adminGift Mugano Business Correspondent
Over the years, governments around the world established trade promotion organisations aimed, on one side, at supplying local exporters and potential exporters the necessary information to identify the foreign markets to sell their products and on the other side, at improving the knowledge by potential foreign customers about domestic products and firms.
Market failures that justify TPOs’ activities have mainly to do with information dissemination and co-ordination failures, such as imperfect information on the part of the domestic producers about foreign sales prospects, asymmetric information problems between domestic producers and foreign consumers, difficulties in cost and risk evaluation by exporters, barriers to entry in foreign markets because of lack of knowledge or of co-ordination (among suppliers, or between suppliers and buyers).
More specifically activities of the TPOs involve:
- Image building, advertising, advocacy;
- Advertising and marketing of domestic products, through trade missions, trade fairs, trade shows and information dissemination;
- Providing support services to local exporters, in order to assist enterprises in the planning and preparation for international involvement, stimulate interest for export in the business community, acquire expertise and know-how necessary to enter export markets, provide organisational help and cost-sharing programs;
- Conducting market research to develop awareness of export opportunities, identify targets and potential business partners.
TPOs are now widespread in both developed and developing countries, with diversified experiences. Zimbabwe is with no exception.
It established ZimTrade to spearhead the promotion of exports. There are a number of reasons for a significant increase in the number of TPOs (that is about tripled in the last 20 years).
First, changes in the regulatory environment (especially in the WTO rules) have led, in the last decades, to substantial restrictions in the export promotion activities (subsidies and similar trade policies) and have, as a consequence, induced the governments to look for new measures to circumvent such restrictions.
The aim of the TPOs is to help domestic and foreign entities internationally involved to match potential opportunities with profitable experiences.
Internationally, governments have established TPOs to facilitate and encourage exports.
The mission of the TPOs is to reduce the problems of imperfect information with the aim to increase and diversify exports. TPOs usually rely on a network of offices abroad in order to facilitate the information gathering on foreign markets and sales opportunities. TPOs provide a number of services including:
- Dissemination of information on export markets,
- Assistance in export marketing,
- Packaging and labelling,
- Quality standards management,
- General training about export activity,
- Legal assistance,
- Assistance in obtaining export financing and
- Trade missions and trade fairs.
Notable examples of countries which are using the TPOs are the United States, United Kingdom, Canada and South Korea.
In the US, international marketing efforts targeted 764 SMEs in the US between 1992 and 1999. Two types of intervention are considered: trade shows and trade missions. Trade shows are an important promotional tool that allows enterprises to gain customers, disseminate relevant information, acquire knowledge on the foreign markets and identify prospects and targets.
Trade missions consist in meetings between buyers and sellers to promote sales in the overseas locations, advertise goods and identify business targets establish long-term relations with potential business partners.
In the UK, trade mission participation on export performance and relation-building with foreign partners. The key factors for the programmes’ success are:
- Increasing diversification in the foreign markets,
- Acquiring specific knowledge about the targets and fostering communication with potential partners prior to the mission,
- Enhancing the use of ICTs; and
- Developing a close contact with customers through regular meetings.
In Canada’s export promotion service is provided by the Canadian Trade Commissioner Service.
It is government-based and characterised by loose coordination, cooperation between federal and secondary levels of government and consultation with the private sector.
There is, however, also a large number of other government-owned or government-controlled agencies that supply support to exporters, and a non negligible number of private export promotion agencies, export clubs and associations with similar goals.
The success of South Korea in terms of export flows has been largely attributed to government support on TPOs. The Korean Trade and Investment Promotion Agency was founded in 1962 and now counts about 97 offices abroad.
Survey of the literature on successful strategies and practices for export promotion by developing countries provides information regarding foreign business practices, cultural and market conditions and it directly supports firms through its overseas investment support centres. The network of the Kotra offices located abroad has been a critical factor in the success of South Korea’s exports.
Now coming home, out of these best practised functions does ZimTrade implement them under its mandate? The answer is obviously no!
In most cases only a handful of the activities are partially undertaken. To be quite specific, does ZimTrade have foreign missions/offices or they rely on our embassies which by their structure are biased to serve political interests than trade?
Is ZimTrade engaged in aggressive information dissemination and training? Is ZimTrade itself fully aware of new market developments (market intelligence)?
It is clear that ZimTrade is not properly capacitated (human resources, infrastructure and financial resources) to deliver these traditional mandates being practiced by other countries.
As we pull up our sleeves in the coming five years in building our beloved country, Government must support ZimTrade into a fully functioning organisation in line with international best practices.
One of the most common challenges in Zimbabwe today is constrained demand which has seen business scaling down operations but if ZimTrade was operating full swing alternative markets would have been provide to the benefit of local companies especially those within areas of trade agreements.
Gift Mugano is an author and expert in International Trade and Development and PhD candidate (Economics) and a lecturer in International Trade and Finance at Nelson Mandela Metropolitan University. He is based in Port Elizabeth, South Africa. Email: [email protected], Mobile: +27 780 174 112.
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