DEVELOPMENT: Poor-Country Businesses Assail Lack of Credit, Non- Tariff Barriers

By Ranjit Devraj Reprint | | Print |

Ranjit Devraj

BRUSSELS, May 17 2001 (IPS) - Monica Khoromana is hot stuff. Her Malawi- based company exports more than 2 million dollars worth of chili sauce a year to markets as far away as the Netherlands and Singapore.

But Khoromana’s business has hit a ceiling. “There is a growing global demand for sauces but growth is not easy because there is no export financing for small and medium-sized businesses and loans carry interest rates that are higher than 60 percent,” she says.

There are other so-called non-tariff barriers, too. Her company, NALI, set up partnerships to enable it to export to the United States but regulations laid down by that country’s Food and Drug Administration are stringent and conforming to them means investing more money.

“If we do not export more, we won’t have the money for upgrading and if we don’t upgrade, we cannot export,” Khoromana explains.

Hers is a vicious dilemma – one faced by countless poor country exporters trying to break into international markets, say participants in discussions organised by the UN Conference on Trade and Development’s (UNCTAD) International Trade Centre.

“We lack access to low interest finance, adequately trained workforces and relevant policies,” says Thandi Mbvundula, another Malawi-based female entreprenuer who is struggling to run a computer management company.

Mbvundula says international development agencies and national governments need to be far more proactive in supporting small and medium-sized private enterprise if they are serious about tackling poverty in the so-called least developed countries (LDCs).

Meanwhile, success stories are few and far between. George Mwase, operations manager for Uganda-based Greenfields, which exports marine products, says he wonders when the next round of non-tariff barriers would hit the business.

“Right now we are still recovering from a series of European bans operative between 1997 and early 2000, on account of salmonella poisoning, a cholera outbreak, and pesticide residues,” Mwase says.

The Ugandan fishing industry’s woes have been compounded by obsolete national legislation, non-existent testing laboratories, incompetent authorities and unhygienic conditions in which fish are caught and handled, he says.

Other entrepreneurs complain about corrupt officials back home who they say stand between aid donors and their intended beneficiaries.

Sulo Shreshta Shah, a carpet exporter from Nepal, demands to know why these agencies do not seem to have control mechanisms to monitor what happens to the funds they dole out in the name of development.

Shah says she set up her business with her own money but found herself unable to access government-controlled funds needed to expand unless she greased the right palms. “Surely you have a duty to see that your own taxpayers’ money is being used properly,” she says, addressing herself to donor agencies.

Ablasse Ouedraogo, deputy director general at the World Trade Organisation, acknowledges that funds made available for private entrepreneurship often go astray. He says improving the flow of information and encouraging partnerships between public agencies and private businesses could help solve the problem.

However, not everyone is impressed with existing approaches to attracting more investment and promoting entrepreneurship as a way out of the economic morass in which the LDCs find themselves.

“It is wrong to assume that in the short-term, trade can be a substitute for aid,” says Charles Gore, senior economic affairs officer at UNCTAD.

The fact of the matter, Gore argues, is that the world’s 49 poorest countries are in no shape to raise the investment and political capital needed to increase trade and gain market access enough to jump-start their economies and distribute the ensuing benefits among their people.

Rather, he says, LDCs must receive both deeper debt relief and generous aid right now to prevent their economies from collapsing altogether in the next few years. “Debt relief,” he asserts, “is in fact crucial to improving the environment for investment.”