Industry Concentration and Supply Chains in CEFTA 2006

WITH THE FINANCIAL SUPPORT OF THE

EUROPEAN UNION

Industry Concentration and Supply Chains in CEFTA 2006

SEE ICSARAJEVO, 25 APRIL 2012

1

Rainer LanzPrivate Sector Development Division, OECD

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION

Outline

1. Motivating Questions

2. Industry Concentration

3. Supply Chains

4. Conclusions and Discussion

2


Motivating Questions

3

Industry Concentration Supply Chains

• How is manufacturing distributed over space in CEFTA?

•What is the size and hence importance of different manufacturing industries?

• Relative Concentration: How are industries distributed over space compared to manufacturing?

What are the most important supply chains in CEFTA economies?

What is the position of CEFTA economies in supply chains?

How important are intra-CEFTA versus extra-CEFTA supply chains?

Next Generation RCI

Sector Competitiveness Trans-national Clusters Regional Supply Chains


Industry Concentration

4


How is manufacturing distributed over space in CEFTA?

5


Manufacturing Concentration in CEFTA Economies

6

Serbia and Croatia account for 73% of turnover and 58% of employment in CEFTA

Manufacturing in CEFTA – Turnover: 42.5 bn EUR – Employment: 1.07 m

Shares of CEFTA Parties:(by turnover)

Albania 1.2 bn BIH 4.2 bn Croatia 14.0 bn Kosovo * 0.6 bn fYR Macedonia 3.6 bnMoldova 1.5 bn Montenegro 0.6 bn Serbia 16.8 bn

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION 7

Manufacturing Concentration in CEFTA: Map

Absolute concentration of manufacturing in CEFTA (based on turnover)

0.25-0.5%

+5%

4-5%3-4%

0.5-1%

1-2%

2-3%

0.25-0.5%

+5%

4-5%3-4%

0.5-1%

1-2%

2-3%


Manufacturing Concentration in CEFTA: Top 10 Regions

8

The top 10 regions in CEFTA concentrate 43% of turnover and 27% of employment.

Top Regions of Manufacturing Agglomeration (by turnover, EUR)

Belgrade SRB 4.6 bnZagreb (city) HRV 2.9 bnSouth Backa SRB 2.0 bn

Skopje MKD 1.8 bnPrimorje-Gorski Kotar HRV 1.7 bn

Sisak-Moslavina HRV 1.3 bnZenicko-Dobojski BIH 1.0 bn

Podunavlje SRB 1.0 bnIstria HRV 1.0 bn

Zagreb (county) HRV 1.0 bn


What is the size and hence importance of different manufacturing industries?

9


Industry Specialisation of CEFTA 2006: Top 5 Industries

10

The low tech food and beverages industry is the leading manufacturing sector in CEFTA, with the basic metals industry a distant second.

Top Manufacturing Industries (by turnover, EUR)

15 Food and Beverages Low Tech 11.8 bn 28%Belgrade (SRB), South Backa (SRB),

Zagreb – city (HRV)

27 Basic metals Medium Low Tech 3.5 bn 8%

Podunavlje (SRB), Skopje (MKD), Hercegovacko-Neretvanski (BIH)

28Fabricated metal

productsMedium Low Tech 3.4 bn 8%

Zenicko-Dobojski (BIH), Belgrade (SRB), Hercegovacko-Neretvanski (BIH)

24 Chemical Products Medium High Tech 3.4 bn 8%

South Banat (SRB), Zagreb – city (HRV), Belgrade (SRB)

23 Petroleum Products Medium Low Tech 2.8 bn 7%

Primorje-Gorski Kotar (HRV), Sisak-Moslavina (HRV), Skopje (MKD)


Relative Concentration: How are industries distributed over space compared to

manufacturing?

11


0.0 0.5 1.0 1.5 2.0

Food products and beveragesMachinery and equipment n.e.c.

