Launching ceremony of the Eastern Partnership

5 July 2017
ITC News
Arancha González
Executive Director

Baku, Azerbaijan 5 July 2017

Minister Shahin Mustafayev,
EU Ambassador Anna Malena Mard,
AzPromo Chairman Rufat Mammadov,
Distinguished Guests,

It is with great pleasure that I am here with you today to launch the initiative “Eastern Partnership: Ready to Trade. An EU4Business initiative”.

This initiative is focused on supporting small and medium businesses in the six Eastern Partnership countries increase their exports to the European Union and to the region. For Azerbaijan this means an opportunity to support diversification by expanding its export base. By helping SMEs international use, it is also an opportunity to ensure trade translates into more inclusive and sustainable growth and jobs. And all of this fits squarely with the policies and initiatives already developed by the government of Azerbaijan.

The International Trade Centre is proud to be implementing this initiative, which is funded by the European Union. We look forward to working closely with our partners in each of the six countries, starting with the Ministry for the Economy and with AzPromo, with whom we are signing a partnership agreement today.

Enabling SMEs to connect to international markets is at the core of the International Trade Centers mandate.

Why does ITC focus on SMEs? Because SMEs account for the vast majority of businesses and jobs, and jobs are the main channel through which most people share in a country’s economic growth. When SMEs are able to bolster their competitiveness and connect to international value chains, they become more productive, employ more and pay better wages. A dynamic, internationally integrated SME sector makes growth more inclusive.

Compared to larger corporations, SMEs often struggle to overcome the many challenges in connecting to international buyers and value chains. ITC works with SMEs, larger private sector companies, governments, and trade promotion agencies like AzPromo to address these problems, and make trade happen.

SMEs represent more than 80% of the economic fabric in Eastern Partnership countries. Since SMEs are important employers of women and young people, their success is particularly important for advancing the socioeconomic empowerment of both groups.

Micro, small, and medium-sized enterprises in Azerbaijan account for nearly 83% of all registered companies, but only 3% of the economy. While the EU is already Azerbaijan's biggest export market, accounting for nearly half of the country’s total exports, this trade is dominated by oil and gas. Azerbaijan’s non-oil industries with high growth potential, such as honey, nuts, wine, fruits and vegetables, other agri-products, carpets as well as services, all remain underrepresented in the country’s export basket.

The EU is a promising market for Eastern Partnership countries: it is the among the world’s largest importer of precisely those goods in which these countries have a comparative advantage. And exports to the region are often a first step towards exporting to the EU.

To convert export potential into actual exports, however, a few barriers need to be overcome.

The first is information and trade intelligence about market opportunities, market requirements, and how to connect to international trading partners.

While business may have been accustomed to meeting CIS health and safety requirements, they now have to shift to conforming with EU requirements. Compliance costs can be high, requiring investments in equipment and external certification as well as changes to internal management processes.

To connect effectively to prospective buyers, even companies with the requisite certifications in hand need access to quality business support services. Yet trade-related services for SMEs are still evolving in the region. I congratulate AzPromo for the remarkable work they have been doing to provide institutional support to exporting SMEs here in Azerbaijan.

For all of the impressive progress Azerbaijan has made since its independence 25 years ago, from domestic economic reforms to oil and gas development, the lasting prosperity its people want and deserve can only be achieved through greater economic diversification. It is commendable to note that Azerbaijan ranks 37th in the 2016-2017 WEF global competitiveness report being the top performer in the region, up from 40 in 2015-2016. New industries and sources of growth are necessary for Azerbaijan to fully realize its growth potential. And SMEs have a critical role to play in ensuring that the gains from growth are widely shared.

Ladies and Gentlemen, as we have seen, the task before us is not easy.

To tackle the challenges, the project takes a holistic approach designed to achieve four interconnected sets of outcomes.

We will start from a value chain analysis. Working backwards from promising opportunities in the EU market, we will look at the whole value chain for selected products to identify the binding constraints on export success. On that basis, we support all stakeholders develop a shared vision of what needs to be achieved and how, so as to create, add, retain and distribute value along the value chain.

The second outcome is about linking SMEs to clients in Europe and in the region. To achieve exports, SMEs need to understand and connect with their buyers. ITC will help SMEs develop marketing strategies tied to target market segments, and facilitate contact with appropriate potential buyers, whether at customized meetings or relevant trade fairs.

But none of this work without the third outcome: supporting the region’s SMEs need to meet quality, cost, and compliance with mandatory and voluntary standards.

And finally, the impact of a project such as this will be limited in the absence of multipliers. This is why ITC will work in each country with business support organisations, from trade and investment promotion organizations such as AzPromo, to chambers of commerce and sector associations. Once properly equipped to support SMEs, they can continue to help companies connect to foreign markets long after the project is over, multiplying the number of businesses that benefit from it.

The project’s three-year timeline to achieve these is more than a little ambitious. That is why the project will focus on companies and sectors that are export-ready or close to it. SMEs will receive concrete support on sourcing, quality, packaging, production, marketing and branding, e-commerce, and trade promotion.

Before closing, let me use this opportunity and thank the European Commission for its financial support, provided through the EU4Business initiative and also the EU delegation to Azerbaijan for their help in the design of the project.

I look forward to working with all actors in Azerbaijan for the success of this initiative.

Thank you for your attention.