PACIFIC EXPORT

SURVEY 2014
RESEARCHED AND PRESENTED BY
:
WHO IS EXPORTING?
During the second quarter of 2014, over 350 rms responded
to a questionnaire on the way they do business and the
problems that they face. Of these, 270 were exporters. The
sample included producers as well as service providers.
Over half of the exporting companies are small with fewer
than 20 employees and less than $AUD1 million in revenue.
By far the majority are privately owned. Size does not appear
to be a barrier to exporting in the Pacic. Furthermore, nearly
1/3 of the companies in the sample only started exporting
in 2011 or after. Over 50% of the companies in the sample
generate the majority of their sales fromexporting.
Women in the region have been active in companies that
export - over one quarter of all exporting companies have a
woman as either proprietor or CEO. No single type of exports
dominate with an even split between agriculture exports
(35%), tourism(33%) and manufactured goods (33%).
Services (27%) and resources (5%) were also represented.
FORWARD
The Pacic Islands region is as geographically vast as it is
economically diverse. Spread across 14 countries, 6 time
zones and 3 sub-regions, the regions export community is
made up of a mix of business types, sizes and sectors.
We knowrst-hand that a wide variety of goods and services
are being exported fromacross the region. LNG, minerals,
timber, seafood, copra, vanilla, noni, tourismand recreation,
virgin coconut oil, spices, consumer goods, and professional
services to name a few.
However, our region is characterised by a lack of private
sector data, and while there is much talk of private sector
development, fewstudies have gone direct to the exporters
of goods and service to ask for their views.
In response to this, Pacic Islands Trade &Invest, the regions
leading export facilitation agency, in a collaborative project
with Australian Aid, conducted the rst ever Pacic Export
Survey.
As part of its economic diplomacy efforts, a major focus for
the Australian Government is prioritising private sector led
growth in the Pacic. Accordingly, the survey established an
overviewof the export sector, examined the future outlook
and highlighted changes in overseas demand. This document
provides an overviewof the Pacic Export Survey report with
analysis provided by Paul Holden, Lead Economist at ADB
Pacic Private Sector Development Initiative.
Caleb Jarvis
Trade Commissioner
Pacic Islands Trade
&Invest, Sydney
In this survey, we found that while Australia and NewZealand
remain the regions principal export destinations, exporters
believe that the largest increases in the coming 12 months will
emanate largely fromAsia. Despite the relatively small size
of Pacic Island economies, the proximity to Asia provides
real prospects and opportunities for growth in trade between
these two regions.
While this brief report outlines some of the challenges facing
exporters, it also indicates that both business condence and
dynamismexist in our region. Indeed Pacic exporters are
optimistic about the future and are eager to engage in world
markets.
We anticipate that this study will be an annual activity
which will provide Pacic Islands businesses, governments
and stakeholders with valuable export-specic data. By
conducting the study regularly, we will be able to gauge
changes in demand, trends and improvements which will
help us work towards the common goal of export-led private
sector development in the Pacic Islands.
It gives all of us at Pacic Islands Trade &Invest, and Australian
Aid great pleasure to present the inaugural 2014 Pacic
Islands Export Survey Report to you. While this document
provides just a snapshot of the responses, we would be
pleased to share an e-copy of the entire report with you.
Kathy Klugman
First Assistant Secretary
Pacic Division
Department of Foreign Affairs
and Trade
The largest number of exporters is in Fiji, which
accounts for over 25% of those in the sample,
followed by Samoa, Tonga, Vanuatu, Cook Islands
and Solomon Islands. Furthermore, customers
are geographically dispersed, with more than 1/3
of exporters servicing at least 6 markets. Only
8% of exporters focus exclusively on Pacic
islands. Australia and NewZealand followed by
the United States are by far the largest export
markets, although rms that were sampled
intend to focus more on Asia in the coming 3
years. This reects export dynamism, as 87%
of the exporters surveyed stated that they
are actively seeking newmarkets to enter. On
average, respondents expected their sales to
foreign markets to increase by more than 45%
over the next 12 months, reecting a substantial
amount of optimismregarding export prospects.
In particular, exporters in Samoa, Fiji and Tonga
are the most condent with sales expected
to rise by over 50% in all 3 countries. They see
export growth arising fromboth existing and new
markets, with the largest increases expected to
come fromAsia.
WHO IS EXPORTING?
(Cont...)
BARRIERS TO EXPORTING
Exporters report a number of barriers to
increasing exports. The most signicant of these
is the ability to nance export activities, with
Samoan and Tongan exporters experiencing
this constraint particularly intensively. Vanuatu
exporters report that high fuel and energy prices
are the most pressing constraint. On the other
hand, Samoa and Cook Islands identify labor
issues as one of the most signicant barriers to
exporting.
The Survey identied some particular issues that
reduce access to nance, the 5 most important
of which are shown in the chart. High collateral
requirements, the need for nancial assistance
and unwillingness of banks to lend were the
main barriers, followed by rms not being in
a position to borrow(possibly related to the
collateral issues) and high interest rates. Smaller
companies were particularly affected, with 77%
of those with export sales of less than AUD$
100,000 reporting problems with accessing
nance.
One way of improving the nancial structure of
businesses would be to sell equity, with foreign
investors being particularly attractive because
of expertise and knowledge of foreign markets.
