Where Pakistan Stands Among Top Rice Exporting Countries, an Analysis of Competitiveness

Muhammad Abdullah, Jia Li*, Sidra Ghazanfar, Jaleel Ahmed, Imran Khan, and Mazhir Nadeem Ishaq

1College of Economics and Management, Northeast Agricultural University, Harbin 150030, China

2School of Management, Harbin Institute of Technology, Harbin 150001, China

3Department of Management Sciences, Harbin Institute of Technology, Harbin 150001, China

Where Pakistan Stands Among Top Rice Exporting Countries, an Analysis of Competitiveness

Muhammad Abdullah1, Jia Li1*, Sidra Ghazanfar1, Jaleel Ahmed2, Imran Khan3, and Mazhir Nadeem Ishaq1

1College of Economics and Management, Northeast Agricultural University, Harbin 150030, China

2School of Management, Harbin Institute of Technology, Harbin 150001, China

3Department of Management Sciences, Harbin Institute of Technology, Harbin 150001, China

Under the umbrella of WTO, the reduction in trade barriers has forced the policy makers to focus on the export competitiveness. Rice is an important source for foreign exchange earnings for the economy of Pakistan, keeping in mind of this fact, the competitiveness of Pakistan's rice with other major exporters was examined by applying revealed competitive advantage. The domestic consumption trends of rice among the major rice exporting countries were also analyzed in the current study. The results revealed that as compare to other major exporters of rice in the world, Pakistan had high competitive and comparative advantage in the production of rice. The comparison of the movements in comparative advantage indices for Pakistan with the major world rice competitors/exporters showed that Pakistan possessed relatively high comparative and competitive advantages in rice production. The declining domestic per capita consumption of rice and increasing trends in competitiveness for Pakistan clearly revealed the expected potential of higher growth which meant that rice exports from Pakistan could continue to play an important role for the earnings of foreign exchange. In order to exploit the potential benefits of rice exports, we need to strengthen the competitiveness in rice sector of Pakistan.

export, rice, competitiveness, foreign exchange, Pakistan

Introduction

Rice is an important cash crop of Pakistan that is not only used to meet the domestic food demand, but also plays an important role to earn considerable amount of foreign exchange for the country every year. Rice production enjoys a significant position in agriculture sector as well as in the national economy of Pakistan. Pakistan is the world's 13th largest producer of rice, after China, India, Indonesia, Bangladesh, Vietnam, Thailand, Myanmar, Philippines, Brazil and Japan, and it is the 5th largest exporter of rice after Thailand, Viet Nam, India, and USA (FAO, 2011). From 2001 to 2011, Pakistan produced an average of 7.79 million tones rice every year and it contributed about 8.5% to world rice export (FAO, 2011). Most of rice varieties are grown in the land of Punjab and Sindh Provinces of Pakistan where millions of the farmers depend on its cultivation, as it is their major source of income. Basmati rice is the popular type of rice which is famous for its quality and aroma and Pakistan is one of the largest producers of basmati rice. India is the main competitor of Pakistan for basmati rice, while Vietnamand Thailand are the main competitors of Pakistan for IRRI verities of rice. Rice being a staple food item for majority of the world population is traded from all over the world, major portion of the world rice production is consumed domestically, while only 7% of the world production was traded internationally and it is the 6th major export commodity in the world, while the 2nd most exported commodity in Asia (FAO, 2011). The purpose of this study was to analyze the competitive position of Pakistan in world rice export and to discuss the issues that influenced the competitiveness of Pakistani rice market.

Data and Methodology

For this study, the data regarding rice production, exports and imports for the period from 2000 to 2011 for 10 major rice exporting countries was extracted from Food and Agriculture Organization of United Nations. Additionally the data regarding the population was also obtained from FAO. These 10 countries were selected on the basis of export volume of rice in 2011. For the computation of per capita consumption of rice for the respective countries, the imports of rice were added to the production and the exported quantities were subtracted from the resulting values. The obtained value was divided by the population in order to obtain the per capita consumption of rice. To measure the export competitiveness for 10 major rice exporters of the world, we used Balassa's (1965) and Vollrath's (1991) Revealed Comparative Advantage (RCA) competitive index. Many researchers (Balassa, 1989; Chen, 1995; Batra, 2005; Laursen, 1998; Hinloopen and Van, 2001) have used these indicators to measure the competitiveness and comparative advantages for different data sets. By following Akhtar et al. (2009), in this study, we used two measures named as RCA and RCA#. In order to measure the competitiveness, Balassa (1965) had developed RCA measure. Afterwards, to avoid double counting problem and to measure the international competitiveness, Vollrath (1991) developed RCA's improved and comprehensive version RCA#. Bender and Li (2002) had also used this sophisticated measure for international competitiveness. Akhtar et al. (2009) have defined RCA and RCA# as: and

