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Trade promotion organizations: a variety of approaches.

According to research and advisory work undertaken by ITC over the past several years on national trade promotion organizations (TPOs), these institutions differ considerably throughout the world in their structure and functions. Although some organizational patterns may be more prevalent in developing countries than others, no single model stands out as one that could be applied with equal success across the board. Instead experience shows that the most appropriate institutional setup is one that is adapted to the given situation in the country concerned.

Some of the findings of ITC's research on trade promotion organizations, including a survey recently conducted among more than 100 such entities in both developing and developed countries, are summarized below. They may be of particular interest to trade promotion authorities and business organizations that are reviewing their own institutional framework for trade promotion.

Types of organizations The TPOs surveyed by ITC are of two types: public organizations and private bodies. The former are the more numerous, with private-sector TPOs being the exception.

Among the public institutions, several different organizational patterns exist among those studied. Some TPOs are part of an existing governmental entity, while others are autonomous or semi-autonomous.

Within a ministry:

Of the TPOs located in a ministry, basically two approaches are used:

* The TPO is a section in the ministry. This arrangement is often looked upon as a first step towards the creation of a full-fledged TPO. Of the institutions surveyed, five follow this pattern. Some of these are in the ministry of trade and industry or the equivalent, one is in the ministry of foreign affairs and another in the ministry of economy.

* The TPO is a department, division or directorate within the ministry, with more powers and autonomy than those of a simple section within the ministry. This pattern is found in 26 of the countries surveyed. Again, a large portion of these are in the ministry of trade and/or industry.

By creating an export promotion unit within an existing ministry, as mentioned above, many developing countries start their export promotion efforts on an experimental basis. In spite of the fact that this is initially considered a temporary solution, in most cases the TPOs remain part of the ministries concerned for many years.

Several factors favour the creation of a TPO within a ministry. One is that the TPO can usually be established by a ministerial decree, without complicated legislative measures. Furthermore, it can be funded through allocations from the regular ministerial budget, thereby avoiding the need for a separate budgetary process.

A unit of this type, however, often lacks the autonomy and operational flexibility desirable for implementing substantial trade promotion activities. Being an integral part of the ministry, it must follow standard procedures of the ministry in its operations and staffing. It does not therefore have the freedom to mobilize financial and human resources at will. This approach should be considered mainly a temporary measure, pending the establishment of a more autonomous entity over the medium to long term as discussed below.

Autonomous institutions:

The establishment of autonomous institutions ascribed to ministries is the most frequently used approach for a trade promotion organization among those surveyed. If adequately implemented, this arrangement is often the most effective of the various options. One reason is that it tends to stimulate a closer relationship between the business sector and the TPO than is the case with a ministerial unit. Under this system the TPO can remain autonomous, but at the same time the ministry can maintain its required control to comply with public administration procedures. The success of this approach depends considerably on the support that the TPO receives from the government, the qualifications and experience of its chief executive officer, and the extent to which it is autonomous in practice with regard to funding, employment of staff and the implementation of promotional activities.

Autonomous institutions have been established under different names. These include centres, councils, bureaus, offices, institutes, boards, agencies, corporations and authorities. In some cases such TPOs are referred to as a commission, a fund or an organization.

The designation itself has a certain influence on the nature of the institution's responsibilities and activities, and on the degree of autonomy with which it operates. For instance authorities, boards and councils have often been established, as their name implies, as a forum composed of government officials who decide on export promotion and development matters. They are provided with a technical and operational secretariat for the implementation of their activities. In addition to their normal trade promotion work, some of these bodies have policymaking responsibilities, and in many cases they are granted coordinating functions.

A tendency often exists, however, to confuse the board or council with its technical secretariat, and in practice it may be difficult to distinguish which of the two entities is responsible for what. The combination of policymaking tasks and the implementation of export promotion functions leads in some cases to diminished effectiveness of the latter function in particular.

TPOs established under other names do not usually have responsibilities in policymaking. Rather they are intended to concentrate on the implementation of promotional and developmental plans.

Of the 55 institutions identified within this group in ITC's survey, 39 are attached to the ministries of trade, commerce, industry and/or tourism; 8 are linked to the ministry of foreign trade; 4 are connected to the ministries of economy and/or finance; and 3 to the ministry of foreign affairs.

With the exception of TPOs in three of the countries reviewed, all the institutions surveyed in this category have some type of board of directors, composed of representatives of the public and/or private sector (see below). A key element in the success of a TPO is the active involvement of the export community in the selection and implementation of the organization's activities, and one of the best ways to achieve this is to have the business sector adequately represented on the board either through experienced business men or women, or representatives of private organizations. Such involvement can also be reinforced through the establishment of consultative or advisory committees for the TPO.

