Goran ZivkovJune 2017, IAMO, Hale

Export driven competitiveness in Europa and Central AsiaUnderstanding competitiveness concept to increase export

• 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,

Agriculture is more integrated and competitive but still there is no country without agriculture Soybean prices in China, Serbia and USA

Maize price USA and Serbia

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Produktna berza CBOT DCE

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Mineapolis Novi Sad

World Competitiveness

World share and production growth in relation to the World (2007 – 2014)

Asia is driving world agriculture in production terms

Cereals

Cereals

Cereals

Oilcrops

Oilcrops

Oilcrops

Vegetables

Vegetables

Vegetables

Fruits

Fruits

Fruits

Meat

Meat

Meat

MilkMilk

Milk

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90%

-5% -4% -3% -2% -1% 0% 1% 2% 3%

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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 (2007 – 2015)

Meat

Dairy

Vegetables

Fruits

Cereals

Oilcrops

MeatDairy

Vegetables

Fruits

Cereals

Oilcrops Meat

Dairy

Vegetables

FruitsCereals

Oilcrops

0%

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30%

40%

50%

60%

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80%

-10% -5% 0% 5% 10% 15%

EU Asia USA

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

-4% -3% -2% -1% 0% 1% 2% 3%

Western Balkan CIS NMS EU15 Ukraine Serbia

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

-4% -2% 0% 2% 4% 6% 8% 10%

Western Balkan CIS NMS EU15 Ukraine Serbia

Area harvested 2007-2014 Trend of production related to World 2007-2014

Production Growth Base

986.42 mil. $

5.83 bil. $

33.74 bil. $

604.23 mil. $

3.79 bil. $

886.36 mil. $

-0.50%

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Ave

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e

Average growth in relation to the World

Export growth in relation to the World 2010-2015

CEFTA NMS EU15 South Caucasus CIS Central Asia

Export Growth

Export trends in selected countries (2010-2015)

GeorgiaAzerbaijan

Kazakhstan

Tajikistan Armenia

Russian Federation

Serbia

Poland

Turkey

Iran

-0.50%

0.00%

0.50%

1.00%

1.50%

2.00%

-10% -5% 0% 5% 10% 15% 20% 25%

Ave

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orl

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e

Average growth in relation to the World

Georgia

Azerbaijan

Kazakhstan

Tajikistan

Armenia

Ukraine

Russian Federation

Serbia

Bosnia Herzegovina

Poland

Turkey

Iran

Export Growth

Export structure (average 2010-2015)

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CEFTA NMS EU15 CIS Caucasus CentralAsia

Meat Dairy Fruits Vegetables Cereals Industrial crops

Export destinations (average 2010-2015)

Export structure and destination will change

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CEFTA NMS EU15 Russia Rest of CIS

CEFTA NMS EU15 Russia Rest of CIS Other

1.102.28

93 54 0.491.39

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Western Balkan NMS EU15 Rest of CIS Caucasus

Export per hectare (average 2010-2015)

Small processing cause small export per hectare

Competitiveness concept Producer level

How to reduce number of mistakes?

How I can be competitive? EU have subsidies, technology …? YES YOU CAN

100 ha, investment of UAE company

2 ha, investment of SlađanaVuković, financial expert from Island

0.3 ha local producer

Blueberry prices in Serbia

Who is competitive blueberry producer?

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2010 2011 2012 2013 2014 2015 2016

US

D/k

g

Green market price Wholesale price Export price

Cost of production Marketing

Yield

LaborCost of state

Access to technology

Access to capital

Appropriated technology

Local

Investment

Knowledge

Export

Price Level of technology

Weather

Taxes

Efficiency Transport

Main factors that determine competitiveness

Properly estimating yield level

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t/h

a

Serbian 10-year average BiH 10-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)

Long term predictability is fine Minimising high variation is problem

Wheat yield level in Serbia and Bosnia and Herzegovina 1947-2016

(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 …

Predictability of prices • There are many MIS

systems and other access to price information

• Today is possible to predict prices to large extend

There is no one price, (price to specific location at specific market for specific quality (and packaging) proven by specificstandard at very specific time

