Changing revealed comparative advantage: a case study of footwear industry of Pakistan.footwear Footwear consists of garments worn on the feet. It is worn for a variety of reasons, including protection against the environment, hygiene and adornment. Usually, socks and other hosiery are worn between the feet and the footwear, except for sandals and flip flops (thongs). industry regarding its competitiveness in the global perspective and its potential for growth. The methodology of Revealed Comparative Advantage A macroeconomic concept for calculating a relative advantage or disadvantage of a certain country in a certain technological field.
Most commonly referring to an index introduced by Balassa (1965):
RCA = (Eij / Eit) / (Enj / Ent (RCA See RCA connector and video/TV history. ) is used to analyse an·a·lyse
v. Chiefly British
Variant of analyze.
analyse or US -lyze
[-lysing, -lysed] or -lyzing, the comparative advantage at 2-digit and 4-digit levels of industrial classification. The paper highlights the problems faced by the footwear industry and identifies the role of entrepreneurship en·tre·pre·neur
A person who organizes, operates, and assumes the risk for a business venture.
[French, from Old French, from entreprendre, to undertake; see enterprise. for the progress of the industry. The analysis shows that in recent years, specifically the period from 2003-06, the footwear industry has moved from disadvantage (as compared with China and India India, officially Republic of India, republic (2005 est pop. 1,080,264,000), 1,261,810 sq mi (3,268,090 sq km), S Asia. The second most populous country in the world, it is also sometimes called Bharat, its ancient name. India's land frontier (c. ) position to comparative advantage. The study indicates that there is potential for higher growth of the industry and it can become a source of export earnings. The study suggests that in the rapidly changing global economic environment and in the face of increasing cost of doing business in Pakistan Pakistan (păk`ĭstăn', päkĭstän`), officially Islamic Republic of Pakistan, republic (2005 est. pop. 162,420,000), 310,403 sq mi (803,944 sq km), S Asia. , there is a need to strengthen the competitiveness of the footwear industry in Pakistan.
JEL classification: L67
Keywords: Revealed Comparative Advantage, Footwear, Pakistan.
The global export patterns are changing fast as a result of reduction in trade barriers and technological advancements that have led to gains in productivity and change in comparative advantage patterns in world economies. Asian economies such as China and India are enjoying a notable growth in changing circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact.
2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or across the world. Pakistan also has great potential for higher growth however the political threats, socioeconomic environment and lack of updated technologies are obstruction in the way of progress.
Some sectors of Pakistan economy have shown a good performance in terms of production and exports. Footwear is one such industry which has increased its exports at large extent since 2003. This sector has pivotal importance in terms of providing and creating jobs, earning of foreign exchange with the help of exports and fulfilling the local consumption requirements.
Both in Pakistan and around the globe, the demand for footwear is increasing. Pakistan is one of the most populous pop·u·lous
Containing many people or inhabitants; having a large population.
[Middle English, from Latin popul countries in the World and according to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. an estimate with an average population growth of 2.25 percent, about 3 million children have been born during the year 2005-06, signaling the growing demand for footwear in Pakistan. It is also estimated that about 60 percent of the World's total consumption consists of simple footwear made entirely of non-leather materials and that for the remaining 40 percent only the upper part of the shoe is made of leather. In the manufacturing of footwear, most frequently used material consists upon leather, man-made materials, rubber / canvas / synthetic and textile along accessories. Different type of shoes are being produced by the local industry e.g. sportsmen, army, disabled persons and safety shoes for the industrial workers etc. The population of Pakistan is expected to be about 172 million in the year 2010. Keeping in view the growth in population, the growth in the demand of footwear industry is also anticipated.
Though, significant growth has taken place in the Shoe Industry Noun 1. shoe industry - an industry that manufactures and sells shoes
industry - the people or companies engaged in a particular kind of commercial enterprise; "each industry has its own trade publications" of Pakistan, but there is a view that it has not been up to the mark and the industry has suffered due to a growing and fierce competition of the emerging economies like India and China. There is a general perception that after suffering from the cut-throat competition especially with China, the footwear industry is doing better especially in the previous two years and it is regaining re·gain
tr.v. re·gained, re·gain·ing, re·gains
1. To recover possession of; get back again: regain one's strength. See Synonyms at recover.
2. the strength to fulfill ful·fill also ful·fil
tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils
1. To bring into actuality; effect: fulfilled their promises.
2. the local demand as well as compete efficiently in the world market.
