International tendering is an enormous business opportunity for Irish SMEs. What is Ireland doing and can we do more to help Irish firms win international tenders?
Seamus McCann (pictured right), chairman of ConsultingIreland, wants to encourage more Irish SMEs to tender for global projects.
The projects are paid for by international bodies such as the European Commission, the UN and the World Bank and, in many cases, 60% of the project value is paid upfront to the business that wins the tender.
Below, McCann outlines the reasons why Ireland needs to allocate additional resources to compete and win in an area with such massive potential.
Did you know?
• On a daily basis, there are 200,000 projects put out to tender by International Financial Institutions (IFIs) such as the EU and World Bank. Two hundred thousand.
• IFI global tenders have an eye-watering market value of €1 trillion-plus per annum.
• Irish organisations and SMEs have excellent international reputations, built up over many years.
• EU and World Bank (and other ‘service and supply’) tenders are available across sectors such as transport, water, energy, ICT, agriculture, health, and education.
• Many of our more established European partners (e.g. France and Germany) are already engaging, highly trained Irish experts, for International (IFI) assignments – in part, because of their English language skills.
• Significantly, English is also the language of choice for most global (IFI) tenders.
• In many cases, company cash flows can benefit from advances of up to 60% and payments are generally prompt.
• In emerging markets, public sector activity is also a prelude to private sector involvement.
• UK political uncertainty, fanned by Brexit, may present significant opportunities for Ireland.
So, there you have it. Tendering for international projects can be very lucrative.
“Denmark, a country very similar to Ireland, is winning ten times our IFI business.”
What role do the IFIs perform?
The International Financial Institutions help reduce global poverty and improve people’s living conditions through sustainable development. They have a more commercial focus than the direct aid (e.g. IrishAid) provided by the likes of the Department of Foreign Affairs and Trade, via the various NGOs.
“According to recent estimates, the current world population stands at 7.3 billion and is expected to reach 9.7 billion by 2050.”
What has been Ireland’s history within the IFI global market?
Back 25 or 30 years ago, Irish companies had an excellent reputation with the likes of the World Bank and the other major IFIs, when national organisations such as the ESB, Bank of Ireland, Eircom, Irish Rail, along with our many specialist SMEs were very active in this area.
How do we compare with some of our competitors?
Ireland’s position continues to decline. We are now the lowest-ranked member among the initial EC12 and currently in 24th place in the EC28 activity table. Denmark, a country very similar to Ireland, with a strong agriculture sector and one that is keenly focussed on other areas such as energy and education, is winning ten times our IFI business.
“IFIs are now increasingly focused on emerging markets, such as South America, Asia and particularly on the continent of Africa.”
Where are the emerging markets?
According to recent estimates, the current world population stands at 7.3 billion and is expected to reach 9.7 billion by 2050.
Africa is expected to account for more than half of this projected growth, on current demographic trends. India and China will account for 35% of global GDP as early as 2030. IFIs are now increasingly focused on emerging markets, such as South America, Asia and particularly on the continent of Africa.
“By not addressing this market, it has the potential to become an enormous own goal for Ireland’s economic future.”
This is how the government can help
As populations increase, key sectors such as transport, water, and energy experience a massive surge in demand; along with the other key areas of agriculture, health, and education. At the moment, in Africa, there are still only a small number of Irish companies operating in the water sector. Unfortunately, no one seems to understand or appreciate the size – or market intelligence – that the major IFIs provide. By not addressing this market, it has the potential to become an enormous own goal for Ireland’s economic future.
The Irish government and its agencies have the ability to help SMEs to realise their full potential and make significant gains in these new markets.
Ireland has ten embassies in the African continent and Enterprise Ireland has plans to have three fully serviced offices to cover this vast continent of 54 independent countries.
However, we have failed to realise that potential for some reasons, including the lack of knowledge and engagement by our public sector in this ‘more commercial’ IFI activity.
“The Irish government needs to offer direct trade-related support, as other countries do, to help indigenous Irish SMEs.”
Can Irish SMEs win business in these emerging markets?
The answer is a resounding yes. My own company has now worked for over 100 of these international governments and close to 30 of those in Africa alone, and we always got paid for our services. The need to diversify into new markets is aptly highlighted by recent events such as Brexit.
What more can be done?
The Irish government needs to offer direct trade-related support, as other countries do, to help indigenous Irish SMEs engage and win substantially more of this business.
How big is the potential prize?
Enterprise Ireland is already engaged with the European Commission. It has a significant number of staff working on Horizon 2020. This is the EU’s R&D programme, and Ireland is targeting to win €1.2 billion over the 2013-2020 period.
However, Horizon 2020 accounts for less than 8% of EC funds and is primarily the goal of selected universities, multinationals and specialist research bodies.
Much of the commercial IFI opportunities that can be identified are financed by the same entity – the European Commission – so one can assume that a similar effort by our state agency, along with our government departments, would yield [at least] similar results for Irish SMEs.
“This has the potential to create significantly more jobs and money than either the NGO or R&D activity in Ireland but unfortunately remains off-radar for most SMEs.”
Why don’t we hear more about international tenders?
I think that emerging markets, allied with potential disruption from Brexit is a massive opportunity and a huge positive for Ireland.
Our state bodies have already dedicated significant resources to the R&D and the NGO sector. It is high time to provide a similar effort for the business community. This has the potential to create significantly more jobs and money than either the NGO or R&D activity in Ireland but unfortunately remains off-radar for most SMEs.
Seamus McCann is CEO of Astec and a veteran international procurement and business specialist.