Autonomous institutions of the type described above have been particularly successful when they operate along the lines of business enterprises, such as preparing annual work plans that are submitted for approval to their board of directors, and subsequently to the minister concerned for further endorsement. The TPO then carries out its day-today activities in an autonomous manner.

Organizations following this pattern should also be free to appoint and manage personnel according to their particular professional requirements, rather than according to civil service regulations, since the latter are not usually designed for trade promotion work. Among the institutions surveyed, however, only a few have been given the necessary leeway to act in this regard.

Other public institutions:

Other types of institutions within the public sector that carry out trade promotion functions include totally independent organizations (which exist in several developed and developing countries), independent committees responsible for directing the services provided by the ministry of trade (the case in one developed country), semi-governmental organizations supervised by the ministry of trade (in one developed country), public-sector chambers of commerce (in two of the developing countries reviewed), public-sector banks (in two developing countries), and various broadly representative economic and trade organizations (for instance in one developing country).

Private-sector entities:

A few private institutions performing as TPOs are also in operation. Among those surveyed, three (all in developing countries) are part of private chambers of commerce, two are private associations sponsored by the government (in developed countries) and one is a private organization created by a group of export companies (in a developing country).

In two of the developing countries reviewed the business community took the initiative to carry out export promotion activities through an organization similar to an exporters' association or a chamber of commerce. In some other cases the government decided to allocate responsibility for trade promotion, with its full support, to a private association or a chamber of commerce.

When they have full support from the government, these institutions have been able to meet the needs of the business community. This factor, coupled with the freedom of action that such bodies enjoy, makes this formula the ideal type of institution in many situations. However, lack of adequate funding for organizations of this type in developing countries has considerably limited the range of their activities.

Other promotional mechanisms:

As a complement to the traditional TPO, and in a few cases as an alternative to it for specific products, many countries have semi-public marketing boards that are organized on a sectorial basis, mainly for commodities. They cover specific products or groups of products and participate actively in the promotion and international marketing of them. In some cases they have been granted an export monopoly privilege. In addition they are often engaged in regulatory activities.

Among the developing countries surveyed, their marketing boards or similar organizations cover the following products: tea, coffee, cocoa, coconut, dates, cotton, jute, coir, sisal, rubber, silk, sugar, tobacco, citrus fruits, spices, rice, grains, soybeans, peanuts, oilseeds, palm oil, meats, fish, gum arabic, timber, nickel, manganese, diamonds, gold, wool, handicrafts and garments. (The list is not exhaustive of the possibilities; other countries not concerned by the survey have marketing boards for additional products.) Developed countries also have marketing boards, dealing mainly with temperate zone products.

Governing bodies

Trade promotion organizations often have governing boards that provide general guidelines for their work. The board members sometimes come exclusively from the public sector, particularly in developing countries. When this is the situation the business sector is not actively involved in defining the TPO's activities. In other cases the boards represent both the public and the private sectors, which is the situation in 55 of the TPOs surveyed, or in some instances the private sector exclusively (5 of the TPOs reviewed). Although this latter pattern facilitates the identification of trade promotion activities that best suit the needs of the export community, it sometimes results in a trade promotion entity that is too distant from the government to get its full attention and support.

Members of the board are chosen in different ways. Some are designated ex-officio, because of the position that they occupy in a ministry or public body. The ministries frequently represented on TPO boards are those dealing with foreign affairs, economy, finance, trade, industry, agriculture, transport, communications and planning. Other ministries are also sometimes involved, although less frequently, including mining, fishing, natural resources, rural development, tourism and technical cooperation. In many cases a central bank officer is also on the board. In addition, in a few instances representatives of the prime minister take part in the board. The chief executive of the TPO is also occasionally included among the board's membership, either with or without voting rights.

Some of the board's members may be designated by a minister, usually the one responsible for trade. Members representing the business sector are often selected by private bodies without any consultation with governmental authorities.

The chairman of the board is named separately in many TPOs, rather than being elected from among the board's members.

Absence of a board:

When the TPO is a department or section of a ministry, a board of directors does not usually exist. Instead the minister or department director decides on the TPO's work programme and methods. In such a situation the business community has less direct say in the TPO's plans and services than with a board.

In a few cases, however, TPOs within a ministry operate with the support of an executive committee or a similar arrangement, which, although usually not including representation from the business sector, helps to give a broad perspective to the TPO's work.

