There is data and there is research. Ian Murray wants more research to help businesses develop an informed export strategy.
Apart from being invited to participate at the Melbourne launch of the Global Readiness index (GRi) with the Minister for Trade, there were two aspects of the GRi I found pleasing. First, the fact that we are seeing this sort of research being done and shared with other providers is a real breakthrough; and second, how pleasing it is to see trade finance as a major issue in doing or not doing international trade.
To address the research issue first, it’s something I feel very strongly about and, without great success, pushed quite firmly for during the Mortimer Review. We have a sector that contributes 22 percent to our GDP. It’s driven by a small number of big players, but contributed to by thousands of small to medium sized companies, many of which we know little about. What we do know is that there are not enough of them: many flirt with export and give it away, some stay for the long haul, and lots never get started.
There is a substantial amount of economic data around and econometric models created for assessing the value of the export market development grants scheme, but what about the real ‘down and dirty’ qualitative and quantitative research that major international marketers use to feed their business strategies?
Little is done and if it is, we are unaware with whom it is shared and what strategies and plans have flowed from its findings. Like multinational marketers, Australia is managing a big business; we need to know the dynamics to address the hurdles to export growth and to get the strategies right.
The Mortimer study was a step in the right direction, but we need more. In particular, we need studies that qualify and quantify the attitudes and behaviour of companies in different sectors, of differing sizes and so on, and we need studies that embrace all the key service provision players while remaining completely free of government influence. There are a number of things that make the EFIC GRi study valuable.
First, it was based originally on some good qualitative input; second, key export service providers were embraced in its design and delivery; and third, it addressed issues that until now have been far from top of the trade facilitation agenda. It would be wrong for me to say we were surprised with many of the outcomes, particularly the high level of respondents saying that access to finance is an obstacle. Being part of an organisation that’s focused on the export process gives you a good insight into the day-to-day hurdles faced by SME exporters in financing business growth.
What is particularly good is that this is now truly quantified and can, with great credibility, be put in front of Government as a key issue. And, one would hope, Government will respond. What was particularly satisfying in the study was the optimism expressed by companies despite the current setbacks. Eighty-four percent of companies with offshore operations said they planned to expand them, 52 percent within the next year. This optimism flowed through to respondents without offshore operations, with 44 percent planning to expand offshore, 32 percent within the next two years.
Interestingly, studies conducted by the Institute while identifying a shortfall in forward orders in many sectors, supports the feeling of optimism among the export community at large. One outcome of the study, while not altogether surprising given the global finance environment, was the large number of companies using retained earnings to finance their offshore expansion with only 30 percent saying they use a debt facility. It begs the question: if funds were easier to get, would expansion be faster and larger?
I suggest it would, particularly for the SMEs; perhaps that’s the area Government needs to look at first. The GRi study and the way EFIC approached it is a good example of what can be done in terms of research. Input came from a range of qualified people and organisations, data collection was a joint effort, and the results have been shared. The more we do of this, the better. Economic data has value that we cannot argue against, but good qualitative and quantitative research is critical to understanding the drivers behind this quite complex market. We urge the Government to encourage more work like this, to keep it independent of their influence and to share it with the organisations that can use it to address the barriers to international business
. -Ian Murray is the executive director of the Australian Institute of Export