Select Committee on Trade and Industry Minutes of Evidence


Examination of Witnesses (Questions 60 - 79)

TUESDAY 6 JUNE 2000

SIR DAVID WRIGHT, MRS BARBARA PHILLIPS, MR DAVID HALL AND MR DAVID WARREN

Mr Rowlands

  60. Let us take a situation like Burma. Would you and your board possibly advocate amendment of policy on human rights grounds? In a case like that, would the Foreign Office want to establish an ethical view of that trading arrangement? How would that dovetail into policy-making at that level?
  (Sir David Wright) That is a good question, particularly in relation to Burma. We do not actually help companies in a proactive way to do business in Burma. The British Government have a clear view about the Burmese regime and its abuses of human rights. They seek opportunities to make that clear and to denounce the regime's activities. Hence, they do not actually encourage trade or investment in Burma.

  61. In that case, do you have, in agreement with the FCO, a blacklist of a group of countries, besides Burma? Of course, there are countries where there are trade embargoes.
  (Sir David Wright) There are certain countries where there are specific UN resolutions—Iraq is a case—where there are obvious limits to what is possible. Libya ceased to be in that category and we are now actively promoting trade with that country. I cannot think of another case that is like Burma. I believe it is a unique one.

  62. Are there countries where there is no embargo but there is an understanding between you and ministers that you will not promote trade?
  (Sir David Wright) I am not talking of an embargo, but of agreement. I cannot think of another case. We maintain contact, through our international group, with the geographical side of the Foreign Office in order to make sure that we are aware of such issues as they arise. We are alert to that aspect of our overall trading policy.

Mr Berry

  63. On service delivery, obviously our posts overseas identify opportunities for your customers in the UK. How does the existence of BTI improve that information, or how will it improve it in the future?
  (Sir David Wright) As you know, we have another IT-based service, called Trade UK. That IT based service is a sales-led system, whereby companies register their interest in receiving sales leads from overseas for a particular product. Those are assembled and collected by posts overseas, put on the Trade UK network and they are sent automatically by e-mail to the companies that have registered their interest in that particular market or product. Currently, we have 14,000 companies registered on that sales-led service, receiving automatically from overseas posts opportunities and new information about potential purchasers.

  64. Did that happen before BTI?
  (Sir David Wright) It did happen before. Originally it was launched in 1998. We are seeking to enhance post performance in that area. As an institution we would not be forgiven if we did not try to maximise the sort of gathering of information and opportunities in posts overseas and delivering it back to companies. We are trying to raise the profile of that work among posts overseas and also sell—although it is free—and promote the Trade UK service to more companies in the UK so that more people come onto the system. We have had quite an increase in the number to about 14,000 from 2,000 in the past year and a half. That is an important part of that system. On the matter of Trade Partners UK, we saw an image benefit from having Trade UK and Trade Partners UK. It is a joint thing.

  65. Talking of selling what is free, how do you decide which of your services are chargeable and which are not?
  (Sir David Wright) The chargeable services have been established for some time now and are largely in terms of three categories of market information which companies can contract for from posts overseas. There are three levels of complexity from a rather cheap chargeable which is basically lists of agents and lists of potential purchasers, to something that costs around £1,000, which is a fairly detailed market research report. Those are delivered by posts but they are contracted normally in business links out in the country or through the partnerships that exist in Scotland or Wales or Northern Ireland with posts. I think that is an important service for the following reasons. First, in charging for them we have seen an improvement on both sides. Companies do not ask frivolously for information that they do not necessarily want to use. Equally, posts are very much clearer about the expertise that they have to show in terms of the quality of the market report that is sent back as a result of a chargeable inquiry, largely because the company has paid good money for it.

  66. In terms of the principle, does this amount to providing rather general information free of charge, but when it comes to specific commercial information then you start to charge?
  (Sir David Wright) Yes.

  67. Do you charge the real cost?
  (Sir David Wright) No, we do not charge the real cost at all.

  68. What is the extent of the subsidy?
  (Sir David Wright) There is no specific calculated subsidy. These are levels agreed with the Treasury.

  69. They may well be levels agreed with the Treasury, but if it is not the full cost, there is a subsidy.
  (Sir David Wright) Let me give you an example. The best quality report that we do costs £800. I have been told by private consultants that they would charge anywhere between £3,000 and £5,000 for the same thing. That is the order of magnitude.

