IMPORTANCE OF EXPORT POTENTIAL ASSESSMENT

Diversifying the economy and broadening the export base towards high-growth sectors is critical for future development and poverty alleviation in many developing countries. Governments often complement general (“horizontal”) policies that improve the overall business environment by more targeted, sector-specific policies. In times of increasing competition for limited public resources, policymakers need to know which sectors are most likely to succeed and where trade advisors can best help to realize export opportunities. ITC has developed a methodology that prioritizes sectors and markets for trade development activities based on detailed trade- and market access-data. Depending on the situation of the country, two different approaches are available to identify products with high potential for exports – the Export Potential Indicator and the Product Diversification Indicator.

ITC’s Export Potential Assessments start with screening the needs of the beneficiary country. While small developing countries have an interest to diversify into new export products, larger countries may want to focus on finding new markets for their existing export products. These issues are taken into consideration when defining the criteria to be used in the identification of priority sectors and markets.

EXPORT POTENTIALS INDICATOR (EPI): GROWING YOUR CURRENT EXPORTS

The EPI serves countries that aim to support established export sectors in increasing their exports to new or existing target markets. It identifies products in which the exporting country has already proven to be internationally competitive and which have good prospects of export success in specific target market(s). Supply conditions are measured through

Revealed comparative advantage: in which products is the country competitive compared with other countries in the world?

Growth of comparative advantage: in which products has the country recently become competitive?

corrected for re-exports and global tariff conditions that could distort a country's ″revealed″ supply capacity.

Demand conditions are measured through

Demand share of a product: which products are highly demanded by the market?

Growth of demand share: which products have recently experienced a relative increase in demand?

corrected for tariff conditions in the target market and demand sensitivity that could affect a market's demand for a product from a given exporter.

Combining the dynamic and corrected supply and demand shares gives the potential share of a product in the exports from a country to a given target market. Total expected bilateral exports (reflecting common language, border, cultural ties, or Diasporas) are used to convert these shares into potential values. The comparison of potential with actual exports reveals room for action for trade advisors.

To gain insights as to whether and how existing potentials can be tapped, further desk research on

Seasonality

Market regulations

Voluntary standards

Consumer preferences, distribution channels, buyer contacts, etc.

using ITC's market analysis tools, company surveys and external databases canbe offered.

IMPACTS OF EXPORT POTENTIAL ASSESSMENTS

Spotting (untapped) export potentials

Spotting opportunities for export diversification

PRODUCT DIVERSIFICATION INDICATOR (PDI): DIVERSIFYING INTO NEW PRODUCTS

The PDI is suitable for smaller countries with a limited range of export products. Since these are often agricultural commodities or natural resources subject to price shocks, the identification of additional export products with good prospects of export success is key to securing sustainable export revenues.

Supply conditions are approximated through

Relatedness of products ″in space″: the so-called “Product Space” concept allows identifying products that are “easy” to reach based on the intuitive idea that products which are often jointly exported by countries require similar capabilities. By using information on export connections from all countries worldwide, an outcome-based measure of the country's proximity to new products can be calculated.

Fiters accounting for certain geographic conditions of the country that may be incompatible with producing the suggested items for diversification.PDI

The proximity scores (the “ease” to reach certain products) are combined with the same size, growth and accessibility indicators that are used in the EPI to create a unique ranking of diversification.

The proximity scores (the “ease” to reach certain products) are combined with the same size, growth and accessibility indicators that are used in the EPI to create a unique ranking of diversification opportunities with good chances of export success.

The suggested products for diversification may not always be in line with the country's policy objectives. In close coordination with relevant stakeholders, filters can be applied to narrow down the diversification options to those that help the country

Move higher up the value chain

Stabilize export prices and thereby revenues

Involve more certain economic actors, like SMEs or women

SPOTTING EXPORT POTENTIALS

AN ITC ASSESSMENT TO FIND NEW TRADE OPPORTUNITIES

TO REQUEST A CUSTOMIZED EXPORT POTENTIAL ASSESSMENT

Export Potential Assessments including a study, a series of skill transfer workshops and a national stakeholder conference can be delivered in 4-8 months.

An indicative budget is available on request. Please contact ITC's Market Analysis team at marketanalysis@intracen.org or call +41 22 730 0468.

„Training programmes of this nature are critical in my everyday work as a Government official involved in Trade and Industrial Policies formulation, implementation, monitoring and evaluation.“

Participant of Workshop on Trade, Market Access and Export Potential Analysis

Zimbabwe, 1-3 June 2015

Study

Results will be transmitted in the form of a comprehensive report, complemented by excel-based tools that contain all the details of the calculations.

Skill transfer

A series of skill-transfer workshops can be organised to convey skills to use and embed Export Potential Assessment results into national trade development agendas. Participants learn about the methodology and data sources, data extraction and processing techniques and the construction of indicators. A minimum of two workshops is required, however three are recommended.

Validation conference

A conference can be organised to communicate and discuss the findings and recommendations of the Export Potential Assessment. The conference involves relevant stakeholder institutions.

FROM DESK RESEARCH TO NATIONAL VALIDATION