New thoughts on old ideas

New thoughts on old ideas article image

Ian Murray delves into the archives to formulate a new way we should think about export that will take us into 2020-as it should. I was recently going through some old material at home and I found a Metal Trades Industry Association of Australia Export Group (now AIG) report to members dated March 1983. What took me was the opening statement in the President’s Review of Group Activities: "Unfortunately, at this time, the Australian economy is suffering from its most severe downturn since the 1930s. The short term outlook continues to be pessimistic with further contraction in activity expected in most sectors of the economy-especially the manufacturing sector." Nothing is ever new, but the circumstances in 1983 were, I believe, somewhat different. Unlike now, the article went on to talk about the devaluation of the Australian dollar, which is certainly not happening now, and I doubt that exporters in 1983 faced the drying up of credit the way they did in 2008/09. The good news is that we survived, as we will this time around. It’s always fascinating to read some of the export reports from the past, as issues faced then seem to constantly repeat themselves. Yes it’s true we live in a very different world, particularly when one considers the changes in communications and travel. But exporters still need money, and they still need to manage risk. When it comes to protecting their lot, many, many things remain the same. This was apparent at a Trade 2020 Strategic Dialogue on Trade Finance I attended in Sydney. The meeting was facilitated by Austrade and attended by trade finance people from the banking sector, EFIC, insurance companies and a small selection of exporters. Like many forums, the discussion focused more on ‘here and now’ and not on where things are likely to be in 2020. Given the current credit circumstances that’s understandable, but disappointing, simply reinforcing my view that, sadly, things tend to remain the same. ‘The same’ is SMEs finding it hard to get finance for export growth, too few exporters considering or even understanding credit insurance until things get tough, and the lack of skills among people in the industry, including exporters, on how to manage export risk. If we are to change things for a better 2020 in terms export risk, then first we need to understand the issues in both a qualitative and quantitative way. What are the barriers facing the current and future exporter in terms of financing their export business? Is the current system falling short in providing the exporter with adequate financial support? Are the barriers and risks so high that many current exporters say growth is too high a risk and potential exporters say it’s all too hard? We don’t want more economic modelling, I’m talking about solid research that gives government and industry a better understanding of issues, to allow strategic dialogue with a solid base in place. Another thing that can push us towards a better 2020 is expanding the skills base of people engaged in the industry. Too few exporters know much about managing the money side of export. I would also argue that too few in Austrade understand the nuances of export finance and the same can be said about many bank personnel, outside of the usually small trade finance group, who interface with business. Centralisation of services has centralised knowledge. If more exporters, more bankers and more people from government who work with business had more knowledge on managing the export risk, the better placed we would be now, and the better equipped we would be to plan for the future. Nobody wants issues to remain the same, they want progress. Nobody wants to read this column in 2020 and say nothing has changed. It isn’t fair of me to say that everything in trade finance is the same as it was in 1983, it isn’t, it’s better because we now have a great deal more options and infinitely better forms of transaction. But I’m not sure if we understand the needs and issues any better and I’m not convinced the knowledge base has improved; I would argue that it’s probably slipped, despite the improvement in communications. If we are to have a really good strategic debate on trade finance and where we will be in 2020, we really need to do more homework, and if we want our exporters to better manage their financial risk more professionally, we need to lift their skills and the skills of those who interface with them. -Ian Murray is the executive director of the Australian Institute of Export


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