Policy and regulatory reforms undertaken in accordance with the multi-year Development Plans form the "engine for growth" in developing countries.
Foreign aid donors' use their knowledge of developing country plans to support early positioning of their own private sectors in these emerging markets.
Economic development projects undertaken to achieve a sector's growth targets offer the donor community an ideal avenue to "buy" their way into developing commercial sectors.
Positioning one's businesses in the early planning and design works of commercially related projects can often lead to capturing the follow-on implementation efforts and related work for that or other sectors.
The U.S. has no effective means to capitalize on the wide range of business opportunities offered by the development planning or project implementation in developing countries.
Policy and regulatory reform information obtained by State Department., USAID, and multilateral banks with U.S. Directors is not shared with other Federal export agencies.
U.S. export oriented agencies, such as Commerce Department, Trade & Development Agency, Ex-Im Bank, and Overseas Private Investment Corp., are not positioned to participate in the early planning stages for development projects.
These Federal export agencies must rely on third parties to bring commercially oriented projects to their attention for limited funding of only feasibility studies, commodity exports, or support for project related joint ventures.
The U.S. needs to more effectively integrate the information flow and coordination amongst its development planning and export oriented agencies, including multilateral banks.
The U.S. should open the multilateral funding sources to U.S. business participation and obtain a better return for the capitalization funding provided.
For highly competitive, commercially related projects, the U.S. needs to consider providing a full range of project life cycle funding on a selective basis.
The U.S. should aggressively challenge other aid donor's questionable claims as to the "openness" of their programs for U.S. private sector participation.
This Guide outlines the key processes and steps followed by a developing country in establishing the economic framework and project interventions for its long term growth. It notes areas of foreign donor participation and the particular U.S. assistance that is available, including identified gaps.
This document should enable U.S. policy makers to clearly observe the functional level of U.S. participation in international economic/commercial development. It will highlight how commercially related assistance can be both beneficial to the host receiving country as well as the U.S. private sector institutions that are delivering the external technical assistance, training, and commodities.
The Guide points out areas for enhanced U.S. cooperation amongst its Federal institutions in order to encourage a more pro-active approach that will directly lead to expanded commercial linkages and trade.
In preparing its 3-5 year economic development plan, the developing country will normally assess its current assets of land, labor and capital to ascertain how best to employ and develop them to achieve economic growth targets. Often, the principles of comparative advantage and value added will assist the country in focusing a particular commercial sector's role in the development plan.
The planning process normally commences with the needed macro economic and sector analysis with emphasis on establishing the appropriate policy and regulatory framework. Within the context of this overall picture, micro economic analysis is undertaken to develop an array of interventions or projects that will be carried out to achieve the expansion targets for each sector of the economy.
In gaining the confidence of the developing country's public and private sector officials, which is critical to establishing commercial ties, it is vital that both the U.S. public and private sectors work together in supplying the needed macro/micro analysis. In so positioning U.S. industries, they will be able to timely respond to the new market opportunities that develop. With advance project level information, both the U.S. public and private sectors can best determine how to proceed to supply the needed inputs.
Obviously, if the U.S. does not start to better mobilize its limited resources, it will be overwhelmed by its Japanese and European counterparts, who aggressively look after their own commercial interests in working with developing countries.
In getting one's "foot in the door" for expanded trade with developing countries, it is vital that U.S. public and private institutions actively engage in the economic analysis and planning efforts that lead up to the development of specific business opportunities. The donor community, represented by multilateral and bilateral institutions, provides the technical assistance and training that establish early public sector ties for the identification of new policy/regulatory reforms to attain a developing country's sector growth objectives. This macro level analysis also identifies a range of possible interventions (projects) that will stimulate the sector's growth. These advance arrangements often provide the vital insights to significant changes in specific sectors/industries that prove invaluable to the donor's own private sector.
U.S. consulting corporations and universities have been the vehicle of choice for supplying this vital technical advice. The U.S. Agency for International Development (USAID) and multilateral institutions have been the normal funding sources for this macro analysis that develops recommended policy and project options.
Gap: The assistance provided and plans developed are looked upon as ends in themselves. This valuable information and contacts are not nurtured and effectively brought to the attention of other key Federal agencies or the U.S. private sector. Often enough, our Japanese and European competitors make commercial use of this information.
Recommendation: USAID and the U.S. directors at the multilateral institutions need to interface their policy/planning development efforts with other key Federal agencies that more closely interact with the U.S. private sector.
