COMCEC Trade Outlook 2018
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Trade Promotion:
Trade promotion, in particular export promotion, is one of the instruments used by the
governments to increase their exports. The policies focus on two major areas, namely, SME
support and diversification of economic production.
The majority of the firms operating in the world, especially the developing countries are Small
and Medium Sized Enterprises (SMEs). SMEs are usually producing in traditional way and focus
on local markets. They need to be supported by the government agencies, chambers and
business associations to make exports and compete in international markets. In this regard,
export promotion strategies focus on the SMEs in many countries.
The SMEs of the OIC Member States also face challenges in exporting. The Workshop held on 12-
14 June 2012 in Ankara, Turkey defined the major common obstacles faced by the SMEs in
exporting as the following:
 Obtaining reliable foreign representation and maintaining control over foreign
middlemen
 Identifying foreign business opportunities
 Limited information to locate/analyze markets
 Inability to contact potential overseas customers
 Keen competition in overseas markets
 Lack of home government assistance
 Offering satisfactory prices to customers
 Accessing export distribution channels
 Difficulties in enforcing contracts
 Lack of knowledge on foreign market requirements
 Limited business development services, marketing and branding
 Excessive transportation / insurance costs
Government agencies, chambers and business unions provide consultancy services, business
development assistance, tax advantages, financial support etc. to promote exports in their
countries. However due to limited financial resources, underdeveloped human and institutional
capacities, many member states could not provide adequate support to their firms.
The undiversified economic structure also constitutes an important obstacle for many OIC
Member States in increasing their exports. The dependence on few products in exports also
makes these countries vulnerable to foreign demand or price shocks.
Several studies concentrated on how the FDIs lead to export diversification. Lipsey (2004) and
Hailu (2010) suggest that FDIs main contribution is knowledge of the international markets.
FDIs also result in indirect inter and intra-industry spillovers to host nation firms which improve
their productivity and reduce the fixed costs associated with exporting, thereby increasing the
number of firms which are export competitive (Jayawera 2009). Spalla (2010) also suggests that
FDIs contribute to international competitiveness of the domestic firms through transfer of the
know-how and technology.
Attracting foreign direct investment (FDI) is considered a vital instrument for diversifying the
exports. Many empirical studies have examined the impact of FDI inflows on export
diversification and reached positive results. Focusing on the Low Income Countries, Jayawera
(2009) found that the cumulative effect after four years of a US$1bn increase in FDI is estimated