Export industry brings a lot of opportunities in entering a new overseas market especially for businesses in the Pacific as they strive to achieve economies of scale. Along with the opportunities comes the need for comprehensive strategies to address all challenges, risks and logistics that export businesses require.
In a recent Export Survey, Pacific Trade and Invest (PT&I) has outlined some findings on export dynamics from the standpoint of Pacific Islands exporters in 2016. The survey was carried out as a follow through from their 2014 survey, providing a more clear picture of the challenges and outlook for the exporters in the Pacific and the changes over the last two years.
The survey looked at 200 export companies from 12 countries with export markets extending to over 30 international markets. The participants represented a diverse range of industry sectors, business size, maturity and annual turnover. While collating information from such a wide range of companies can be challenging, PT&I noted the invaluable assistance received from chambers of commerce and other regional as well as national agencies in obtaining relevant data.
Key Findings of the Survey
In comparing the survey results with the 2014 survey, there was clearly an increase in new exporters that had started exporting within the last three years and those exporting agricultural products.
The importance of trans-Pacific trade was evident in half of the exporters that targeted at least one Pacific Islands country as their export destination. These were generally bigger economies such as Fiji, Vanuatu, PNG and Solomon Islands but also included Samoa and Marshall Islands. While Australia and New Zealand remained the main export destinations beyond the pacific islands, majority of exporters were aiming to enter newer markets such as Asia and North America over the next three years. Interestingly, a decline was noted in the percentage of exports to most regions across all industry sectors except for Asia and North America.
The survey showed that new businesses that had been exporting for three years or less were smaller in size with younger proprietors. Women proprietors were the most common in this group (32% vs 27% in total) showing a higher participation of women in the sector in the more recent years.
The region continued to have a varied range of exporting businesses across all industry sectors (including agriculture, manufactured goods, tourism and services) and across various business sizes, maturity and annual turnover. Although the total volume of exports grew from the 2014 survey, the number of countries exported to decreased.
Export confidence remained very positive with three in four businesses predicting that their export orders will increase over the next 12 months. While there was an increase in the businesses benefiting from Free Trade Agreements and Closer Economic Partnerships since 2014, the survey also noted the need to enhance these partnerships in order to better harness the potential of such trade agreements by the export industry.
Challenges and Risks
Such surveys are useful not only in identifying opportunities that can be properly enhanced for the export industry in the region but also to determine the challenges faced by the exporters that would require attention.
According to the Report, exporters raised a number of issues which posed as impediments to growth of their export businesses, access to finance/capital ranking as one of the most common one. This was worse for smaller businesses and new entrants in the export arena. Attracting foreign investment is proving to be more difficult for such export businesses not only because of high cost of doing business, but also due to lack of scale, proper infrastructure and in some cases political instability.
Apart from financing issues, key concerns were also around rising fuel prices, capacity constraints, labour issues, changes in government policies and as seen in recent cases with Vanuatu and Fiji, effects of natural disasters.
Exporters also highlighted the need for assistance in the marketing, market research, trade finance, market access, e-commerce and further training in export related areas.
In trying to reduce some of these barriers to exporting, areas of focus now include mechanisms or policies of reducing transport costs, facilitating export grants and introducing exporters to overseas agents/distributors.
Becoming Export Ready
Through market surveys such as this, organisations like PT&I are able to identify issues which in turn helps direct assistance and support for exporting business in a more effective way. Governments are also able to use such information to better assess their priority areas and policy reforms to help boost the export industries.
For an export business owner, there are a few more measures to consider as your business grows. These include biosecurity risks, freight and logistics, negotiating supplier/distributor contracts, licensing and other regulatory approvals required. PLN Advisory can assist your business address some of these issues so feel free to contact us for any further information.
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