Export and investment promotion services : do they work?

This assessment of USAID's experiences in 10 countries -- Costa Rica, Dominican Republic, Guatemala, Chile, India, Indonesia, South Korea, Thailand, Egypt, and Morocco -- addresses three key questions: (1) What is the rationale for donor support of export promotion? (2) Is USAID assistance in this area paying off? and (3) What service strategies and providers are most effective? The study, which was based on interviews with 90 service providers, a survey of 300 exporters, and a review of overall export performance and policy environments in the 10 countries, reached five main conclusions. (1) Sound macroeconomic policies and partial trade reform are preconditions for export success and effective use of subsidized export promotion services. Export services have negligible impacts in hostile policy environments. (2) Subsidized services to exporters can have high payoffs: a few USAID projects had rates of return of 12%-26%. Furthermore, a "bandwagon effect," wherein early, visible export success encourages regulatory improvements, the entry of additional firms, and the development of specialized private providers of export services, has been observed. (3) The most highly rated export promotion programs encouraged active involvement of private exporter associations through advisory councils or cost sharing, and focused on providing results-oriented services. (4) The services most valued by incipient exporters are those that lead to enduring relationships with business partners, particularly buyers, investors, and suppliers able to help them meet international standards for price, product, and quality. Assistance to export support services contributed little to export growth if a dynamic service provider market already existed. (5) Government-provided services are usually ineffective; government providers typically focus on the wrong services, lack trained staff able to provide a quality product, become consumed by bureaucratic procedures, and are particularly susceptible to assuming a regulatory rather than a promotional function.