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Helping SME’s to export more?
Ian Sayers
Senior Advisor for the Private Sector
41 22 730 0260
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Special challenges for SME’sSpecial challenges for SME’s Special challenges for SME’sSpecial challenges for SME’s
© ITC, Ian Sayers,
26 March 2001
Trade procedures and SME’sTrade procedures and SME’s
Mindset + Information = Profitable Mindset + Information = Profitable + Support + Support SME Exports SME Exports
The SME- Export equation:The SME- Export equation:
What can the international community do What can the international community do to help?to help?
Successful SME Trade strategiesSuccessful SME Trade strategies
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The export supply chain
Materials
suppliers
Retailer
Component manufacture
r
Assembler
MTS, Law, finance, transport, storage, inspecting, certifying, packing, labelling and
handling
ExportExportSalesSales
Storage
Sourcing & Sourcing & PurchasingPurchasing
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SME’s can be your export growth stars, but they have particular challenges
Buyer country representation and credibility
Marketing overseas and winning orders
Finance, and regulatory issue discrimination
Contradictory policies from different government agencies
Complying with a multitude of quality and trade certification requirements for different import markets (FN, DIN, BS, etc.)
Buyer country representation and credibility
Marketing overseas and winning orders
Finance, and regulatory issue discrimination
Contradictory policies from different government agencies
Complying with a multitude of quality and trade certification requirements for different import markets (FN, DIN, BS, etc.)
…leading to poor profitability for low volume exports due to higher per unit costs
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What makes the SME position more important now than ever before ?
Opportunity for Internet related business leading to higher SME contribution to GDP
Growth in the number of SME’s. Trend towards smaller, flexible operating units or outsourced production
Internet communications and related inspection/verification systems can improve SME export credibility
More opportunities for niche market SME’s as order, shipment volume and lead-times are reduced
Opportunity for Internet related business leading to higher SME contribution to GDP
Growth in the number of SME’s. Trend towards smaller, flexible operating units or outsourced production
Internet communications and related inspection/verification systems can improve SME export credibility
More opportunities for niche market SME’s as order, shipment volume and lead-times are reduced
...Export capability is only as strong as the weakest link in the chain
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Only a few studies so far on the subject of SME export success over time
Some suggest that SME’s that start with international trade have a better rate of survival1
Some suggest that SME’s that start with international trade have a better rate of survival1
Others show that SME’s concentrating first on domestic growth have difficulty making profitable international sales later.
Others show that SME’s concentrating first on domestic growth have difficulty making profitable international sales later.
…lack of examples gives scope for more focused research and analysis
1. McKinsey Consulting report February 2001, Golman Sachs report, December 2000
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Additional SME trade challenges(1)
ITC
Poor communications, burdensome anduncertain bureaucracy (especially customs)
Taxation and tariff systems that call for deposits in advance on exports or that tax imported components
Tax regimes that penalise rather than support small business registration
Poor communications, burdensome anduncertain bureaucracy (especially customs)
Taxation and tariff systems that call for deposits in advance on exports or that tax imported components
Tax regimes that penalise rather than support small business registration
Lack of accessible published information & market knowledge, uncertainty on where to buy & sell
Fragmentation = Non competitive order quantities & high shipping costs
Lack of buyer verification mechanismsand market sector malpractice news
Lack of accessible published information & market knowledge, uncertainty on where to buy & sell
Fragmentation = Non competitive order quantities & high shipping costs
Lack of buyer verification mechanismsand market sector malpractice news
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Additional SME trade challenges (2)
ITC
… Changes required need thought and co-ordination support, but are generally not contentious
Long-winded patent and copyright protection
Lack of accessible published information about national regulations, quality,marketing and sales practices in importing countries
Long-winded patent and copyright protection
Lack of accessible published information about national regulations, quality,marketing and sales practices in importing countries
High banking and accounting fees or inappropriate mechanisms for small transactions
Access to working capital, trade credit & foreign exchange
Maintaining accurate cost, accounting & production data for pre-qualification and making deals
High banking and accounting fees or inappropriate mechanisms for small transactions
Access to working capital, trade credit & foreign exchange
Maintaining accurate cost, accounting & production data for pre-qualification and making deals
RawMaterials
Inventories
Cash ReceivedWork-in-Progress
Inventories
FinishedGoods
Inventories
Debtors orReceivables
Purchase orders Other ProductionResources
Other ProductionResources
Distribution &Retail
Working CapitalWorking Capitalor Order-to-or Order-to-
Cash ReceivedCash ReceivedCycleCycle
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Informationflow
Productflow
An example:Inefficient sequentialsupply chainstructureswith poorinformationflow
steelsteelRubber
Export SalesExport SalesMarket
dominating
Assembler &
distributor
Suppliers ofraw materials
Suppliers of components & other inputs
Suppliers ofassembled components
Final consume
rs
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… the key - preparation, communication and motivation
Information flows
steelsteel
Rubb
er
ExportExportSalesSales
Require transformationand integrationto become competitive
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© ITC, Ian Sayers,
26 March 2001
Successful SME Trade Successful SME Trade strategiesstrategies
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Some national initiatives to level the playing field for SME exports?