The objective of this study is to analyse the comparative advantage of the footwear industry in Pakistan and compare it with China and India in the global perspective. The study will look into the issues facing industry regarding its competitiveness in the world market and will look at the future potential of growth in the footwear industry of Pakistan. The revealed comparative advantage Balassa Index (1965) will be used to analyse the comparative advantage at 2-digit and 4-digit level of industrial classification.
This paper is organised as follows: Section 2 reviews the literature and Section 3 focuses on the key trends in footwear industry of Pakistan. Section 4 describes the methodology and Section 5 measures and explains the empirical results. Last section concludes the study.
2. LITERATURE REVIEW
RCA measures provide indication on the movement in a region's comparative advantage. Richardson Richardson, city (1990 pop. 74,840), Dallas and Collins counties, N Tex., a suburb of Dallas; founded in the 1850s, inc. as a city 1956. Richardson manufactures telecommunications equipment, medical devices, supercomputers, computer chips, and fiber optics. and Zhang (1999) have analysed the patterns of variation across time, sectors and regions for USA. They have used the Balassa index of RCA. They find the patterns to differ across different parts of the world, over time as also for different levels of aggregation of the export data. Differentials are accounted for by factors like geographical proximity of trading partners and per capita income Noun 1. per capita income - the total national income divided by the number of people in the nation
income - the financial gain (earned or unearned) accruing over a given period of time with the extent of influence of these factors varying over time and across sectors/sub sectors.
Bender, Siegfried Siegfried (sēg`frēd) or Sigurd (sĭg`ərd), great folk hero of early and medieval Germanic mythology. and Kui-Wai Li (2002) analysed the structural performance and shift of exports and the revealed comparative advantage of the Asian and Latin Lat·in
a. The Indo-European language of the ancient Latins and Romans and the most important cultural language of western Europe until the end of the 17th century.
b. American regions over the period 1981-1997. They employed the revealed comparative advantage indices firstly to observe the related changes in export pattern among different regions and secondly to examine if changes in the export pattern are associated with shifts in comparative advantage between regions.
Utkulu and Seymen (2004) analysed the competitiveness and the pattern of trade flows from Turkey to the EU at sectoral levels. They made use of different measures of Revealed Comparative Advantage (RCA) (in addition to simple Balassa Index).
The change in Chinese Chinese, subfamily of the Sino-Tibetan family of languages (see Sino-Tibetan languages), which is also sometimes grouped with the Tai, or Thai, languages in a Sinitic subfamily of the Sino-Tibetan language stock. exports patterns has been analysed by Yue Noun 1. Yue - the dialect of Chinese spoken in Canton and neighboring provinces and in Hong Kong and elsewhere outside China
Cantonese, Cantonese dialect, Yue dialect (2001). It uses the RCA index to show the changing pattern. It is shown in his empirical investigation that the Chinese exports pattern have changed with its comparative advantage and that there are distinct differences in export patterns between the coastal regions and the interior regions in China.
Revealed Comparative Advantage (RCA) analysis has been undertaken by Batra and Khan khan
Historically, the ruler or monarch of a Mongol tribe. Early on a distinction was made between the title of khan and that of khakan, or “great khan.” Later the term khan was adopted by the Seljuq and Khwarezm-Shah dynasties as a title for the highest (2005) at both the sector and product level. The study analysed the structural change across sectors in India and China during 2000-2003 and also made a comparative analysis of RCA for India and China for the years 2000 and 2003. It employed Balassa's (1965) measure of relative export performance by country and industry/commodity for the two and six digit A single character in a numbering system. In decimal, digits are 0 through 9. In binary, digits are 0 and 1.
digit - An employee of Digital Equipment Corporation. See also VAX, VMS, PDP-10, TOPS-10, DEChead, double DECkers, field circus. level of HS classification. The index of RCA (RCAI RCAI Research Center for Allergy and Immunology (Japan)
RCAI Restorative Care of America, Inc.
RCAI Railroadiana Collectors Association, Incorporated ) is calculated using data on exports for both India and China from UN COMTRADE COMTRADE Common Format for Transient Data Exchange (IEEE) .
Another study that used the revealed comparative advantage (RCA) approach at HS 4-digit level is by Mahmood (2004). It examines export specialisation of Pakistan's non-agriculture production sectors during 1990-2000. The study explores the relative position of different non-agricultural production sectors within Pakistan's revealed comparative advantage profile and identifies those non-agricultural export categories, in which Pakistan is losing, gaining or maintaining its export competitiveness.