The doorway to expanded trade with developing countries initially opens with the donor community review of the 3 to 5 year development plans and the outline of interventions or projects that will be undertaken. It is at this early phase in the life cycle of a development project that many other donors attempt to lock in activities of commercial interest to their own economies.
The U.S. is represented at the Donor Conferences by the State Department and USAID officials who identify projects in line with the U.S. humanitarian assistance objectives. Gap: Neither the U.S. private sector or those Federal agencies that inter-relate with it, i.e. The Department of Commerce, Trade and Development Agency (TDA), Export-Import (Ex-Im) Bank, and Overseas Private Investment Corp. (OPIC), have ready access to the information gathered by USAID. There is no effective mechanism which uses their input on projects of major interest to them. In fact, these agencies must usually wait much later until potential projects are brought to them by other sources.
Recommendation: The State Department, USAID and the U.S. directors at multilateral institutions need to better coordinate their operations with other commercially oriented Federal agencies and U.S. private sector institutions.
Phase 3 - Expand U.S. Involvement in Project Planning
Policy reform efforts and economic development projects provide needed stimulus for growth as well as a "doorway" for U.S. firms to establish an early foothold in these new emerging markets. The project planning phase looks to determine the best division of interventions for a sector's growth and to identify the types and levels of local and foreign technical assistance, training and commodities that may be needed for implementation. The planning and analysis effort may include a formal feasibility study, identifying the preliminary technical, economic, social, environmental, and financial constraints, including the availability of foreign donor assistance.
As a result of the Donor Conference, a particular donor may step forward with an offer of technical assistance to undertake this planning effort and further establish its lock on the follow-on business that emerges from the project efforts.
With the withdrawal of the U.S. from funding of Capital Projects through USAID, there is no source of support, except on a multilateral basis, to assist the U.S. private sector in undertaking the full range of activities associated with the design and implementation of commercially oriented development projects. Gap: While the TDA does fund feasibility studies of commercially oriented projects for the U.S. private sector, it does not fund the follow-on detailed design efforts. TDA's limited resources equates to only one tenth of that put forward by Japan in support of feasibility study works for its own industries. Multilateral institutions such as the World Bank rely on their own project officers to identify, from their contacts, potential suppliers of project design services. Accordingly, it is quite difficult for many U.S. firms to participate in these Bank funded efforts, even though the U.S. is a major contributor to the institutions' capitalization.
Recommendation: The U.S. needs to do more to open the multilateral funding sources for U.S. business participation. For those highly competitive commercial industries, the U.S. needs to look to supplying a full range of project design and implementation funding on a selective basis.
Phase 4 - Use U.S. Firms For Detailed Project Design Work
The entry into expanded trade through projects with developing countries starts with the contracted work for a project's detailed design. In establishing the specifications, composition and layout of a project, including its detailed technical, economic, and financial requirements, the firm contracted by the donor institution, in collaboration with the host country, is ideally positioned to guide the direction of suppliers. In many cases, the design firm is called upon to prepare the procurement documents for the follow-on purchases and will also be provided responsibility for supervising the implementation of the full project.
The U.S. has no bilateral program that adequately supports its private sector in securing detailed project design work. While the Federal Government has been encouraged by some U.S. architect and engineering firms to lend its support to their efforts in capturing contracts for this type of work, only the Ex-Im Bank has responded with a limited program for highly commercial projects. The bulk of the Bank's financing continues to emphasize the export of hard goods during the procurement phase of a project.
Gap: With limited bilateral support for their efforts, U.S. engineering firms have had to try and penetrate the multilateral institutions in pursuit of project work. However, with the U.S. directors of these organizations reporting to the U.S. Treasury, their attention has been more focused on macro economic/political issues than in supporting U.S. private sector participation in Bank funded projects.
Recommendation: The Ex-Im Bank, TDA and USAID need to support funding on competitive terms of detailed engineering design and project supervisory services. The U.S. directors in the multilateral institutions must also be more closely aligned with the overall commercial interests of the U.S. through the workings of the Trade Promotion Coordinating Committee. A review is long overdue as to the level of U.S. private sector participation in the multilateral institutions' projects in relation to its capital contributions to the organizations themselves.
