ITC Survey: Small business exporters report improvements in business environment, expect exports to rise

3 December 2013
ITC News

The business environment for exporters has improved over the last decade, a survey of small and medium-sized enterprises (SMEs) in developing countries conducted by the International Trade Centre (ITC) has revealed. More than half of respondents said it had become easier to export, while only a quarter of SMEs reported that it had become harder (See Chart 1). Microenterprises with fewer than 10 employees were especially upbeat, with 61% saying conditions had improved.

CHART 1Has it become easier or harder to export over the last 10 years?

Encouragingly, more than two-thirds of SMEs expected export volumes to increase over the next 12 months, while only one in twenty anticipated a decline (See Chart 2).

‘The results represent a vote of confidence in the efforts of governments worldwide to make it easier for their companies to trade internationally,’ said Arancha González, ITC’s executive director. ‘The optimism of SMEs bodes well for export-driven growth and job creation.’ SMEs, which drive more than 80% of job creation in low-income countries, will be playing an important role in creating economic opportunities for the 470 million people expected to enter the global labor market by 2030, she said.

CHART 2What are your export expectations for the next 12 months?

Key constraints continue to affect export growth

At the same time, lack of access to trade finance and remaining problems related to the business environment were cited by more than a third of respondents as posing major export constraints (See Chart 3).

CHART 3Which of the following factors constrain your export activity?

Microenterprises were particularly concerned with the lack of access to trade finance, with 56% reporting it to be major drawback compared with just 38% of respondents overall. The significant decline in tariff levels over the last two decades, as a result of multilateral, regional and bilateral negotiations, and unilateral preferences granted to least developed countries (LDCs) is reflected in the findings of the survey. Two thirds of respondents listed tariffs as a minor or no constraint (68%). Only 18% of respondents felt that their own production skills and the quality of their products presented a major impediment to exports, with another 34% considering it a minor impediment.

CHART 4Evaluate the effect of the following business environment-related factors on your exports

Corruption on the rise

While the export environment has improved, the level of corruption has worsened, according to a relative majority of respondents (43%). Only a fifth of SMEs (20%) cited improvement in this area (See chart 4). Microenterprises were the most pessimistic respondents, with more than half saying that corruption had grown worse, compared to 31% of enterprises with more than 250 employees.

Significant differences between regions emerged from the survey results on this point. Respondents in sub-Saharan Africa were the most pessimistic, with almost two-thirds identifying worsening corruption as a major problem compared to a worldwide average of 43%.

Respondents from sub-Saharan Africa were bleaker in general. Almost half of them cited problems with the business environment as a major constraint compared to an overall average of 34% and 22% in Latin America and the Caribbean. For instance, more than half of exporters from sub-Saharan Africa complained about rising transport costs, compared with 33% worldwide and just 22% in Eastern Europe and Central Asia.

CHART 5Have changes in the level of corruption had an impact on your ability to trade? 

Non-tariff barriers hit LDC exporters the hardest

The findings of this survey complement the results of the in-depth research ITC has carried out over the last two years among more than 10,000 companies in 24 developing countries on the effects of non-tariff measures (NTMs) on their exports.

Exporters from LDCs are more exposed to NTMs and procedural obstacles to trade than businesses in developing nations, the survey has found.

Seventy percent of exporters and importers in LDCs reported that they faced burdensome NTMs, compared to an overall average of 54%. The most affected companies were those from Guinea, where 95% complained about burdensome NTMs. In Kazakhstan and Jamaica, on the other hand, only a third of businesses reported problems with NTMs. In Indonesia, where the survey was completed last month, 37% of the companies surveyed reported being adversely affected by NTMs.

CHART 6Percentage of companies affected by non tariff measures in selected developing countries based on ITC NTM surveys

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Several nations have already taken action based on the outcome of the ITC surveys. Sri Lanka, for example, is upgrading its quality assurance infrastructure and has secured US$ 554,000 in funding from the World Trade Organization’s (WTO) Standards and Trade Development Facility for that purpose. ITC and the Ceylon Chamber of Commerce have assessed the fruit and vegetable value chain, updated the national database of pests, seeds and diseases, and built capacity in the public and private sectors around food quality and safety standards as part of this project.

Similarly, the NTM survey conducted by ITC in Burkina Faso (2011) provided additional evidence to the Burkinabe government to support the setting up of a local accreditation facility in order to provide its agricultural exporters with food safety and plant health certificates, which previously had to be obtained abroad. (For more information see the article.)

Procedural issues provide particular challenges

Cumbersome administrative procedures also pose a major burden for exporters, the NTM survey found. These tend to hit SMEs particularly hard because they often lack the appropriate resources to deal with obstacles such as complex certification-linked processes, inadequate facilities, sudden changes in regulations and permit delays. Such problems occur mostly in exporters’ home countries even when the underlying regulations are imposed by partner countries.

For instance, an enterprise that manages to comply with a regulation often faces additional delays or costs amid administrative inefficiencies in documenting its compliance. Addressing such procedural issues by simplifying paperwork, ensuring that information on rules and procedures is easily available, and increasing access to accredited testing laboratories is thereforea vital aspect of trade facilitation.

A multilateral Trade Facilitation Agreement under the auspices of the WTO would provide the framework to address these challenges and thus contribute to the export competitiveness of SMEs, The gains would be greatest to SMEs in LDCs, and landlocked developing countries (LLDCs), as they are affected by procedural obstacles the most, the survey found.

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