Recently two quite significant but related things stirred my thinking on the SME sector and its ability to enter into the export arena. Firstly I read an article focusing on the trade targets and the government’s objective to double the number of exporters by 2006. Then I was interviewed by a researcher wanting to know what barriers SMEs faced in getting into export.
They relate because what doubling the number of exporters essentially means is encouraging many more (like 25,000 more) SMEs to start exporting. On the surface, that probably sounds feasible, particularly if only one export transaction is needed to qualify. But after talking through issues with the researcher I realised just how hard it is. Even harder of course if one expects these exporters to develop a truly sustainable export business. In saying that though I must give credit to the resources Austrade has put into sourcing new exporters. The TradeStart program has, I believe, been highly successful and the doubling strategy has definitely taken exporting to a higher level in terms of awareness, including the SME sector.
However, there remains a lot of issues that need to be addressed if we are to be truly successful in encouraging small businesses to become sustainable exporters. The first issue is culture. Australian companies do not have an export culture. If they did, we would have more than four percent exporting. Unlike Europe, where export is second nature, Australia is an island continent with, unlike New Zealand, sufficient population for companies to sustain a good domestic business. In Europe and in New Zealand, for possibly different reasons, people think export from a very young age. The Scandinavian countries in particular, teach children at primary school about trade. This happens here but to a very minor extent, which probably creates little or no impact.
The second issue is risk. So many companies are comfortable working in the domestic environment and see no reason to ‘put their houses on the line’, often again, to expand into export. Some moves are afoot to make it easier for small companies to get finance for their export business, and it couldn’t come faster.
The third is education, or gaining the skills to be an effective exporter. Not only for getting companies interested in exporting, the real issue is making them professional exporters; exporters who know how to manage the risk, how to negotiate the best deal and how to produce an export marketing plan that’s effective. The government spends money on export education but I sometimes question how it’s spent. For example, the Federal government is investing millions of dollars in an International Language Centre for exporters. But quite frankly, language is not the issue. Business culture, yes. Risk management, yes. But learning a foreign language in the hope that you will know it well enough for it to be of any value … no.
And finally there is the role the Free Trade Agreements will have on SMEs. This can be seen two ways. First, there is no doubt that the FTAs will provide opportunities overseas for Australian companies which is good, but one must not overlook that FTAs are two way: those companies feeling comfortable now with their domestic business will probably need to look at global opportunities when the competition arrives.
It’s important to invest now in developing a stronger export culture, improving the important export skills of SMEs and putting in place mechanisms to help companies raise affordable capital. Then we will be well on the way to increasing Australia’s number of sustainable exporters, and building on the benefits of those Free Trade Agreements.
Ian Murray-Executive Director, Australian Institute of Export