South-South trade: The developing countries are a potential market that Nepali exporters often overlook
FEB 27 -
Like many least developed countries (LDCs), Nepal depends on the industrialized countries for most of its exports. The traditional markets in the North are still important for a number of our products which account for a bulk of the export transactions. But these markets are highly competitive as suppliers from all over the world have their eyes fixed on them. The competition among the developing countries to sell their products in the North is fierce because all of them offer almost the same things, mainly agricultural and labour-intensive products. Access to these markets is not easy either. Large volume shipments, strict quality control and precise packaging and labelling are needed. Moreover, entry into these markets requires complex health, safety and corporate social responsibility which are tough and costly to follow. As a result, our exporters are in a difficult situation in the North while they are overlooking opportunities in South-South trade.
Under these circumstances, it is imperative that Nepali exporters focus on trade with the developing countries in the South if they want to speed up their market diversification drive. The benefits are many. Marketing opportunities in the developing countries are immense and relatively easy to exploit. The markets in the South have consumption patterns and business practices similar to ours so exporters can easily adapt to them. The range of tradable products in these countries is considerably more diverse and complementary than we generally believe. This makes it easy for our expo-rters to find niche markets in these countries. Cont-rary to what many think, consumers in the developing countries spend a huge amount of money on impo-rting goods from the industrialized countries which are also available in other developing countries. This points to a huge potential market in the South. More-over, exporters bewildered by health standards and environmental regulations for access to the rich countries may find the
developing countries uncomplicated in many ways.
Today, increasing attention is being turned towards the much-touted “rise of the South” as a new source of sustainable trade opportunities for countries like ours. The developing countries are emerging as a strong economy. Their economies are being rapidly linked by trade, capital, technology and labour flows among themselves. That has strengthened their economic linkage and has increased their influence in the global economy more than before. Trade among these countries has seen constant growth, surpassing North-South trade, particularly since the last decade. During this period, exports between developing countries have swelled from less than 50 percent of their total exports to a larger share. Southern markets have become important as export destinations and import sources globally.
Barring India our exporters have been neglecting export opportunities in other developing countries. The conventional thought has been that there is no market in the developing countries because they have no money to buy our products. Exporters still hold the view that the developing countries compete for markets for similar product lines, particularly textiles, clothing and farm or primary commodities which they have been exporting. These beliefs are true to some extent. However, the diversity of tradable goods and the relatively easier access to markets in the developing countries have turned these deeply rooted perceptions on their head.
Nevertheless, our exporters should understand that trading with countries in the South has a lot of business implications. Exporting to these countries can shorten the distribution chain and slash transportation costs. This can help overcome the problems in trade facilitation in the country. There are possibilities of moving up the value chain by establishing business links with firms in the countries in the South. On top of that, their commitments to regional and global trading systems have freed their markets rapidly. It is not prospects that are lacking but efforts to break into markets in the South.
Therefore, some immediate steps need to be taken to expand Nepal’s effective participation in South-South trade. First, an analysis of trade flows to the developing countries is vital for identifying trade prospects on a product-by-product basis. Second, identification of market needs and supply constraints in the potential target markets is equally important. Third, dissemination of information about the markets in the South needs to be enlarged. There is also a need to hold buyer-seller meetings to facilitate business relations. These initiatives cou-ld remove the constraints in Nepal’s trade with the developing countries. Fina-lly, enhancing the country’s participation in South-South trade is a complement, and not a substitute, to trade with the North.
(Shakya specializes in the trade interests of Nepal and the LDCs)
Source: The Kathmandu Post
