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ARTNeT CONFERENCE ASIA-PACIFIC RESEARCH AND TRAINING NETWORK ON TRADE
ARTNeT Trade Economists’ Conference Trade in the Asian century - delivering on the promise of economic prosperity
22-23rd September 2014
Parallel Session 2: Food security and trade
www.artnetontrade.org 9/22/2014 1
H O U C I N E B O U G H A N M I
S A R A T H K O D I T H U W A K K U
J E E V I K A W E E R A H E W A
S U L T A N Q A B O O S U N I V E R S I T Y , O M A N U N I V E R S I T Y O F P E R A D E N I Y A , S R I L A N K A
Food and Agricultural Trade in the GCC:
An Opportunity for South Asia?
9/22/2014
2
Contents
Research Issue
Objectives
Methods of analysis
Trade between GCC and SAARC
Results of the gravity model
Trade potential
Conclusions
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3
Interregional Trade between GCC and SAARC
Bilateral trade between GCC and SAARC has a long history yet remains brisk.
Current situation: GCC as the leading oil-based energy exporter and SAARC (particularly India) as a large importer.
GCC: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the Unites
Arab Emirates
SAARC: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka
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Trade in Food and Agriculture
The inherent climatic conditions of the GCC countries restrain the agricultural production in the region leading to the reliance on food and agricultural imports.
In contrast most South Asian countries have large agricultural sectors.
70% of the population live in rural areas
Employs about 60% of the labor force
Contributes about 22% of the regional GDP
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5
Food Security Concerns
SAARC: Substantial importance for the domestic agriculture/ Poverty alleviation strategy
GCC: Stabilized food supply.
The gap between the agricultural production of GCC countries and the consumption has gone up substantially in recent years.
The GCC nations are shifting their agricultural policies away from the nationalistic goal of food self-sufficiency towards more flexible and broad based efforts including the reliance on imports to ensure food security
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6
Purpose
To assess the export potential of food and agricultural items from South Asian Association for Regional Cooperation (SAARC) countries to the Gulf Cooperation Council (GCC) countries.
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Specific Objectives
The changing pattern of import sources of food and agricultural items of the GCC countries
The changing pattern of export destinations of food and agricultural items of the SAARC countries
The determinants of food and agricultural trade between the two regions
The existing trade potential across various country pairs in the two regions
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8
Methods of Analysis
Patterns of trade: Market share and concentration ratios
Determinants of food and agricultural trade: Gravity model
Trade potential: Indicative Trade Potential (ITP)
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10
Market share: Exports or imports as a percentage of total exports or total imports
Concentration ratio: Share of the top 3 trade partners
Gravity model
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Dependent variable: exportsjt (the value of exports from South Asian country i to its
trading partner j). model 1: value of total exports and in model 2: value of food and agricultural exports Independent variables DISTij, comlang_officialij a colonylinkij exporter and importer fixed effects intra regional dummies
Trade potential: Trade predicted by the model as a ratio of actual
trade
Key Results
GCC countries depend on few suppliers for their major food and agricultural imports
SAARC countries have a substantial concentration over top three product groups exported to GCC.
India and Pakistan are the first and second top exporters of rice to GCC
India is among the top three exporters of meat of bovine animals and sugar products to GCC.
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12
CR3 of top 10 food and agricultural imports of GCC (HS 4 level)
0
10
20
30
40
50
60
70
80
90
100
HS 1511 HS 1006 HS 2070 HS 1701 HS 2020 HS 2402 HS 1003 HS 2106 HS 4020 HS 1001
C R
3 o
f G
CC
ov
er
im
po
rt
ma
rk
ets
Products HS code Commodity Top 3 Exporters to GCC HS 1511 Palm oil & its fraction Malaysia, U.A.E and Indonesia
HS 1006 Rice India, Pakistan and Thailand HS 2070 Meat & edible offal of poultry meat Brazil, France and United States of America
HS 1701 Cane or beet sugar and chemically pure sucrose, in solid form
Brazil, India and U.A.E
HS 2020 Meat of bovine animals, frozen India, Brazil and Australia
HS 2402 Cigars, cheroots, cigarillos & cigarettes Germany, Switzerland and Turkey
HS 1003 Barley Ukraine, Australia and Canada
HS 2106 Food preparations Ireland, United States of America and Bahrain
HS 4020 Milk and cream, concentrated or sweetened Netherlands, New Zealand and Saudi Arabia
HS 1001 Wheat and meslin Australia, Germany and Canada
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GCC share total agricultural exports of SAARC’s top ten food and agricultural product groups
0
5
10
15
20
25
30
35
40
45
50
HS 10 HS 2 HS 9 HS 8 HS 17 HS 3 HS 7 HS 23 HS 24 HS 22
% o
f to
tal
ag
ric
ult
ur
al
ex
po
rts
Products
2009
2012
HS code Product label HS 10 Cereals
HS 02 Meat and edible meat offal
HS 09 Coffee, tea, mate and spices
HS 08 Edible fruit, nuts, peel of citrus fruit, melons