  70. That is the ballpark figure. In terms of one of your key objectives being to help smaller firms, how do you see that objective developing? Presumably some smaller firms are not quite as IT sophisticated as larger firms, so they may miss out on your gateway. Everyone talks about smaller firms, for whatever reason, but that is one of your objectives. What are the two or three key things that you think can be done to improve the support that you can give to smaller firms in relation to export promotion?
  (Sir David Wright) Let me take three points. We need to make sure that this arrangement that we have in business links, with our international trade development teams, is accessible and known in the region. That is why I am keen that we should be perceived as being part of the strategy of a region; that we should participate fully in the regional export forum; and that the activities that we have available will be known by companies so that they have a clear understanding of where to go. That comes back to one of the themes that I hope I have explained today. There has been a failure of understanding of where to go for assistance in the past. That is one thing that we can do. We also have to be more responsive than we have been in terms of the activities in posts overseas in respect of SMEs. SMEs are important members of trade missions; they are important commissioners of those chargeable services that I mentioned. Returning to a question raised by Ms Abbott at the beginning about improving quality and improving outputs, it is very important for small companies that are commissioning these chargeable services that they should be quite clear that what they get back is on time, meets their specific needs and is at a quality that will allow them to do business. There is a great deal of improvement that we can make in that area. I think that SMEs also are enormously helped by large companies. We often think of the large contractors as being the big boys who win the big contracts and we tend to draw a line under that perception. The big boys who win the big contracts normally trickle down a huge amount of business to SMEs. That is particularly true in the engineering sector. It is particularly true of some of the big oil and gas contracts that we are keen to promote. If we can enhance our success, for instance, in some of those large contract areas—power generation, oil, gas and water—some of these big infrastructure projects often have a trickle down effect to SMEs.

Mr Baldry

  71. I have some questions on target markets and partnerships. First, I should draw your attention to the Register of Members' Interests which shows that I am either a director of or adviser to public companies in the Czech Republic, India, Italy, the Kurdish Republic of Pakistan and Saudi Arabia. One way or another, I tend to see a fair amount of commercial staff in posts overseas and staff of British Trade International here. I have no cause to be anything other than full of admiration for the work that they do.
  (Sir David Wright) Thank you very much.

  72. On target markets, how many target markets do you have at present? What does it mean to be a target market in terms of staff and money? How do you decide on your target markets? How long does a market remain a target market? How do you promulgate target markets? Do you have an exit strategy for target markets without causing offence to the country concerned or to the UK business? As the Trade and Industry Committee is to visit Turkey later this year, where appropriate you might like to answer those questions specifically in relation to Turkey so as to give us an example of how it works.
  (Sir David Wright) Thank you, Mr Baldry. The simple answer is that there are 15 target markets. Do you want a list of the target markets, or do you have that already?

  73. I am sure you have provided us with a list.
  (Sir David Wright) The list is available. We classify Western Europe as one target market, the United States as another and then we have places like Central Europe, Egypt, China, Japan, Mexico and South Africa, to name but a few. Those target markets were announced before the establishment of British Trade International in March 1999. That followed from an early report that preceded the Wilson review, called the Export Forum Report. That found that the previous identification of over 80 target markets was too numerous, so the target markets are now down to 15. In a sense, at this point, perhaps I could answer your difficult question about exit strategy. That is extremely tough as we discovered in 1998/99 when we removed a large number of markets from that category. Indeed, it has created a particular problem in relation to South East Asia. Some of those markets had been identified as particular targets in the previous global economic environment. The removal has caused us a problem in that we are having to consider how, as they are now recovering, we can bring them back into focus. Exiting is difficult and has to be done against a clear assessment of potential. We shall go through that assessment with economists, taking outside advice on that in the next year in relation to the current 15. Our plan is that target markets should receive initial resources for about two to three years. So we are now well into the second year of this particular list. On the allocation of resources, about 65 per cent of our programme budget goes to target markets and of our running costs in the UK, 50 per cent of those goes to that activity. We evaluate them, as I said, on the basis of assessment by experts and also on the basis of take-up of our services and satisfaction on the part of our customers. We shall have to go through this difficult activity over the next year and a half and it will be an issue on which we shall have to go to our board. Again, it comes back to a point I have made several times today: this is where having a board and indeed having business advisory groups is relevant to giving us the view of the experts and the people who are using our services.

