New Avenues for Export Diversification: A Product Level ... 6... · 2004 to 2015) Only product...

New Avenues for Export Diversification: A Product Level

Analysis of Some Selected Exporting Industries

Rizwana Islam

Tahreen Tahrima Chowdhury

Introduction• Bangladesh is the 2nd fastest growing major economy of 2016.

• Adopted export oriented industrialization policy in the 1980s.

• Average GDP growth rate of Bangladesh: 6.5% (2004-2016)

• GDP growth rate: 7.1% (2016)

• GDP is largely driven by the country’s export.

• The Major Export Sectors: Textile, Shipbuilding, Fish and Seafood, Jute and jute products, Leather and leather goods, Pharmaceutical, Steel and Food processing.

• The Major Export Destinations: USA, Germany, UK, France, Spain, Canada and Italy.

• Major Sectors Contributing to Export Earnings: More than 90% earnings come from four major sectors-

RMG & Textile (84%)

Leather and Leather Goods (4.2%)

Frozen Food (1.8%)

Raw Jute and jute products (2.8%)

Export Of RMG and Total Export of Bangladesh

0

5000

10000

15000

20000

25000

30000

35000

40000

198

3-8

4

198

5-8

6

198

7-8

8

198

9-9

0

199

1-9

2

199

3-9

4

199

5-9

6

199

7-9

8

199

9-0

0

200

1-0

2

200

3-0

4

200

5-0

6

200

7-0

8

200

9-1

0

201

1-1

2

201

3-1

4

201

5-1

6

EXPORT OF RMG (IN MILLION US$) TOTAL EXPORT OF BANGLADESH (IN MILLION US$)

Why Export Diversification?• Need for Export Diversification is acute.

• Export Diversification: Change of the export structure of a country.

• Historical Evidence: Though Diversification is a risky strategy as it requires new skills, new technologies and new facilities, it is a very useful tool.

Era Country(s)

1960s and 1970s Taiwan and South Korea

1970s Malaysia, Thailand and Singapore

1980s China

1990s India

• The Case of Portfolio Effect: Diversification buffers a sectorfrom dramatic fluctuations in any other sector.

Why Export Diversification? (Continued)

The Case of Dynamic Effect: Long run growth is associated with learning to produce expanding range of products. Countries that broaden their exporting ability can ensure greater scale of growth and so analyzing comparative advantage of the exporting sectors to explore the possibilities of further growth can come in handy.

Diversification and Bangladesh: Not an unchartered territory for Bangladesh:

Jute and Jute Products

RMGWhat next?

Objectives

• Main objective: Analyzing some of the exportoriented industries of Bangladesh with a viewto exploring the scope of facilitating exportdiversification and recommendation of someplausible policy implications.

The major objective of this study includes:• Estimating comparative advantages of the products (at

four digit level) of some selected exporting industries.

• Looking for any pattern in the export of these products according to the top priority importing countries.

Which industries have comparative advantage over others in the export sector?

Selected Industry List

Leather and Leather Goods

Pharmaceuticals

Plastic Goods

Ship Building Industry

Agro Processed: Processed & Dry Products

Light Engineering: Bi-cycle

Data Source: ITC Calculations Based on UN COMTRADE Data

Value of RCA Comparative Advantage

RCA=0 Neutral

RCA>1 CA is “Revealed”

RCA<1 ComparativeDisadvantage

Revealed Comparative Advantage of the different products from the period 2001 to 2015 will be calculated using the following formula developed by Bela Balassa (1965);

Where,

• E=Export of all commodities by all the countries

• Ej =Total export of commodity j by all countries

• Eji =Country i’s export of commodity j

• Ei = Country i’s export of all commodities

Methodology

Findings: Export Share and Estimation of RCA (at Industry Level)

• Industries with ‘Revealed’ Comparative Advantage:

