Diversification

The analysis performed so far suggests a need to explore key factors that could drive expansion of the range of export activities and diversification of export and import bundles, particularly in the African regions and SAS. Indeed, the number of exported products as well as the number of destinations to which a country is able to export, are important measures of competitiveness and quality of integration with international markets (e.g. Cadot et al., 2011). They are indicative of products for which national producers have acquired the necessary skills and, in the case of exports of intermediate inputs, of reliability of the country as a source of inputs. On the import side, the degree of diversification of imports of intermediates can be a good proxy for country’s openness to imports of intermediates and for the competitiveness of producers who rely on foreign intermediate inputs. This section presents a discussion of the evolution of the diversification profiles of countries in each of our five regions as far as it concerns trade in processed intermediates.

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HS0115 HS1624 HS3940 HS5063 HS7283HS85HS87 HS0115 HS1624 HS3940 HS5063 HS7283HS85HS87 HS0115 HS1624 HS3940 HS5063 HS7283HS85HS87 HS0115 HS1624 HS3940 HS5063 HS7283HS85HS87 HS0115 HS1624 HS3940 HS5063 HS7283HS85HS87 HS0115 HS1624 HS3940 HS5063 HS7283HS85HS87

OTHESAMENWCASASSEA

Impact of Agreements: CoeffBilTAREG + CoeffBilTA

ESA, WCA and SAS are the regions where the least change is observed.⁸⁹ In ESA, South Africa is the most diversified economy in terms of intermediates and it is probably the most connected with international GVCs, thereby providing an important value chain connection to more global markets for other less advanced countries in the region. Kenya, Nigeria, Ghana and Mauritius are the countries showing the highest potential to catch up with South Africa while most other countries in the region are still below world averages. A similar, even though less marked, trend can be observed in SAS where India is among the most competitive economies as far as diversification of intermediates is concerned. Pakistan and Sri Lanka are the two countries of the region that show the greatest potential for catching up.

SEA and MENA are the two regions recording some of the most pronounced changes (Figures 21 and 22). In SEA, the largest changes are observed for Viet Nam and the Philippines;

they reduced half of the gap to other well performing and well integrated economies in their region like Thailand, Indonesia, Malaysia or China. However, a gap between top and bottom performers is emerging over time with intermediate exports of some smaller countries such as Myanmar remaining persistently concentrated. In MENA, countries like Egypt, Tunisia, Oman and Qatar made significant progress. It is also noteworthy that the countries that are lagging behind are those with relatively high endowments of natural resources. While this might suggest a possibility of a “natural resource curse” (e.g. Frankel, 2010) making itself visible also in the context of integration with value chains, it may also show limitations of the diversification argument, especially in countries which have a strong comparative advantage in natural resources.

On the import side, the availability and active search for cheaper inputs would be reflected by the number of intermediate products that are imported by countries and the number of sources that are included in the export bundle. Our results show that the average value of the number of imported products and the number of import sources are larger than was the case for exports. The reason for this might be related to the fact that countries diversify risks by importing from different sources at the same time and that production in value chains implies combining inputs form several sources.

However, it also shows that countries differ less with respect to what they buy from value chains as opposed to what they sell to them, a point made as well in the analysis based on inter-country input-output earlier on in this report.

Concentrating on dynamics in SEA and MENA, Viet Nam and the Philippines again seem to be most interesting examples of rapid intermediate import diversification. As a group, the MENA region also shows an interesting dynamic which might be at the origin of the gains in competitiveness observed in intermediates’ exports.

89. Therefore we present a unique snapshot for these regions based on the most recent data (2010/11)—

Annex Figure 31 and 32.

OECD TRADE POLICY PAPER N°179 © OECD 2015

Figure 21. Changes in number of exported intermediates and served markets Panel A. Southeast and Eastern Asia

Panel B. Middle East and North Africa

Note: The labelled dots in the four panels show the actual numbers of exported intermediates and served markets for each individual country. The unlabelled dots correspond to all other countries in the world (therefore affording a comparative analysis with respect to other countries). The vertical and horizontal lines correspond to the median number of exported intermediates and the median number of served markets. Median values are used instead of mean values because they split the sample into two groups where the half of less performing countries can be found to the left of the vertical line or below the horizontal line. The left panels show values for 1998 whereas the right panel shows this for 2011.

Figure 22. Changes in number of imported intermediates and markets form which intermediates are sourced Panel A. Southeast and Eastern Asia

Panel B. Middle East and North Africa

OECD TRADE POLICY PAPER N°179 © OECD 2015