Ensuring Competitiveness Through Targeted Support Services for the private Sector
Ms Aicha Pouye, Director of ITC’s Division of Business and Institutional support, noted that trade support institutions (TSIs) in rural areas are often at a disadvantage in providing the latest market information, business skills and other trade support services to local exporters. They often lack the financial and human resources needed to provide adequate support. On the other hand, national-level TSIs, including official trade promotion organizations (TPOs), are not always able to expand their services and coverage at the sub-national level. The session aimed at identifying practical solutions for ensuring that TSIs in rural areas provide relevant and up-to-date support services to exporters.
The main conclusion of the session was that in order for rural-based SMEs to become export ready, it is important for them to understand buyer requirements, first at the domestic market level, then at the regional and eventually at the international level. Connection is required between SMEs themselves, between TSIs and between TSIs and TPOs, and with policymakers, to ensure they take account of the needs of rural based SMEs, and as a result there is marked improvement in terms of their access to finance, trade intelligence and availability of affordable business support services.
Before targeting regional and international markets, it is important to promote local sourcing to support small rural based SMEs. They need to be provided with all relevant information, products and services to help them to comply with domestic market requirements. Backward linkages between the agriculture sector and the tourism sector should also be developed.
Mr Mahmoodun Nabi Chowdhury, Head of Corporate Banking, BRAC Bank, Bangladesh, said that not all small producers receive support from TPOs because these are normally focused on cities or based in capitals. Many TPO staff do not understand the issues faced by rural producers. They also often lack market information, which results in a bias in favour of local markets they do understand. Small producers and SMEs often do not have information or the capacity to negotiate with importers from abroad. Access to finance is another major challenge. Farmers do not have the skills needed to negotiate with banks and the banks are unwilling to deal with them. They need business support services. Communication is another issue: farmers do not have access to the internet to get the information they need, he said.
Mr Achmad Baiquni, Director of Finance, Bank BRI, Indonesia, said that there are three main challenges in dealing with small rural producers, related to production, marketing and finance.
- The production problem is mainly related to variability in volumes and harvests;
- the marketing issue is that small producers have no access to business mapping or information about domestic and international markets;
- the finance issue concerns limited access to pre- and post-export financing, lack of capital, financial data and collateral.
To deal with the challenges related to production, the Indonesian Government has set up a TSI to provide assistance to farmers and SMEs, and BRI has placed trade finance officers in its offices. In terms of marketing, BRI supports TSIs in helping small producers to attend trade exhibitions and also has programmes to connect international importers to local domestic suppliers. The bank helps producers in preparing sales contracts. On the financing front, BRI provides working capital and post-export financing, as well as providing export-import insurance.
Mr Cesar Freund, International Cooperation Manager, PROMPERU, Peru, said his organization has six regional offices in the country, providing a channel between local producers and the organization’s headquarters in the capital. They identify local partners to help reach the producers and work with those partners to help beneficiaries prepare business plans to access international markets. In recent years the strategy has been to support local TSIs. Peru is a very centralized country politically, but local players want to make their own plans and not have them imposed from the capital, which is why PRMOPERU works with local partners, such as local governments, universities and local chambers of commerce. In addition to financing difficulties, one of the problems faced by local producers is the small scale of their production. They may have attractive products, but often they are not producing in the volumes required by international buyers. PROMPERU assists in setting up producer associations to lower costs and achieve the volumes needed to reach international markets.