Specialization and Comparative Advantage: Evidence from Top Ten Main Actors of OIC Countries in Disruptive Era
Dyah Titis Kusuma Wardani
Universitas Muhammadiyah Yogyakarta
Background
Technology plays an important role in international trade and commerce since international trade is one of the sources of growth. As Salvatore (2004) said that, international trade is as one of the engines of growth.
Technology intensive product is in Empirical Trade Analysis (ETA) with Standard International Trade Classification (SITC) Rev 2 -3 digits
42 out of 57 OIC member countries join
WTO.Top ten OIC countries have potential trade
in inter and intra-OIC trade.
Background
Based on the United Nations Conference on Trade and Development (UNCTAD) and World Trade Organization with SITC-3 digits classification, research organization of Netherland namely Empirical Trade Analysis (ETA) groups SITC-3 digits into six product groups.
What is Empirical Trade Analysis (ETA)
Empirical Trade Analysis (ETA) with SITC Rev 2 codes; 3 digits level consist of:
Product group A: primary products (83 sectors)
Product group B: natural-resource intensive products (21 sectors) Product group C: unskilled-labor intensive products (26 sectors) Product group D: technology intensive products (62 sectors) Product group E: human-capital intensive products (43 sectors) Sectors not classified according to intensity (5 sectors)
Background
Research Question
Text Here
How does specialization and
comparative advantage of top ten main
actors in the OIC countries change?
Research Objective
This paper aims to examine specialization and comparative advantage of top
ten main actors in the OIC countries
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and Text.
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Comparative Advantage Analysis Empirically, to estimate the com- parative advantages of products that are exported by OIC top ten main actors (OIC Executive Sum- mary, 2016) including Indonesia and Turkey to the world, the index of Revealed Symmetric Compara- tive Advantage (RSCA) will be used.
………..(1)
… ………(2)
Comparative Advantage Analysis Empirically, to estimate the com- parative advantages of products that are exported by OIC top ten main actors (OIC Executive Sum- mary, 2016) including Indonesia and Turkey to the world, the index of Revealed Symmetric Compara- tive Advantage (RSCA) will be used.
Product Mapping Analysis
To see the catch up process among top ten main actors of OIC member countries, in this study we will use product mapping analysis.
=(
Where TBIij shows the country's trade balance index i for the product group (SITC) j; xij and mij show exports and imports of product group j by country i. Extreme TBI value of -1 indicates that the country only imports, whereas if the TBI value is +1, it can be interpreted that the country only exports. If the TBI value is between -1 and +1, it can be said that the country carries out ex- ports and imports. The TBI value is negative in- dicating the net importer; and a positive TBI value indicates the net exporter.
Product Mapping Analysis
To see the catch up process among top ten main actors of OIC member countries, in this study we will use product mapping analysis.
Where TBIij shows the country's trade balance index i for the product group (SITC) j; xij and mij show exports and imports of product group j by country i. Extreme TBI value of -1 indicates that the country only imports, whereas if the TBI value is +1, it can be interpreted that the country only exports. If the TBI value is between -1 and +1, it can be said that the country carries out ex- ports and imports. The TBI value is negative in- dicating the net importer; and a positive TBI value indicates the net exporter.
