Implementing trade-facilitation measures to boost SME exports

22 May 2014
ITC News

(Astana, Kazakhstan) – Putting in place predictable trade-facilitation rules and regulations is critical to raising the export potential of small and medium-sized entreprises (SMEs), but to deliver real benefits to SMEs, countries must implement the regulations. This was the conclusion of a side event organized by the International Trade Centre (ITC) as part of the Astana Economic Forum in Astana, Kazakhstan on 22 May.

Speakers at the panel discussion, entitled ‘Helping SMEs to internationalize: Navigating through thick borders’, also reviewed success cases of SME export faciltation, including those from landlocked countries. ITC Executive Director Arancha González moderated the discussion.

‘When we survey SMEs, 55% tell us that the overall business environment is improving, but lack of trade facilitation remains a major constraint to exports,’ Ms. González said, in opening the debate. Problems with non-tariff measures related to border control and customs procedures are among the largest problems that SMEs face, she said.

Kazakhstan addresses non-tariff measures

Easing non-tariff measures – customs procedures in particular – is a priority for the government of Kazakhstan, said Zhanar Aitzhanova, Minister of Economic Integration of Kazakhstan, in her keynote address. This process has already begun to deliver results, she said, citing Kazakhstan’s improved ranking in the World Bank’s annual Doing Business index. The country was ranked 50th out of the 189 countries and territories surveyed.

‘Once Kazakhstan enters the World Trade Organization [WTO], we will take steps to implement the recent Trade Facilitation Agreement immediately,’ Ms. Aitzhanova said, referring to the multilateral Trade Facilitation Agreement agreed on by WTO members last December. In the meantime, Kazakhstan is already working on increasing transparency in customs regulations and procedures, she said.

SMEs need up-to-date information on how to export and cross borders, but such information is often hard to access in developing countries, particularly when regulations change, said Gyan Chandra Acharya, United Nations Under Secretary-General and High Representative for the Least Developed Countries, Landlocked Developing Countries (LLDCs) and Small Island Developing States. He highlighted the particular difficulty faced by exporters in landlocked countries, whose goods need to transit neighbouring countries to reach wider markets. Hence, LLDCs have a particular interest in improved trade-facilitation conditions worldwide, he said. ‘Fees charged by transit countries need to be proportional to the services provide; rent-seeking behavior must be stopped,’ Mr. Acharya said.

Customs organizations listen to SMEs

SMEs are under-represented in exports, and this is often due to the difficulty they have in complying with unpredictable customs procedures, said Zhu Gaozhang, Director of Compliance and Facilitation at the World Customs Organization (WCO). In East Asia, for instance, SMEs account for over half of economic output, but only 30% of exports.
‘SMEs do not have sufficient capabilities to navigate the complexity of administrative and bureaucratic procedures,’ he said, adding that customs organizations play a crucial role in implementing the WTO Trade Facilitation Agreement. WCO has developed a number of tools and guides for national customs organizations, including one on how to work better with SMEs and facilitate their trade.

‘Historically, we have been working with larger companies,’ Mr. Zhu said. ‘We are now also working with SMEs and reviewing border procedures based on their feedback.’

There is much work to be done in the area of customs simplification, particularly in reducing the number of required documents and ensuring that rules are applied consistently, said Pelin Gunessoglu, Chairwoman for West Africa of Turkey’s Foreign Economic Relations Board (DEİK) and owner of two food-processing SMEs that supply multinationals and employ 150 staff. ‘We do not know which kind of tax they are applying for which kind of products,’ she said.

After-sales service: key to export success

SMEs need to become more customer-focused to maintain relationships with clients abroad, Ms. Gunessoglu said. ‘It is not enough to provide the right product at the right price, but you also need to provide the right service,’ she said. ‘Supporting customers has made all the difference for us.’

Finding the right suppliers and developing long-term relationships with them is also a major factor in competitiveness. Her companies work with 25 suppliers from the Americas, Africa, Europe and the Far East, as well as Turkey. Her companies export dried fruits and fruit products worth between US$ 20 million and US$ 30 million a year. ‘We could easily double our turnover if we found more suppliers,’ she said.

Turkey’s export competitiveness has received a major boost recently with the dramatic increase in the number of Turkish Airlines flights to Africa. Trade volume increased 70% as a result, Ms. Gunessoglu said. ‘I need to look them in the eye, shake their hands and that is how business is done.’

Building the capacity of logistics service providers in developing countries is an important contributor to the export competitiveness of SMEs, said Thomas Sim of the Association of Southeast Asian Nations (ASEAN) Federation of Forwarders Associations. Mr. Sim chairs the association’s working group on education and training. Freight forwarders, he said, can play a key role in logistical assistance to SMEs, which – unlike larger companies – often do not have in-house staff with experience in logistics.

In summing up the panel discussion Ms. González highlighted the need for predictable customs regulations and trade-facilitation measures to enable SMEs to enter international markets. ‘The rules are not enough if they are not implemented,’ she said. SMEs require support to understand regulations, gain access to finance and meet quality standards, she added. Governments, business associations and development organizations such as ITC need to work together to create the right conditions for SMEs to internationalize and navigate through borders that are still all too often thick.

For more information, read ITC’s business guide on the implementation of the WTO Trade Facilitation Agreement.