2008
PRESS RELEASE
20th Nov 2008
Exporters Survey reveals that Bank facilities not an issue for exporters .High labour costs, high cost of energy and wildly fluctuating currencies have been pinpointed as the major concerns for exporters according to the findings of a major survey conducted by the Irish Exporters Association. The survey also revealed the changing attitudes of Irish exporters on a range of subjects such as export credit insurance, late payments and financing. The full findings of this annual survey were revealed today (20.11.08) in Dublin at the launch of the ‘Export Ireland Survey and International Trade Finance Review 2008’.John Whelan , ceo of the IEA, stated at the launch ;
’’It is essential in this time of economic turmoil not to loose sight of the fundamentals required for a prosperous economy. A major export drive is what we need now .The Export Ireland Survey 2008 gives some good indications from exporters on key areas to focus on to enable us to make our way out of the present reversal of fortune.’’
Mr Whelan concluded by saying;
‘’Bank approval times for credit facilities are lengthening, and there is expected to be a continued premium on the ability to cash flow export growth , hence the IEA today are calling for the introduction of a Government backed export credit guarantee scheme. This will encourage exporters to go more aggressively into the rapidly growing BRIC economies (Brazil, Russia, India and China). And will go a long way to relieving the banking credit and back –up security issues that are now part of the business scene. We sincerely hope that the Minister for Finance will move as swiftly on this issue as he has on the bank guarantee arrangement.”
The main features of the Survey are shown below;
Challenges in the market place
Hence we see in the survey on the topic of “Challenges in the market place” that just under half of the export community believe that they can increase export sales in 2008. Most exporters see their main sales growth coming from the euro zone. However, there are also high expectations for sales growth arising in the UK, particularly for the services exporters. The rest of Europe outside the euro zone is ranked third in importance for sales growth and in particular into Poland.
There are a number of “major concerns” which exporters have in 2008 as reported by the survey findings. The primary concern for the long term growth prospects in Ireland is the loss of competitiveness associated with the cost of labour. The pay pause in the new pay phase negotiated under the Social Partnership Agreement “Towards 2016” will go some way towards alleviating this concern, but many will have to invoke the -inability to pay -clause when the first payment falls due. Adding further to the concern for competitiveness loss, particularly by the manufacturing sector, was the cost of energy.
Finance and Exchange rates
The survey shows that euro exchange rate with our main trading partners’ currencies, the US dollar and the pound sterling, was ranked the third most important concern of exporters. This is not surprising as the euro has gained extensively against the US dollar and sterling over the past year. However, the survey shows that exporters are using a sophisticated range of methods to manage their currency exposure. Currency netting or pooling is most common, with forward contracts the second most popular method of exchange rate management.
There are also an increasing number of exporters (36%) who state they will trade in Euros only. There is also evidence that the euro is becoming more accepted internationally as a reserve currency for trading, with 38% of UK buyers accepting the euro, 18% of US buyers, 67% of Latin American buyers and 83% of the rest of Europe (outside the euro zone) accepting the euro for trading.
Barriers to trade
On the question of barriers to doing business overseas, again respondents stated the strength of the euro as the number one barrier for exporters in the two key markets of the UK and the USA. In Germany the main barrier was cited as marketing and brand development costs. In China, not unexpectedly, language and culture differences were the main barriers. Poland was reported by exporters to be the easiest market to do business with. This is reflected in the very rapid rise in exports to Poland over the past number of years and continuing into 2008 with a 36% increase in exports for the first half of the year.
Outsourcing
Outsourcing of certain elements of the supply chain has decreased for manufacturing companies in the period between the survey in 2003 and 2005 from 48% and 40%, to 38% in the 2008 survey. This is attributed to the rapid decrease in the computer industry export operations in Ireland. This industry sector has the highest propensity to out-source, with worldwide out-sourcing of 45.6% of intermediate goods according to the WTO.
The Euro
The trading currency analysis in the survey shows the continued high exposure of Irish exporters to non-euro currencies, with 50% of export invoicing in either sterling or US dollars. However, there is a growing acceptance of the euro in financial transactions. Exporters to the UK managed to get 38% of their buyers to accept euro invoicing and in North America 18% accepted euro invoicing. Whereas much higher levels of acceptance of the euro was found in Africa 53%, Middle East 48% and Asia 45%.
Payment Methods
The method of payment sought by exporters from their overseas clients continues to be “open- account”, effectively offering the same terms as for clients in Ireland. Exporters to the UK and the euro zone offer open-account to 80% of their clients, whereas in Asia, Middle East and Africa only 40% of clients are given the best terms or open-account trading. Letters of credit and advance payment account for the rest of the trading arrangements, with the latter being utilised much more frequently than the LC’s.
Financing of export activity was stated by 52% of exporters as coming from their own resources with only 17% resorting to overdrafts. Coupling the information with the assertion by 97%9of exporters that they have no difficulty in getting banking finance, points to a very positive scenario for the export industry in the aftermath of the credit crises affecting the banking sector.
The main services exporters seek from their banks are clearly shown as international payments and foreign exchange services. There is an interesting increase in the use of internet banking, reported to be used by 27% of exporters. The AIB website is the one most valued (44%) by respondents.
Bad Debts
The incidence of bad debts has improved by ten percentage points since the 2005 survey, and bad debts in the current survey were reported by 42% of exporters. This is assumed to be as a result of the EC late payments directive which came into force across the time frame. In managing bad debts, exporters use the old traditional solicitor’s letter in 77% of the cases, a debt collection agency in 18% of cases and the small claims courts for the remaining 5% of cases.
Credit Insurance
Credit Insurance is shown as a rising trend with 24% of exporters now saying they use it, up from the 17% reported in the 2005 survey. This is considered a good outcome from the promotional activity of the Irish Exporters Association since the last survey to raise the profile in terms of the benefit of export credit insurance. (Reference IEA publication “Export Credit Insurance: A means to better exporting”).
Export Opportunities and State Support
The survey shows a growing level of maturity and self reliance amongst exporters when it comes to identifying export sales opportunities . Most exporters (55%) state they use their own marketing efforts to identify export sales opportunities. In second place with 24% of respondents was the reliance on overseas agents and distributors for sales opportunity identification. This is followed by 20% who state the extensively use the internet for this function. A further 15% stated they use trade shows, with an equal number or 15% relying on customer referrals. Less than 10% stated they use Enterprise Ireland and the Irish embassies in their search for export sales opportunities. This would point to a lack of knowledge of the range of excellent services available from this source and points to the need for more promotion of these state services. The lack of promotion of the available state services is also reflected in the responses of exporters where 80% of them stated the support to exporters from Government was average or poor.
ENDS
For further info on the Survey, contact John Whelan, at;
E-mail: ---jfwhelan@irishexporters.ie
Phone----01 6612182
Mobile--- 087 9271243
 |
 |