Results

Table 1 contained the information about percentage contribution in financial terms of each country over the time in overall world exports of rice. As compared to other focused years Pakistan contributed more in 2006. We could also observe that Pakistan did notincrease its share, since 2000. Similarly Pakistan did not increased its percentage share in over all the rice exports. Difference between percentage values of year 2000 and 2011 revealed that the contribution of Pakistan had decreased in following years, except the year of 2006 and 2010, which showed a slight increase in export contribution to overall world. India also had mixed kinds of the results. But the point that could be noted was that there was significant difference between the percentage values of years of 2000 and 2011. Thailand had a major contribution in overall world's rice exports. Table 1 showed that Thailand had a constant growth in its rice exports. From 2000 to 2011, USA had mixed kinds of the results, but overall its contribution in rice exports decreased. Vietnam had significant results in terms of percentage contribution in rice exports and there could be seen a massive difference between the percentage contribution of the years of 2000 and 2011. Italy had gradually decreased its share in rice exports. Uruguay also had a decreasing trend in rice exports. Brazil also seemed in its struggling phase, but its share increased in overall rice exports. China had a decreasing trend throughout the study period. Rice exports of Argentina remained constant throughout the study period.

Fig. 1 defined average rice exports in terms of the value of each focused country from 2000 to 2011. Thailand (THD) was the major exporter of rice in the world in terms of the value. From 2000 to 2011, Thailand had contributed in rice exports more than any other country. Vietnam (VTM) stood at the second number in rice exports. India (IND) was at the third. USA and Pakistan (PAK) remained at the fourth and the fifth position in contributing overall world's rice exports, respectively. China (CHN), Uruguay (URG), Italy (ITL), Argentina (ARG) and Brazil (BRZ) were at the sixth, seventh, eighth, ninth and tenth number, respectively.

Table 1　Percentage contribution in overall world's rice exports (in terms of Dollar value)

Fig. 2 depicted the overall trend of rice export in terms of the value from 2000 to 2011 of the major rice exporters in our sample. Fig. 2 confirmed that Thaliand was the major contributor in world's rice exports. Moreover, it showed that Thailand had an increasing trend throughout the study period. During the year 2004 and 2008,Thailand's rice export had increased as compare to other study periods. India also had an increasing trend. During the years of 2002 and 2007 India's rice export had increased as compared to other study periods. Pakistan's rice export increased at decreasing rate throughout the study period. It could be observed that Pakistan's rice export increased from 2004 to 2006, and similarly from 2007 to 2010. It had been observed that USA rice export was decreasing. From 2000 to 2011, the rice exports of Vietnam adopted the mix trend.

Fig. 1　Average rice export quantities (tons) from 2000 to 2011 by major rice exporters

Fig. 2　Rice exports with respect to value (000$) from 2000 to 2011

Table 2 defined the annual per capita rice consumption patterns in the sample selected. Table 3 contained the information about competitiveness indicator (RCA) of major rice exporters in the world. Similarly, Table 3 interpreted the competitiveness (RCA#) for 10 major rice exporters. According to Table 2, rice consumption in Pakistan had decreased over time. Competitiveness indices (RCA and RCA#) also indicated that competitiveness had increased in case of Pakistan. As the population of India had anincreasing trend, similarly its rice consumption had also an increasing trend. Competitiveness indices indicated that competitiveness was decreasing in case of India. Thailand is the major exporter of rice in the overall world rice exports. On the other hand, its consumption was also greater than any other country in our selected sample. From 2000 to 2011, the competitiveness indices remained almost constant. It meant the competitiveness of Thailand in rice exports was neither substantially increasing nor decreasing.

Table 2　Annual per capita rice consumption

USA had also mix kinds of consumption patterns from 2000 to 2011. According to RCA competitive index, USA was not competitive in 2001. RCA# was also supporting the results of RCA as USA was not competitive in rice exports during 2001. Vietnam had also increasing consumption patterns. As its rice consumption was almost equal to the Thailand's rice consumption. We had found Vietnam as competitively advantageous in rice exports during the time period 2000 to 2011. From 2000 to 2004, the rice consumption in Italy increased, and after 2004, its consumption went down gradually. The competitiveness indices for Italy had confirmed that it remained competitive throughout the study period except in 2001.

According to Table 2, consumption patterns for Uruguay varied over the time. However, Uruguay appeared to be a massive rice consumption country. It could be observed from Tables 3 and 4 that competitiveness of Uruguay apparently decreased over the time and it showed a massive decline in competitiveness from 2000 to 2011. From Table 2, Brazil showed mixed consumption patterns from 2000 to 2011. Except for three years, 2008, 2009 and 2011, it was confirmed from Tables 3 and 4 that Brazil was not competitively advantageous country at all. Its RCA was less than unity and RCA# was negative for eight years.

As China is the most populous country of the world. Table 2 had confirmed that its consumption was greater than that of many selected countries. The appealing point that could be observed from Tables 3 and 4 was that, China remained competitively disadvantageous country throughout the study period. China fell at the last number of the ranking, with the least competitive advantage. From Table 2, Argentina had the positive and mixed kinds of the consumption pattern. Argentina was a competitively advantageous country as its RCA in all years was greater than one. Moreover, in Table 4, its RCA# was also positive for all time periods selected for this study.

