Regional Workshop on Export Competitiveness Strategies

Regional workshop on export competitiveness strategies for Asia and the South Pacific countries

Sydney, 24-27th October 2011

Workshop report

Prepared by Isaac Njoroge,

Sydney workshop Director

1. Background

The development of policies and strategies to improve on national competitiveness by countries has been on the rise in recent years largely because of rapid globalisation and more latterly the global financial crisis. Many countries have set up committees and task forces, commissioned studies and produced reports in efforts to understand what competitiveness is all about. This has been heightened by the annual production of the two major competitiveness reports that rank countries according to their competitiveness; the World Economic Forum (WEF) Global Competitiveness Report and the International Institute for Management Development (IMD) World Competitiveness Yearbook. The concept of competitiveness is somewhat controversial when it is applied at the national level rather than at the industry or firm level. Competitiveness can be broadly defined as the ability of firms to remain profitable in delivering the products and services that consumers demand. Hence competitiveness can be seen as a firm level concept with an impact on growth at the national level. It is a continuous process of seeking a better future for individual firms, industries and ultimately national economies.

While competitive firms provide the key factor in a country’s competitiveness, governments have a leading role to play in shaping the environment in which these firms operate. Governments provide the necessary institutional infrastructure and services to facilitate competition among firms. They provide macroeconomic stability, establish the necessary legal structures, address market failures and foster R&D in the public and private sectors.

It is against the above background that the Sydney workshop for Asia and Pacific countries was held. The workshop which attracted senior representatives from Governments and private sectors from 17 countries in Asia and Pacific region had two objectives:

1.  To share country experiences in implementing export competitiveness strategies with a view to addressing common regional issues as well country specific impediments to competitiveness.

2.  To explore new approaches to export competitiveness strategies necessary to meet the emerging challenges in many developing countries.

2. Workshop theme and context

The workshop was organised around five themes in five sessions. These are:

i)  Exports: A pathway for economic growth

ii)  Exports and the development challenge in Asia and the South Pacific

iii)  The new Competitive advantage: the fall of the Traditional competitive advantage and the rise of the New

iv)  Export growth and movement up the ladder of competitive advantage

v)  New approaches to export competitiveness: Trade logistics facilitation

vi)  Export growth package

i)  Exports: A pathway for economic growth.

Development is about welfare transformation through economic, social, political and technological progress. During the past 60 years, growth spurts have occurred in most Asian and Pacific countries but the most successful among them are those that embraced export development agendas in their development strategies. During the last three decades, economic growth in these countries has been aided by the integration of the global economy while most recently (last ten years),economic growth has been helped by innovations and productivity gains arising from such examples as the semi conductor/IT technology and the internet, labour cost advantages and improved services offerings. It can therefore be concluded that:

·  Exports are an important driver of economic development. Export performance is a significant component of trade and has enormous potential to drive economic growth. It is desirable to promote export competitiveness and ground it on a good partnership between public and private sector.

·  At firm, national and regional levels, it is necessary to share experiences and lessons learned. This would enhance the speed of competitiveness growth and build credible partnerships.

·  The size of domestic market is not a critical factor as has often been cited. It should not be a deterrent to competiveness development. Instead firms and countries should cultivate an external outlook to tap into the bigger global market.

ii) Exports and the development challenge in Asia and the South Pacific

The significance of competitiveness in Asia and the Pacific should be understood within the context of the rapidly changing global economy where technology and knowledge is perhaps the most important resource and determinant for sustained competitiveness in the region. New challenges and opportunities are created by globalisation and technological progress and the public and private sectors in this region will need to jointly devise strategies to exploit the potential benefits that globalisation, technology and competition offer.

Discussion one: Is capitalism under siege and are businesses seen as sources of social and environmental problems leading government officials to set policies that undermine competitiveness?

Group / Observations and conclusions
Group one / ·  Small island states contend that Businesses contribute to social and environmental problems in countries. India and Sri Lanka disagree.
·  India anticipates that improved competitiveness of her industries will solve her high unemployment problems
Group two / ·  Need for balanced growth hence importance of both government and business collaborating on environmental issues
·  Desire to meet minimum standards should not be seen as siege on business but rather an attempt to balance people, profit and planet (3Ps)
·  Transparency in the formulation of policies and linking these to country needs should mitigate perception of attacks on business
Group three / ·  Small groups of big business monopolise the business sector and therefore have the power to influence social and environmental issues
·  Government officials unilaterally undermining competitiveness by increasing fees, licence fees, regulatory policies and introducing complex procedures
Group four / ·  Governments requiring higher levels of compliance without meeting or sharing the costs involved
·  Business unwilling to implement minimum wage requirements
·  CSR almost nonexistent in many countries
·  Little or limited importance placed on environmental issues and large gap between government and business

iii) The new Competitive advantage; the ability to execute

The key message in this session was that an unexploited competitive advantage and a competitive advantage that takes ages to exploit is no advantage at all. Strategies will only deliver on the anticipated outcomes if they are expeditiously executed. A few buzz statements were captured here:

·  Strattergee-Polisee: It does not matter how you spell it; if it is not implemented, competitiveness will not be achieved!

·  Complex border, customs and trade procedures are detrimental to economic development. Destroy the bureaucracy and make it simple. The Single window system was acknowledged as an effective way of improving border administration, transport and communications and the business environment.

·  Holistic approach to trade facilitation and related issues. An integrated approach to resolving the numerous trade facilitation challenges is needed. Piecemeal interventions tend to be short lived and unsatisfactory.

