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    Jumpstarting Trade in LDCs

     

     
     
    © International Trade Centre, International Trade Forum - Issue 3/2004

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    Challenges

    LDC businesses need help overcoming supply constraints to spur export growth.

    Over a period when the world economy has generally been growing and diversifying, the share of least developed countries (LDCs) in world trade has shrunk to the present 0.4%, down from 0.7% in 1985. Despite schemes to improve market access for LDC exports - such as Canada's Market Access Initiative or the European Union's Everything But Arms initiative - most countries remain unable to tap into new opportunities.

    Why? To boost LDCs' participation in the world economy, market access is necessary, but it's not enough. LDCs depend heavily on primary commodities and low value-added exports, which have seen steady price falls. Higher-value goods and services that match the more profitable trade opportunities are not the norm in LDCs, and neither is the capacity to develop them.

    Severe "supply-side" constraints block business development. Often, LDCs' policies are not supportive of trade, nor is trade integrated in their overall development strategies. They have limited capacity to formulate strategies that diversify exports in response to changing demand. LDCs lack trade support services in key areas such as trade financing, quality management, trade information and marketing, which can help firms compete in the international marketplace. Weak physical infrastructure to support trade - roads, ports, energy and telecommunications - is a handicap to growth. Finally, enforcement of the rule of law and greater transparency to reduce corruption often remain problem areas for business.

    Despite the major challenges LDC exporters face, some have succeeded in exploiting new business opportunities through entrepreneurship and perseverance. Their successful exports range widely, from back-office services to perfume essences and tourism. Governments and bilateral and international agencies must work together to improve the environment for more entrepreneurs to emerge and grow.


    Solutions

    • Boost supply capacity. Identify economy-wide linkages that impact on the production and movement of goods and services. Raise awareness with policy-makers to support measures that integrate policy reform and financial and technical assistance for export growth.
    • Emphasize priority sectors. Research international market trends and focus resources on a few sectors with potential for adding value. Activities that yield results include improving processing and design, exploiting niche markets and new markets such as those in the services sector.
    • Improve trade support services. Expand the range and quality of services in areas such as trade information, export packaging, finance and legal issues. Support marketing efforts by helping exporters participate in marketing missions and trade fairs, or by organizing buyer-seller meetings.


    How ITC Can Help

    • The Integrated Framework, a programme of six development agencies, coordinates technical assistance in the least developed countries. It encourages them to include a trade dimension in national development strategies such as Poverty Reduction Strategy Papers. ITC helps countries enhance their supply capacity, strengthen the trade promotion infrastructure, review export market opportunities and develop specific export strategies for labour-intensive sectors.
    • ITC has identified higher-value market niches for LDC exports, in areas such as business services, medicinal plants, tourism and organic products. It helps countries and sectors assess and improve their competitive advantages in these and other sectors.
    • ITC improves trade promotion infrastructure by building institutional capacity to provide export training and advice in areas such as trade financing, product development, quality standards and marketing.