Price varies

Between year

Time of sale

Point of sale Quality &

Variety

Packaging and labelling

Inflation and depreciation of currency

Price variation are high since

many factors are influencing it

Knowing prices

Potential market Import per month UV 2010 - 14 ($/t) Monthly imported price Distribution of import(% of total import per month)

Highest Lowest Weighted Average

RomaniaJanuary

1.229September

443971

BulgariaJanuary

1.022September

357662

German(average Munchen

and Hannover)

March

2.334August

1.2521.851

Greece (average Solun and Atina)

March

1.591November

797996

0 $/t

500 $/t

1,000 $/t

1,500 $/t

jan

feb

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apr

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Knowing prices

Tomato glasshouse cost and revenue structure (1 ha, 10 years), Macedonian conditions

-1,400

-1,200

-1,000

-800

-600

-400

-200

0

200

400

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year10

Th

ou

san

d E

UR

Return of investment

New glasshouse MK commong practice EA investment offer

8%1% 5%

1% 1% 1% 2% 1% 5%2% 1%

13%8% 1%

21%

28% 2%

99% 1%

1.15 mil. €

2.94 mil. €

Profit 1.95

mil. €

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tal i

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Ro

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ater

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vari

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co

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ost

s

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ma

to I

clas

s

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ma

to II

cla

ss

Am

ort

iza

tio

n

Tax

es

To

tal r

eve

nu

e

Investment costs Variable costs Inflow

Mill

ion

€Variable costs

49%

Gross margin

51%

In proper biasness plan mistakes are very small

Proper business plan

Competitivness is possible to measure today theoretically (internally and externally) before even set up production

0.00

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0.80

1.00

1.20

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2.00

Feed Other variable costs Labour Depreciation and finance

InterPig Model, 2013LMC, study of sugar sector in Serbia

Measuring competitiveness at producer level

Competitiveness concept Policy level

Working together

Policy decisions lead to individual

business decisions

Separate duties

Individual business decisions lead to

country trend

0

5,000

10,000

15,000

20,000

25,000

30,000

2010 2011 2012 2013 2014 2015

THS

USD

Albanija Makedonija

Export of tomato from Macedonia and Albania

0

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10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2013 2014 2015 2016

Thsd

.USD

Export structure of crude oil: BiH 2013-2016

Turkey Others (11 countries)

Adding 44 million USD of export of refined oil

Policy influence at competitiveness

SEEDEV Competitiveness Model

Scoring formula for each product follows:

𝑚𝑖 =

𝑥𝑖𝑛 + 1

∙ 5 + 1

𝑗=1𝑛 (

𝑥𝑖𝑗

𝑛 + 1∙ 5 + 1)

where 𝑚𝑖 is score for the product 𝑖; 𝑥𝑖 – rank of the product 𝑖 for the specific

criteria; 𝑥𝑖𝑗– rank of the product 𝑖 for the criteria 𝑗 ; 𝑛 – total number of products

in the analysis.

Products are scored 1-10 so the formula determines the tenth of all products in which the products’ rank is in for the specific criteria and assigns corresponding score.

Chart Title

Production quantity Area harvested Yield Export quantity Value of export Export unit value

0

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ProductionShare

ProductionTrend

Area Share

Area Trend

Yield Share

Yield Trend

QuantityShare

QuantityTrend

Value Share

Value Trend

UV Share

UV Trend

Fruits Apple

Hazelnut

Persimmon

Pro

du

ction

Trad

e

Share and trends

Production, trade, area harvest, export unit value, yield …

More than 30 indicators

Comparing with region (Central Asia, Caucasus, Western Balkan), EU, World

Production share0.

