Export driven competitiveness in Europa and Central Asia Understanding competitiveness concept to increase export Goran Zivkov June 217, IAMO, Hale
Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug Jan Jun Nov Apr Sep Feb Jul Dec May Oct Mar Aug World Competitiveness Agriculture is more integrated and competitive but still there is no country without agriculture The world has become a more global. Processes and changes in one part of the world, now don t have exclusively local effect, but also on places and processes far from that part of the world. Global competitiveness distribution. We live in a global world and in such environment real competitiveness advantages of countries in specific areas of production are becoming more and more obvious. Countries are becoming increasingly integrated, so regardless of how much the country as a whole, or a certain region or a particular municipality may be specific, it is impossible for its agricultural production, trade and prices to be unaffected by the global and regional trends. However, there are reasons why food will continue to be produced throughout the world, the most important of which are: Distribution of competitiveness among states does not entirely correspond to relation between certain producers (it doesn t mean that the worst Dutch producer is better than a good producer from Serbia); More competitive countries can never produce everything; There is considerable production for own consumption which does not include personal work in the product price; Lower expectations of producers from less competitive countries; Preference for local markets and local products; Many perishable products are not easy transportable Different trade barriers like transport cost, tariffs, Soybean prices in China, Serbia and USA 7 6 5 4 3 2 1 29 21 211 212 213 214 215 Produktna berza CBOT DCE Maize price USA and Serbia 35 3 25 2 15 1 27 28 29 21 211 212 213 214 215 216 Mineapolis Novi Sad
Average World share Asia is driving world agriculture in production terms World share and production growth in relation to the World (27 214) 9% 8% Vegetables 7% 6% 5% Oilcrops Cereals Fruits 4% 3% Milk Meat Milk Meat Cereals 2% Oilcrops Meat Milk Vegetables 1% Vegetables Cereals Fruits Oilcrops % Fruits -5% -4% -3% -2% -1% % 1% 2% 3% Average growth in relation to the World EU Asia USA
Europe is driving World trade of agricultural products but lacking behind World trends World share and export growth in relation to the World (27 215) 8% 7% Dairy 6% 5% Vegetables Meat 4% Fruits Oilcrops 3% Cereals Cereals Fruits Vegetables 2% Fruits 1% Dairy Oilcrops Cereals Dairy Meat Oilcrops Vegetables % Meat -1% -5% % 5% 1% 15% EU Asia USA
Production Growth Base Area harvested 27-214 Trend of production related to World 27-214 2.5% 2.% 1.5% 1.%.5%.% -.5% -4% -3% -2% -1% % 1% 2% 3% Western Balkan CIS NMS EU15 Ukraine Serbia 1.8% 1.6% 1.4% 1.2% 1.%.8%.6%.4%.2%.% -.2% -4% -2% % 2% 4% 6% 8% 1% Western Balkan CIS NMS EU15 Ukraine Serbia
Average World share Export Growth 3.% Export growth in relation to the World 21-215 2.5% 33.74 bil. $ 2.% 1.5% 1.%.5%.% 886.36 mil. $ 986.42 mil. $ 5.83 bil. $ 3.79 bil. $ 64.23 mil. $ -.5% -4% -2% % 2% 4% 6% 8% 1% Average growth in relation to the World CEFTA NMS EU15 South Caucasus CIS Central Asia
Average World share Export Growth Export trends in selected countries (21-215) 2.% Poland 1.5% Georgia Azerbaijan 1.% Turkey Russian Federation Kazakhstan Tajikistan Armenia Ukraine.5% Russian Federation Iran Serbia.% Tajikistan Serbia Azerbaijan Kazakhstan Georgia Armenia Bosnia Herzegovina Poland Turkey Iran -.5% -1% -5% % 5% 1% 15% 2% 25% Average growth in relation to the World
Export structure and destination will change Export structure (average 21-215) 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% Export destinations (average 21-215) 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % CEFTA NMS EU15 CIS Caucasus Central Asia Meat Dairy Fruits Vegetables Cereals Industrial crops % CEFTA NMS EU15 Russia Rest of CIS CEFTA NMS EU15 Russia Rest of CIS Other
