CURAÇAO EXPORT NATION STRATEGY
Multi-lateral and Bilateral dimensions of export regulations
A bottom-up approach can be used to identify opportunities for the development of exports to create growth. This method is based on an analysis of the determinants of growth from micro-foundations. It makes it possible to better identify the key drivers of sectoral growth, the sectors with the greatest potential and the policy mix best suited to promoting growth. This approach will be used in the development of the National Export Strategy for Curaçao.
The government recently signed an agreement with the International Trade Center (ITC) in Geneva to help with this task. Vanessa Toré, Head of the Division of Foreign Economic Cooperation of the Ministry of Economic Development (MEO) explains the approach. The ITC has a proven approach for formulating national export strategies. In this methodology, product groups are examined against a range of benchmarks to determine whether they should be the focus of a country’s effort in export promotion after due consideration is taken of the various macro plans and sectoral objectives established by a country. The criteria include the country’s export potential, export readiness and national wellbeing.
The Export Potential is based on current and past export performance, namely current export performance, world market performance and domestic supply conditions. Products are subsequently ranked as having low, medium or high potential and ranged as being of low, medium or high importance. The Export Readiness takes into account the number of exporting companies, their modes of export (active or passive), product quality and price competitiveness. It also considers their level of market intelligence and marketing skills. The National Wellbeing is based on the concept of Gross National Happiness which relates to the impact that an industry can have on psychological well-being, education, conservation of the environment, preservation and promotion of culture and the community vitality.
According to the ITC approach, export-development is evaluated against each of these criteria using subjectivity and ranked on its negative, uncertain, unrelated or positive· socio-economic impact which is based on the potential for job creation. Sectors are classified according to current employment figures and projected job creation over a defined future period www.intracen.org
“We must adapt our institutional settings and infrastructure to accommodate export-driven international business undertakings”
Caryl Monte thinks that Curaçao needs to create an enabling environment for the acquisition of foreign direct investments, the development of Export and International Trade Awareness. This requires multi-lateral export regulations in the context of the WTO-membership, bi-lateral export regulations on the basis of bi-lateral trade agreements and uni-lateral or national export regulations.
CONDITIONS TO DEVELOP THE CURAÇAO EXPORT NATION STRATEGY
Export facilities and assistance for the private sector (export promotion and information, export coaches, onsite trade commissioners, export guarantee and financing institution);
A developed export sector, including quality export goods and services that are competitively priced (at least a focus on some core quality products and services, either wholly obtained or sufficiently processed in accordance with applicable rules of origin, that are well-priced);
Efficient customs clearance process;
Adequate transportation (by air and sea) and communication facilities;
Institutional capacity and effective export ecosystem;
Export awareness/orientation, export drive/commitment and export focus (from government and private sector);
Well-designed export policy (e.g. National Export Strategy and implementation plan), based on sound export nation principles (re trade, infrastructure quality, trade facilitation, pricing, logistics, etc.).
He sees several long-term opportunities that the NES can generate, such as:
High investment in the export nation strategy;
Enlargement of the market for export of goods & services through bi-lateral/regional trade-agreements;
Development of the export sector;
Economic diplomacy, through multi-lateral, regional and bilateral relations;
Technological innovation and distribution due to the growth of E-commerce.
“We must learn to see where the international market is going and seek market access wherever that market is”.
How important is the WTO?
One question that often arises in discussions regarding the development of a national export strategy is whether the island could develop the export nation strategy without the World Trade Organization). The WTO is a multilateral trading platform for the world comprising 160 plus members. Its main objective is to promote international trade liberalization through multi-lateral agreements, which, save for agreed upon exceptions, prohibit national trade distortions and other barriers such as the imposition of discriminatory local policies and other unfair trade practices with respect to the imports from other countries.
In order to be able to do business on a higher level it is necessary to obtain full compliance with the WTO rules. Curaçao is pursuing an independent membership within the WTO. As a separate customs territory Curaçao can become a member and defend its own interests as a small and vulnerable economy.
For more information visit www.wto.org.
“Due to our smallness and vulnerabilities, we must see the world in a new way and adopt an international trade-focus”
What’s in it for us?
Monte explains that experience with National Export Strategies show clear advantages for the countries that introduce it. Besides Macro Economic gains, one can expect a positive impact on Public Finance and the Balance of Payments.
Countries typically experience an increase in private sector investments and export which lead to increase in GDP and thus to economic growth. The increase in business activities, usually impacts profits positively, which leads to further growth in investments and stimulation of economic growth. The surge in business activities will also lead to more employment and higher wages, which promotes consumption.
Public Finance Gains
The expected increase in profits will lead to more profit tax income for the government, which will compensate for any loss of income on import duties.
More employment and wages paid, will lead to more wage tax income for the government and social premiums to fund the social funds. This will decrease the government or ‘tax-payer’ contribution to the social funds. The rise in profit and wage tax and decreases in the government contribution to the social funds will decrease the budget deficit or improve a budget surplus, making public finances more sustainable.
Impact on Balance of Payments
Expansion of the net exports reduces the trade deficit and deficit on the current account of the Balance of Payments. This improves the foreign exchange reserves, providing more buffers for the external value of the local currency and decreasing the pressure on monetary policy.
Implementation of a dedicated Export Nation Strategy will increase the effectiveness of macro-economic policy performance and all three components will improve. The economic policy, fiscal policy and monetary policy will all have a positive outcome.
Full membership of the WTO as an Independent Customs Territory;
Bold Economic Leadership to proclaim a clear export vision and let it be manifested;
Build a strong Export Sector! Based on an Export Nation Strategy;
Ensure institutional and trade capacity building and a permanent development agenda;
Negotiate a nexus of relevant regional bi-lateral trade agreements;
Ensure economic attractiveness of key sectors for FDI directed towards export. Economic Attractiveness of the export industry attracts foreign direct investments (FDI) for export industry development and long-term economic growth and stability;
Always stay relevant by keeping fully engaged at national, regional and multilateral level. Secure effectiveness of the export ecosystem on the national level. Close trade agreements and ensure joint capacity building with Trinidad and Tobago, Caricom, Dominican Republic, Colombia, Suriname, Panama, etc. on the regional level. Stay involved with the WTO on the multilateral level;
Implement the Pareto principle: concentrate on the smallest number of countries in the region with the least possible export products that have the largest impact. Then scale the sector;
Create a technology-driven production and distribution platform to become a technology driven export nation.