Advisory committees:

In many countries advisory committees have been set up for TPOs, composed of selected members of the export community. They have been established in some TPOs that already have a board of directors, as well as in others without a board. The role of these committees is to study and follow up on particular problems or aspects of the promotional work, in addition to advising on general features of the TPO's operations. Such advisory bodies are especially useful when the export community is not represented in the TPO's governing body or when no governing body exists.

It is important to keep initial enthusiasm in such committees alive in order to obtain the maximum benefit from them. For this purpose some TPOs designate one person from their staff to coordinate with the committee and follow its work.

Top management

The title and hierarchical position of the top executive of a TPO vary considerably among the organizations covered in the study. In the case of autonomous institutions, the titles most frequently found for the post are those of general director, executive and/or managing director, and director. Other designations include those of chief executive, chairman, president and executive secretary. If the TPO is a completely private concern the titles might be executive director, general manager or managing director.

For TPOs located within ministries the highest executive position is usually that of director or general director, or in some instances state secretary or deputy minister.

When the top executive has the title of chairman or president (who frequently is also chairman of the board) he or she is usually assisted by a vice-chairman, an executive chairman or vice-president.

No particular designation is used for the number-two post in a TPO. In about one third of the organizations analyzed, the top executive has one or more deputies or assistants, who to different degrees have the freedom to decide on, and authorize, various types of operations. The deputies are often in charge of support services, administration and promotional activities. This arrangement allows the executive director to handle the most important problems and to maintain close contacts with other institutions involved in foreign trade.

In TPOs that take the form of a department, division or section within a ministry, the head is often named from among the ministry's regular staff. Efforts should be made in such a situation to avoid a rapid rate of turnover, as may happen with other positions in the ministry, in order to achieve continuity in the TPO's management.

TPOs in many developed countries are managed by teams of executives consisting of the chief executive, deputies and the division directors or section chiefs. Such management teams tend to meet regularly to discuss problems of a general nature, as well as those of common concern to several divisions or sections. This approach is highly recommended as a means of achieving operational efficiency.

Organizational structure

The organizational structure of TPOs varies significantly from one country to another among the institutions surveyed. No single structural pattern can therefore be considered a model for success. (See ITC's publication Profiles of Trade Promotion Organizations for the organizational charts of over 60 TPOs in developed and developing countries.) The set-up adopted in individual countries reflects the particular needs of the specific trade promotion situation.

Product vs. functional divisions:

Only a few TPOs reviewed have specialized product divisions within which staff handle a given number of products or groups of products. Those that do have this arrangement have the advantage of creating in-house product specialists, irrespective of the market to be penetrated. The existence of effective trade associations for individual products might reduce the need for product specialists in a TPO, provided that appropriate liaison mechanisms exist between the TPO and these associations.

Other TPOs have established divisions according to geographic markets. The structuring of such divisions follows to a certain extent the pattern in ministries of foreign affairs.

One approach is not necessarily better than the other. In deciding which pattern to follow, TPOs tend to consider the diversity of the country's exportable products, the geographical concentration of its markets, its historical links with certain key markets and so on. Success in implementing one system or the other, or combining the two, also depends to a great extent on the degree of internal coordination in the TPO, the technical qualifications of its staff and similar factors.

In many TPOs the division of responsibilities between product and market development, on the one hand, and promotion, on the other, is not clear, since in most cases TPOs have established a division or section responsible for "promotion," "operations," "development" or something similar, which involves a mixture of functions related to product identification, market research and marketing assistance for individual exporters.

Special services:

While almost all of the TPOs surveyed have a trade information service, the service's position within the organization varies considerably In most TPOs it acts as an independent unit, and in only a few cases it is attached to the promotion division or forms part of another division.

The more highly developed TPOs provide the business community with specialized advisory services on matters such as export documentation and procedures, costing and pricing, quality control, product adaptation, export packaging, transportation, marketing techniques, export financing and publicity. The extent and nature of these services differ greatly among TPOs. The activities are usually grouped under one section or division within the TPO, in some cases the promotion division.

Relatively few TPOs in developing countries have a research and planning unit. Those that exist analyze foreign trade conditions and make recommendations to the TPO management and other governmental authorities on possible solutions to export problems. They also prepare work programmes and product promotion programmes for the TPO.

About one-fifth of the autonomous TPOs surveyed have a specialized section to handle training, not only of staff but also of the export community. Other types of TPOs do not usually have such units, and most of their training activities are organized by outside institutions.

