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Evaluating the Effectiveness of Export Support Services in Developing Countries

A Customer (user) Perspective

Evaluating the Effectiveness of Export Support Services in Developing Countries

Introduction
Enterprises succeed in international markets because of their competitiveness. Success depends to a large extent on the level of knowledge and skill they bring into their international marketing activities. The study also investigates whether the degree of satisfaction differs between small and medium/large firms.
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Introduction
This paper examines the effectiveness of export support services in a small African country, Eritrea. Different organizations are involved: banks, insurance companies, tax and excise offices, shipping and transport companies and the export promotion office. The support offered focuses on financial incentives, tax incentives, credits and market information.
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Purpose of Study
The lack of detailed statistics in many developing countries makes it very difficult to assess the effect of export support services on the firms export performance. The purpose of this paper is to show that an assessment of the effectiveness of export promotion and support services can be made on the basis of the perceptions of the manufacturers involved.
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Design/Methodology/Approach of Research
This research is based on a survey of 88 footwear and textile manufactures from a small new African country, Eritrea.

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Practical Implications
The findings of this study are useful for export policy makers in developing countries. The presented method shows that it is possible to measure the perception of the manufacturers with regard to the effectiveness of export promotion and support services. It also allows to compare the performance of those services and to identify priorities for the policy agenda.
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Data Collection Method


The data are collected from small, medium-sized and a few large footwear and textile-manufacturing enterprises in Eritrea. The population consists of 54 footwear and 65 textile manufacturers. In this study, 88 SMEs (41 footwear and 47 textile manufacturers) were interviewed and have rated the effectiveness of the export support services.
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Data Collection Method


A 5-point scale ranging from poor to excellent (poor, satisfactory, good, very good and excellent) measures the effectiveness of the export support services. A pilot study on five SMEs was conducted to test the operational definition of the concepts used in the survey.
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Finding
On average, the quality of the export support services is rated as satisfactory. This can be considered as rather low, as the export promotion policy of the government is much more ambitious. That small enterprises in Eritrea have less access to export support services than larger firms.
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General Finding
The data show that 88 percent of those who filled the questionnaire are men. Their age is on average above 51 years. The managers/owners are rich in experience. Almost 85 percent of the companies have been established more than 10 years ago. Out of the88 managers, 59 respondents worked in the small and medium-sized footwear and textile-manufacturing enterprises for more than ten years
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Foreign Exchange
The SMEs rated the foreign exchange service of the National Bank of Eritrea as satisfactory (2.20). 13 Companies rate the Quality of the Foreign Exchange service of National Bank of Eritrea as poor. Eritrea has rapidly moved toward a liberal exchange system. The outbreak of the border war with Ethiopia exacerbated the shortage of foreign exchange.
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The enterprises regard the credit facilities for export activities offered by the Commercial Bank of Eritrea (CBE) as satisfactory (2.295). Fifteen companies rate the quality of this service as poor. The SMEs consider the bank loan interest rate (which is 8 percent for exports, 11 percent for imports and 12 percent for domestic trade in 2004) as very high. There are no specific complementary export programmed, like pre- and post-shipment credit for exporters. 12
Evaluating the Effectiveness of Export Support Services in Developing Countries

Export Credit

Export Insurance
The services of the corporation that provides insurance for export activities are rated as rather good (2.841). Only four companies rate the quality of this service as poor. The export credit insurance protects exporters against commercial risks, Political risks, Risks emanating from civil war and civil disturbance , new import restrictions or cancellation of a valid import license, and unforeseen additional transport costs, are also insured.
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Shipping Service
The service of the Eritrean Shipping and Transit Agency Service (ERISTAS) is rated as satisfactory (2.00). However, 28 firms rate the quality of this service as poor. Lack of information on the departure and arrival of ships and Government Support. The service offered by the Eritrean Shipping Line is characterized by delays 14 and cancellations.
Evaluating the Effectiveness of Export Support Services in Developing Countries

Passenger and Air Cargo Service


The passenger and air cargo service in Eritrea are rated as quite good. The service is scoring the highest average (3.27) and only one company rated the quality as poor. Several airlines have scheduled flights to different destinations and give the Manufacturers alternative transport opportunities.
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Tax and Excise Service


The services of the tax and excise office in Eritrea are rated as satisfactory (2.193). However, 20 companies rated the quality of this service as poor. In the investment code export is free of tax.

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The SMEs gave the lowest rating to the service of the export promotion office (1.841). In total 36 companies rated the effectiveness of this service as poor. The Eritrean government follows a free market trade policy and does not provide subsidies. The lack of private sector enterprises providing export promotion services is Another problem for the small and medium-sized manufacturers.
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Export Promotion Office (EPO) Service

Discriminant Analysis
The objective of this sub-section is to determine which of the export promotion and support services account for most of the differences between the small and the medium and large (MLE) enterprises. In this analysis the criterion variable is the degree of effectiveness attached to the eight export support services included in the study. The dependent variable is consisting of two groups. While the first group comprises 44 small enterprises, the second group comprises 44 medium and large enterprises.
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The ratings for three export support institutions are higher for the medium and large enterprises (Table V), i.e. the services offered by the export promotion office, the tax and excise office and the commercial bank. The high discriminating score of the export promotion office is consistent with the complaints made by small enterprises that the export promotion office favours the larger enterprises. 19
Evaluating the Effectiveness of Export Support Services in Developing Countries

Concluding Remarks
This paper shows that the customer (user) approach is useful to evaluate the perception of SMEs regarding the effectiveness of export support services in developing countries. Although the government has export promotion and support policies in place it lacks clear implementation strategies.
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Concluding Remarks
We have learnt from the industrializing East Asian economies that investment in export support services takes times. The Asian experience shows two interesting things: it is feasible, but it cannot be realized overnight.

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Thank you!!

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