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a world of opportunity

With the cold wind of recession blowing through the economy the sensible course of action may appear to be to batten down the hatches and hope to emerge unscathed when it passes.

However it might well be better to look beyond the horizon and seek new markets to secure a prosperous future.

That’s the view of Jon Woodwards, the vastly experienced International Business Director of Aberdeen & Grampian Chamber of Commerce, who points out that not only is the weak pound of benefit to UK exporters but the recession is not striking all parts of the world equally.

He highlights a CBI survey which showed that new order books for August fell by 56% but export order books fell by only 34%.

“There is some clear space which tells you that exporting is a good thing to be doing at the moment,” he said. “Exports are down but if you have to be selling product anywhere it is better to be selling it in an export market rather than in the domestic market.

“There are markets around the world which are either recession proof in some way or they are not subdued to the same extent as our markets.

“Some of those markets are in the Far East and China’s manufacturing and consumption are down but it is still relatively buoyant in terms of importing goods, equipment and services.”

He said there is also significant potential in developing economies including Africa with Angola at the top of the list.

“Even considering the recession and relatively low oil prices some countries suddenly find themselves with more wealth available than they have ever had before.

“Angola, which is a very good example, is the fastest growing African economy and now the second largest oil exporter in Africa. The country is being transformed at the moment. There are tower cranes everywhere and they are building sea ports, airports, roads, hospitals and infrastructure of every sort and there are social imperatives as well.

“The smart thing for UK exporters to do is identify those foreign markets which are still buoyant and to which they can most readily export.

“In some of those markets the costs are high and the risks are high but the profitability and the margins which can be obtained are also very high.”

He said one of the main barriers to exporting is the red tape and bureaucracy which, across the EU at least, should be eased at the end of this year as a result of the European Services Directive.

However a British Chamber of Commerce survey has shown that only 10% of companies are currently aware of it and he urged the Government to promote the initiative.

Some companies which embark on export initiatives become strangled with red tape which, as well as causing frustration and wasting energy and manpower can add considerable cost.

“It is pretty easy to deter people unless you can put in place mechanisms that will make things easy for them,” he said.

He believes the Government can help in other areas and explained that policy at the moment is, understandably, to concentrate on geographical areas and sectors in which they get the biggest bang for their buck.

The problem is it leaves many industries in a vacuum, including oil and gas, which is not one of the favoured ones.

“Angola is not considered to be a high growth market by the UK government so there is limited funding to support a trade capability whereas if companies in our region were asked, every one would say Angola was important.

“Trade organisations don’t have the capability to satisfy the demand and we would like Government help.

“We would like them to review their high growth markets - where they apply their funding and the trade sectors they consider important - and we would like to see more attention to SMEs which are very important in this area.

“There are many public and private sector organisations and the companies themselves, all providing assistance to promote British export. But they attack a market almost independently and although each one is doing its little bit the element of coordination is missing.

“Britain should be presenting a united, credible, joined-up face to foreign markets rather than lots of independent organisations which aren’t talking with each other appearing in a sometimes quite shambolic fashion that confuses the market.

“I think it is important for the Government to consider the establishment of task forces where all of the stakeholders can join forces under a single plan deployed towards a country or particular market.

All these various strands can be brought together and consolidated and I think ultimately that would be far more effective, much more understandable and more cost efficient.”

He said Ghana was one example where there were huge opportunities and where the UK was very favoured.

“But there are lots of individual players going in there to try to influence the market and help British companies establish themselves and it is all very disjointed. If we had a very small amount of funding and reorganised what we were doing we could appear as UK plc.”

Whichever export market a company may consider attacking, preparation is the key to success and that is where the Chamber, which has seven staff in its international team, can provide invaluable support.

Experts will talk to companies to understand their ambitions and advise them if they might be capable of entering a market. They will also explain how long it will take, how expensive it will be, and how much energy and manpower it will need.

“Most companies will not be deterred by that but gaps in their knowledge of the market and their capability will be very apparent and our job is to fill those gaps by providing intelligence and information to them about things like the fundamentals of the countries, political stability, social economics, stability as an investment destination, its tax, its law, its other industries, its prospects, and its future economically.

“We are trying to put them into the position where they can make informed decisions about whether they should enter the market or not. If they do decide to enter the market then we roll up our sleeves and it gets more practical. They will probably need to visit the market to look at it first hand and they will need to start forming networks in the country to understand who their customers are, who their competitors are, how the pricing system works. They will need a lawyer, an accountant, employees and real estate and we have the networks to supply that information.

“One of the greatest risks is underestimating the scale of the task because it could take a year to enter a market and we operate in some of the highest cost regions in the world.

“Angola is the third most expensive country in the world to stay and live - on a par with Tokyo or Moscow. The less developed the country the more expensive it is to exist there in a western fashion. A trip there for a week will cost £6000 in expenses so if you get your market entry process wrong and have to make a couple of extra trips to the country to sort things out it is a big financial risk.”

He explained there are also cultural differences to overcome.

“You can’t go from Aberdeen to China and expect to conduct business in the way we do here.

“You will find that most business cultures around the world, outside perhaps Europe and North America, are relationship driven.

“A British businessman going to look for work in China has got to be prepared for several meetings with his Chinese counterpart and to be asked about where he goes on holiday, if he plays golf, if he is married and are the kids in school.

Some might think 'I am just wasting my time. I have been there three times and all we have talked about is the school holidays’ but what is happening is the Chinese person is building a relationship, building trust and establishing that you are a likeable character.

“That achieved, and sometimes rather unexpectedly, he might just say ‘Ok let’s talk about your business, that sounds good to me. Here’s a contract.’

“International trade is a broad subject covering politics, socio economics, regulation and tax but just as importantly its about understanding people and cultures - it is a very complex area.”