47%

0.02

%

0.25

%

0.30

%

0.57

%

0.32

%

0.19

%

3.55

%

0.02

%

0.07

%

0.38

%

0.10

%

0.16

%

3.32

%

0.21

%

4.71

%

0.00

%

0.31

%

0.07

%

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%

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%

0.01

%

0.03

%

0.33

%

0.21

%

0.00

%

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%

0.28

%

0.00

%

0.30

%4.93

%

3.41

%

2.55

%

3.99

%

46.5

3%

41.7

0%

21.0

6%

17.5

2%

6.29

%

8.78

%

77.5

0%

3.97

%

21.7

6%

0.00

% 5.87

%

0.98

%

0.00

%

2.74

%

11.6

5%

0.20

% 5.92

%

36.1

5%

0.00

%

3.28

%

1.49

%

0.00

% 5.18

%

6.08

%

2.38

%

5.26

%

4.37

%

1.91

%

1.05

%

1.98

%

4.68

%

0.24

%

1.09

%

3.51

%

1.77

%

6.14

%

98.6

0%

3.75

%

14.2

2%

0.00

%

4.06

%

2.00

%

0.00

%

14.5

0%

0.13

%

0.97

% 5.83

%

4.87

%

0.00

%

4.13

% 9.13

%

0.00

%

2.65

%

0%

20%

40%

60%

80%

100%

120%

Bar

ley

Mai

ze

Wh

eat

Ap

ple

s

Ap

rico

ts

Ch

erri

es

Gra

pe

s

Haz

eln

ut

Lem

on

Man

dar

in

Mel

on

Pea

ch

Pea

rs

Per

sim

mo

ns

Plu

m

Qui

nce

s

Stra

wb

erri

es

Wat

erm

elo

ns

Co

tto

n

She

ep

Bo

vin

e m

eat

Tea

Car

rot

Cu

cum

bers

an

d g

her

kin

s

Eggp

lan

ts

Lee

ks

On

ion

s

Po

tato

es

Spin

ach

Tom

ato

es

Cereals Fruit Ind. Anim. Tea Vegetables

Production share of Azerbaijan

World share CIS share Region share

*Pomegranate is not taking into consideration since there is no reliable data for many countries

Export trends by products in Serbia (average 2010-2015)

Measuring trend by comparing with others

-60%

-40%

-20%

0%

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40%

60%

Trend Growth in relation to the World

0%

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20%

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40%

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90%

Onion Sesamumseed

Apricot Cotton Carrot Rice Beans Grape fresh Bovine live Apple Plum Tomato Potato Sunflowerseed

Wheat Poultry Bovine meat

Competitiveness of Tajikistsan in relation to CIS

Fruit Vegetable Cereal Oilcrops Industrial crops Animal products

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

Cotton Apricot Onion Beans Sesamumseed

Carrot Rice Grape fresh Apple Plum Tomato Bovine live Potato Sunflowerseed

Wheat Poultry Bovine meat

Competitiveness of Tajikistan in relation to EU

Competitiveness is changing category by area

Competitiveness is changing category by time

Serbia competitiveness analysis 2013

Serbia competitiveness analysis 2017

0

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0.9

Fruits Vegetables Cereals Industrial crops Milk

0

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25

Number of years (2005-2014)Domination (2010-2014)

SPC DPC SQC SPA

Milk 0 9 0 1 DPC

Maize 0 7 1 2 DPC

Potatoes 1 5 2 2 DPC

Grapes 0 1 1 8 SPA

Mandarins 5 0 5 0 SPC

Wheat 0 7 1 2 DPC

Tomatoes 1 4 0 5 DPC

Apples 5 5 0 0 DPC

Watermelons 0 3 7 0 DPC

Hazelnuts 4 0 6 0 SPC

Barley 0 4 6 0 DPC

Cucumbers 0 3 6 1 DPC

Eggs 2 4 0 4 DPC

Cabbages 4 2 0 4 SPA

Acronyms: SPC- successful price competitionDPC - deficit in price competitivenessSQC - successful quality competitionSPA - structural problem area (trade deficit despite low prices)

Product Competitiveness – quality and price competition case of Georgia

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.