Fabricated metal productsFurniture and other manufacturing

Rubber and plastic productsOth.non-metallic mineral products

Publishing and printingPulp, paper and paper products

Chemicals and chemical productsWearing apparel

Electrical machinery n.e.c.Wood and wood products

TextilesLeather and leather products

ICTMotor vehicles, trailers

Basic metalsOther transport equipment

Coke, refined petroleum productTobacco products

Theil Index of Concentration for Turnover

Relative Concentration of Manufacturing Industries in CEFTA

12

Top 6 industries which are the most concentrated relative to overall manufacturing

Top 6 industries which are the most concentrated relative to overall manufacturing

Food products is the largest industry in CEFTA and is therefore not surprisingly concentrated in a similar way than manufacturing

Food products is the largest industry in CEFTA and is therefore not surprisingly concentrated in a similar way than manufacturing


Within or between country concentration?

1381%

85%73%

96%91%

76%83%

94%86%73%

93%70%

93%71%66%

72%78%

58%69%

98%

19%15%

27%4%9%

24%17%

6%14%

27%7%

30%7%

29%34%

28%22%

42%31%

2%

0.0 0.5 1.0 1.5 2.0

Food products and beveragesMachinery and equipment n.e.c.

Fabricated metal productsFurniture and other manufacturing

Rubber and plastic productsOth.non-metallic mineral products

Publishing and printingPulp, paper and paper products

Chemicals and chemical productsWearing apparel

Electrical machinery n.e.c.Wood and wood products

TextilesLeather and leather products

ICTMotor vehicles, trailers

Basic metalsOther transport equipment

Coke, refined petroleum productTobacco products

within countries between countries

Differences in the distribution of turnover between single industries and overall

manufacturing are mainly observed within countries rather than between countries.

Differences in the distribution of turnover between single industries and overall

manufacturing are mainly observed within countries rather than between countries.


Supply Chains

14


What are the most important supply chains in CEFTA economies?

15


CEFTA Exports of Manufacturing Industries (2009)

160 500,000 1,000,000 1,500,000 2,000,000 2,500,000

Motor Vehicles, Trailers and Semi-TrailersPulp, Paper, Printing and Publishing

Wood and Products of Wood and CorkOther Non-Metallic Mineral Products

ICTRubber and Plastics Products

Manufacturing n.e.c; RecyclingOther Transport Equipment

Coke, Refined Petroleum ProductsFabricated Metal Products

Electrical Machinery and Apparatus n.e.cMachinery and Equipment, n.e.c

Chemicals and Chemical ProductsBasic Metals

Food products, Beverages and TobaccoTextiles, Leather and Footwear

CEFTA Exports (in 1000 EUR)

Top 3 Exporting Industries:1.Textiles

2.Food Products3.Basic Metals

Top 3 Exporting Industries:1.Textiles

2.Food Products3.Basic Metals

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000









Final Goods Intermediates

CEFTA Exports: Intermediate and Final Goods

Top 3 Exporting Industries for Intermediates (Value):1.Basic Metals

2.Chemical Products3.Coke and Petroleum Products

Top 3 Exporting Industries for Intermediates (Value):1.Basic Metals

2.Chemical Products3.Coke and Petroleum Products


What is the position of CEFTA countries in supply chains?

18


Supply Chains and Revealed Comparative Advantage

19

An RCA higher than 1 implies that country c has a RCA in industry k. For example, CEFTA has a RCA in exports of intermediate food products, if its share in world exports is greater in intermediate food products than in overall manufacturing.

ManufWorld

Manufc

kWorld

kc

X

X

X

X

X

RCAkc

,

,

,

,

,

Market share of country c in world exports in industry k

Market share of country c in world exports in manufacturing

Revealed comparative advantage (RCA) captures relative trade specialisation dividing an industry market share by the manufacturing

market share for exports (or imports):


What is a Country’s Position in Supply Chains?