Table 3　Competitiveness indicators (RCA) of major rice exporters

Table 4　Competitiveness indicators (RCA#) of major rice exporters

Discussion

Thailand and India were the largest Asian exporters of rice with 43.6% of the world market share in 2011, while Pakistan ranked at the 5th with 8.5% share to the world total rice export, but having the greatest share to rice export does not mean that Thailand and India have the greatest competitive advantage. Pakistan ranked at the top in competitiveness among the major rice exporters. Pakistani Basmati rice was itself a brand image of Pakistan throughout the world and it was being exported to around 70 countries in the world. The aroma and the length of the Pakistani rice give a special competitive edge to Pakistan in rice trade. Although Pakistan had the highest competitive advantage over other major players of the world in rice export, but the competitiveness of Pakistani rice showed variation in different years of world export patterns. From 2000 to 2004, there was a decline in competitiveness of Pakistan's rice export; from onward there was a positive increase in competitiveness. However, the competitiveness of Pakistan rice export decreased in 2011 as compared to 2010, while thecompetitiveness of Indian and Thailand rice showed an increase in 2011 as compared to 2010. There were several reasons of decline in rice competitiveness of Pakistan. Pakistani rice eventually fell away to their competitor India who had started to edge out Pakistani rice in the international trade market. Pakistani rice market was facing tough competition from Indian rice market because of their lower rice prices and excessive rice supply. Indian government was facilitating their producers through high subsidies, low price seeds, urea and pesticides. Government of India had also lift up the ban on non-basmati rice export and had devaluated the Indian currency to encourage domestic export. While Pakistani producers and exporters were facing the burdens of high tax rate, production cost, high prices and electricity shortage. High production cost and high prices were the major barriers to rice export form Pakistan. The price of our long grain rice was higher than the prices of Vietnam's long grain rice, while the price of Pakistani Basmati was higher than Indian Basmati rice. Hence, buyers from all over the world had alternative cheaper options to buy which badly affected Pakistan's rice trade in international market. Electric power outages were creating increase in the cost of rice production in Pakistan. Use of power generators to fulfill the power needs had increased the cost of rice processing. High discount rates as compared to regional countries including Bangladesh, India, and Sri Lanka were another reason of decline in competitiveness and export. Shifting of Quality Review Committee (QRC) from Rice Exporters Association of Pakistan to Trade Development Authority of Pakistan (TDAP) had also affected the rice export from Pakistan. Exporters didn't seem to be satisfied with the quality check and standards of TDAP.

Lacking of Research and Development (R&D) was also one of the major reasons behind decline in rice exports competitiveness of Pakistan. Hence, there is an urgent need to consider all the problems and barriers encountered to rice export from Pakistan, in order to protect the rice exports from intense international competition, the research instituted should upheld WTO disciplines to support rice exports and more investment should be made in rice research and at the technical training institutes. Focus should be made on investment in improved storage facilities, pest reduction, and yield improvement and in the development of rice verities which were water efficient. Efforts should also be made on marketing activities, in order to exploit the potential benefits in the world's rice market.

References

Akhtar W, Sharif M, Shah H. 2009. Competitiveness of Pakistani fruits in the world market. The Lahore Journal of Economics, 14(2): 125-133.

Balassa B. 1965. Trade liberalization and revealed comparative advantage. The Manchester School of Economics and Social Studies, 33(2): 92-123.

Balassa B. 1989. Comparative advantage, trade policy and economic development. London, Harvester Wheat Sheaf. pp. 25-27.

Batra A, Khan Z. 2005. Revealed comparative advantage: an analysis for India and China. Indian Council for Research on International Economic Relations, Indian, pp. 167-168.

Bender S, Li K W. 2002. The changing trade and revealed comparative advantages of Asian and Latin American manufacture exports. Yale University, Economic Growth Center. pp. 841-843.

Chen J. 1995. An empirical test of competitiveness among major rice exporting countries. Department Of Agriculture Economics, Michigan State University. pp. 48-49.

FAO. 2011. Food and agriculture organization, statistic division. http:// www.fao.org.

FAO. 2014. Food and agriculture organization, statistic division. http:// www.fao.org.

Hinloopen J, Van M C. 2001. On the empirical distribution of the Balassa index. Weltwirtschaftliches Archiv, 137(1): 1-35.

Laursen K. 1998. Revealed comparative advantage and the alternatives as measures of international specialization. Copenhagen Business School, Department of Industrial Economics and Strategy/ Aalborg University, Department of Business Studies. pp. 98-30. Vollrath T L. 1991. A theoretical evaluation of alternative trade intensity measures of revealed comparative advantage. Weltwirtschaftliches Archiv, 127(2): 265-280.

F31 Document code: A Article ID: 1006-8104(2015)-02-0080-07

11 December 2014

Muhammad Abdullah (1984-), male, Ph. D, engaged in the research of rice marketing in Pakistan. E-mail: neau2010@outlook.com

. Jia Li, professor, supervisor of Ph. D student, engaged in the research of economic management of agriculture and forestry. E-mail: neau2011@outlook.com