Netherlands Belgium Malta Luxembourg Ireland Montenegro Austria Denmark Germany Italy Slovenia Portugal Cyprus United Kingdom France Spain Sweden Slovakia Estonia Greece Czech Rep. Lithuania Hungary Poland Croatia Latvia TFYR of Macedonia Georgia Bulgaria Serbia Finland Belarus Armenia Romania Rep. of Moldova Ukraine Bosnia Herzegovina Azerbaijan Albania Kyrgyzstan Russian Federation Kazakhstan Thousand dollars per hectare Small processing cause small export per hectare 4 35 Export per hectare (average 21-215) 3 25 2 15 1 5 2.28 1.39 1.1 93 54.49 Western Balkan NMS EU15 Rest of CIS Caucasus
How to reduce number of mistakes? Competitiveness concept Producer level How I can be competitive? EU have subsidies, technology? YES YOU CAN
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov USD/kg Who is competitive blueberry producer? 1 ha, investment of UAE company 2 ha, investment of Slađana Vuković, financial expert from Island.3 ha local producer 16 14 12 1 8 6 4 2 Blueberry prices in Serbia 21 211 212 213 214 215 216 Green market price Wholesale price Export price
Main factors that determine competitiveness Level of technology Price Weather Access to technology Knowledge Yield Local Access to capital Efficiency Transport Appropriated technology Cost of state Labor Export Taxes Investment Cost of production Marketing
1947 1948 1949 195 1951 1952 1953 1954 1955 1956 1957 1958 1959 196 1961 1962 1963 1964 1965 1966 1967 1968 1969 197 1971 1972 1973 1974 1975 1976 1977 1978 1979 198 1981 1982 1983 1984 1985 1986 1987 1988 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 t/ha Properly estimating yield level Wheat yield level in Serbia and Bosnia and Herzegovina 1947-216 4 Long term predictability is fine Minimising high variation is problem 3 2 1 Serbian 1-year average BiH 1-year average Serbian yield Serbia, first 5 years Serbia, second 5 years BiH, first 5 years BiH, second 5 years BiH yield Linear (Serbian yield)
Knowing prices There is no one price, (price to specific location at specific market for specific quality (and packaging) proven by specific standard at very specific time Price varies Predictability of prices There are many MIS systems and other access to price information Today is possible to predict prices to large extend Inflation and depreciation of currency Packaging and labelling Price variation are high since many factors are influencing it Between year Time of sale (1) Producers farm gate price, (2) Wholesale price, (3) Unite Value export price, (4) Supermarket purchasing price, (5) Supermarket selling price, (6) Unite Value import price, (7) Green market price Quality & Variety Point of sale
jan feb mar apr maj jun jul avg sep okt nov dec jan feb mar apr maj jun jul avg sep okt nov dec jan feb mar apr maj jun jul avg sep okt nov dec jan feb mar apr maj jun jul avg sep okt nov dec jan feb mar apr maj jun jul avg sep okt nov dec jan feb mar apr maj jun jul avg sep okt nov dec jan feb mar apr maj jun jul avg sep okt nov dec jan feb mar apr maj jun jul avg sep okt nov dec Knowing prices Potential market Import per month UV 21-14 ($/t) Monthly imported price Distribution of import Highest Lowest Weighted Average (% of total import per month) 1,5 $/t 3% Romania January 1.229 September 443 971 1, $/t 5 $/t $/t 2% 1% % 1, $/t 2% Bulgaria January 1.22 September 357 662 5 $/t $/t 1% % German (average Munchen and Hannover) March 2.334 August 1.252 1.851 3, $/t 2, $/t 1, $/t $/t 15% 1% 5% % Greece (average Solun and Atina) March 1.591 November 797 996 2, $/t 1, $/t $/t 3% 2% 1% %
