Understanding how TISIs can help small businesses become more competitive

26 June 2018
ITC News
The challenge

Micro, small, and medium-sized enterprises (MSMEs) are the backbone of any economy; they make up the vast majority of enterprises and account for large shares of output and employment. They tend to employ the most vulnerable segments of the workforce, including low-skilled workers, women and young people.

Productive MSMEs are critical to economic growth and inclusive development. Trade can help businesses become more competitive through learning by doing and exposure to superior technology, quality and competition. However, MSMEs, particularly in developing countries, often encounter barriers when trying to trade across borders.

Trade and investment support institutions (TISIs) play a crucial role in enabling MSMEs to compete abroad. Effective TISIs provide services such as market intelligence, advocacy and training. They also connect export-ready MSMEs with potential buyers and investors.

In advanced economies, TISIs typically maintain MSME databases with descriptions and contact details. Knowing their clients helps them offer services MSMEs need. In many developing and least developed countries, however, TISIs do not have such information, limiting their ability to broker connections with international buyers and investors.

The response

ITC has developed an SME Competitiveness Benchmarking tool to help TISIs better understand their clients’ needs, making it possible to tailor services for maximum return on investment.

As part of this process, ITC equips TISIs with the hardware and software necessary to maintain an active MSME database. More specifically, ITC assists TISI staff with using the survey software, selecting a sample of firms to survey and training the team of interviewers.

Specially designed e-learning courses help interviewers become familiar with the survey questionnaire, which enables ITC to score MSMEs across several dimensions of competitiveness (for example, the ability to meet quality requirements) and to measure the effectiveness of the support they receive from TISIs. By comparing gaps in TISI service delivery with areas where enterprises are weak, the survey identifies the TISI services that would yield the greatest dividends in terms of increased business competitiveness.

SME Competitiveness Benchmarking is designed to combine information at the macro (national business climate), meso (local support ecosystem for businesses) and micro (firm capacity) levels to provide a nuanced picture of the capacity of a country’s private sector to compete in international markets. Policymakers and TISIs can use the findings to identify and address bottlenecks to competitiveness; to compare the competitiveness of firms based on size, sectors and location; and to better match firms with potential investors and buyers.

ITC is currently conducting benchmarking exercises in Argentina, the Gambia, Ghana, Morocco, Nigeria, Rwanda, Saint Lucia, Senegal and Zambia, in some cases building on recent collaborative data collection with national institutions.

The results

The benchmarking exercises have already generated insights that TISIs can use to define priorities and better target their services.

In Hungary, where ITC partnered with the Hungarian National Trading House to survey domestic enterprises, the results showed that firms operating within value chains paid less in transportation costs than similar businesses operating outside of value chains. Attracting value chains and helping MSMEs plug into these chains thus lowers the trade costs smaller companies face.

In Kenya, ITC is collecting SME competitiveness data in partnership with the Kenya National Chamber of Commerce and Industry (KNCCI). The collaborative initiative has already led to the establishment of a coalition of public and private sector institutions. These include the trade ministry, a small business authority and the Export Promotion Council, which have pooled their members’ lists into a shared database. KNCCI has said the exercise contributed to updating its own database, enabling it better to reach out to the firms that would benefit most from its support.

In the Gambia, the SME Competitiveness Survey was deployed in tandem with the country’s National Export Strategy, a policy roadmap for increasing exports and job creation. The survey included a specially designed module to analyse skills gaps for young people in the agriculture, tourism and information-technology sectors. Would-be employers in the tourism sector said unsuitable qualifications were their top obstacle, while in the information technology and agriculture sectors, labour costs posed the greatest challenges. These findings have informed the Gambia Investment and Export Promotion Agency’s Youth and Trade Development Roadmap (2017-2021). Suwaibou Cham, a senior manager at the agency, said the benchmarking results ‘have allowed us to better assess the skill gaps along the value chain and ultimately identify youth employment opportunities.’

The survey’s gender-related questions have filled gaps in the data on the bottlenecks faced by women entrepreneurs in the services sector in Kenya and Indonesia. For example, it emerged that women-owned companies in Kenya have a poor understanding of national intellectual property processes, with the result that fewer than 15% of them have a domestically registered patent. Meanwhile, women exporters in Indonesia are 10 percentage points more likely than non-exporters to have a business website, underscoring the importance of being connected to sell globally. TISI programmes in the two countries can now work to remedy these shortcomings.

The future

The SME Competitiveness Benchmarking tool is currently being deployed or finalized through ITC projects in several countries. Jerson Badal, from the Saint Lucia Trade Export Promotion Agency (TEPA), which recently completed the data collection phase of the exercise, has expressed confidence that the ability to better target support programmes for MSMEs would help his agency attract donor funding.

By strengthening the capacity of local institutions and associations to assess and address MSME needs, the tool offers a lasting solution for countries seeking to boost the competitiveness of their MSMEs.

A planned extension of the tool will make it possible for MSMEs to assess their own competitiveness and understand what they need to do in order to become export-ready.