Research Methodology
Bahrain Indonesia Malaysia Morocco Oman Pakistan Qatar Saudi ArabiaTurkey Egypt
-1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0
RSCA
1996 2006 2016
Figure 1.1 RSCA on Average: Top Ten Main Actors of OIC in 1996, 2006 and 2016
Bahrain
Indonesia
Malaysia
Morocco
Oman
Pakistan
Qatar
Saudi Arabia
Turkey
Egypt
-1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8 1.0
TBI
1996 2006 2016
Figure 1.2 TBI on Average: Top Ten Main Actors of OIC
in 1996, 2006 and 2016
Group C:
Comparative
disadvantage & Net exporter
(RSCA<0; TBI<0)
Group A:
Comparative advantage &
Net exporter
(RSCA>0; TBI>0) Group D:
Comparative disadvantage &
Net importer
(RSCA<0; TBI<0)
Group B:
Comparative advantage &
Net importer
(RSCA>0; TBI<0)
Figure 1.3 Product Mapping of Four Categories
Trade TBI>0 Balance
Index
TBI<0
RSCA<0 RSCA>0
Revealed Symmetric Comparative Advantage
Figure 1.4 Illustration of Four Quadrants of Product Mapping
-1 -0.8 -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8 1
-1 -0.8 -0.6 -0.4 -0.2 0 0.2 0.4 0.6 0.8 1
Product Mapping
RSCA
TBI
A
D B C
Point in each quadrant represent the combination of the highest RSCA and TBI of each product
Bahrain 684, 671, 424, 522, 46, 512, 844, 531, 47, 843, 282, 288, 652, 893, 812, 693, 56, 699, 661, 74
Indonesia 232, 634, 424, 687, 245, 287, 75, 341, 36, 72, 431, 74, 635, 322, 851, 71, 763, 844, 653, 333
Malaysia 424, 431, 232, 762, 687, 634, 763, 247, 761, 776, 848, 248, 759, 341, 245, 91, 72, 764, 75, 881
Morocco 271, 522, 36, 244, 562, 685, 37, 56, 57, 75, 842, 54, 845, 287, 681, 292, 34, 844, 633, 278
Oman 333, 941, 122, 783, 271, 34, 844, 46, 273, 682, 1, 35, 723, 424, 111, 625, 74, 784, 781, 845
Pakistan 42, 658, 652, 263, 651, 848, 659, 844, 847, 611, 846, 653, 842, 291, 655, 872, 75, 845, 36, 941
Qatar 333, 341, 562, 673, 522, 334, 583, 844, 274, 843, 273, 74, 842, 723, 1, 554, 625, 111, 744, 288
Saudi Arabia 333, 334, 512, 516, 511, 562, 269, 522, 274, 693, 583, 289, 661, 25, 271, 673, 554, 659, 22, 691
Turkey 121, 91, 845, 846, 46, 673, 62, 658, 57, 56, 659, 843, 847, 848, 431, 844, 75, 58, 554, 54
Egypt 323, 265, 42, 941, 263, 334, 245, 658, 651, 54, 75, 333, 844, 684, 652, 273, 677, 659, 696, 846
Table 1.1 OIC Main Actors of Top Twenty SITC Products 1996 Ranked based on RSCA
Bahrain 684, 281, 693, 334, 278, 671, 333, 512, 672, 562, 676, 652, 61, 673, 897, 122, 791, 98, 24, 846
Indonesia 424, 232, 687, 322, 431, 245, 91, 634, 72, 75, 267, 289, 287, 36, 671, 651, 341, 71, 37, 85
Malaysia 424, 431, 687, 848, 232, 72, 776, 91, 512, 341, 335, 634, 762, 898, 683, 247, 277, 513, 759, 261
Morocco 271, 562, 244, 522, 37, 773, 36, 411, 843, 54, 633, 842, 844, 56, 278, 612, 585, 57, 689, 658
Oman 941, 333, 46, 273, 562, 512, 511, 335, 661, 684, 22, 411, 672, 334, 1, 931, 122, 25, 424, 48
Pakistan 42, 652, 658, 46, 651, 842, 848, 847, 611, 846, 661, 845, 263, 75, 269, 512, 62, 696, 843, 278
Qatar 341, 274, 931, 333, 334, 288, 46, 598, 522, 896, 269, 786, 431, 635, 291, 692, 791, 98, 634, 611
Saudi Arabia
333, 516, 583, 334, 512, 941, 511, 22, 288, 341, 522, 562, 793, 692, 513, 684, 554, 58, 24, 642
Turkey 46, 659, 273, 25, 673, 846, 661,278, 844, 47, 655, 783, 613, 652, 57, 62, 847, 693, 775, 782
Egypt 271, 659, 562, 941, 46, 54, 62, 57, 551, 265, 24, 661, 56, 842, 292, 971, 263, 652, 245, 761
Table 1.2 OIC Main Actors of Top Twenty SITC
Product 2016 Ranked based on RSCA
Bahrain 684, 512, 522, 671, 282, 844, 424, 288, 843, 46, 36, 47, 531, 893, 693, 699, 652, 812, 56, 641
Indonesia 687, 341, 232, 245, 634, 851, 71, 74, 72, 844, 36, 842, 322, 75, 843, 424, 287, 35, 763, 635