HS 17 Sugars and sugar confectionery
HS 03 Fish, crustaceans, molluscs, aquatic invertebrates nes
HS 07 Edible vegetables and certain roots and tubers
HS 23 Residues, wastes of food industry, animal fodder
HS 24 Tobacco and manufactured tobacco substitutes
HS 22 Beverages, spirits and vinegar
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Share of imports from SAARC countries of the top
ten food and agricultural imports of GCC
0
5
10
15
20
25
30
35
40
45
HS 9 HS 3 HS 14 HS 10 HS 11 HS 23 HS 8 HS 7 HS 17 HS 13 HS 2
Sh
ar
e o
f im
po
rts
%
Products
2007
2012
Product code Product label
HS 09 Coffee, tea, mate and spices HS 03 Fish, crustaceans, mollusks, aquatic invertebrates nes
HS 14 Vegetable plaiting materials, vegetable products nes
HS 10 Cereals HS 11 Milling products, malt, starches, inulin, wheat gluten
HS 23 Residues, wastes of food industry, animal fodder HS 08 Edible fruit, nuts, peel of citrus fruit, melons HS 07 Edible vegetables and certain roots and tubers HS 17 Sugars and sugar confectionery HS 13 Lac, gums, resins, vegetable saps and extracts nes HS 02 Meat and edible meat offal
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Top 5 food and agricultural product groups exported by India to GCC
0
10
20
30
40
50
60
70
80
90
100
HS 0801 HS 1006 HS 0202 HS 1701 HS 1001
Ma
rk
et
sh
ar
e
Products
2010
2011
2012
HS code Top 5 product groups exported by India HS 0801 Brazil nuts, cashew nuts & coconuts HS 1006 Rice
HS 0202 Meat of bovine animals, frozen
HS 1701 Cane or beet sugar and chemically pure sucrose, in solid form
HS 1001 Wheat and meslin 9/22/2014
16
Top 5 food and agricultural product groups exported by Pakistan to GCC
0
5
10
15
20
25
30
202 1006 804 204 1701
Ma
rk
et
sh
ar
e
Products
2010
2011
2012
HS code Top 5 product groups exported by Pakistan HS 0202 Meat of bovine animals, fresh or chilled
HS 1006 Rice
HS 0804 Dates, figs, pineapples, mangoes, avocadoes, guavas
HS 0204 Meat of sheep or goats - fresh, chilled or frozen
HS 1701 Cane or beet sugar and chemically pure sucrose, in solid form
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Top 5 food and agricultural product groups exported by Sri Lanka to GCC
0
5
10
15
20
25
30
35
40
45
902 801 803 2106 2008
Ma
rk
et
sh
ar
e
Products
2010
2011
2012
HS code Top 5 product groups exported by Sri Lanka HS 0902 Tea
HS 0801 Brazil nuts, cashew nuts & coconuts
HS 0803 Bananas and plantains, fresh or dried
HS 2106 Food preparations
HS 2008 Preserved fruits
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India is in an advantageous position to achieve more gains from increasing GCC-SAARC food and agricultural trade.
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Results of the estimation of gravity model
Conventional trade cost variables have significant effects on total and food and agricultural trade.
There is a tendency for more trade between SAARC-GCC countries.
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Variable Units Source of data
Mean Standard deviation
Total trade
Food and agricultural trade
Value of total
exports
US Dollar ‘000 Trademap 4,267,000.9
7
24,689,000.0
2
Value of food and
agricultural
exports
US Dollar ‘000 Trademap 479,709.58 2,618,998.31
Distance kilometers CEPII 6981.72 4448.99 -1.385***
(-21.75)
-2.043***
(-15.58)
Common language
– official (dummy)
Na CEPII Na Na 0.408**
(2.78)
0.621**
(2.05)
Colony link
(dummy)
Na CEPII Na Na 0.908***
(4.52)
1.915***
(4.63)
Intra regional
linkages (dummy)
Na World Bank Na Na
sa_intra dummy 0.937
(1.73)
1.001
(0.90)
eastasia_intra dummy -0.170
(-0.65)
0.164
(0.30)
eu_intra dummy -0.0633
(-0.34)
0.521
(1.35)
gcc_intra dummy 1.095*
(1.79)
5.544***
(4.39)
sa_gcc pair dummy 1.358***
(4.26)
3.330***
(5.07)
Constant 1.32*
(1.73)
10.95***
(6.95)
No. of Observations 3106 3106
R squared
country fixed effects
0.80
Yes
0.67
Yes *** Significant at 1% probability level; ** significant at 5% probability level; *significant at 10% probability level
Results of gravity analysis
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Results of the analysis of trade potential
Among the major SAARC exporting countries, Sri Lanka and India have high potential for increasing food and agricultural exports to GCC countries.
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Export potential of India to GCC countries
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
Bahrain Kuwait Oman Qatar SaudiArabia
UnitedArab
Emirates
Ex
po
rt
va
lue
(U
S$
)
Import countries
Actual Export (A) value in '000 US$
Potential Export (A) Value in '000US$
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23
Export potential of Pakistan to GCC countries
0
100,000
200,000
300,000
400,000
500,000
600,000
Bahrain Kuwait Oman Qatar SaudiArabia
UnitedArab
Emirates
Ex
po
rt
va
lue
(U
S$
)
Import countries
Actual Export (A)(Value in’000 US$)
Potential Export (A)(Value in’000 US$)
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24
Export potential of Sri Lanka to GCC countries
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
Bahrain Kuwait Oman Qatar SaudiArabia
UnitedArab
Emirates
Ex
po
rt
va
lue
(US
$)
Import countries
Actual Export (A)(Value in’000 US$)
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Conclusions
Indian dominance in food and agricultural exports
There is a tendency for more trade between SAARC-GCC countries.
Sri Lanka and India have high potential for increasing food and agricultural exports to GCC countries.
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Thank You
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