. Th is allows the technical assistance provider to show immediate positive results and everyone is happy over the short term. Th e problem is that the man comes back tomorrow, hungry again, but by then the donor may have moved resources on to another "quick win" situation.

    Sustaining trade development



    Government-funded (not necessarily government-controlled) national development institutions are indispensable to sustainable development. Though painstaking to establish, these institutions provide continuity after technical assistance projects end.
     

    This is as true for LDCs (least developed countries), such as Cambodia and Lao People's Democratic Republic, as it is for developed countries, such as Ireland, which has benefited from substantial European Union (EU) development assistance for over 20 years. The alternative is cosmetic interventions with little real hope of sustainability once the technical assistance project comes to an end.

    Most writers on trade development, of which there are regrettably not many, start from some World Bank-sponsored articles written in the early 1990s and usually agree that trade promotion organizations (TPOs) in developing countries have not been very successful. Developing countries' TPOs were generally considered an inappropriate delivery mechanism for trade support: they were a single (or monopoly) public service supplier, with unsuitable and poorly paid staff, hamstrung by inflexible government procedures, wrong attitudes and strategies; they had a confusion of purpose resulting from the assumption of regulatory and administrative roles; and they had failed to develop the range of necessary commercial support services.

    Taking another look at TPOs



    This issue of Trade Forum, which features the very successful 5th World Conference of TPOs, held in Malta in October 2004, provides us with an opportunity to take another look at TPOs around the world and ask ourselves a few questions: Have TPOs moved forward since 1991, and are they more or less relevant today? Do we have better options to deliver trade support services? Are these the right questions?

    Yes, they have moved forward, some TPOs more than others. Unfortunately, some TPOs in the less developed countries still lag far behind. This does not mean that they are not needed.

    No "one-size fits all"



    The trade environment has changed radically since the early 1990s, and has become a more fast-paced and complex world for exporters, potential exporters and national policy-makers. Institutional structures to deliver trade support services are more, not less, necessary.

    These changes in the trade environment make it incumbent on TPOs to monitor and review their position constantly and also remind us that there is no "one-size fits all". The delivery of technical assistance is complicated, because no magic formula exists that will work in all countries all of the time.

    What structures are appropriate? A developing country cannot rely on foreign technical support - however good - indefinitely. At an early stage, it must start to develop its own expertise, best nurtured within focused, institutional structures.

    There are many institutions needed for trade development: from those related to basic infrastructure, such as customs, transport, air and sea ports, to those that facilitate market access and support competitiveness, such as standards bureaux or packaging institutions. TPOs are just one of these necessary structures, although arguably the ones with the most comprehensive base for trade.

    As mainstream development agencies, the institutions cannot be for profit. They must, however, have a reliable source of funding. In most cases, national government funding, however sourced (from taxes, levies or donations), is still the best answer.

    Integrated services - one way to go



    Today, few people question the need for a focal point for export development, although there is still much debate over what form it should take. For example, should the mix include trade, tourism and investment promotion? Different countries are choosing different options and indeed changing direction from time to time. A few recent examples of merged institutions that provide business development services under one roof include:

    Innovation Norway: In January 2004, this state-owned company replaced four organizations: the Norwegian Tourist Board; the Norwegian Trade Council; the Norwegian Industrial and Regional Development Fund (SND); and the Government Consultative Office for Inventors (SVO). Innovation Norway promotes nationwide industrial development, by contributing towards innovation, internationalization and promotion.

    Malta Enterprise: Since January 2004, Malta Enterprise has become the focal point for enterprise, bringing together three separate agencies, MDC (investment promotion), METCO (trade promotion) and IPSE (support to small business). It acts as a single point of contact for all enterprises considering trade, investment or commercial links with the country. It provides a range of practical services and solutions to Maltese firms that seek to internationalize their operations and to international companies, seeking to trade or invest.

    Enterprise Mauritius: In late 2004, Enterprise Mauritius was incorporated and took over much of the work of three organizations - the Export Processing Zone Development Authority (EPZDA), export promotion (MIDA) and the outgrowth of a United Nations Industrial Development Organization regional subcontracting activity (SUBEX-M), which will be wound up.

