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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