Leather and Leather Goods

Light Engineering Product: Bi-cycle

0.00

1.00

2.00

3.00

4.00

5.00

6.00 5.20

1.96

3.473.873.88

3.493.84

3.00

2.202.632.67

2.222.382.501.99

BRCA of Leather & Leather Industry

BRCA

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2.031.713.39

11.3011.0612.06

9.0810.51

11.5310.79

8.55

4.575.085.414.51

BRCA of Bi-Cycle Industry

BRCA

Findings: Export Share and Estimation of RCA (at Product Level)

• Analysis of Revealed Comparative Advantage for each of the six industries was extended into two dimensions:

Estimation of the export shares of these four-digit level products to total exports of the industry

Computation of RCA of the products at HS Code four-digit level


Industry

Product Code

(at HS Code 4-Digit

Level)

Product NameComparative

Advantage

Leather & Leather Goods

4104

Tanned or crust

hides and skins of

bovine "incl.

buffalo" or equine

animals, without

hair on, whether or

not split (excluding

further prepared)

‘Revealed’ (Very

high i.e. more than

10 from 2001 to

2015)

4105

Tanned or crust skins

of sheep or lambs,

without wool on,

whether or not split…

‘Revealed’ (From

2003 to 2015)


Industry

Product Code

(at HS Code 4-Digit

Level)


Advantage


4106

Tanned or crust hides and skins of goats or

kids, pigs, reptiles and other animals, without wool on, and leather of

hairless animals, whether or not split (excluding further

prepared and leather of bovine and equine animals, sheep and

lambs)

‘Revealed’ (Very

high i.e. more than

13 from 2001 to

2015)

4107

Leather further prepared after

tanning or crusting "incl. parchment-

dressed leather", of bovine..


2001 to 2015

except the year

2002)


Industry

Product Code

(at HS Code 4-Digit

Level)


Advantage


4113Leather further prepared

after tanning or crusting

"incl. parchment-dressed

leather", of goats…


2003 to 2015)

4202

Trunks, suitcases, vanity

cases, executive-cases,

briefcases, school

satchels, spectacle

cases…

‘Revealed’ (In 2014

& 2015)

4203

Articles of apparel and clothing accessories, of leather or composition

leather..


2009 to 2011 &

2015)

4205

Articles of leather or composition leather

(excluding saddlery and harness bags)


2010 to 2012)

Comment: Leather & Leather GoodsIndustry

• Prominent Products:

• Tanned or crust hides and skins of bovine "incl. buffalo" or equine animals, without hair on, whether or not split (excluding further prepared)

HS Product Code: 4104

• Tanned or crust hides and skins of goats or kids, pigs, reptiles and other animals, without wool on, and leather of hairless animals, whether or not split (excluding further prepared and leather of bovine and equine animals, sheep and lambs)


Products with Comparative Advantage: Tanned or crust hides & skins Articles of apparel and clothing accessoriesArticles of leather or composition leather Trunks, suitcases, vanity cases, executive-cases, briefcases, school satchels, spectacle cases, binocular cases, camera cases, musical instrument cases, gun cases, travelling-bags, toilet bags, rucksacks, handbags, shopping-bags, wallets, purses, map-cases, cigarette-cases, tobacco-pouches, tool bags, sports bags, bottle-cases, jewellery boxes, cutlery cases and similar containers etc.


Industry

Product Code

(at HS Code 4-

Digit Level)


Advantage

Pharmaceuticals

3003

Medicaments consisting of two or more

constituents mixed together for therapeutic or prophylactic uses, not in measured doses or put

up for retail sale (excluding goods of

heading 3002, 3005 or 3006)

Comparative Disadvantage

3004

Medicaments consisting of mixed or unmixed

products for therapeutic or prophylactic uses, put

up in measured doses "incl. those in the form

of transdermaladministration"

Comment: Pharmaceuticals Industry

• Top two products with higher export share:

• Medicaments consisting of two or more constituents mixed together for therapeutic or prophylactic uses, not in measured doses or put up for retail sale (excluding goods of heading 3002, 3005 or 3006)


• Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses "incl. those in the form of transdermal administration"



Industry

Product Code

(at HS Code 4-

Digit Level)


AdvantageComment

Plastic 3915

Waste, parings

and scrap, of

plastics


2004 to 2015)

