Export Promotion Organizations [XPO’s] – Are they Useful? By Andrew Singer, May 2006.

How the XPO model came about From 1950 to 1962, the developing country share of world imports crashed from 32% to 21%. This was seen as a crisis, and required a response. Major UNCTAD meeting in 1964. Recommended “a permanent center in each LDC for trade information and market research.” The concept of a centralized XPO [or TPO] was born.

The Model Quickly became Universal Most developing countries set up XPO’s – most in the 1960’s and 1970’s. UNCTAD established the International Trade Centre in 1964. Its main job was to help set up these XPO’s, and get them started. Most were set up within a ministry, or as a public agency under a ministry. Nearly all provided services free of charge. Nearly all were staffed entirely from the civil service. This is the model that still persists. I estimate there are still over 70 XPO’s in developing countries.

The World Bank Research Project of 1991 The first major research project on how this model had worked in practice. Undertaken by Prof Don Keesing [Stanford & World Bank] and myself. The major conclusion – that the XPO model, that had dominated aid support for developing country exports for over three decades, had not worked well. We searched for successful examples. Experience had nearly always been negative.

The World Bank Research Project of 1991 My work since 1991 has served to confirm these conclusions. Even the worst of the XPO’s refuse to die. Aid agencies refuse to let them die. Giving aid to support exports is just too attractive. If an agency exists to promote exports, then it is almost bound to be supported, no matter how ineffective.

Why the Model did not Work What happens in countries where exports have expanded successfully. Services for exporters are provided by a plurality of mainly private service providers, many of which are highly specialized, and provide highly technical services. What seems to work is a marketplace, supplied by lots of specialists. Where an XPO exists, its impact is accepted as being limited.

Why the Model did not Work The initial expectation in 1964 – that one single service provider would provide the missing ingredient for export take-off – that expectation was, in my view, fundamentally wrong. Placing this single service provider in the public sector, and staffing it from the civil service – that just made a wrong model even worse. Concentrating on market entry services, rather than dealing with supply constraints, that was also, in hindsight, a big mistake.

The Concentration on Market Entry In recent years, that mistake has been broadly accepted. As OECD markets have opened up to developing country exports, these exports have not achieved a broad take-off. [eg. AGOA, EBA] It is now understood that the essential reasons are on the supply side. Market entry, where XPO’s have so long have concentrated their efforts, was never the issue. Understandable. Market entry services need much less technical specialization – and are politically much more attractive to host governments. Too often, in my experience, concentration on the XPO has been used as “window-dressing,” to take the spotlight off difficult policy-related supply constraints.

Given the Experience – Can they be Useful? Yes, so long as it is accepted that 90% of the effort [and aid] needs to be put into dealing with supply constraints, where XPO’s do not, in my view, have a useful role. Another condition – to be useful, front-line staff need to have direct export experience. Civil servants generally won’t do. Second experienced export professionals from the private sector. Concentrate on firms that are new to exporting. Provide them with [seconded] advisors. Provide training in broad cross-sector skills [eg. how to find an agent, how to deal with the paperwork, etc.] Any subsidies [eg. trade fairs] should be strictly time-bound. Service users should pay a significant and increasing proportion of the full costs.