·  Most strategies fail to be implemented because of the existence of “Silent killers of strategy implementation” in most countries and in most organizations and too many officials avoid confronting them. “Leaders need to face these killers if their countries are to learn and succeed” (Quoted from Prof Michael Beer, Harvard Business School).

·  Four areas are identified as critical in executing a competitive advantage. These are market access, border administraton, transport and communications infrastructure and the business environment. The Single window system has been acknowledged as one of the more effective tools of addressing three of these areas namely border administration, transport and communications and the business environment.

·  The Single window system has been found to lead to 7.5% trade gain and results in significant reduction in cost to trade in countries where this has been implemented.

·  The transport challenge is to develop a deregulated and privatized multi- modal transport system responsive to the economy’s needs and user expectations. This will ultimately lead to economies of scale and will enhance a country’s competitiveness.

iv) Export growth and movement up the ladder of competitive advantage

This session was discussed in the context of the “Flying geese phenomenon” which originated in the 1930s and presupposes the existence of a hierarchy with a dominant economy acting as the growth centre and followed by other developing economies. The larger economies of India, Pakistan, Malaysia, Sri Lanka and Bangladesh could help the smaller economies in the region to catch up. This is already happening in the case of Malaysia and India in their respective third country training programmes.

The following issues were captured in this session:

·  Learn from champions; pick low hanging fruits, clustering and the flying geese lessons.

·  Ideally they should start by acting on the opportunities that are easy to exploit, sectors easy to develop and problems not too complicated or costly to resolve. Models such as clustering that have worked elsewhere can be copied to drive opportune sectors. As a region the countries should emulate the flying geese example; to move together, pulling along the weaker economies so that the region as a whole can move further.

·  Many of the problems facing the countries appear very similar. They also often find themselves in the same situations. Consequently it is advisable to share knowledge regularly and constantly. The political partnership between governments should extend to private sector in the region. That would result in improvements to governance challenges which have hitherto led to ‘flawed’ policy and weak implementation of strategies.

·  The institutional framework should be streamlined both at regional and national levels. This could entail unifying service delivery; setting up specialist structures, and incentivizing exports alongside removing anti-export bias. Countries should focus on building on their comparative advantage and making the markets work better and more efficiently by providing market information. Some might advocate that careful choice of a sector to favor a path of high-tech products may eventually be the way to go. The infrastructure and resources required for this are however expensive and there should be patience on the journey to solutions and sophistication e.g. establishing a single window system. In any case innovation is critical and can be achieved even amongst existing sectors in relation to marketing, quality and standards, provision of information and so forth.

v) New approaches to export competitiveness: Trade logistics facilitation

The importance of Trade facilitation in improving national competitiveness was highlighted by the following observations/lessons:

·  Each international trade transaction requires an average of 40 documents of 200 data elements with 15% repeated at least 30 times and 60-70% repeated more than once (UNCTAD).

·  A 2009 study on APEC economies found that eliminating layers of trade regulation and improving institutions would cut information and compliance costs for businesses and lead to an estimated 7.5% increase in intra regional trade and US$406 billion in global welfare gains(Helble et al.2009, “Transparency and Regional integration in the Asia Pacific”.

·  To improve on Trade facilitation measures, emphasis should be laid on:

-Improving processes: Trade, business processes, efficiency and mapping

-Aligning policy: Legal review and legislative framework

-Focusing on people: Human resources, training, organisation strategy, administrative strategy, change management and culture

-Implementing platform: Technology and infrastructure

·  Customs reform and modernisation is a major driver of sustainable development and a key part of efforts to improve economic development and reduce poverty(Helen Clark,UNDP)

·  The challenge is to develop a deregulated and privatised multi modal transportation and logistics system responsive to the traders and economy’s needs and users expectations

vi) Export growth package

A country’s competitiveness is the degree to which it can, under free and fair market conditions, produce goods and services that meet the test of international markets while simultaneously expanding the real incomes of her citizens. The process of implementing any export growth package can be represented in pictorial form as shown below:

Source: IMD

a) In pursuing an Export growth path, countries would need to address the following questions:

·  How do you manage their relationship with the World community?

·  Which economy drives you?

·  Do you rely on assets or processes?

·  Do you promote individual risk taking or aim to preserve social cohesiveness?

The answers to the above questions are important as they will determine the export growth pattern that the country will take.

b) There are some universal options that Countries can adopt. These have worked elsewhere with different results:

·  A country can chose to be either Aggressive (Germany) or Attractive(Ireland)

·  A country can chose to focus trading relationships with those in their proximity (Canada) or go global (Japan).

·  A country can chose to focus on her most important resource, her people (Singapore) or on things such as infrastructure (Dubai)

·  A country can chose to promote risk-takers and allow entrepreneurship to flourish (USA) or ensure an egalitarian society (Sweden).

c) Irrespective of the responses to the questions under a) above or the option that a country decides to take under b),there are 10 universal golden rules that must be observed for a country to achieve high levels of competitiveness. A country must:

1.  Create stability in law

2.  Have a flexible and resilient economic structure

3.  Invest in traditional and technological infrastructure

4.  Promote private savings

5.  Develop aggressiveness and attractiveness at different levels and sometimes for different sectors

6.  Maintain quality, speed and transparency in Government

7.  Maintain a relationship between wages, productivity and taxation

8.  Preserve the social fabric by reducing wage disparity

9.  Invest heavily in education

10. Balance proximity and globalism.

Source: IMD

d) The results of the group work on traditional export competitiveness model are summarized as follows: