China helps Asian LDCs boost trade capacity

8 June 2015
ITC News

ITC is working with the Chinese government to help equip small and medium-sized enterprises (SMEs) from six Asian least-developed countries (LDCs) with the awareness and technical knowledge they need to take full advantage of preferential access to the continent’s largest market.

China is already the world’s biggest market for LDCs, accounting for nearly a quarter of all merchandise exported by LDCs in 2013 - worth some US$59.4 billion - albeit with oil and other mineral products accounting for almost nine-tenths of the total.

Beijing extended duty-free, quota-free market access to LDCs on 95% of its tariff lines in 2013, according to the World Trade Organization, and has announced its intention to expand this coverage to 97% of products by 2015. But tariff-free access alone is often not enough to jumpstart trade – especially for SMEs, which struggle to understand prospective markets, connect to buyers and comply with still-mandatory non-tariff measures. They must also bear the fixed costs these entail.

Khemmani Pholsena, minister of industry and commerce of Lao PDR, has noted that her country’s exports to neighbouring China were a modest US$2.7 billion in 2013 despite a variety of tariff preferences. ‘This might reflect two possibilities: one is the exporting country’s domestic supply side constraints and the other is the importing country’s domestic regulation restrictions as well as non-tariff barriers,’ she said.

“China has become the largest economy in the world in purchasing power terms. This creates enormous export opportunities for neighbouring developing countries”

                                                           Sylvie Bétemps Cochin, ITC project manager          

Building supply capacity and overcoming trade obstacles could create virtuous circles of production, trade growth and job creation, especially where SMEs are concerned. In Asia, SMEs account for more than 90% of businesses and 80% of the workforce. The more they are able to connect to regional value chains, the greater the potential for job creation and broad-based income growth.

This three-year project, launched in 2014, seeks to diminish the obstacles SMEs from the six LDCs face in penetrating the Chinese market through a combination of customized information about trading with China, capacity building and facilitating direct contact with potential Chinese partners and buyers.

To accomplish these objectives, ITC is partnering with trade and investment support institutions such as chambers of commerce and trade promotion organizations in Afghanistan, Bangladesh, Cambodia, Lao PDR, Myanmar and Nepal. This is being done to help SMEs build familiarity with Chinese import regulations, customs procedures, certification requirements and market entry strategies.

This project is funded by China’s Ministry of Commerce (MOFCOM), which is responsible for trade, investment and international economic cooperation, underscoring the growing role that emerging economies play in trade-related technical assistance. Through this project, China is serving not only as an engine of economic growth, but also as a leader facilitating regional trade integration at the business-sector level.

Key steps in the project include demand-side surveys in China and supply-side surveys in the Asian LDCs; the creation of an awareness-raising roundtable on export potential and trade-related constraints vis-à-vis China; training workshops and advisory support on Chinese market conditions and requirements; and participation in trade fairs and other business-to-business events. An additional study looked at how businesses in Cambodia, Lao PDR, and Myanmar – the three LDC members of the Association of Southeast Asian Nations (ASEAN) - stand to be affected by the bloc’s free trade agreement with China.
SMEs in the LDCs will benefit from customized trade-related information including a business guide book; match-making events to connect with potential buyers and investors; and field visits and participation in trade fairs in China.

The capacity of trade support institutions in the Asian LDCs to support their local SMEs in making inroads into China’s vast market will be enhanced through more targeted information and SME-specific tools to disseminate more widely in their countries.

The project has already brought together ministers and top public and private sector representatives from China, Cambodia, Lao PDR and Myanmar in the southern Chinese city of Nanning to explore opportunities to bolster trade and development and discuss practical ways to support SMEs. Gathering on the sidelines of the China-ASEAN Business Summit, they discussed issues such as trade facilitation, customs procedures and best practices with regard to standards, labelling and certification requirements.

At the Nanning meeting, U Zaw Min Win, vice president of the Union of Myanmar Federation of Chambers of Commerce and Industry, said the SMEs making up the overwhelming majority of businesses in Myanmar struggle to understand Chinese import rules and regulations. Additionally, many would-be exporters suffered from a lack of timely market information. ITC could make valuable contributions through training programmes and the provision of trade-related information, he suggested.

Looking ahead, ITC project manager Sylvie Bétemps Cochin observed that ‘China has become the largest economy in the world in purchasing power terms. This creates enormous export opportunities for neighbouring developing countries. It has become a strategic market for Asian LDCs to gradually integrate into international value chains, and serves as an incubator for export expansion and diversification.

‘This innovative south-south cooperation project should facilitate new connections between Chinese enterprises and SMEs in Asian LDCs and lay the groundwork for greater participation by SMEs in continental commerce.’

Funder China