Whither TPOs? A View from Asia

Market-driven TPOs support outward-oriented trade and investment policies in successful Asian economies.

Few current trade policy issues are as polarized as the debate over the relevance of trade promotion organizations (TPOs) for developing countries. Some ardent free traders see TPOs (particularly those funded and controlled by the state) as inefficient and costly bureaucratic structures that offer little support to exporting by private firms. Instead, they advocate rapid import liberalization and competitive exchange rates to stimulate exports.

At the other extreme, old-style state interventionists argue that private sector export activity will not occur without support from the public sector TPOs. Interventionists thus equate expanding TPOs with export success. Empirical evidence from dynamic Asian economies is more useful than economic ideology to understanding complex institutional issues like TPOs.

TPOs contribute to Asia's export success

The rise of dynamic Asian economies from poverty to super-exporters of computers and cars is widely hailed as one of the remarkable development achievements of the 20th century. Past explanations for Asia's success include outward-oriented trade and investment policies, low inflation, world-class infrastructure and ample cheap manpower.

With greater recognition today that good policies need good institutions, the spotlight is on the pivotal role of TPOs and other institutions in supporting the creation of business competitiveness. TPOs in Asian newly industrialized economies have been market-driven, consistently providing timely and high-quality marketing assistance to firms (particularly small and medium-sized enterprises) and reducing transaction costs of exporting. Among the most reputed are the Hong Kong Trade Development Council, International Enterprise Singapore (formerly the Singapore Trade Development Board), the Korea Trade-Investment Promotion Agency and the China External Trade Council (of Taiwan, Province of China).

Market-driven TPOs

Four features of the Asian market-driven TPOs mentioned above are worth highlighting:

Private sector involvement. Asian TPOs have generally had a strong private sector involvement in their establishment and operation. This involvement usually includes a chief executive officer from the private sector, senior managers with private sector experience and a board dominated by representatives from the private sector. Emulating the private firms they seek to support, these TPOs have developed services tailored to business needs as well as quick response times and high-quality standards.

International presence. Asian TPOs tend to focus on the key export markets targeted by national firms. A major aspect of their external orientation is an extensive network of overseas offices and close links with foreign buyers and market trends. Timely market intelligence and strong business contacts are vital for their effectiveness.

Qualified professional staff. Recruitment in Asian TPOs is on a competitive basis with the emphasis on recruiting top marketing, business management and engineering graduates from good universities and providing them with extensive on-the-job experience in trade promotion. Competitive salaries, postings in international markets and sponsored postgraduate training are used to retain and upgrade skills.

Sufficient financial resources. International marketing is expensive and Asian TPOs tend to be well resourced (with budgets of between US$ 10 million and US$ 60 million) through a combination of direct budgetary support and cost-recovery-based services.

Lessons from Asian TPOs

The experience of dynamic Asian exporters suggests that market-oriented TPOs are an important ingredient, along with good policies and other institutional support, in influencing business competitiveness in a global world. Other developing countries can draw useful lessons from Asian experiences in designing and restructuring their TPOs.

Ganeshan Wignaraja is Senior Economist at the Asian Development Bank, Manila. He was formerly Head of Competitiveness and SME Strategy,Maxwell Stamp PLC.