Magazine article International Trade Forum

Successful Export Promotion: Lessons from Emerging Economies

Magazine article International Trade Forum

Successful Export Promotion: Lessons from Emerging Economies

Article excerpt

Emerging economies such as Brazil, China and India have been very successful in enhancing trade performance. But how have they actually achieved this--and what lessons could less developed countries learn from their experiences?

One element that works against improved trade performance is the high cost of trading faced by many emerging economies and developing countries. This is often the result of poor infrastructure as well as cumbersome procedures at national borders.

Support for trade-related infrastructure and trade facilitation seeks to address such constraints and has been effective in improving trade performance and competitiveness. Cooperation with the private sector--and state-business relations more generally--can also contribute positively to trade performance.

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Three key ingredients can ensure a country's successful trade performance: support for trade-related infrastructure such as roads, railways, ports, energy and telecommunication; trade facilitation and the improvement of rules and procedures that govern how goods cross borders; and effective state-business relations.

GOING FORWARD ON TRADE-RELATED INFRASTRUCTURE

Experiences in China, India and Brazil present lessons on how overlapping challenges that impede the private-sector financing of infrastructure have been tackled. In a nutshell, it is important to establish a favourable institutional environment for infrastructure development, look for domestic institutional investors, seek foreign investment with the support of the public sector. This could be done by providing credit guarantees, supporting public-private partnerships (PPPs), and enabling private participation in infrastructure, for instance by enhancing upstream preparation involving sector, policy and legal and regulatory reforms.

In China and Brazil, bank loans have helped to secure long-term financing, which is essential for infrastructure investments. The main substitute for bank finance for infrastructure if, for example, governments are not prepared to agree to enough contingent fiscal liability (as has happened in India), is to search for domestic institutional investors. The creation of new pension schemes offers some potential by producing a market for local currency-denominated long-term securities, thereby reducing the demand for bank finance.

Less developed countries could search for foreign investors--a move that could be supported by the provision of credit guarantees from the public sector, either directly through loan guarantees or indirectly through regulatory forbearance at public sector banks. Brazil, for example, has motivated foreign companies to invest in public-private partnerships. Brazilian energy companies have issued shares and bonds in international markets, having had investment-grade ratings and having profited indirectly from sovereign guarantees. This could be a promising option for some larger corporations or public utilities in less developed countries.

GOING FORWARD ON TRADE FACILITATION

Following the example of China, India and Brazil, it is essential for less developed countries to boost the use of information and communication technology, promote electronic data interchange and single window facilities for submission and processing of information and documents. They must also support the harmonization of documentary requirements across countries, minimize physical inspections, in particular through adoption of risk management techniques, and introduce industry and sector-specific trade facilitation initiatives, such as for agricultural products or low-valued exports. …

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