Page 31 - Countertrade

Using the experiences of these enterprises the fundamentals of the
continuum of countertrade are used to juxtapose domestic Russian
response with that of multinational enterprise to the dynamics of a
complex, unstructured, volatile environment.

During the period 1991 to 1996 over 80 percent of the VOS enterprises
were insolvent.

Russia and ex-Soviet Satellite Countries along with emerging Asian
markets, like Indonesia and Thailand, developed official countertrade
policies as a means by which to overcome their lack of foreign exchange
to pay for imports from the west.

“Some 30% to 35% of world trade is countertrade. The annual global
market size for countertrade is estimated to be between US$200 to
US$500 billion. No one really knows what the correct percentages are
and how large the true market size is. The potential for its growth is so
large that efforts were made by some countries to curb the growth of
certain forms of countertrade at the World Trade Organisation (WTO).
Yet the majority of these very countries are the biggest perpetrators of
its practices, restricting their practices within the exceptions contained in
the agreement promulgated at the WTO.” (6)

Countertrade is a generic, or umbrella term, representing various types
of reciprocal arrangements and linked transactions. At one time one can
be contented with just “reciprocal arrangements”, but it will not be
complete today, without adding “linked transactions” to this definition.

The cheapest price competition model of most Asian countries is under
severe threat today. China produces far cheaper than many Asian
countries. With price advantages reduced the only avenue left for Asian

industries is to differentiate their offerings from those of their competitors
and compete beyond price, quality and service.

Differentiation means either the seller proactively adds value in order to
beat the competition or wait for the buyer to determine and compel the
value added it wants. The Seller who fails to meet the requisite value
added loses the sale. What seemed to be still overlooked by some Asian
countries is the power of a Public-Private-Partnership, (PPP) which in
the spectrum of countertrade may be seen as offset whereby a seller
(MNE) agrees as a condition of the sale to undertake activities, which
will benefit the buyer (Government), giving the buyer more value for his
money such as advance a country’ PPP initiatives.