Phase 5 - Win Fair Share Of Project Procurements By U.S. Firms
The actual procurement phase in a project can prove to be the most difficult door to crack for entry into a developing country. A private firm's participation, or lack thereof, is directly influenced by how much advance time it has to prepare to respond to the formal tender documents issued by the developing country or the donor financing the procurement. A firm's ability to structure a comprehensive proposal, which may require forming a consortium of firms, will directly depend on obtaining advance notification. Many multilateral and non-U.S. bilateral donors do not advertise the tenders beyond their own limited-distribution publications.
U.S. businesses are often disadvantaged by the means employed by foreign donors and multilateral institutions in advertising the procurement opportunities. While the U.S. Foreign Commercial Service does try to keep abreast of these developments, the donor funding organizations can arrange the procurement processes to favor their own intended commercial interests.
Gap: Many U.S. businesses are unable through their own resources to become aware of a tender in time to respond effectively to foreign project procurement actions. This may include lining up local business partners, possibly using OPIC resources, and securing an Ex-Im Bank commitment for U.S. goods that may be utilized.
Recommendation: The U.S. needs to expand its National Trade Data Bank (NTDB) to incorporate business leads from all concerned U.S. agencies and the U.S. directors of multilateral financial institutions. The NTDB in turn, needs to be structured by topic to provide simple and timely access by the U.S. business community. This should also help to minimize the need for senior U.S. Government officials to continually have to intervene in the foreign procurement processes late in the award cycle.
Phase 6 - Enhance U.S. Participation in Implementation/Evaluation
In entering a developing country market for the long term, the implementation phase of a project is critical to proving the supplier's capability to deliver the contracted technical assistance, training and materials within the time and other constraints. There are normally three stages in a contractor's efforts: mobilization, execution, and de-mobilization. How well the U.S. executing contractor interfaces with host country public and private sector personnel will, to a good extent, determine if they will look in the future to this organization to render additional services. The quality of the contractor's performance will also affect the views of the financing donor organization toward the use of U.S. firms on future projects.
The donor organization financing the project will often have an inside track on subcontracting work that develops. These donors will, as a normal course of business, fund periodic external evaluations of the progress attained on the project to insure that the overall objectives are being achieved. Both subcontracting and evaluation activities offer opportunities for U.S. businesses, large and small, if the U.S. has a financing facility that can facilitate such participation.
Gap: While both TDA and Ex-Im Bank can, in a limited way, assist with supporting the private sector with contracting efforts, it rests primarily with the private firm to sell its unique goods/services to the implementing contractor and the relevant host country and donor institution. Major questions do exist as to the nationality of the actual firms implementing these donor funded projects. To divert attention from many donor "locked" projects, they claim that their assistance is "untied" and that most of the work is performed by firms other than their own.
Recommendation: The U.S. should stop accepting, on face value, the questionable claims of its competing donors and more aggressively challenge these claims, while supporting its own industries in the process.
Phase 7 - Involve U.S. Firms in Completion/Follow-on Activities
In expanding trade with a developing country, the successful completion of a key project intervention is the best way to demonstrate both the donor's and contractor's capability to deliver the required resources as needed. Added follow-on work can be readily sought by the contractor that is already mobilized and has close working ties with the local private sector.
The original financing donor will in most cases also seek further technical assistance to support the developing country's analysis as to what new measures may be undertaken to enhance the particular sector's growth prospects and its impacts on related economic sectors.
At this late phase, the donor community comes back into the picture in assessing the overall growth in that sector. Through their ongoing Donor Conferences, they will determine if further stimulus is needed and its overall scope. If the implementing donor has proven its capability to effectively support development of this particular sector, that institution would normally be looked to for covering any further follow-on projects. Gap: With the U.S. withdrawal from fully funding Capital Projects in developing countries, it becomes even harder for U.S. businesses to try and capture follow-on projects. The business opportunities in high growth sectors of these countries will often be captured by those donor supported firms that further that particular donor's own commercial interests. The fragmented efforts put forth by the U.S., i.e. TDA, Ex-Im Bank, and OPIC, while worthy on their own merits, are no match for the fully integrated approaches offered by Japanese and European competitors.
Recommendation: The U.S. needs to more effectively integrate the coordination efforts of the Trade Promotion Coordinating Committee into an overall trade development scheme that also incorporates the U.S. directors at the multilateral development institutions.
Questions or comments? E-mail me at JRMeenan@aol.com.
This page and its contents ©1995 James R. Meenan, United States of America. All Rights Reserved.
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