H O U C I N E B O U G H A N M I

S A R A T H K O D I T H U W A K K U J E E V I K A W E E R A H E W A

S U L T A N Q A B O O S U N I V E R S I T Y , O M A N

U N I V E R S I T Y O F P E R A D E N I Y A , S R I L A N K A

Food and Agricultural Trade in the GCC:

An Opportunity for South Asia?

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Contents

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

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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. GCC: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the Unites

Arab Emirates

SAARC: Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka

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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.

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

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Food Security Concerns

SAARC: Substantial importance for the domestic agriculture/ Poverty alleviation strategy

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

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Purpose

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.

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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

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Methods of Analysis

Patterns of trade: Market share and concentration ratios

Determinants of food and agricultural trade: Gravity model

Trade potential: Indicative Trade Potential (ITP)

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Market share: Exports or Imports as a percentage of Total exports or Total imports

Concentration ratio: Share of the top 3 trade partners

Gravity model

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Dependent variable: exportsjt (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 DISTij, comlang_officialij a colonylinkij exporter and importer fixed effects intra regional dummies

Trade potential: Trade predicted by the model as a ratio of actual

trade

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.

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CR3 of top 10 food and agricultural imports of GCC (HS 4 level)

0

10

20

30

40

50

60

70

80

90

100

HS 1511 HS 1006 HS 2070 HS 1701 HS 2020 HS 2402 HS 1003 HS 2106 HS 4020 HS 1001

C R

3 of

GC

C o

ver

imp

ort m

arke

ts

Products HS code Commodity Top 3 Exporters to GCC 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

form Brazil, India and U.A.E

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

HS Wh d li A li G d C d

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GCC share total agricultural exports of SAARC’s top ten food and agricultural product groups

0

5

10

15

20

25

30

35

40

45

50

HS 10 HS 2 HS 9 HS 8 HS 17 HS 3 HS 7 HS 23 HS 24 HS 22

% o

f tot

al a

gric

ult

ura

l exp

orts

Products

20092012

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 HS B i i d i

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Share of imports from SAARC countries of the top

ten food and agricultural imports of GCC

0

5

10

15

20

25

30

35

40

45

HS 9 HS 3 HS 14 HS 10 HS 11 HS 23 HS 8 HS 7 HS 17 HS 13 HS 2

Sh

are

of im

por

ts %

Products

20072012

Product 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

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Top 5 food and agricultural product groups exported by India to GCC

0

10

20

30

40

50

60

70

80

90

100

HS 0801 HS 1006 HS 0202 HS 1701 HS 1001

Mar

ket

shar

e

Products

201020112012

HS code Top 5 product groups exported by India HS 0801 Brazil nuts, cashew nuts & coconuts HS 1006 Rice HS 0202 Meat of bovine animals, frozen

HS 1701 Cane or beet sugar and chemically pure sucrose, in solid form

HS 1001 Wheat and meslin 9/22/2014

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Top 5 food and agricultural product groups exported by Pakistan to GCC

0

5

10

15

20

25

30

202 1006 804 204 1701

Mar

ket

shar

e

Products

201020112012

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

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Top 5 food and agricultural product groups exported by Sri Lanka to GCC

0

5

10

15

20

25

30

35

40

45

902 801 803 2106 2008

Mar

ket

shar

e

Products

201020112012

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

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

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Results of the estimation of gravity model

Conventional trade cost variables have significant effects on total and food and agricultural trade.

There is a tendency for more trade between SAARC-GCC countries.

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Variable Units Source of data

Mean Standard deviation

Total trade

Food and agricultural trade

Value of total exports

US Dollar ‘000 Trademap 4,267,000.97

24,689,000.02

Value of food and agricultural exports

US Dollar ‘000 Trademap 479,709.58 2,618,998.31

Distance kilometers CEPII 6981.72 4448.99 -1.385*** (-21.75)

-2.043*** (-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 linkages (dummy)

Na World Bank Na Na

sa_intra dummy 0.937 (1.73)

1.001 (0.90)

eastasia_intra dummy -0.170 (-0.65)

0.164 (0.30)

eu_intra dummy -0.0633 (-0.34)

0.521 (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 3106 3106 R squared country fixed effects

0.80 Yes

0.67 Yes

*** Significant at 1% probability level; ** significant at 5% probability level; *significant at 10% probability level

Results of gravity analysis

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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.

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Export potential of India to GCC countries

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

Bahrain Kuwait Oman Qatar SaudiArabia

UnitedArab

Emirates

Exp

ort v

alu

e (U

S$)

Import countries

Actual Export (A) value in '000 US$

Potential Export (A) Value in '000US$

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Export potential of Pakistan to GCC countries

0

100,000

200,000

300,000

400,000

500,000

600,000

Bahrain Kuwait Oman Qatar SaudiArabia

UnitedArab

Emirates

Exp

ort v

alu

e (U

S$)

Import countries

Actual Export (A)(Value in’000 US$)

Potential Export (A)(Value in’000 US$)

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Export potential of Sri Lanka to GCC countries

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

Bahrain Kuwait Oman Qatar SaudiArabia

UnitedArab

Emirates

Exp

ort v

alu

e(U

S$)

Import countries

Actual Export (A)(Value in’000 US$)

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Conclusions

Indian dominance in food and agricultural exports

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.

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Thank You

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