Only product

among the 26

products that has

CA from 2004 till

2015

Shipbuilding 8908

Vessels and

other floating

structures for

breaking up


2001 to 2010 and

2014 and 2015)

Only product

among the eight

products that has

got greater CA

from 2001 to

2015, except the

years 2011, 2012

and 2013


Industry

Product Code

(at HS Code

4-Digit Level)


AdvantageComment

Agro:

Processed &

Dry Products

1904

Prepared foods obtained

by the swelling or

roasting of cereals or

cereal products, e.g. corn

flakes; cereals (other than

maize "corn") in grain

form or in the form of

flakes or other worked

grains (except flour,

groats and meal), pre-

cooked or otherwise

prepared, n.e.s.

‘Revealed’

(From 2009 to

2015)

Only product

among the five

products that has

got CA in the

recent years

Light

Engineering:

Bi-cycle

8712Bicycles and other

cycles, incl. delivery

tricycles, not motorised‘Revealed’

Higher Share &

Higher CA

(Exceptionally

High i.e. more

than 10 from

2004 to 2010)

Findings: Country wise Export & Patterns Seen over the Years

• ‘Important Importing Markets’ are the ones that play a substantial and important role (in terms of higher export percentage & being in the list of top importers for the products over the years)

• ‘Inconsistent or Lost Markets’ are the countries that showed prospective of higher export in some years (consecutive or random) but didn’t carry on doing so for long.

• ‘Emerging Markets’ are the ones that are showing signs of prospective import scenario.


Industry Important MarketsInconsistent/Lost

MarketsEmerging Markets Comment

Leather & Leather

Goods

Hong Kong, China,

Italy, Spain, Japan,

Korea, Taipei,

Chinese, Viet Nam,

Brazil, China and

India

USA, Mexico, Poland

and Area Nes-

There is not much

change in the top

importing countries

for BD in case of

leather industry.

Pharmaceuticals

Myanmar, Sri Lanka,

Viet Nam,

Afghanistan,

Philippines, Kenya,

Slovenia.

Brazil, India, Austria,

Germany, and

Panama

South Africa,

Venezuela, Bulgaria,

Cambodia and

Ecuador

Somewhat unstable

in recent years with

the entry of newer

countries in this

scenario




Plastic

China, Area Nes,

Poland, France,

Germany, Belgium,

France, India, UK,

USA.

Australia, Hong Kong

and Ukraine-

Stable in recent

years which is

helping the

expansion of export

earnings from this

sector

Shipbuilding

Netherlands,

Poland, Japan

(random), China

(random)

UAE, India, Sri

Lanka, Singapore,

USA, Greece,

Denmark, Qatar,

China, Pakistan,

Germany, New

Zealand, Ecuador

and Saudi Arabia.

New Zealand, Saudi

Arabia, Ecuador,

Uganda, Sudan

(after 2007 & 2008),

Sweden (after

2008), and Thailand

(after 2005 & 2012)

Increasing exports

to newer countries

entering in this

scenario is helping

the restoration of

higher export

earnings.




Agro: Processed &

Dry Products

USA, UAE, Oman,

Singapore, Malaysia,

Kuwait, UK

Saudi Arabia,

Bhutan, Japan,

Canada, Italy, India,

Qatar, and Australia

-

Stable export to

some identified

countries is helping

the betterment of

export scenario in

recent years for

these products

Light Engineering:

Bi-cycle

UK, Belgium,

Ireland, Denmark,

Netherlands,

Germany, Spain,

Austria

USA, India, Portugal,

Canada, Iran, and

Greece

-

Long term import-

export partnership

with some countries

is helping the

increase of export

share of bi-cycles in

BD

Policy Implications

• Heterogeneity within the sectors.

• Evaluation based on product wise performance over time.

• Government intervention at product level.

• Products including bi-cycle, cereals, corn flakes, waste, parings and scrap of plastic, vessels and other floating structures for breaking up, trunks, hand bags, brief cases, suit cases, wallets, cigarette cases and other leather products should be prioritized within the specific sectors.

• Identification of markets that are more stable and have higher potential.

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