The mistakes of export promotion agencies

Last week the World Bank hosted a two-day seminar on “Policies to Promote Export Growth and Diversification,” including a particularly interesting session on export and FDI promotion institutions moderated by guru Andrew Singer. The overarching theme: Be realistic about what these types of institutions can accomplish, and avoid creating big institutions that are just “window-dressing”.

According to Singer, the historical focus of export promotion organizations (XPOs) on market entry was mistaken and helps explain the general failure of XPOs. Developing country exports are limited by supply-side constraints, not market access.

So what should XPOs be doing? Singer prescribes a more limited role, in keeping with the general trend toward shaving down centralized export promotion activities. He says XPOs can help firms new to exporting in two ways:

1. Providing seconded advisors from the private sector, and
2. Providing training in broad cross-sector skills, like finding an agent or dealing with paperwork.

Regarding several countries (ie. Mexico, the UK) with a single institution encompassing both export promotion and FDI attraction functions, Singer is wary. He says that these functions target two very different clients and probably are better housed in separate institutions.

Continuing on the FDI promotion theme, a message that emerged from the conference’s first day was that foreign investors must be able to reach the levels of host-country government that can solve their problems directly. FDI promotion agencies occupy too low a level of government to accomplish this, thus Singer suggests FDI promoters focus on two things:

1. Making sure they know what kind of investments are likely to be attracted to their country, and perform direct promotion using outsourced consultants, and
2. Serve as a constant contact point for foreign investors, from the moment they step off the plane until they sign a contract on the dotted line.

More on the FDI promotion debate.