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How to become export savvy

Raghu Dayal

THE GLOOM that pervaded till recently the foreign trade horizon has cleared. An over 11 per cent increase in India's exports in 1999-2000 has spurred the industry and the Government to maintain the momentum, get their act together, learn the lessons from the past; both their own and from others who have evolved viable trade strategies.

The country has somehow followed a stereotyped approach. Come the end of March, the quiet corridors of Udyog Bhavan are abuzz with the clutter of export promotion councils and trade associations lobbying for incentives and amendments to the trade policy. Ostensibly a long-term policy, the EXIM policy is tinkered with as a ritual to get revalidated on All Fools'Day every year.

Known for clarity of perception and effectiveness in his pursuits, the Commerce Minister, Mr. Murasoli Maran, has looked ahead, scanning the global trade horizon, for a place for India Inc. While in terms of traditional tactics towards a trade regime co nducive to a respectable growth rate for India's exports, the pronouncements of the policy on March 31 are forward-looking, the need today is to think really bold and big. Mr. Maran may well like to pause and ponder: Why a trade policy at all? Why the DG FT and its associated paraphernalia? Why this hype and hoopla on the Budget and the EXIM policy?

Markets are not developed by mere expediencies or short-term tactical moves bereft of an abiding long-range strategy. Instead of sanctimonious cliches and a cacophony of demands and incentives, looking for a Santa Claus in every Commerce Minister, there has to be a whole new approach. In place of small sops and transient gains, so fervently coveted, long-term instruments to impart competitive strength need to be adopted. Instead of the traditional market development assistance, a durable format in the form of a level playing field needs to be pushed for.

The structural infirmities that debilitate India's trade continue to be low productivity, unreliability and inconsistency in product development and manufacture, little innovativeness, high transaction costs on account of graphomaniac regime, inadequate infrastructure, entrenched monopolies, unwarranted delays, inept agents and service providers. Not infrequently, the entrepreneurs themselves excel in ingenious subterfuge to make a fast buck and milk the exchequer. The few clever and smart exploit the loopholes, the others left holding the wrong end of the stick.

The industry has to avoid the temptation of continuing asking for sops and incentives. The export incentive scheme itself imposes significant transaction costs on exports; the complexity of the system leaves substantial discretion with the regulatory aut horities which, in turn, results in harassment and corruption. The emphasis on price cuts has only helped Indian exports find a niche of low-end, low-quality, low-price and low margin segments of the market. Competing only at the low-end of the market he lps little; China and Vietnam can do it more cheaply.

The country attempts to sell what it produces; it has seldom attempted to produce what it can sell. The system of quality control in India has been one of compulsion from outside. Amidst rapid changes occurring by the day in `the age of export overload' these structural deficiencies in the Indian situation cry out for a complete overhaul.

The world of international trade changes constantly. The rules of the trade are being redefined, markets are liberalising and globalising, international business practices are fast transforming, and competition is intensifying. Entrepreneurs perforce ne ed to respond swiftly and effectively to these changes, if they are to remain competitive and profitable, indeed, in many cases, if they are to remain in business at all. Just as definitions of trade have altered and expanded, so too must the role of the state organs and trade promotion organisations and industry associations change. In essence, they have to become agents of change, to upgrade skills and capability, to be nimble and swift, to be bold and visionary.

While traditional trade promotion services remain relevant, they are no longer sufficient. Trade information, missions, exhibitions, generic publicity and commercial representation abroad are neither enough to help improve competitiveness nor generate e xport success.

Exporters require expertise in such areas as improvement in competitiveness, quality management, packaging, legal aspects of international trade, human resource development, product diversification and marketing, effective use of trade information and im plications of WTO rules for different products and markets. There is a lot of protest at new, ingenious factors that impede a free trade. The impediments termed NTBs (non-trade barriers), no doubt, a euphemism for veritable trade obstacles, cannot be wis hed away.

A new vocabulary for business is emerging; old arcane terms such as `outsourcing' and `industrial clustering' are becoming standard terminology. A trade promotion strategy designed and implemented in isolation from other economic and commercial initiativ es seldom succeeds. Trade development is essentially a national, interdisciplinary and multi-sectoral imperative. New export capacities need to be generated and export-oriented foreign direct investment needs to be promoted. Developing higher value-adde d export performance needs to be directly supported. On-shore domestic production issues as well as off-shore market development issues need to be addressed.

To tailor products for the market is no small task. It may be seductive for companies to assume large affluent markets to be new outlets for old products. Minor cultural adaptations or peripheral adjustments do not help for the whole panoply of product design and development, packaging, labelling, distribution and delivery to be addressed. Many among the successful export sectors in India have been labour-intensive products reserved for the small-scale sector -- leather, gems and jewellery, ready-made garments and handicrafts. The unwarranted ideological constraints of reservations, for example, are anachronistic.A trinity of clear long-range strategies is thus a categorical imperative for success: (a) competitiveness, not just the need to b enchmark where one stands, but the availability of more and more low-cost tools to measure competitiveness and chart ways forward, (b) the supply chain, how enterprises can join global supply chains and move up the value-added ladder, and (c) foreign di rect investment, of not just funds but also technology and marketing outlets for export development.

To wrest a one per cent share of the world trade for the country, Indian exports needed to rise to a level of about

$100 billions per annum by the close of the century. The task appeared in no way impractical or overvaulting until five years ago when, in the initial phase of reforms, exports zoomed. Then came a downturn and an environment of pervasive pessimism. The c ountry's tryst for even that meagre slice of the cake remains unrealised. What is indeed essential is to introspect and change the mindset for so very long sustained on concessions and incentives eked out of an obliging state apparatus oblivious to the l oss of the very elan and elixir of life that is nurtured and developed by a clear vision, grit and determination to compete and win.

There are several examples of different countries adopting different mechanisms. New Zealand's Strategic Approach emphasises the establishment of an institutional structure to help build a national strategy from the ground up. A strategic trilogy was pu shed and widely disseminated, to track potential export development by sectors, to maintain institutional networks, to ensure regular coordination among organisations associated with long-term trade performance and tailor trade promotion support services to the specifics of the strategy. Chile adopted a similar strategic approach. The main plank has been the encouragement of an internationally competitive environment, a balance of unilateral trade liberalisation with open regionalism, and lowering of e xport transaction costs. It moved ahead effectively, simplifying export procedures in a substantial manner. It took a long-term view of enterprise level support, facilitated foreign trade investment and promoted private sector involvement in infrastruct ural development. All areas of the economy moved in harmony, in an integrated way. Competition came to be no longer based on low prices or cheap costs.

The 1999 World Competitiveness Year Book by the International Institute for Management Development applied 287 criteria, and ranked India 39 among 47 countries. The World Economic Forum surveyed 59 countries in 1999 and put India in the 53rd slot. The Wo rld Bank appraised 46 countries for inter se competitiveness; India ranked 40th. The common weak strands in these surveys were infrastructural inadequacies, deficient corporate and financial management, uncertain policy framework, inept corporate boards, low productivity, besides unreliable quality. Inadequate attention to human resource development and low levels of commitment and investment in R&D aggravate these deficiencies. The real task for the authors of the trade policy as much as its beneficiar ies is to systematically grapple with these vital issues for the country to count in the league of nations consistent with its size and potential.

(The author is a former Joint Secretary, Ministry of Commerce.)