# **3.2 Survey of Trading Firms**

# _Design of the Study_

**In order to estimate the potential for trade expansion generally, and across Malebo Pool more specifically, we conducted a series of structured interviews with firms in Kinshasa and Brazzaville** in April-June 2010. The interviewed firms had to respond to a sole criterion: that they are, or were in the past, engaged in cross-border economic activities, be it in the form of trade in goods or in the form of passenger transport. Conditional on this criterion, we sought to cover as representative a sample of firms as possible, covering the full spectrum of relevant economic activities.

**We obtained interview answers from 57 firms** , 17 of which are manufacturers, 19 are based in Brazzaville, and 12 are informal.<sup>21</sup> The average sample firm has 238 workers. However, the size distribution is highly skewed, the median being 14 workers, and 16 sample firms being one-person organizations. Only four of the 57 firms are engaged in the transport of passengers, which means that our statistical analysis of the survey answers will have to be confined to analyzing trade in goods. Sample firms were presented with an identical 72-item questionnaire, containing questions on the existing structure of the business as well as hypothetical assessments of the impact of trade liberalizing measures on their activities. Interviewees were promised strict confidentiality, which is why we present no information in this report that could be traced to individual firms.

# _Results: Quantitative Analysis_

**Firms overwhelmingly expect to increase the volume of international trade in response to a fall in costs of importing and exporting.** We came to this insight by asking firms to estimate the medium-term percentage impact on the volume of their cross-border trade of four hypothetical scenarios:

- a 50-percent fall in transport costs on exports/imports to/from all foreign markets,

- a 50-percent fall in administrative trade costs on exports/imports to/from all foreign markets,

- a 50-percent fall in border delays impeding exports/imports to/from all foreign markets,

- a 50-percent fall in total trade costs on exports/imports to/from Kinshasa/ Brazzaville.

- Table 8 presents mean and median projections in response to our hypothetical questions. Given the small sample sizes and strongly skewed responses in some cases, we consider medians to be more informative than means. Since most firms provided answers only to the questions that touched on their already existing activities, we state the number of respondents in each cell.<sup>22</sup>

**The main constraints on international trade flows appear to be due to the cost of physical transport and to administrative costs, with an elasticity of trade volumes to trade costs of about 0.5.** All but one our sample firms expected to increase the volume of cross-border trade in response to a fall in trade costs.<sup>23</sup> Although many firms complain about delays due to inadequate

> 21 Since the number of formal firms is limited and the distribution of informal firms is unknown, rigorously randomized sampling was not possible. We therefore relied on local consultants to approach a representative selection of organizations, and we are satisfied that the sample thus retained, while inevitably somewhat _ad hoc_ , does not suffer from any systematic selection bias.

> 22 We also asked our sample firms to predict the effect of a fall in the costs of upriver trade with Bangui, but only few firms replied to this and most of them stated that this would make no difference to their activities.

> 23 The sole negative projection was made by one of the private suppliers of rapid passenger crossings across Malebo Pool (“canotier”), who predicted that a 50-percent reduction in general costs of passenger transport would halve his volume of passengers. This points to the existence of potential losses from cross-border liberalization by firms currently benefitting from the existing restrictions.