Supportive tax regimes and rules (taper and capital relief's)
SME information kiosks and support for Internet technology
Establishment of industry clusters and business incubators with peer mentoring groups
Reduction in cost of Government administration and response times
Evaluation of technical obstacles to international trade from SME exporters perspective
Supportive tax regimes and rules (taper and capital relief's)
SME information kiosks and support for Internet technology
Establishment of industry clusters and business incubators with peer mentoring groups
Reduction in cost of Government administration and response times
Evaluation of technical obstacles to international trade from SME exporters perspective
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Some national initiatives to level the playing field (continued)
On-line trade document completion
International trade practice news
Transparent and certain customs operations
Encouragement to the banking sector to be more responsive through licensing greater competition and micro-loan schemes
Creation of stable trade support institutions in partnership with SME business representatives
On-line trade document completion
International trade practice news
Transparent and certain customs operations
Encouragement to the banking sector to be more responsive through licensing greater competition and micro-loan schemes
Creation of stable trade support institutions in partnership with SME business representatives
... for success - businesses and Governments must work together:
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© ITC, Ian Sayers,
26 March 2001
So what can the international So what can the international community do to help?community do to help?
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Suggested approaches:
ITC
Comprehensive sectoral analyses and diagnoses from perspective of SME’s for:
• supply chain risks,
• trade procedures, regulations and, finance
• customs procedures
Consultation and awareness events with import country businesses & government
Create a representational body to assure attention to the SME perspective and international co-ordination
Build trade procedures information co-ordination and dissemination network / system
Comprehensive sectoral analyses and diagnoses from perspective of SME’s for:
• supply chain risks,
• trade procedures, regulations and, finance
• customs procedures
Consultation and awareness events with import country businesses & government
Create a representational body to assure attention to the SME perspective and international co-ordination
Build trade procedures information co-ordination and dissemination network / system
.. Identify niche for information co-ordination and provision.
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Provide global support for:
ITC
Widespread access to inexpensive, reliable Internet services
Increased transparency of import market requirements
Global co-ordination of trade related taxation
Anti-fraud and legal redress measures
Simplification of legal and regulatory processes
Regional progress conferences, distance support and exchange visits
Widespread access to inexpensive, reliable Internet services
Increased transparency of import market requirements
Global co-ordination of trade related taxation
Anti-fraud and legal redress measures
Simplification of legal and regulatory processes
Regional progress conferences, distance support and exchange visits
.. Identify niche for information co-ordination and provision.
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Relevance and applicability ...
Recognise: The importance of SME’s in the global economy
That they need focused support in a few key areas
Efforts are needed to equalise the burden of trade compliance
Mindset + Information = Profitable Mindset + Information = Profitable + Support + Support SME Exports SME Exports
The SME- Export equation:The SME- Export equation:
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www.intracen.org
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Thank you
Ian Sayers
International Purchasing & Supply Management Section,Division of Trade Support Services,
International Trade Centre (UNCTAD/WTO), 54-56 rue de Montbrillant, CH 1202 Geneva, Switzerland,
Tel: +41 22 730 0260, Fax: +41 22 730 03 [email protected], http://www.intracen.org/ipsms