Malaysia 424, 431, 761, 762, 634, 763, 848, 247, 248, 91, 25, 232, 341, 687, 245, 72, 897, 621, 821, 844
Morocco 271, 36, 37, 244, 842, 845, 685, 56, 681, 844, 522, 57, 34, 846, 562, 46, 633, 287, 54, 659
Oman 271, 844, 34, 941, 682, 783, 288, 35, 282, 273, 122, 845, 46, 842, 881, 554, 784, 424, 781, 334
Pakistan 42, 846, 844, 652, 658, 842, 848, 847, 659, 611, 651, 653, 843, 845, 655, 291, 263, 941, 34, 894
Qatar 334, 512, 562, 274, 289, 516, 511, 269, 522, 583, 25, 693, 685, 288, 271, 611, 661, 554, 673, 111
Saudi Arabia
334, 512, 562, 274, 289, 516, 511, 269, 522, 583, 25, 693, 685, 288, 271, 611, 661, 554, 673, 111
Turkey 91, 46, 846, 845, 56, 62, 843, 658, 844, 57, 58, 847, 673, 848, 54, 842, 659, 223, 661, 48
Egypt 42, 323, 941, 245, 844, 334, 658, 265, 846, 842, 684, 843, 659, 263, 56, 652, 696, 651, 273, 62
Table 1.3 OIC Main Actors of Top Twenty SITC Products 1996 Ranked by RSCA and TBI
Bahrain 334, 684, 562, 512, 672, 693, 671, 281, 278, 676, 652, 791, 282, 846, 522, 658, 341, 61, 98, 897
Indonesia 424, 245, 232, 687, 322, 289, 431, 91, 897, 634, 287, 36, 37, 844, 75, 671, 71, 851, 72, 122
Malaysia 424, 848, 91, 431, 341, 247, 687, 762, 512, 25, 248, 898, 335, 634, 761, 524, 621, 245, 752, 246
Morocco 271, 37, 244, 562, 843, 411, 36, 633, 54, 689, 288, 842, 844, 56, 522, 681, 773, 57, 34, 287
Oman 511, 941, 562, 512, 411, 273, 46, 684, 335, 274, 524, 334, 672, 34, 91, 773, 931, 22, 48, 288
Pakistan 46, 652, 42, 842, 658, 846, 847, 848, 843, 845, 611, 661, 35, 36, 273, 651, 62, 696, 34, 11
Qatar 341, 274, 333, 931, 334, 288, 46, 269, 598, 522, 291, 896, 786, 611, 635, 791, 612, 431, 692, 98
Saudi Arabia 516, 583, 512, 341, 288, 334, 511, 562, 522, 274, 793, 513, 22, 684, 692, 554, 896, 642, 58, 111
Turkey 46, 659, 47, 273, 25, 846, 62, 661, 673, 844, 57, 58, 658, 845, 847, 56, 278, 783, 897, 775
Egypt 271, 62, 659, 562, 941, 971, 842, 46, 56, 245, 661, 611, 761, 265, 57, 292, 551, 24, 54, 773
Table 1.4 OIC Main Actors of Top Twenty SITC Products 2016
Ranked by RSCA and TBI
Place Your Picture Here
Figure 1.5 “Product Mapping”: Top Ten Products of Bahrain between 1996 and 2016
Figure 1.5.1 “Product Mapping”: Top Ten Primary Products of Bahrain 1996-2016 in “A” Quadrant
424
Other fixed vegetable oils, fluid or solid, crude, refined
424
Other fixed vegetable oils, fluid or solid, crude, refined
282 Waste and scrap metal of iron or steel
288 Non-ferrous base metal waste and scrap, nes
36
Crustaceans and molluscs, fresh, chilled, frozen, salted, etc
281 Iron ore and concentrates 334 Petroleum products, refined 278 Other crude minerals
61 Sugar and honey
98 Edible products and preparations, nes
Place Your Picture Here
1.5.2 “Product Mapping”: Top Ten Unskilled-labor Intensive Products of Bahrain 1996-2016 in “A” Quadrant
844
Under garments of textile fabrics, not
knitted or crocheted 652
Cotton fabrics, woven (not including narrow or special fabrics)
846 Under-garments, knitted or crocheted
658
Made-up articles, wholly or chiefly of textile materials, nes
845
Outerwear knitted or crocheted, not elastic nor rubberized
Place Your Picture Here
Figure 1.5.3 “Product Mapping”: Top Ten Technology Intensive Products of Bahrain 1996-2016 in “A” Quadrant
522
Inorganic chemical elements, oxides and halogen
salts 512 Alcohols, phenols etc, and their derivatives
512 Alcohols, phenols etc, and their derivatives 562 Fertilizers, manufactured
522
Inorganic chemical elements, oxides and halogen salts
723
Civil engineering, contractors' plant and equipment and parts, nes
582
Condensation, polycondensation and polyaddition products
Figure 1. 6 “Product Mapping”: Top Ten Products of Indonesia between 1996 and 2016
