CHAPTER 3. SME EXPORTS IN OIC MEMBER STATES: OPPORTUNITIES AND

CHALLENGES

3.1.

Introduction

The global economic crisis, consequent retrenchment in trade related expenditure, political change and

ferment in the Middle East, and environmental hazards, have not really prevented the OIC countries to

grow. In terms of overall trade, the expected downturn from adverse economic, political and

environmental conditions has been offset by a rise in energy prices of about 26% between 2010 and 2011.

In terms of trade figures member countries reported an increase of approximately 24%, with overall trade

accounting for nearly 11% of world trade.

Of note is the increase in intra-OIC country trade. The pattern of growth in intra-OIC trade reflects the

growth of those countries where such intra-country trade occurred. This pattern is confined to the top ten

countries in the OIC. More specifically, over 2010-2011, intra-OIC exports increased by 28% due in the

main to the significant export contributions by countries such as Saudi Arabia, the UAE, Qatar, Iran, Iraq,

Turkey, Nigeria, Indonesia and Malaysia. These exports consisted of manufactured goods, mineral fuels,

food products, non-edible raw materials, machinery and equipment transport. Growth in intra-OIC trade

also suggests an increased level of interdependency between member countries and South-South

interaction, which marks a break from the hegemony of traditional trading patterns which relied on

western countries for much of exports.

Despite the evidence of growth in trade in the OIC countries in general, and especially intra-OIC trade,

the cost of developing new markets remains a problem. Taken together with the paucity of data and

information on market conditions, foreign exchange risks, the cost or supply of labour, foreign

government regulation and obtaining licenses and bonds, there are a range of market asymmetries that

need to be addressed in the present and in the future. The general pattern of trade and exports also suggest

that there are specific conditions that enable a relatively small sample of these countries to dominate the

exports market place. We also find considerable gaps in reliable, accurate, up to date and adequate levels

of information about SMEs generally and specifically in relation to the exports market. Given the

universally acknowledged role of SMEs in economic development and in both local and international

businesses markets, it is critical that the specific issues of interest to SMEs. Identifying these conditions

and gaps in relevant information could perhaps help decision makers to answer critical questions. Why do

the level, type and range of exports vary from country and from region to region? What local factors

impact on a region’s or country’s ability to increase exports over time? Are there effective institutions and

policy measures that can support exports? Are framework conditions adequate for the realization of

exporting opportunities by firms? What role do SMEs play in international trade in and for these

countries? What conditions obtain for SMEs to be more effective as exporters? There are contextual

considerations to be taken into account which might reveal where opportunities can be best realized and

where more effective policy and demand side actions can be supported.

The contextual focus allows for the examination of relevant factors and characteristics that affect and

define the nature of the export market in those countries. Typically, the economic growth conditions in

Malaysia and Indonesia do not hold in sub-Saharan Africa. The nature and type of goods and services for

exports are different in each country and they vary from one region to another. Spill-over effects and

interdependencies in terms of trade outflows and inflows between particular countries also have an impact

on the type of exporting activities, their size, volume and future prospects.