The TPOs surveyed handle trade fairs and missions in quite different ways, depending on how involved the particular TPO is with this activity. When it is responsible for organizing trade missions and trade fair participation abroad, preparing exhibition facilities and producing publicity material, it usually has a fairly large unit dealing with these functions. In other cases the TPO staff responsible for marketing and product development also tend to cover fairs and missions. In a few countries a totally separate organization is responsible for trade fairs, and in those cases the role of the TPO is limited mainly to suggesting names of possible participants and helping select events for the annual trade fair programme.

Some TPOs, especially in Latin America and Africa, have units specialized in providing information on incentives. A few also have responsibility for investment promotion in the home country, and they have sections in charge of that activity.

Certain TPOs have other, more unusual responsibilities, and they have set up specialized sections to undertake them. For example some handle international trade negotiations, help administer economic integration programmes, supervise the national export plan, operate trade centres, manage export zones, run industrial estates, promote tourism, oversee export licensing, promote imports, administer overseas project development and promote investment abroad. It is important to note that allocating "controlling" responsibilities to TPOs concerning quotas, incentives and similar measures may diminish their promotional focus and should therefore be avoided.

Administrative functions:

All TPOs have a division or department dealing with administrative matters. Its position within the organization varies, but in most cases it is located on the same level as units responsible for promotion. The responsibilities of the administrative units differ considerably among TPOs depending on the size of the organization, the number of staff, the decentralization of activities and so on.

Branch offices:

The practice of TPOs in decentralizing their operations throughout the home country varies among the countries reviewed. Some have a large number of offices, located in the main industrial centres. This is especially the case in developed countries. In many TPOs in developing countries all operations are centralized in one location, which is often inconvenient for exporters outside the main city.

The pattern of operations of branch offices differs from one case to another. Some such offices have a limited scope of action, while others provide a wide range of services including research on the local export potential, trade information and various types of technical support.

Commercial representation:

About three-fourths of the TPOs covered in the survey have some type of commercial representation service abroad. Such services can considerably increase the effectiveness of a TPO's work in export promotion. The organizational arrangements for handling such services vary among the different countries studied.

In about 50 of the countries studied, the overseas commercial representatives are directly responsible to the TPO concerned. In 27 countries reviewed, the responsibility for commercial representation services is with the ministry of foreign affairs or the ministry of trade. In about half of the cases in which a ministry is involved, however, communications and work instructions are handled directly between the TPO and the officers abroad, without passing through the ministry. The TPO keeps the ministry informed of its actions. In some countries, however, commercial representatives working within a ministry lack close links with the TPO concerned.

When the TPO is responsible for managing the commercial representation service, a separate unit has seldom been established for this purpose. Instead this function is usually managed by the administrative or the marketing department, a situation that is not entirely satisfactory from the operational point of view, since it tends to link the overseas representatives with only one part of the TPO, while such officers should serve the organization as a whole.

Staffing

The largest TPOs surveyed have a staff of 1,000 or more, but less than a dozen reach this level. Most of the TPOs reviewed have less than 150 staff members, some with considerably fewer.

Because many of the TPOs studied are not in effect autonomous, one of the common staffing problems is attracting sufficiently qualified and experienced personnel to the organization at the salaries offered. Many TPOs are obliged to recruit their staff within the civil service system, which usually does not take account of the specialized nature of a TPO's activities, and, in consequence, the salary levels required. As a result, TPO posts are often classified too low, which means that the best candidates may instead seek jobs with business firms that pay more generously. In many developing countries TPOs build up their staff by hiring junior officers with good potential for development and then train them on the job. Although this training might be beneficial for the country as a whole, it consumes a large portion of the TPO's resources and does not result in continuity of the TPO's activities, since the trained staff often leave the institution to work in the business sector, where they are better paid. Also the junior staff often lack the business experience required for their jobs.

A few TPOs have the authority to enter into contracts with private companies or nonprofit organizations to obtain staff at salary levels comparable with those in the business sector. Some others hire a substantial proportion of their technical personnel on a contractual basis to avoid the salary limitations imposed by civil service regulations. In many countries, however, the regulations do not allow this practice. Furthermore, unless it is possible to keep the same persons for an extended period of time, the TPO has a high rate of staff turnover, which affects the overall efficiency of the organization.

The low salary levels usually affect only local personnel, since as a rule commercial representatives posted in foreign countries are paid salaries comparable to those of the diplomatic service.

(See also " Financing a TPO: possible sources," by the same author, in FORUM, April-June 1989, page 14.)

Camilo Jaramillo is ITC's adviser on the institutional aspects of trade promotion. This article is based on a new study that he prepared, "Monograph on Export Promotion and Development."
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Author:Jaramillo, Camilo
Publication:International Trade Forum
Date:Apr 1, 1992
Words:3971
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