Regional Executive Forum 2002
Session 5 - Competitive Advantage and Business Alliances – Where Should the Focus be?

The Issue: Two critical objectives of export strategy are to: 

Maximize local content of the existing export base (labour, materials, production process, enterpreneurship, management and finance); and 

Generate business complementarities that will broaden the export base (products and services) and lead to the emergence of new areas of competitiveness.  

Both objectives involve value-addition alliances within, and among, local enterprises. 

However, in Africa, export strategy-makers tend to rely largely on foreign direct investment to create value-addition in the national export mix.  Inadequate attention is given to promoting the development of in-country value-addition alliances.  

The Proposition: Enormous scope exists for value-addition in the national export mix through partnerships between local enterprises. The formation of in-country alliances rather than the promotion of foreign direct investment (FDI) should, therefore, be at the centre of national export strategy.  

Various in-country value-addition schemes are operating successfully in developing countries, through public-private sector partnerships and private-private sector partnerships. These include programmes designed to: 

• promote industrial clusters

• foster joint production and marketing groups

• promote production partnerships between exporters and small-scale producers in the agriculture sector (e.g. contract farming);

• strengthen backward linkages between companies located in export processing zones and suppliers of goods and services located outside the zone; and

• promote business alliances between small-scale producers and local affiliates of multi-national companies. 

The introduction and development of such schemes should be a key concern of the national export strategy-maker and a core activity of the national trade support network. 

Focus of the Debate: In the African context, what should the approach be to fostering in-country value-addition alliances? What types of alliances work best? What should be the role of the public sector?  What are the implications for strategy and for the operation of the national trade support network? 

A related issue concerns the relationship between export promotion and the promotion of FDI.  Given the continuing importance of FDI (not withstanding the above proposition), and the limited resources available to implement national strategy, does “best practice” call for the export and investment promotion functions to be combined within a single organization?