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Editors: Ludo Cuyvers Wilma Viviers Publishers: African Sun Media

Editors: Ludo Cuyvers Wilma Viviers Publishers: African Sun Media. Background of the DSM research. 2006 NWU, Univ of Antwerp and VU Brussels – research project on information needs of exporters

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Editors: Ludo Cuyvers Wilma Viviers Publishers: African Sun Media

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  1. Editors: LudoCuyvers Wilma Viviers Publishers: African Sun Media

  2. Background of the DSM research • 2006 NWU, Univ of Antwerp and VU Brussels – research project on information needs of exporters • Prof Cuyvers (UA) – Board of Directors of FIT (Flemish Investment and Trade: 1994 -): development of DSM • Prof Viviers – research in international trade, SEDA trainer, ITRISA certificate etc.. • Viviers approached dti – DSM for SA – reasons: scarce resources, focused export promotion • The DSM provides a focused approach to export promotion by identifying and prioritising export opportunities on a scientific basis • 2007- 2011 DSM for SA – on SITC 4, HS 6 (twice) • Why this book on Export promotion and DSM – take stock of developments of DSM since 1994 AND requests of dti, provgov’t, export councils, etc

  3. Outline of the book… Chapter 1: Introduction PART I: The development of a decision support model for export promotion • Chapter 2: The political economy of public export promotion: the case of the Flemish region, Belgium • Chapter 3: Overview of international market selection methods • Chapter 4: Methodology of the decision support model. PART II: Applications of the DSM in selected countries • Chapter 5: Belgium’s export opportunities and export potentials in the world: A quantitative assessment using the DSM approach • Chapter 6: Realistic export opportunities and export potentials: a comparison using DSM results for Belgium, South Africa and Thailand • Chapter 7: The identification of export opportunities for South Africa in the rest of the African continent PART III: Strategic use of the DSM methodology and results • Chapter 8: The assessment of public export activities using DSM results: the case of Belgium • Chapter 9: Developing strategies for export promotion using a decision support model: South African case studies • Chapter 10: Adaptation and application of the DSM for services in South Africa • Chapter 11: Exporter’s information requirements: competitive intelligence as an export promotion instrument

  4. A Decision Support Model to identify realistic export opportunities for South African products and services Pr Prof Wilma Viviers Dr ErmieSteenkamp Dr Sonja Grater

  5. Outline… • Background • DSM Dashboard • Methodology • Results • Applications and work in progress

  6. Background… • the dti, National Export Strategy, 2007: “…the lack of a scientific method to prioritise markets and products resulted in a shotgun approach to export promotion…The challenge lies in how to select and prioritise markets from a global list of export opportunities... ” • NIPF (2007) – importance of diversification of exports • New Growth Path (2010) – to increase exports for job creation • The DSM provides a focused approach to export promotion by identifying and prioritising export opportunities on a scientific basis.

  7. ∑1,296,720 possible country-product combinations

  8. Starting from 1,296,720 possible world-wide possible export opportunities... Use a filtering process to select export opportunities with the most potential ∑236 640 possible country-product combinations

  9. DSM methodology in a nutshell The DSM uses a sequential filtering process (4 filters) that will eliminate less promising export opportunities and focus on those countries and product-country combinations that show the most potential

  10. The DSM Dashboard… • Examples: • General DSM dashboard information • Product: • Oranges (HS 080510) • Automobiles (HS 870323)

  11. DSM methodology – Filtering process • Filter 1 • Filter 2 • Filter 3 • Filter 4

  12. Filter 1 • Filter1.1 • Country risk scores for political and commercial risks (ONDD) • Filter 1.2 • GDP (IMF, World Bank) • GDP per capita (IMF, World Bank) • GDP growth (IMF, World Bank) • GDP per capita growth (IMF, World Bank) • Cut-off value: X – αδ • Should be selected based on GDP or GDP per capita for at least two years.

  13. Results: Filter 1.1 – Country Risk Ratings 240 countries 209 countries with a country risk score below 9.286 196 countries enter next stage due to data limitations 7

  14. Filter 1.2 – GDP and GDP per capita analysis 196 countries 67 countries selected i.t.oGDP &GDP per capita 65 countries selected i.t.oboth GDP growth & GDP per capita growth Total selection of 106countries after filter 1 Data available for only 101 countries that enter filter 2 8

  15. the filtering process • Filter 1 • Filter 2 • Filter 3 • Filter 4

  16. Filter 2 • Relative market size and -growth: • Import statistics per country/product combination on a HS 6-digit level (UN Comtrade) • Imports as proxy for demand potential (market size) • Import growth in the short and long term

  17. Categorization of countries and products 545,703country / product combinations • Category 3 • 17,494 • Category 4, 5, 6 • 106,985 • Category 7 • 14,636 139,115 country / product combinations 11

