Recommendation to establish a Wales International Business Chamber
Wales has the lowest proportion of exporting companies across all regions in the UK, with a mere 1.6% of VAT registered companies in Wales engaged in the exporting of goods and services. This is one of the findings of a new report prepared for the Independent Review Team assessing the work and role of Wales North American Business Chamber (WNABC).
The report by Professor Robert Huggins and Daniel Prokop of the Centre for International Competitiveness at the Cardiff School of Management, University of Wales Institute, Cardiff (UWIC), claims that Wales suffers from a significant lack of engagement by Wales in the global economy. They consider this to be a key factor hindering its overall economic competitiveness, with much of Wales’ international trade being largely connected with the larger foreign-owned firms located in Wales, rather than the indigenous business community.
Whilst foreign-owned business play a vital role in internationalising the economy of Wales, the report argues that more needs to be done to increase the connection of the wider SME base in Wales with the global economy, particularly as these firms are more likely to retain a greater percentage of the wealth they create within Wales.
The European Union (51% of total trade) is the key trading zone for Wales, followed by North America (21% of total trade). Also, Asia and Oceania (16% of total trade) is a significant trading bloc for Wales. According to the report, this indicates that international trade in Wales is relatively diverse in terms of both source and destination. Within the European Union, Germany represents the most important trade partner for Wales, followed by France and Belgium.
Machinery and transport equipment represent the most important source of both exports (36%) and imports (40%) for the Welsh economy, accounting for 38% of total international trade. Exports related to other manufactured goods (24%) are the second largest export market for Wales, followed by the extraction industries (18%) – minerals, fuels, and lubricants – and chemicals (13%). With the exception of minerals and other crude materials, exports out of and into Wales tend to relate to similar broad sectors. According to the report, this suggests a possible lack of specialisation or comparative advantage in any particular area of economic activity.
The biggest growth in Welsh international trade in recent years has concerned Eastern European nations outside of the EU. These are largely the ex-Soviet states and satellites, in particular Russia and Romania. There has also been significant growth in trade, particularly in exports, in the Middle East and North African trading bloc. This has been led by Dubai, Qatar, Jordan, and Iran. The biggest growth in trade during this period has largely concerned the increased importing and exporting of commodities.
Professor Huggins stated: “Business leaders in Wales cannot ignore the impact of globalisation on their activities and on economic development, and the main driver of globalisation is trade. The growing importance and power of emerging economies such as Brazil, Russia, India, and China - the BRIC nations - will clearly have a substantial bearing on levels of trade. This will bring both threats and opportunities to Wales, by increasing competition in the way of import penetration and providing a range of new export opportunities. Although this gives rise to enormous potential market opportunities for businesses in Wales, taking advantage will be far from easy – mainly due to the scale of competition from other developed nations and regions.”
Byron Davies, having been appointed to chair an Independent Review Team into the work of the Wales North American Business Chamber (WNABC) stated: “The time was right to review the arrangements and to look at the positioning of business in Wales on international matters. After establishing the background and context of the WNABC a consultation process commenced which included business organisations in Wales to understand the international needs of business. Positive discussions were held with CBI Wales, the Federation of Small Business, the Institute of Directors, the South Wales Chamber, International Business Wales, Welsh Local government Association and many other public and private organisations with an international interest.”
Byron added “During this consultative part of the Review, it became evident that the landscape had changed since the inception of the WNABC, there had been devolution in Wales and there had been a recent global downturn. The Review Team considered that an objective and independent piece of work was needed to identify the changing picture in Wales and Robert Huggins was commissioned to undertake some groundwork. The work of Robert Huggins and Daniel Prokop was an important contribution to the thinking of the Review Team and was an important factor in convincing us of the need for the WNABC to become more internationally focused to serve the best interest of business in Wales. The Review Team report that will be submitted to the WNABC Executive Board on 18 May 2010 will therefore make a recommendation to establish a Wales International Business Chamber that will work collaboratively with other business bodies, public and private sector organisations and sit alongside and work with International Business Wales in creating an international outlook to business in Wales.”
Professor Huggins stated: “International business groups such as the proposed Wales International Business Chamber have a potentially important role to play in the internationalisation of the Welsh economy through the global-widening of markets and networks, and supporting engagement with global communities of practice. They can help to alleviate cultural barriers, empower SMEs to engage with larger firms, particularly multinationals, and provide better access to knowledge in developed and developing nations, such as the BRIC economies.”
17/05/10
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