Developing policy strategies to expand export supply capabilities

Developing countries need to develop a coherent and effective policy framework for addressing critical constraints on building internationally competitive export supply capabilities. Experience of some countries that have been successful in this area suggests that an effective policy framework should contain both general and sector-specific policy elements. At a general level, the policy orientation has been to ensure that prerequisites for building internationally competitive export capabilities are met. These include: sound macroeconomic management favouring price stability and a realistic exchange rate; fostering of entrepreneurship and competition in the economy; development of human resources and technology; full mobilization of domestic resources, including through growth-oriented savings and investment policies; improvement of infrastructure (e.g. transportation systems, telecommunication, institutional capacity, etc.); and availability of external financial resources. Specific measures and incentives targeted to sectors and industries with an export potential have included fiscal and financial incentives; an import policy aimed at optimizing access to imported inputs (such as raw materials, components, machinery or spare parts) while at the same time providing temporary protection from import competition to nurture the development of "infant" industries.

While lessons can be drawn from the successful experience of these countries in the design of policies and strategies for exports development, each developing country would need to choose its own policy mix based on its economic circumstances, particularly the developmental stage of its industries and market-based institutions. The objective of technical cooperation in this context would be to facilitate the development and implementation of effective policy strategies and measures in developing co un tries for addressing critical constraints on diversifying and strengthening their export base through inter alia access to opportunities for exchange of experience among countries, analytical and policy research information, and technical advice.

In particular, technical cooperation activities may address, on a broad base, problems encountered by developing countries in the design, implementation and evaluation of their industrial and trade policies. Four areas merit particular attention: export incentive schemes, sectoral development programmes, import liberalization and technological and human resource development.

Experience shows that the design of export incentive schemes and their effective implementation can be complex undertakings. Many developing countries require assistance to design incentive measures that can be dovetailed to the particular requirements of national economies; to ensure an effective administration of incentives without unnecessary bureaucratic red tape; and to monitor the economic cost of incentives to the domestic economy (e.g. by the establishment of transparent mechanisms). There is a particular need for assistance in the case of technically sophisticated export promotion tools such as export credit insurance and guarantee schemes. Likewise, the design and implementation of sectoral development programmes to enhance the international competitiveness of selected industries are challenging tasks. Experience points to a number of critical points: the choice of the "right" sector for promotion; the correct identification of the constraints of promoted industries; the design of support measures in response to sector-specific needs; and the application of appropriate safeguards to ensure that sectoral support does not become a source of permanent economic rent.

Appropriately designed and implemented import liberalization strategies have proven to be an effective tool in improving resource allocation and international competitiveness of exports. The many problems encountered by developing countries in the implementation of such schemes, and failures to achieve the objective of strengthened competitiveness, reflect a significant need for technical assistance. The scope for technical cooperation is substantial. Major problem areas in the design of liberalization strategies are the sequencing of reforms, the "tarification" of non-tariff barriers, the pace of import liberalization, the phasing of tariff reductions and the proper balance between "wholesale" and sector-specific liberalization. Wide differences among developing countries in their economic, social and political conditions require strategies which are tailored to particular needs. The Trade and Development Board, at its thirty-ninth session, recognized in its agreed conclusions that technical cooperation could assist in improving the design and implementation of trade liberalization programmes. It was also held that international support should allow for pluralism of approaches towards trade policy reforms.

Technological and human resource development, including the acquisition of skills, technical education and disciplined work habits, are vital for developing competitive export sectors and for sustained development of export capabilities. Developing countries are making efforts to adapt their technology policies and to strengthen their human resource base and institutional arrangements, both for technology acquisition from abroad and for its domestic absorption, adaptation, generation and diffusion. The least developed countries are particularly affected by constraints in bringing about the technological and structural changes required for their export development and competitiveness. There is a particular need for technical cooperation to assist developing countries: in strengthening their technological and innovative capacities, including their ability to acquire, absorb and generate, use and commercialize technology, through, inter alia, the development of effective policies and measures and related institutional arrangements; and in improving skill formation and utilization (particularly in the least developed countries).