From local to global ambitions: the benefits of standards compliance

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Standards are a critical element of the trade landscape. Standards are regulations set by either public or private bodies (including firms) to ensure that products are fit for consumption, that they meet specific technical standards, or that they can be used as inputs for specific commercial processes such as manufacturing. Developing countries are often hampered by a lack of access to independent and credible inspection, testing, certification and accreditation services – what can be termed the “standards infrastructure." 
 
A quality controller inspects products on a conveyor belt before they are packaged.
A quality controller in a soft-drinks factory in Muntinlupa City, Philippines inspects products on a conveyor belt before they are packaged. © ILO/Bobot Go, via Flickr


Without a strong national standards infrastructure, many firms struggle to compete in regional and international markets. The positive side is that when the standards infrastructure improves, firms are more likely to be able to upgrade quality and demonstrate this by meeting standards, facilitating their participation in higher value-added trade.

Brazil’s footwear industry, for example, was hit hard by a surge in Chinese exports in the late 1990s and its global market share fell by more than 50%. To survive, the industry had to produce higher quality shoes, and open up new markets. The use of standards was important in this effort to upgrade quality and access new markets: Several firms increased the quality of their products by drawing on the services of local testing institutions and by investing in vocational training to upgrade skills.

Kenya’s horticulture industry provides another positive example. The export-focused industry has been an important driver of employment and poverty reduction, but changing regulations and tighter sanitary and phyto-sanitary standards in its export markets, and the need for price differentiation against competitors, have underlined the importance of standards in the industry’s evolution. A strong standards infrastructure has been a key factor supporting Kenya’s growth into the world’s fourth-largest exporter of cut flowers.

Improving the national quality infrastructure to support firms’ abilities to better conform to international standards is therefore an important and growing area of the World Bank Group’s engagement in the area of trade and competitiveness. In recent years, the Bank Group has been working with clients in Bangladesh, Tunisia, Indonesia, Kyrgyz Republic, Georgia, Philippines, Lao PDR, Cambodia and Honduras to: streamline national technical regulations and standards frameworks; develop systems that enhance the quality and safety of products; improve the flow of information for all stakeholders; and prepare countries to take advantage of trade opportunities under existing and new trade agreements. We are increasingly focused on the importance for firms in developing countries of demonstrating adherence to labor, environmental and other social standards. This has become a core requirement for participation in many global value chains. Because many standards are defined by businesses, rather than governments, engagement with the private sector is also a strong feature of this work.

A new partnership between the World Bank Group and the International Standards Organization (ISO) is an important development in this effort to improve on standards. The aim of this partnership is to help increase countries’ awareness and involvement in the development, adoption and use of international standards that promote open, fair and transparent trade. The Memorandum of Understanding signed recently serves as the foundation for future cooperation in a number of areas. These include knowledge generation and dissemination; encouraging research and promoting awareness; improving monitoring and evaluation; and enhancing developing country capacity on international standards to help them participate in global trade, in ways that support economic development, new and better paid jobs, social progress and protection of the environment.

The Trade and Competitiveness Hub in Singapore is also strengthening our engagement with SPRING Singapore, the country’s national standards body, to identify and address standards-related challenges in Asia’s developing countries. SPRING not only has a rich experience in using standards as part of economic development – it is also closely engaged with developing countries in the region. For example, SPRING is working with counterparts in Myanmar to facilitate the development of testing facilities and other elements of the standards infrastructure. Developing this standards infrastructure will be essential for Myanmar as it increasingly participates in regional and global trade. SPRING is also actively involved in regional standards-setting bodies like the ASEAN Consultative Committee on Standards and Quality, which are important in fostering regional harmonization and cooperation on standards.

Through our operational work with countries around the world, and new partnerships with bodies like ISO and SPRING, we are helping upgrade the standards infrastructure that is essential for local firms to connect to global value chains. We believe that this is a highly relevant agenda for developing countries and one that will only grow in importance in the future.
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Authors

Karuna Ramakrishnan

Finance and Private Sector Development Analyst

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