Glasshouse Horizontal screen Heating High preasurre fogging system Growing gutters Irrigation instalation Electrical instalations Transport cost materials Labour for construction Mashinery equipment Cold storage Total investment cost Greenhouse personnel Supervision Grower training Row materials and supply Energy Other variable costs Total costs Tomato I class Tomato II class Amortization Taxes Total revenue Thousand EUR Million Proper business plan In proper biasness plan mistakes are very small Gross margin 51% Variabl e costs 49% 8 7 6 Tomato glasshouse cost and revenue structure (1 ha, 1 years), Macedonian conditions 2.94 mil. 99% 1% Return of investment 5 4 28% 2% Profit 1.95 mil. 4 2 3 21% -2-4 -6-8 2 1 8% 1% 5% 1% 1% 1% 2% 1% 5% 2% 1% 1.15 mil. 13% 8% 1% -1, -1,2-1,4 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 1 New glasshouse MK commong practice EA investment offer Investment costs Variable costs Inflow
Measuring competitiveness at producer level Competitivness is possible to measure today theoretically (internally and externally) before even set up production 2. 1.8 1.6 1.4 1.2 1..8.6.4.2. Feed Other variable costs Labour Depreciation and finance InterPig Model, 213 LMC, study of sugar sector in Serbia
Competitiveness Working together concept Policy level Individual business decisions lead to country trend Policy decisions lead to individual business decisions Separate duties
THS USD Policy influence at competitiveness Thsd.USD Export of tomato from Macedonia and Albania 3, 25, 45, 4, 35, Export structure of crude oil: BiH 213-216 Adding 44 million USD of export of refined oil 2, 3, 15, 1, 5, 25, 2, 15, 1, 21 211 212 213 214 215 Albanija Makedonija 5, 213 214 215 216 Turkey Others (11 countries)
Trade SEEDEV Competitiveness Model Scoring formula for each product follows: m i = j=1 n ( x i n + 1 5 + 1 j x i n + 1 5 + 1) where m i is score for the product i; x i rank of the product i for the specific criteria; x i j rank of the product i for the criteria j ; n total number of products in the analysis. Products are scored 1-1 so the formula determines the tenth of all products in which the products rank is in for the specific criteria and assigns corresponding score. Fruits UV Trend UV Share Value Trend Chart Production Title Share 1 9 8 7 6 5 4 3 2 1 Production Trend Apple Hazelnut Persimmon Area Share Area Trend Production Share and trends Production, trade, area harvest, export unit value, yield Value Share Yield Share More than 3 indicators Comparing with region (Central Asia, Caucasus, Western Balkan), EU, World Quantity Trend Quantity Share Yield Trend Production quantity Area harvested Yield Export quantity Value of export Export unit value
.47% 4.93% 6.8% Barley.2% 3.41% 2.38% Maize.25% 2.55% 5.26% Wheat.3% 3.99% 4.37% Apples.57% Apricots 46.53% 1.91%.32% Cherries 41.7% 1.5%.19% Grapes 21.6% 1.98% 3.55% Hazelnut 17.52% 4.68%.2% 6.29%.24% Lemon.7% Mandarin 8.78% 1.9%.38% Melon 77.5% 3.51%.1% 3.97% 1.77% Peach.16% Pears 21.76% 6.14% 3.32%.% Persimmons 98.6%.21% 5.87% 3.75% Plum 4.71%.98% Quinces 14.22%.%.%.% Strawberries.31% 2.74% 4.6% Watermelons.7% Cotton 11.65% 2.%.%.2%.% Sheep.17% 5.92% Bovine meat 14.5%.1% Tea 36.15%.13% Production share.3%.%.97% Carrot.33% 3.28% 5.83% Cucumbers and gherkins.21% 1.49% 4.87% Eggplants.%.%.% Leeks.21% 5.18% 4.13% Onions.28% Potatoes 9.13%.% Spinach.%.3% Tomatoes 2.65% Production share of Azerbaijan 12% 1% 8% 6% 4% 2% % Cereals Fruit Ind. Anim. Tea Vegetables World share CIS share Region share *Pomegranate is not taking into consideration since there is no reliable data for many countries
Measuring trend by comparing with others Export trends by products in Serbia (average 21-215) 6% 4% 2% % -2% -4% -6% Trend Growth in relation to the World
Competitiveness is changing category by area Competitiveness of Tajikistsan in relation to CIS 9% 8% 7% 6% 5% 4% 3% 2% 1% % Onion Sesamum seed Apricot Cotton Carrot Rice Beans Grape fresh Bovine live Apple Plum Tomato Potato Sunflower seed Wheat Poultry Bovine meat Fruit Vegetable Cereal Oilcrops Industrial crops Animal products.9.8.7.6.5.4.3.2.1 Cotton Apricot Onion Beans Sesamum seed Carrot Rice Grape fresh Apple Plum Tomato Bovine live Potato Sunflower seed Competitiveness of Tajikistan in relation to EU Wheat Poultry Bovine meat