Figure 1.6.1 “Product Mapping”: Top Ten Primary Products of Indonesia 1996-2016 in “A” Quadrant
-1-.50.51TBI
-1 -.5 0 .5 1
RSCA
INDONESIA-PIMARY PRODUCTS 1996
232 Natural rubber latex; rubber and gums 424 Other fixed vegetable oils, fluid or solid, crude, ref 424 Other fixed vegetable oils, fluid or solid, crude, refined 232 Natural rubber latex; rubber and gums
245 Fuel wood and wood charcoal 322 Coal, lignite and peat
287 Ores and concentrates of base metals, nes 431
Animal and vegetable oils and fats, processed, and waxes
75 Spices 245 Fuel wood and wood charcoal
341 Gas, natural and manufactured 72 Cocoa
36
Crustaceans and molluscs, fresh, chilled, frozen, salted,
etc 75 Spices
72 Cocoa 287 Ores and concentrates of base metals, nes
431
Animal and vegetable oils and fats, processed, and
waxes 36
Crustaceans and molluscs, fresh, chilled, frozen, salted, etc
322 Coal, lignite and peat 341 Gas, natural and manufactured
Place Your Picture Here
Indonesia primary product in 1996 and 2016 have almost the same
product pattern for export to the world such as SITC [232] Natural rubber
latex, rubber and gums; [424] Other fixed vegetable oils, fluid or solid,
crude, refined; [245] Fuel wood and wood charcoal; [287] Ores and
concentrates of base metals, nes. [75] Spices; [341] Gas, natural and
manufactured; [36] Crustaceans and molluscs, fresh, chilled, frozen,
salted, etc. [72] Cocoa; [431] Animal and vegetable oils and fats,
processed, and waxes; [322] Coal, lignite and peat. These commodities
are consistent in 20 years steady in top ten the highest RSCA. However,
their rankings are not the same.
Figure 1.6.2 “Product Mapping”: Top Ten Unskilled Labor Intensive Products of Indonesia 1996-2016 in “A” Quadrant
-1-.50.51TBI
-1 -.5 0 .5 1
RSCA
INDONESIA-UNSKLLIED LABOR INT 1996
Indonesia unskilled-labor intensive product in 1996 and 2016 have similar formation of top 10 commodities.
Commodities are dominated on footwear outwear, textile and garment also articles of apparel, and clothing accessories. Nevertheless, there is outlier commodity in 1996, that is furniture and parts of thereof.
Surprisingly, in 2016 the number one commodity in unskilled-labor intensive is pottery.
Figure 1.6.3 “Product Mapping”: Top Ten Technology Intensive Products of Indonesia 1996-2016 in “A” Quadrant
-1-.50.51TBI
-1 -.5 0 .5
RSCA
INDONESIA-TECHNOLOGY INT 1996
In 1996, there is only one commodity that includes in technology intensive product such as
Fertilizers, manufactured. In contrast, in 2016 there are some, or four commodities that
includes in technology intensive products such as Alcohols, phenols etc., and their
derivatives, Office machines, Nitrogen-function compounds and Equipment for distribution
of electricity. Therefore, the pattern of Indonesia technology intensive product from 1996 to
2016 is change dramatically
Figure 3.6.1 “Product Mapping”: Top Ten Primary Products of Turkey 1996-2016
-1-.50.51TBI
-1 -.5 0 .5 1
RSCA
TURKEY-PRIMARY PRODUCTS
Figure 3.6 “Product Mapping”: Top Ten Products of
Turkey between 1996 and 2016
Figure 3.6.2 “Product Mapping”: Top Ten Unskilled Labor Intensive Products of Turkey 1996-2016
-1-.50.51TBI
-1 -.5 0 .5 1
RSCA
TURKEY-UNSKILLED LABOR INT 1996
Figure 3.6.3 “Product Mapping”: Top Ten Technology Intensive Products of Turkey 1996-2016
-1-.50.5TBI
-1 -.5 0 .5
RSCA
TURKEY-TECHNOLOGY INT 1996
Conclusions
1. Between period of 1996 and 2016 OIC main actors such as Morocco, Turkey, Saudi Arabia and Egypt were able to maintain the comparative advantage in two sectors, such as primary products and unskilled labor intensive product.