  18. the filtering process • Filter 1 • Filter 2 • Filter 3 • Filter 4

  19. Filter 3.1 • Market penetration (concentration ratio) • Herfindahl-Hirschman-index HHIij = ∑ (Xkij / Mtot,ij)2 • Xkij the exports of country k to country i for product category j. • Mtot,ij country i’s total imports of product category j. • More concentrated markets, more difficult to penetrate

  20. Filter 3.2 • Market accessibility index • International shipping time per country (ocean freight) from Durban harbour to the main port in the destination country (source: freight forwarder) • international shipment cost (ocean freight) from Durban harbour to the main port in the destination country (source: quotes obtained from freight forwarder) • domestic time to import(source: Doing Business Report, The World Bank) • time required for obtaining all necessary documents, • inland transport and handling, • customs clearance and inspections and • port and terminal handling • domestic cost to importsimilar to iii (source: Doing Business Report, The World Bank) • logistics performance index(source: Arvis, Mustra, Ojala, Shepherd and Saslavsky, 2010) • the efficiency of the customs clearance process; • quality of trade and transport-related infrastructure; • ease of arranging competitively priced shipments; • competence and quality of logistics services; • ability to track and trace consignments; and • the frequency with which shipments reach the consignee within the scheduled or expected time • ad valorem equivalent tariffs per product-country combination (source: UN Comtrade ) • Ad valorem equivalent NTB per product (source: Kee, Nicita and Olarreaga, World Bank)

  21. Filter 3.2 (continues) • An index value compiled by means of an principle components analysis. • Three factors that measure the market accessibility of a market: • a domestic factor that incorporates domestic time and cost and the LPI; • an international factor that includes international shipping time and –cost; and • a barrier factor that includes tariff and non-tariff barriers. • The three factor scores added to arrive at a market accessibility index for each product-country combination that entered filter 3. • Provides a score for each product-country combination relative to all other product-country combinations included in the analysis.

  22. Filter 3 139,115country / product combinations enter filter 3 Category 3 – 48.1% concentration allowed A cut-off value is defined based on the average and standard deviation of the market accessibility index over all countries. Cut-off: 35.81% market accessibility Category 4, 5, 6 – 49.9% concentration allowed Category 7 – 51.7% concentration allowed 89,229 country/product combinations selected based on market concentration 115,360 country/product combinations selected based on market accessibility 66,222 country / product combinations enter filter 4 15

  23. the filtering process • Filter 1 • Filter 2 • Filter 3 • Filter 4

  24. Filter 4 • Classification of REOs • Market characteristics (size and growth, filter 2) • Relative market share of South Africa

  25. DSM methodology … • Filter 4: Classification of realistic export opportunities (REOs)

  26. DSM results…

  27. Geographical distribution of potential value of export opportunities

  28. Top 10 countries (total potential export value)

  29. Top10 products and services 10

  30. Top 10 product-country and services-country combinations

  31. Strategic implications for Export promotion organisations (Number of export opportunities for products)

  32. Strategic implications for Export promotion organisations (Potential export values $US thousands)

  33. Applications of the DSM and work in progress • New research unit: TRADE (Trade and Development) – June 2012 • Rerun of DSM for South Africa to the rest of the world and Africa • Linking DSM export opportunities with provincial production and IPAP 2 clusters and impact on employment. • Firm-level survey on exporters • Production, sales and export, export destinations, employment, investment, capital and labour inputs, productivity, etc. • In-depth market studies on selected realistic export opportunities • Examples: dried apricots, red meat, macadamia nuts to Germany, extruders to Tunisia.

  34. Other publications on DSM methodology and South Africa results • STEENKAMP, E.A., ROSSOUW, R., VIVIERS, W. & CUYVERS, L. 2009. Export market selection methods and the identification of realistic export opportunities for South Africa using a decision support model. http://www.sadctrade.org/node/281. Date of access: 17 Dec. 2009. • VIVIERS, W., STEENKAMP, E.A. & ROSSOUW, R. 2010. Identification of realistic export opportunities for South Africa: application of a decision support model (DSM) using HS 6-digit level product data: report prepared for the Department of Trade and Industry, South Africa, September. 57p. • PEARSON, J.J.A., VIVIERS, W., CUYVERS, L. & NAUDE, W. 2010. Identifying Export Opportunities for South Africa in the Southern Engines: A DSM Approach. International Business Review 19(4): 345-359, August. • GRATER, S., STEENKAMP, E.A. & VIVIERS, W. 2011. Identification and comparison of export opportunities for South African products and services. In Dumont, M. & Rayp, G. (eds). 2011. International Business. Garant Publishers: Antwerp, Belgium.

  35. Thank you Questions? Contact details: Wilma.Viviers@nwu.ac.za

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