An international trade body has outlined a six-point plan for an export-led economic recovery for Wales.
The Wales International Business Council (WIBC) said we were still facing significant and worsening economic, environmental and social challenges, and an underperforming economy was holding back progress.
WIBC Chairman, Byron Davies, said we needed to recognise the importance of niche businesses and which areas to support.
“It follows that to encourage growth in the high productive industries, the following six points are critical.
“The first is Research and Development. R&D activities accelerate the introduction of differentiated products and services. We need to improve existing products by adding value. This requires recognising the importance of development and refinement, more so than research.
“Secondly, to increase productivity companies must invest in new technology. This requires the use of working capital and access to loans. A higher depreciation rate preserves working capital. It does not reduce tax revenue, it just delays tax payment. Accelerated depreciation rates on productive equipment will increase the overall tax take in both the long and short run.
“The third area is job opportunities – we need policies which encourage SMEs to invest and provide those challenging career opportunities.
“Fourthly is market development: we are an open economy with a small domestic market. Market development support should be provided to exporters as most other countries do. It is naive to think that an export-led recovery can be realised if we don’t recognise the need to grow and sustain our markets. We have few barriers for imports and competition is tough.
“Next is an affordable loan scheme: Canada, Hong Kong, India, Japan, Korea, Singapore, Thailand, the USA and others have loan schemes to support export businesses. Our principal banks are risk averse and reluctant to lend to Wales-based manufacturers and exporters, preferring to lend on non-productive property. This needs to be recognised and remedial support put in place.
“Finally, for the above critical schemes it is simple to implement a well publicised, easy to access fraud alert scheme. Make the penalties tough,” he said.
The WIBC said that post-global financial crisis in 2008, the world economy had gone through a fragile recovery, but the European debt crisis had continued to introduce uncertainty into future growth.
WIBC Director, Russell Lawson, said: “It is important that we refocus on these six areas with fresh eyes. For example, policy makers don’t seem to recognise the difference between ‘research’ and ‘development’. A manufacturing company which has products with almost 100% Welsh content requiring funding for more ‘development’ will lead to more exports.
“But as an exporter the company also has to fund tool and dies, modern machinery, stock and market development. Government must level the playing field and match the conditions and the reality around the protection, acquisition and exploitation of intellectual property which is available in other countries. Wales has niche products and opportunities able to be further ‘developed’ with the right encouragement.
“And in the area of productivity, being more efficient and internationally competitive with modern machinery will increase company profitability and will lead to greater PAYE with increased employment opportunities. More importantly, more foreign exchange will be earned reducing our external debt.
“It would be so cost effective for Government to provide back-up guarantees to approved manufacturing and exporting SME’s through our own Bank. The cost and risk to the Welsh taxpayer is almost nil, but the potential benefits are great.
“To catch up with the rest of the world we require a change in our attitudes. Changes must be radical not incremental. The Welsh Government must provide this impetus and leadership.
“If the talk is of an export led recovery, let the actions match the rhetoric. Their policies must create an environment that encourages entrepreneurial activity and supports SME’s who are prepared to take risks,” he said.