    Some take a different direction . . .



    Different solutions are appropriate at various points of time in a country's development, as the following examples show. But the basic premise remains: there must be a government-funded institutional structure to focus attention on trade development needs.
     

    International Trade Canada: International Trade Canada (ITCan) emerged at the beginning of 2004 from a division of the former Department of Foreign Affairs and International Trade into two separate departments (ministries): Foreign Affairs Canada (FAC) and ITCan, which now supports trade development by providing services to exporters, developing policy and attracting investment. Trade and investment promotion are together under the senior Minister of International Trade. Foreign affairs remains a separate department under the Minister of Foreign Affairs.
     

    Export Barbados Inc.: The country's Prime Minister recently said in a budget statement: "Barbados is one of the few countries in the world which faces a foreign exchange constraint to its national development, but which does not have a specialized institution to conceive of export promotion and development policies and programmes and to oversee the implementation of initiatives to constantly seek and exploit new export market opportunities."

    As part of an IMF (International Monetary Fund)-inspired response to the balance of payments crisis, the former Barbados Export Promotion Corporation was closed by another administration in the early 1990s and the export development function was subsumed in the work of the Barbados Investment and Development Corporation.

    The Prime Minister concluded this was a strategic and institutional error because it marginalized the function of export development and promotion, and resulted in relatively indifferent export performance. He proposed that a new institution, Export Barbados Inc., be created to spearhead initiatives to develop and promote exports.

    Export Ireland: In 1998, Ireland's export and indigenous industrial development agencies were merged into one body, Enterprise Ireland. A recent Enterprise Strategy Group report concluded: "At a national support level, Ireland needs a single point of focus for international market development activities, charged with facilitating access to international and global markets and with promoting Ireland's enterprise brand internationally."

    The report recommended the establishment, within Enterprise Ireland, of "a dedicated structure, Export Ireland, with its own budget and strong, experienced leadership, to develop a more focused approach to export market intelligence and promotional activities".

    Developing national capacity



    Some technical assistance providers have skirted the issue of institutional capacity building by using foreign project consultants and/or matching grant schemes. These have an important role to play, but do not offer the country the prospect of sustainability.

    Sustainability only comes with developing national skills and national institutions. Both are a slow and costly process.

    In developing countries, few of the necessary services are available at all (or to the degree required) from any source - public, private or international technical assistance. Government-funded agencies are in the best position to deliver these services on a long-term basis.

    The key here is that TPOs must offer relevant services and have an appropriate organizational strategy consistent with the overall national trade development strategy. The broad outline of the services required is usually enshrined in the enabling legislation or in the organization's mandate and rules. It must be remembered that what are relevant services in Finland, for example, may not be relevant - or indeed feasible - in Kenya and that, in both cases, they will change over time.

    More enterprise- and sector-specific services



    Trade support services required today are more enterprise and sector specific. Exporters are no longer happy with general information; they want specialized assistance tailored to their company's specific needs. In some cases, firms are prepared to pay for it.
     

    An example of this is Proexport Colombia, which has retrained its staff and developed new web-based tools to deliver client-tailored information on selected markets and sectors. Proexport pays staff part of their remuneration according to the business success of the organization.

    Services should add value



    Firms are looking for services that add value to their operations. In other words, the TPO must provide assistance that the firm cannot readily obtain by using the Internet, a private consultant or some other readily available resource. To deliver value-added services requires specialist knowledge and contacts that can offer timely information and advice. Highly competitive countries now place a great deal of emphasis on the work of their foreign trade representatives.

    Private sector service providers offer this type of facility in few developed or developing countries.

    Countries must fish for themselves



    I am sure that these are not the only questions worth asking, but I am equally sure that these are some of the right questions. The right answers lead back to the conclusion that sustainable development assistance is about helping countries to reach a stage where the assistance becomes irrelevant because skills, structures and systems have been put in place to provide national solutions to problems.
     

    In the field of trade development, TPOs represent an important part of the necessary structure for sustainability. Countries need to be taught how to fish for themselves, however slow and difficult the process.
     

    Philip Williams is ITC Senior Adviser on Trade Support Institutions.