Serbia competitiveness analysis 213.9.8.7.6.5.4.3.2.1 Competitiveness is changing category by time Serbia competitiveness analysis 217 Fruits Vegetables Cereals Industrial crops Milk.8.7.6.5.4.3.2.1
25 Price and Quility Competitiveness Product Competitiveness quality and price competition case of Georgia Number of years (25-214) SPC DPC SQC SPA Domination (21-214) Milk 9 1 DPC Maize 7 1 2 DPC Potatoes 1 5 2 2 DPC Grapes 1 1 8 SPA Mandarins 5 5 SPC Wheat 7 1 2 DPC Tomatoes 1 4 5 DPC Apples 5 5 DPC Watermelons 3 7 DPC Hazelnuts 4 6 SPC Barley 4 6 DPC Cucumbers 3 6 1 DPC Eggs 2 4 4 DPC Cabbages 4 2 4 SPA Number of years (25-214) SPC DPC SQC SPA Domination (21-214) Peaches 6 4 SQC Cattle meat 5 2 3 SPA Pears 2 1 4 3 SPA Onions 9 1 SPA Pig meat 5 5 SPA Walnuts 1 7 2 DPC Beans 4 6 DPC Poultry meat 4 6 SPA Sunflower seed 9 1 DPC Carrots 1 2 7 SPA Plums 6 1 2 1 SPC Garlic 3 4 3 DPC Eggplants 3 4 3 SPA Cherries 2 8 SPC Peppers 4 4 2 DPC Sheep/Goat 4 4 2 SPC Acronyms: SPC- successful price competition DPC - deficit in price competitiveness SQC - successful quality competition SPA - structural problem area (trade deficit despite low prices) Half of the products have deficit in price competitiveness, trade deficit with high export prices. Four products are successful in price competition (hazelnuts, plums, cherries and sheep and goat meat), while only two are successful in quality competition in last five years (mandarins and peaches). Other products, mostly vegetables and meat, have structural problem which means that they have trade deficit despite low prices.
Product Competitiveness and Demand Malta Finland Cyprus Estonia Luxembourg Sweden Latvia Bulgaria Kazakhstan Armenia Georgia Denmark Turkmenistan Ireland Tajikistan Slovakia Lithuania Kyrgyzstan Uzbekistan Slovenia United Kingdom Russian Azerbaijan Czech Rep. Belarus Belgium Portugal Romania Netherlands Austria Greece Ukraine Rep. of Moldova Spain Germany Hungary Iran France Italy Poland Turkey Supply Demand Malta Luxembourg Armenia Azerbaijan Tajikistan Kyrgyzstan Uzbekistan Turkmenistan Georgia Iran Republic of Moldova Greece Estonia Turkey Cyprus Finland Slovenia Denmark Slovakia Ireland Poland Italy Sweden Portugal Latvia Bulgaria Lithuania Belgium United Kingdom Spain Ukraine Hungary Netherlands Czechia France Germany Romania Austria Kazakhstan Russian Federation Belarus.1.2.3.4.5.6.7.8.9 1.9.8.7.6.5.4.3.2.1 Source: UN Comtrade EU15 NMS Rest of CIS Region EU15 NMS Rest of CIS Region
Product Competitiveness and Demand Slovenia Estonia Turkmenistan Malta Bulgaria Latvia Luxembourg Tajikistan Uzbekistan Rep. of Moldova Hungary Georgia Slovakia Lithuania Cyprus Kazakhstan Armenia Portugal Sweden Finland Greece Azerbaijan Ireland Czech Rep. Italy Romania Austria Ukraine Kyrgyzstan Belarus Turkey Russian Federation Spain Denmark Iran Poland United Kingdom Netherlands France Belgium Germany Supply Demand Tajikistan Turkmenistan Rep. of Moldova Georgia Estonia Latvia Malta Kyrgyzstan Azerbaijan Bulgaria Armenia Kazakhstan Lithuania Cyprus Belarus Finland Iran Romania Slovenia Hungary Luxembourg Ukraine Austria Slovakia Czech Rep. Sweden Denmark Uzbekistan Portugal Poland Netherlands Turkey Greece Italy Ireland France Belgium Spain United Kingdom Germany Russian Federation.1.2.3.4.5.6.7.8.9.8.7.6.5.4.3.2.1 EU15 NMS Rest of CIS Region EU15 NMS Rest of CIS Region
Product Competitiveness and Demand.9.8.7 Competitiveness.6.5.4.3.2.1 Caucasus Gulf Rest of CIS NMS EU15 Selected markets
Export Production Hezelnut compatitivness comparsion Know where you are Identify drivers for growth and gaps in the value chain Prepare technological cards Make analysis which will show where is the expected highest RoI / which technology level. UV Share Value Trend Value Share UV Trend Quantity Trend Production Share 1 9 8 7 6 5 4 3 2 1 Quantity Share Production Trend Yield Trend Area Share Area Trend Yield Share Azerbaijan Uzbekistan Georgia Export quantity Export value Export unit value Production Area harvested Yield Iran Implement properly regardless are you entrepreneur or policy maker