2. Countries like Bahrain, Oman and Qatar were able to maintain the comparative advantage only in primary products.
3. Indonesia, Pakistan and Malaysia, they together, were able to maintain their comparative advantage in their primary products. Hence, the have different characteristics of factor endowments;
4. Indonesia and Pakistan are countries with abundant labors, Indonesia and Pakistan were able to maintain comparative advantage in unskilled-labor intensive products.
5. In contrast, Malaysia is more technology intensive, since Malaysia’s has scarce of labors
compare to Indonesia.
These research finding is in line with Heckscher-Ohlin (H-O) model. H-O model is a mathematical model of international trade developed by Eli Heckscher and Bertil Ohlin. This model is based on David Ricardo's theory of comparative advantage and predicts patterns of trade and production based on the number of endowment factors of a country.
This model essentially states that a country will export products that
use cheap and abundant factors and import products that use rare
factors
Recommendation
Thank You
RESULT AND
DISCUSSION
RSCA 1996 RSCA 2006 RSCA 2016
No. CommCode Commodity No. CommCode Commodity No. CommCode Commodity
Primary Products 1
232
Natural rubber latex;
rubber and gums
1
424
Other fixed vegetable oils, fluid or solid, crude, refined
1
424
Other fixed vegetable oils, fluid or solid, crude, refined 2
424
Other fixed vegetable oils, fluid or solid, crude, refined
2
232
Natural rubber latex;
rubber and gums 2
232
Natural rubber latex;
rubber and gums 3
245
Fuel wood and wood charcoal
3
322
Coal, lignite and peat
3
322
Coal, lignite and peat 4
287
Ores and concentrates of base metals, nes
4
72 Cocoa
4
245
Fuel wood and wood charcoal
Unskilled-Labor Intensive Products
5 851 Footwear 5 651 Textile yarn 5 651 Textile yarn
6
844
Under garments of textile fabrics, not knitted or crocheted
6
844
Under garments of textile fabrics, not knitted or crocheted
6
851 Footwear 7
653
Fabrics, woven, of man-made fibers (not narrow or special fabrics)
7
653
Fabrics, woven, of man-made fibers (not narrow or special fabrics)
7
844
Under garments of textile fabrics, not knitted or crocheted
8
842
Men's and boys' outerwear, textile fabrics not knitted or crocheted
8
851 Footwear
8
653
Fabrics, woven, of man-made fibers (not narrow or special fabrics)
Technology Intensive Products 9
562
Fertilizers, manufactured
9
512
Alcohols, phenols etc, and their derivatives
9
512
Alcohols, phenols etc, and their derivatives
10
512
Alcohols, phenols etc, and their derivatives
10 513 Carboxylic acids,
and their derivatives 10
751
Office machines
Table 3.5 RSCA Analysis – Indonesia Case of Top 10
Commodities for Three ETA Groups
RSCA 1996 RSCA 2006 RSCA 2016
No. CommCode Commodity No. CommCode Commodity No. CommCode Commodity
Primary Products 1
121
Tobacco unmanufactured;
tobacco refuse
1
46
Meal and flour of wheat and flour of meslin
1
46
Meal and flour of wheat and flour of meslin
2
91 Margarine and shortening 2
121
Tobacco unmanufactured;
tobacco refuse
2
273
Stone, sand and gravel 3
46
Meal and flour of wheat and flour of meslin
3
57
Fruit and nuts, fresh, dried 3
25
Eggs, birds', and egg yolks, fresh, dried or preserved
4
62
Sugar confectionery and preparations, non-chocolate
4
273
Stone, sand and gravel
4
278 Other crude minerals
Unskilled-Labor Intensive Products 5
845
Outerwear knitted or crocheted, not elastic nor rubberized
5
846
Under-garments, knitted or crocheted
5
659
Floor coverings, etc 6
846
Under-garments, knitted or crocheted
6
659
Floor coverings, etc
6
846
Under-garments, knitted or crocheted
7
658
Made-up articles, wholly or chiefly of textile materials, nes
7
658
Made-up articles, wholly or chiefly of textile materials, nes
7
844
Under garments of textile fabrics, not knitted or crocheted
Technology Intensive Products 8
773
Equipment for distribution of electricity
8
775
Household type equipment, nes
8
775
Household type equipment, nes
9
775
Household type equipment, nes
9
773
Equipment for distribution of electricity
9
727
Food-processing machines (non-domestic) and parts thereof, nes
10
727
Food-processing machines (non-domestic) and parts thereof, nes
10
727
Food-processing machines (non-domestic) and parts thereof, nes
10
722
Tractors (other than those falling in heading 74411 and 7832)