20

First Stage Intermediate Stage Final Stage

RCA in imports of intermediates and in

exports of final goods

RCA in imports of intermediates and in


RCA in imports of intermediates and in exports

of intermediate goods

RCA in imports of intermediates and in exports

of intermediate goods

No RCA in imports of intermediates but RCA in


No RCA in imports of intermediates but RCA in


Food, Beverages and

TobaccoFirst Stage Intermediate Stage Final Stage

BIH

HRV

MKD

MKD MDAMDAMNE

SRB

Textiles, Leather and

Footwear

Wood and Products of Wood


BIH HRV MNE SRB ALB BIH


ALB

SRBBIH

HRV

MKD

MDA

MKD

Low Tech Industries


Examples of Potential Intra-Industry Supply Chains

21

Fabricated Metal Products

Medium-Low Tech Industries:

Medium-High Tech Industries and ICT:

Pulp, Paper, Printing and Publishing


BIHALB SRBHRV BIHSRB

Motor VehiclesFirst Stage Intermediate Stage Final Stage

BIH

Other Transport Equipment

Chemicals and chemical productsICT


ALB MKD SRBMNEBIH


HRVALB BIH MKD

SRB

MDA SRB

Basic Metal Products


How important are intra-CEFTA versus extra-CEFTA supply chains?

22


CEFTA Manufacturing Exports (2009)

230 500,000 1,000,000 1,500,000 2,000,000 2,500,000









CEFTA Exports (in 1000 EUR)

WITH THE FINANCIAL SUPPORT OF THE EUROPEAN UNION 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000









Extra-CEFTA Intra-CEFTA

CEFTA Exports: Intra- vs. Extra-CEFTA

24

Overall Shares for Manufacturing Exports: Intra-CEFTA: 28% Extra-CEFTA: 72%

Overall Shares for Manufacturing Exports: Intra-CEFTA: 28% Extra-CEFTA: 72%


CEFTA Exports of Intermediates: Intra- vs. Extra CEFTA Shares

934

2654

1031

26

5131

1816

3227

4713

9166

7446

9069

9894

4969

8284

6873

5387

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%









Intra-CEFTA Extra-CEFTA

Overall Shares for Manufacturing Exports of Intermediates:Intra-CEFTA: 29% Extra-CEFTA: 71%

Overall Shares for Manufacturing Exports of Intermediates:Intra-CEFTA: 29% Extra-CEFTA: 71%


ConclusionsHow is manufacturing distributed over space in CEFTA? • Manufacturing activity is highly agglomerated, i.e. the top 10

regions (out of 102) in CEFTA concentrate 40% of the manufacturing activity

What is the size and hence importance of different manufacturing industries?

• Low and medium-low tech industries account for about 80% of manufacturing activity, e.g. Food and beverages account for 28% of manufacturing turnover

Relative Concentration: How are industries distributed over space compared to manufacturing?

• Industry concentration occurs mainly within countries rather than between countries

26


ConclusionsWhat are the most important supply chains in CEFTA

economies?• Medium-low tech industries, i.e. basic metals

What is the position of CEFTA economies in supply chains?• Entire supply chain: Food products as well as Basic metals

(first and intermediate stage) and fabricated metal products (intermediate and final stage)

• Intermediate and final stage: Textiles, Wood products and cork, Paper and publishing

• No specialisation in medium-high tech industries and ICT

27


ConclusionsHow important are intra-CEFTA versus extra-CEFTA supply

chains?• Extra-CEFTA exports dominate accounting for 71% of

intermediate exports• For Food products, beverages and tobacco, intra- and extra-

CEFTA supply chains are of similar importance• For Basic metals and Fabricated metal products, intra-CEFTA

supply chains account close to one third of intermediate exports• For Paper products and publishing, and Wood products and

cork, intra-CEFTA supply chains account for 26% and 34% of intermediate exports.

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Thoughts for Discussion

• Common interests and scope for cooperation of regional working groups will vary by sector

• Not to forget: Importance of inter-industry linkages and supply chains • Services are often significant inputs for manufacturing

production and hence crucial for sector competitiveness• Is extra-CEFTA trade of higher quality than intra-CEFTA

trade? Where is more value added incorporated?• Where do SEE countries have the potential to “move up the

value chain”? Between sectors or along stages or functions within a given sector?

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Thank you for your attention!

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Documents

Industry Concentration and Supply Chains in CEFTA 2006