  74. Do you want to say anything specifically related to Turkey?
  (Sir David Wright) Turkey was selected as a target market because of its strong economic growth. It has an important geo-political position, sitting as it does between Europe and Russia and the developing republics of the Caucasus. One must not ignore the fact that the United States has made Turkey its second most important market after China. In that respect, we are reflecting a well-expressed view. When we identify a target market we do not just identify the market, but we also identify sectors that we believe are of particular importance to British industry. Perhaps I can list the main ones in respect of Turkey: automotive products, construction industry, food processing and packaging, healthcare, retail and transport. We have a 5.7 per cent market share in Turkey and £300 million worth of investments. We have a range of activities planned in terms of trade missions, seminars and inward missions from Turkey. That looks like a pretty good example of the sort of enhanced activity that we would normally give to a market when we have given it that designation.

  75. On partnerships, such as the Indo-British partnership initiative, the other day I enjoyed a very good party at the Langham Hilton, sponsored by Ashurst Morris Crisp and the Virgin airline, where the ballroom was absolutely full of business people from India and the UK. The purpose of the party was to thank Frank Hunt who was retiring as co-ordinator of the Indo-British partnership initiative. I do not believe that they were just there for the Virgin sponsored champagne. Is the Indo-British partnership initiative unique or do we have that sort of partnership with other countries? It seems to work extremely well. The business community here and the business community in the country concerned work in partnership over a long period of time. In terms of some of the difficulties that you have had with your exit strategies from some of these markets, it may help if you are then able to pass on that responsibility to the private sector, saying, "If you value this market, we have been here for some time so you must be able to set up a partnership of the model we see in relations with India". For example, one could be set up with the Turkish CBI and the CBI here. I believe that the Indian arrangement has worked extremely well.
  (Sir David Wright) It is a unique arrangement. If my memory is correct, it was set up by the then Prime Ministers of the two countries in 1994, I think.[5] It has served the unique purpose of generating interest among British companies in the potential of the India market where we have nearly 6 per cent of the market share. We have also built on it a new trade development scheme, called Enterprise Initiative India, which is designed to introduce more SMEs to the Indian market. I agree with you that it is a formula that one may consider in terms of an exit strategy. On the other hand, we may well conclude, particularly in relation to India, when we assess the situation in due course, that the potential of the market is so great that it should remain an important focus for our activity.

  76. I was not suggesting for one moment that you should exit from India. I wanted to explore whether that is a model on which other markets, such as Saudi Arabia, Turkey and others, can establish just that sort of partnership, where you have the private sector in both countries working together. For example, Saudi Arabia will open up to foreign investment and there will be great potential for UK companies because they are somewhat suspicious of too much United States investment. Is there not an opportunity there to do something in the Gulf and the Middle East as it has worked so well in India?
  (Sir David Wright) There is a great deal that can be done in an area where we want to see more private sector involvement in conjunction with our Government. We do that to some extent already through business councils. One can identify a number of effective business councils which represent partnerships between the two sides. Egypt comes to mind. There is an Israel-Britain council and there is a very effective business council with Singapore. Similarly, last week the representative of the UK-Philippines business council was here. I believe that we also have one with Thailand. There are good examples of where we have partially mirrored the Indian situation, but we do not have one with quite such a high level of focus as the prime ministerial launch given to that council.

Mr Rowlands

  77. On targeting Turkey, how many commercial posts do we have in Turkey at present and how does that compare with our European partners?

  (Sir David Wright) I would need notice of the question in relation to the comparison with our European partners. At the moment we have two in Turkey: the embassy in Ankara and the consulate general in Istanbul.[6]

  78. How many people in post do you have?

  (Sir David Wright) In post we have eight people Ankara and 12 in Istanbul who deal with commercial work.

  79. It would be interesting to compare that with the position of our major rivals in terms of their staffing of such posts.
  (Sir David Wright) I do not have that information available, but I can certainly secure it and send it to the Chairman.



5   Note by Witness: The Indo-British Partnership Initiative was set up in 1993. Back

6   Note by Witness: There are three commercial Posts in Turkey. The British Consulate in Izmir also has one member of staff working on commercial matters. Back


 
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