Number of years (2005-2014)Domination (2010-2014)SPC DPC SQC SPA

Peaches 6 0 4 0 SQC

Cattle meat 0 5 2 3 SPA

Pears 2 1 4 3 SPA

Onions 0 0 9 1 SPA

Pig meat 0 5 0 5 SPA

Walnuts 1 7 2 0 DPC

Beans 0 4 6 0 DPC

Poultry meat 0 4 0 6 SPA

Sunflower seed 0 9 0 1 DPC

Carrots 0 1 2 7 SPA

Plums 6 1 2 1 SPC

Garlic 0 3 4 3 DPC

Eggplants 0 3 4 3 SPA

Cherries 2 0 8 0 SPC

Peppers 0 4 4 2 DPC

Sheep/Goat 4 0 4 2 SPC

Price and Quility Competitiveness

00.10.20.30.40.50.60.70.80.91

Belarus

Russian Federation

Kazakhstan

Austria

Romania

Germany

France

Czechia

Netherlands

Hungary

Ukraine

Spain

United Kingdom

Belgium

Lithuania

Bulgaria

Latvia

Portugal

Sweden

Italy

Poland

Ireland

Slovakia

Denmark

Slovenia

Finland

Cyprus

Turkey

Estonia

Greece

Republic of Moldova

Iran

Georgia

Turkmenistan

Uzbekistan

Kyrgyzstan

Tajikistan

Azerbaijan

Armenia

Luxembourg

MaltaDemand

EU15 NMS Rest of CIS Region

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

Turkey

Poland

Italy

France

Iran

Hungary

Germany

Spain

Rep. of Moldova

Ukraine

Greece

Austria

Netherlands

Romania

Portugal

Belgium

Belarus

Czech Rep.

Azerbaijan

Russian…

United Kingdom

Slovenia

Uzbekistan

Kyrgyzstan

Lithuania

Slovakia

Tajikistan

Ireland

Turkmenistan

Denmark

Georgia

Armenia

Kazakhstan

Bulgaria

Latvia

Sweden

Luxembourg

Estonia

Cyprus

Finland

Malta Supply

EU15 NMS Rest of CIS RegionSource: UN Comtrade

Product Competitiveness and Demand

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

GermanyBelgium

FranceNetherlands

United KingdomPoland

IranDenmark

SpainRussian Federation

TurkeyBelarus

KyrgyzstanUkraineAustria

RomaniaItaly

Czech Rep.Ireland

AzerbaijanGreeceFinland

SwedenPortugalArmenia

KazakhstanCyprus

LithuaniaSlovakiaGeorgia

HungaryRep. of Moldova

UzbekistanTajikistan

LuxembourgLatvia

BulgariaMalta

TurkmenistanEstonia

Slovenia Supply

EU15 NMS Rest of CIS Region

00.10.20.30.40.50.60.70.8

Russian FederationGermanyUnited KingdomSpainBelgiumFranceIrelandItalyGreeceTurkeyNetherlandsPolandPortugalUzbekistanDenmarkSwedenCzech Rep.SlovakiaAustriaUkraineLuxembourgHungarySloveniaRomaniaIranFinlandBelarusCyprusLithuaniaKazakhstanArmeniaBulgariaAzerbaijanKyrgyzstanMaltaLatviaEstoniaGeorgiaRep. of MoldovaTurkmenistanTajikistanDemand

EU15 NMS Rest of CIS Region

Product Competitiveness and Demand

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Caucasus Gulf Rest of CIS NMS EU15 Selected markets

Competitiveness

Product Competitiveness and Demand

Hezelnut compatitivness comparsion

Export quantity Export value Export unit value Production Area harvested Yield

Exp

ort

Pro

du

ctio

n

1

2

3

4

5

6

7

8

9

10Production Share

Production Trend

Area Share

Area Trend

Yield Share

Yield Trend

Quantity Share

Quantity Trend

Value Share

Value Trend

UV Share

UV Trend

Azerbaijan

Uzbekistan

Georgia

Iran

• 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

• ….

Implement properly regardless are you entrepreneur or policy maker