Food and Agricultural Trade in the GCC: An Opportunity for South Asia?

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1 Food and Agricultural Trade in the GCC: An Opportunity for South Asia? 1 HOUCINE BOUGHANMI SARATH KODITHUWAKKU JEEVIKA WEERAHEWA SULTAN QABOOS UNIVERSITY, OMAN UNIVERSITY OF PERADENIYA, SRI LANKA

2 Contents Research Issue Objectives Methods of analysis Trade between GCC and SAARC Results of the gravity model Trade potential Conclusions 2

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. 3 GCC: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the Unites Arab Emirates SAARC: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka

4 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. 4 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

5 Food Security Concerns SAARC: Substantial importance for the domestic agriculture/ Poverty alleviation strategy 5 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

6 Purpose 6 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.

7 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 7

8 Methods of Analysis 8 Patterns of trade: Market share and concentration ratios Determinants of food and agricultural trade: Gravity model Trade potential: Indicative Trade Potential (ITP)

9 Market share: Exports or Imports as a percentage of Total exports or Total imports 9 Concentration ratio: Share of the top 3 trade partners

10 Gravity model Dependent variable: exports jt (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 DIST ij, comlang_official ij a colonylink ij exporter and importer fixed effects intra regional dummies Trade potential: Trade predicted by the model as a ratio of actual trade 10

11 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. 11

$4020 HS 1001 HS code Commodity Top 3 Exporters to GCC Products HS 1511 Palm oil & its fraction Malaysia, U.A.$ 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

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

12 CR3 of top 10 food and agricultural imports of GCC (HS 4 level) C R3 of GCC over import markets HS 1511 HS 1006 HS 2070 HS 1701 HS 2020 HS 2402 HS 1003 HS 2106 HS 4020 HS 1001 HS code Commodity Top 3 Exporters to GCC Products 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 Brazil, India and U.A.E form 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 12

13 GCC share total agricultural exports of SAARC s top ten food and agricultural product groups % of total agricultural exports HS 10 HS 2 HS 9 HS 8 HS 17 HS 3 HS 7 HS 23 HS 24 HS 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 Products

45 40 Share of imports from SAARC countries of the top ten food and agricultural imports of GCC 14 Share of imports % 35 30 25 20 15 10 2007 2012 5 0 HS 9 HS 3 HS 14 HS 10 HS 11 HS 23 HS 8 HS 7 HS 17

14 45 40 Share of imports from SAARC countries of the top ten food and agricultural imports of GCC 14 Share of imports % HS 9 HS 3 HS 14 HS 10 HS 11 HS 23 HS 8 HS 7 HS 17 HS 13 HS 2 Product Products code Product label HS 09 Coffee, tea, mate and spices HS 03 Fish, crustaceans, molluscs, 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

100 90 Top 5 food and agricultural product groups exported by India to GCC 15 80 70 Market share 60 50 40 30 2010 2011 2012 20 10 0 HS 0801 HS 1006 HS 0202 HS 1701 HS 1001 Products HS code HS 0801 HS

15 Top 5 food and agricultural product groups exported by India to GCC Market share HS 0801 HS 1006 HS 0202 HS 1701 HS 1001 Products HS code HS 0801 HS 1006 HS 0202 HS 1701 HS 1001 Top 5 product groups exported by India Brazil nuts, cashew nuts & coconuts Rice Meat of bovine animals, frozen Cane or beet sugar and chemically pure sucrose, in solid form Wheat and meslin

30 25 Top 5 food and agricultural product groups exported by Pakistan to GCC 16 Market share 20 15 10 2010 2011 2012 5 0 202 1006 804 204 1701 Products HS code Top 5 product groups exported by

16 30 25 Top 5 food and agricultural product groups exported by Pakistan to GCC 16 Market share Products 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

17 45 40 Top 5 food and agricultural product groups exported by Sri Lanka to GCC Market share Products 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

18 18 India is in an advantageous position to achieve more gains from increasing GCC-SAARC food and agricultural trade.

19 Results of the estimation of gravity model Conventional trade cost variables have significant effects on total and food and agricultural trade. 19 There is a tendency for more trade between SAARC- GCC countries.

20 Variable Units Source of data Results of gravity analysis Mean Standard deviation Total trade Food and agricultur al trade Value of total US Dollar 000 Trademap 4,267, ,689, exports 7 2 Value of food and US Dollar 000 Trademap 479, ,618, agricultural exports Distance kilometers CEPII *** (-21.75) *** (-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 Na World Bank Na Na linkages (dummy) sa_intra dummy (1.73) (0.90) eastasia_intra dummy (-0.65) (0.30) eu_intra dummy (-0.34) (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 R *** squared Significant at 1% probability level; ** significant at 5% probability level; *significant 0.80 at 10% 0.67 probability

21 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. 21

22 Export potential of India to GCC countries 14,000, ,000,000 Export value (US$) 10,000,000 8,000,000 6,000,000 4,000,000 Actual Export (A) value in '000 US$ Potential Export (A) Value in '000 US$ 2,000,000 0 Bahrain Kuwait Oman Qatar Saudi Arabia Import countries United Arab Emirates

Export potential of Pakistan to GCC countries 600,000 23 500,000 Export value (US$) 400,000 300,000 200,000 Actual Export (A)(Value in

23 Export potential of Pakistan to GCC countries 600, ,000 Export value (US$) 400, , ,000 Actual Export (A)(Value in 000 US$) Potential Export (A)(Value in 000 US$) 100,000 0 Bahrain Kuwait Oman Qatar Saudi Arabia Import countries United Arab Emirates

24 Export potential of Sri Lanka to GCC countries 500, , , Export value(us$) 350, , , , , ,000 50,000 Actual Export (A)(Value in 000 US$) 0 Bahrain Kuwait Oman Qatar Saudi Arabia Import countries United Arab Emirates

25 Conclusions Indian dominance in food and agricultural exports 25 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.

26 Thank You 26

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