Financial Times

How about getting into the export trade?
By Nilooka Dissanayake
So, you are thinking of going into business? Congratulations on wanting to join a group of hard working individuals who are said to be the backbone of the national economy. Oh, yes. You are indeed joining a group of people-the small and medium size enterprises, better known as SMEs-who with or without support from the state still succeed in contributing to Sri Lanka's economic progress.

Increasingly, SMEs are looking beyond national boundaries and reaching out into the global market. And our leaders recognize this trend. President Chandrika Bandaranike Kumaratunga believes that "SMEs have been the bedrock of the industrial sector in Sri Lanka and as we move to an export driven economy the SME sector must be given every assistance to move beyond domestic markets to overseas export markets." Prime Minister Ranil Wickramasinghe believes that "extending a helping hand to the SMEs to enter international markets is an excellent strategy to be used by all developing countries in their attempt to reach NIC status."

If you are dreaming of going into business as an exporter, how should you go about it? We posed this question to Kingsley Bernard, President of the National Chamber of Exporters of Sri Lanka. "Many people approach our chamber with this question. We gladly help these would-be exporters because developing the pool of exporters in the country is a priority area. We tell them about the potential markets and the products which have a demand in the international markets," he says.

Accordingly to Bernard, the chamber also conducts regular workshops and courses on topics relevant to the export trade. The Export Development Board also provides such courses and organizes inward and outward trade missions.

How do you decide what to export and where, if one is not having a particular idea or project in mind? We put this question to Bernard because we, through the Business@Home column, come across so many readers who ask us this question.

"Generally in business, we do a lot of market research, find out what the consumers want, what their needs are and then adapt our products to fulfill that need," Bernard said. "But, in trying to enter export markets, this approach becomes impractical due to costs and the variety of markets needs around the globe. So, it is advisable to look at what we have, our product or service, our capabilities and resources available to us and then try to match it to an existing market. This approach should not be mistaken for the product-oriented approach where you just try to plug the product you have, to a market without looking to see whether that is what the market requires. You still need to be attuned to the customer needs."

Bernard quotes an example of a local manufacturer of immersion heaters who realized that in order to capture the Dutch market, he needed to reduce the size of the heaters. Apparently, the Dutch are very conscious of conserving energy. Also, their average family size is just three persons. Hence they prefer small heaters to large ones.

Imagine the subtle intricacies that you have to consider. Still, many Sri Lankan SMEs are entering international markets. Would you be surprised to learn that the garment industry of Sri Lanka-which one always expects to be the arena of the big boys-consists mainly of SMEs? Well, it is. So, you are not alone.

Nowadays, the difficulties posed by the sheer distances between you and your markets can be overcome by resorting to information and communication technologies. You can do a lot of your market research online. You can seek what buyers need and what other sellers are offering and at what prices. Internet is an invaluable tool if you are looking at export markets. International surveys show that SMEs all over the world are counting on the Internet to provide them with marketing information and for promoting their products and services in the global market.

Let us assume that you somehow found an overseas buyer. How are you going to finance the shipment? Banks are famous-or should I say notorious-for letting down new exporters at this point. Will the buyer pay? You are unable to provide a history because you are new to this game. Then what do you do?

"Take a credit guarantee," recommends Bernard, who is also a Management Consultant for the Sri Lanka Export Credit Insurance Corporation (SLECIC). "Most international buyers ask for credit. And if you want to compete in the global market, you need to offer that credit. SLECIC offers credit guarantees to your bank and the bank can in turn provide you with the necessary credit."

According to Bernard, you can safeguard yourself by going another step. You can take an export credit insurance policy. Says Bernard: "When you take an export credit insurance policy from SLECIC, you get a whole range of services bundled together with that policy. With our experience and expertise in working with Sri Lankan exporters and their buyers in the global market, we can help you decide on your buyer liability limit and screen your buyers."

"In an increasingly risky world, the possibility that your buyers-though genuine-may be unable to pay is a practical reality," says Hemaka de Alwis, Chairman of SLECIC. "An export credit insurance policy offers you the assurance that you will not suffer due to their default. As the state owned Export Credit Agency of Sri Lanka, SLECIC exists to provide information, support and protection for exporters.

We also recognize that the first time and SME exporters face special difficulties in international trade. To them affordability is a key factor. We have looked into all this and we recently reduced our premia on certain products to enable smaller exporters to afford the insurance protection they badly need."

I guess all this is good news if you are thinking of getting into exports. But there are many challenges ahead of you. Let us discuss them in the future. In the meanwhile, let us know what topics you want us to touch upon in this column. You can contact us on ft@sundaytimes.wnl.lk or on 5-552524.

The writer is the Managing Editor of Athwela Vyaparika Sangarawa (Athwela Business Journal), the only Sinhala management monthly targeting the small and medium enterprises and its English version, Small Business International magazine.

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