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An Evaluation of International Market Development Fund for SMEs

Dec 10,2007

Zhang Liping

In order to adapt to the scenario after entry into the WTO, China has launched in 2001 the International Market Development Fund for Small and Medium-sized Enterprises (SMEs) (hereinafter referred to as "IMDF") to support SMEs to get access to international market. According to the related regulation, SMEs with an annual export volume less than USD 15 million can apply for the market development fund when they want to develop overseas.

Up to 2006, IMDF had made remarkable achievements in enabling SMEs to get access to international market through various links such as overseas exhibition, international certification, overseas market publicity, development of newly emerging market, training, seminar and overseas bidding and evaluating. The average annual growth rate of export volume of SMEs that got the fund has reached 53.1%1 in the past five years, more than two times that of the whole SMEs at the same period (22.5%) and much higher than China's average annual export growth rate (30%).

It is necessary to evaluate the effect of the IMDF after 5-year operation to improve the related policy. The project team has made efforts to draw relatively objective and comprehensive judgment on the following important issues: whether IMDF is operated according to designated targets, what are the roles of IMDF, how much it can contribute to export, what are the problems in the operation, and whether current management method is fair and effective.

I. Principles, Methods and Contents of the Evaluation

Objectivity: The project team has analyzed data and materials collected by competent departments, reviewed relevant issues by means of questionnaire survey, discussions and visiting enterprises, and used model to estimate the contribution of IMDF to export growth.

In this survey, questionnaires were sent to enterprises and to competent departments respectively through the website of IMDF, and returned through website or via departments of commerce at various levels, which indicates the feature of random survey. From mid-September 2006 to the end of early October, 541 and 12,132 questionnaires have been reclaimed from competent departments and enterprises respectively. Among the questionnaires from enterprises, 6,656 were from those enterprises that have not received any fund support and 5,476 have received fund support. If calculated according to the number of competent departments (5,000) and of SMEs (46,000) registered online, the reclaiming rates stood at 10.8% and 26.4% respectively. A point for special explanation is that because not all respondents answered or delivered valid answers to each question2, only those valid answers were analyzed in specific questions, so as to make survey results more practical.

Comprehensiveness: The team members have made efforts in making multi-level and multi-angle assessment on IMDF. Apart from collecting and analyzing the opinions of enterprises that got fund, those enterprises that have not yet received any support from IMDF were also collected and analyzed.

Periodicity: This evaluation tries to summarize the achievements and problems in the past, and look forward to the future. The project team has noticed initial periodic characteristics of China's IMDF, i.e. firstly, the fund volume is getting larger though remains small as a whole; secondly, the number of competent departments has been increasing gradually, and related policies and administrations have been improved continuously; thirdly, the recognition of enterprises to IMDF has been enhanced gradually.

The evaluation of IMDF covers three aspects: target fulfillment, management efficiency as well as fund roles and effect. We try to use those materials and data provided by competent departments to evaluate whether the grant of IMDF conforms to the objectives and principles of the Measures for Administration of International Market Development Fund of SME (for trial implementation) (hereinafter referred to as the Administration Measures), and use the data collected through questionnaire surveys to evaluate IMDF policies and their implementation as well as the fund's performance and effects. In the last part, a mathematical model is used to calculate the contribution of IMDF to export growth.

II. Target Fulfillment Evaluation

1. Activities organized by IMDF to support SMEs to get access to international market

In the past five years, the fund has assisted SMEs to get access to international market in respect of six categories and 19 sub-categories (See the Table below for detailed information). These items are the pivotal links for SMEs to carry out international business and are convenient for implementation, which are highly appraised by enterprises. SMEs in Tianjin regard those items as "guides" for them to conduct international business. From the supporting content of IMDF, even those enterprises with no export experience could get to know how to enter the world market. Management departments also agreed that these policies and measures could enhance the awareness of SMEs to explore international market.

Table 1 Main Supporting Content of IMDF

Source: Compiled according to the Measures for Administration of International Market Development Fund of SMEs (for trial implementation) and the Detailed Rules for Implementation.

2. To make more SMEs get benefit

IMDF has defined SMEs as enterprises with an annual export volume less than USD 15 million, which is easier for management departments to determine who should be assisted and with a clear goal, i.e. to help the enterprises with weak competition in gaining access to world market.

To make limited fund available to more enterprises, IMDF renders support not only to SMEs, but also subsidizes those enterprises, social organizations and government institutions providing services to SMEs in their activities to help SMEs enter the international market. Compared with single enterprise, these intermediary agencies have advantages in specialization, information and human resources, which is good to reduce costs and risks for individual enterprises.

3. To implement the strategy of a multi-outlet market and encourage SMEs to develop emerging international market

In the past five years, IMDF has been distributed relatively equal to each target market but emphasized a little more on newly emerging markets. Statistics show that from 2001 to 2005, the average annual growth rate of IMDF projects involved to help SMEs carry out market business in Latin America, Africa and East Europe has been higher than the overall level. Especially in the market of Latin America, the growth rate has surpassed the overall level by 5.4 percentage points. This is consistent with the target of IMDF in implementing the strategy of a multi-outlet market.

4. To support major sectors and take regional industrial characteristics into consideration

To implement the strategies of winning through high quality and invigorating trade through science and technology, IMDF has listed several priority sectors, including electromechanical products, high-tech products, products with 70% parts made by domestic producers or products with proprietary intellectual property rights. Competent departments should give priority to the projects in line with the above mentioned principles in the process of granting funds. Meantime, the application of IMDF should be closely related to regional industrial development level and enterprises' product development strategies.


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1Export volume changes of enterprises involved into group projects are not included.

2There were many kinds of invalid answers. The most common one was in multiple-choice questions. Some enterprises selected more than one answers. Consequently, the answer for this questionnaire was deemed as invalid and would be deleted in the analysis.