Over 75% of the sample of exporters are either
actively seeking or considering a foreign investor.
However, these same companies perceive
Pacic island economies as being unattractive to
foreign investors.
These perceptions almost certainly reect the
views of the business people themselves of the
business environment in the Pacic. The high
cost of doing business is considered to be the
primary barrier to foreign investors, together with
issues related to market size, infrastructure and
regulation. The lowrate of return on investment,
which was agged as an issue is a result of the
other constraints.
Access to
nance
Capacity
constraints
High fuel
prices
Internatonal
competton
Government
policies
Domestc
economic
conditons
Labour issues
51 40 37 33 33 30 29
0
10
20
30
40
50
60
Collateral
requirements
Limited access to
nancial assistance
Banks will not lend
Not in a positon to
borrow
High interest rates
27 23 19 18 17
0
5
10
15
20
25
30
High cost of
doing
business
Markets too
small /
isolaton
Transport
infrastructure
Politcal
instability
Lack of skilled
labour
Low returns
on
investment
Regulatona
and
bureacracy
Poor IT
infrastructure
61 52 49 46 45 42 40 31
0
10
20
30
40
50
60
70
WHAT HELP DO EXPORTERS WANT?
EXPORT CONFIDENCE IS HIGH
Unsurprisingly, exporters focused on the
particular assistance that they would like to
have. Almost all of the most important factors
revolve around marketing and distribution,
including introduction to customers, agents
and distributors, assistance in marketing
products and better market research. Lower
transport costs and export grants were two other
important areas where exporters would like to
see improvements. However, the optimistic
outlook for export growth of the survey answers
shows that exporters are being proactive in
seeking newcustomers and markets.
The survey revealed only limited awareness
of free trade agreements and economic
partnership agreements. Given small market
size and the potentially negative effects of trade
diversion arising fromPICTA, this is probably
not a major constraint on exports. However, the
very limited knowledge of the European Union
Economic Partnership Agreement could be a
barrier to more exports to the EU.
OTHER MEASURES TO HELP EXPORTERS
While individual exporters identied measures
that will help themexpand their overseas sales,
the replies to the survey also show, clearly, that
the business environment in countries in the
region is a more general barrier to doing business.
Improving access to nance, reducing regulation,
eliminating barriers to foreign investment,
improving business laws and working on
enhancing economic opportunities for women
will not only lead to more exports, but will also
result in improved rates of return on investment,
which in turn will lead to higher sustainable rates
of growth. Australian government sponsored
programs such as the Pacic Private Sector
Development Initiative is working on all of these
issues. The soon to be implemented ADB
Business Investment Fund will provide technical
assistance and possible equity investments to
allowexporters to growtheir businesses.
EXPORT DYNAMISM EXPORT DYNAMISM
Exporting opportunities have led companies to
upgrade their efciency, develop newproduct
lines, increase marketing efforts and actively
seek newmarkets. Online marketing has become
the single most commonly used instrument
by exporters, illustrating the importance of
connectivity in the Pacic islands. The smallest
companies use this tool most intensively. The
larger companies place greater emphasis on
improving business processes and entering new
markets.
Condence amongst the export community
is very high with 57% expecting an increase in
export revenue over the next 12 months. This
is signicantly higher than in the previous 12
months, where 39% experienced growth.
Condence is particularly high amongst
exporters in Fiji, Samoa and Tonga and
those exporting Agricultural Products and
Manufactured Goods.
This condence is founded by expected growth
frommany export markets. Within the existing
markets growth is expected fromAsian countries
including China, Hong Kong, Taiwan, The
Philippines and South Asia. The Middle East is
also a market predicted to develop.
Many exporters are also expanding their markets,
with many looking to enter the more traditional
markets of Australia, NewZealand, North
America and Europe.
METHODOLOGY
Strategic Objectives:
Provide a greater understanding of the diversity of
industries in the Pacic Islands, particularly with regards
to international trade. The results of this research will be
used as topics of discussion in various regional forums and
national Governments to address economic growth and
development.
Research Objectives:
The specic research objectives of this study are:
Understand opportunities and pain points regarding
exporting from the Pacic Islands.
Identify key export markets within the Pacic Islands
and in other geographic areas.
Determine condence in business prospects over the
next 12 months.
Ascertain considerations of business sale and direct
foreign investments.
Identify Free Trade and Economic Partnership
agreements that are benecial to organisations in the
Pacic.
Determine difculties in obtaining nance and reasons
for these challenges.
Sampling Approach
A total of 352 surveys among organisations in the
Pacic Islands, of which 270 export or sell products or
services to overseas customers and 82 do not export.
The interviews were conducted with the key decision
maker or inuencer for business decisions.
Quantitative online research methodology was used.
10 minute questionnaire.
Government agencies were excluded from the sample.
All sample has main based of operations in the Pacic
Islands.
Database was provided by Pacic Islands Trade &
Invest.
Contact Details
For more information about this survey, or for access to
the full report please contact:
Tim Martin
Executive Manager
Pacifc Islands Trade & Invest
tim.martin@pacictradeinvest.com
Fieldwork
Surveys were conducted between 25th March 8th May 2014
by ACA Research of North Sydney, NSW.