Hanif Ḥanīf (Arabic حنيف, plural and Jafri (2006) construct Balassa's Revealed Comparative Advantage (RCA) index for the textile sector of Pakistan. Their study explores the relationship between the financial development and international trade competitiveness in the case of Pakistan. So they examined the role of access to external finance on the country's textile exports competitiveness. The results show that greater access to external finance has a strong positive impact in the improvement of country's textile sector competitiveness.
The above mentioned empirical studies Empirical studies in social sciences are when the research ends are based on evidence and not just theory. This is done to comply with the scientific method that asserts the objective discovery of knowledge based on verifiable facts of evidence. on revealed comparative advantage provide evidence that the literature focuses more on the measurement of the comparative advantage for various sectors of economies.
3. FOOTWEAR INDUSTRY: FACTS AND PROBLEMS
In the global market, the demand for footwear is high and in most of the developing countries it is growing on average. It is also estimated that about 60 percent of the world's total consumption consists of simple footwear made entirely of non-leather materials and that for the remaining 40 percent only the upper part of the shoe is made of leather. [SMEDA SMEDA Small and Medium Enterprise Development Authority (Pakistan)
SMEDA Small and Medium Enterprise Development Agency
SMEDA Saskatoon Mountain Economic Development Authority (Canada) (2006)]. According to UN COMTRADE data, Pakistan footwear exports for the year 2006 were about US$ 135 million. Out of total footwear exports, leather footwear accounts for 43.15 percent, which makes leather footwear extremely significant.
Pakistan's footwear industry manufactures around 120 million pair annually for local consumption and it exports 2 million pair per annum Per annum
Yearly. roughly and the average price charged for each pair stands around $10. Its share in Pakistan's total exports is about to touch the figure of $200 million.
3.1. Trends and Patterns of Footwear Export Value and its Growth
Export value of footwear in 2006 increased to US$135.21 million compared to US$75.31 million in 2002 i.e. an increase of 7 percent. For India the increase in value is 9 percent while china's footwear export value grew by 9 percent in the same period.
In the years 2003 and 2004, Pakistan's footwear export value grew by 2 percent and 24 percent respectively. However, in the same years, china's footwear exports growth rate increased by 1 percent whereas India witnessed a 2 percent and 1 percent growth rates Growth Rates
The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures.
Remember, historically high growth rates don't always mean a high rate of growth looking into the future. respectively 2003 and 2004. In the years 2005 and 2006, growth in the value of footwear exports is positive but lower as compared to previous years for both Pakistan and India. However china witnessed a higher growth in the value of footwear exports in these years.
[FIGURE 1 OMITTED]
Volume of Pakistan's footwear exports grew at a considerable rate of 16 percent for the years 2003 and 2004. Whereas, India faced a negative growth of 2 percent in the volume of its footwear exports in the same period and China's footwear exports increased at a rate of 5 percent and 3 percent respectively. In the recent years i.e., 2005 and 2006 the volume of Pakistan's footwear exports increased at lower rates of 9 percent and 3 percent as compared to last two years. India's exports continued to decrease at a rate of 1 percent while china increased its volume of footwear exports by 10 percent and 11 percent respectively.
[FIGURE 2 OMITTED]
The share of Pakistan's footwear exports in the World's total footwear exports is about 0.18 percent while it is 1.6 percent for India and 29 percent for China in the year 2006. For Pakistan it rose from 0.16 percent to 0.23 percent in 2005 and decreased to 0.18 percent in 2006. Footwear exports share in Pakistan's total exports rose to 1 percent in 2005 from 0.7 percent in 2002 and it accounts for about 0.8 percent in 2006 of Pakistan's total exports. India's footwear exports account for about 1.6 percent of total exports while for China the same is 2.2 percent in the year 2006.
Footwear Exports at Disaggregated Broken up into parts. Level (HS-4)
The pattern of comparative advantage can be different across different levels of dis-aggregation in the sector. Also there are components or sub-products of footwear which contribute more in the total footwear export value of the country. So to analyse the state of sub-products of footwear we also calculate the exports value and their growth rates at the more disaggregated level i.e. the 4 digit level of HS classification.
In terms of sub sector across the footwear industry, footwear, upper of leather (6403) and Footwear, nes (6405) have the largest share in Pakistan's total footwear export value. Footwear nes, outer soles and uppers of rubber or plastics (6402) is on the third position in terms of its contribution in total footwear exports value. The products (6403) and (6405) have 43 percent and 38 percent share respectively in Pakistan's total footwear export for the year 2006. from the Appendix Tables 1, 2, and 3 it can be inferred that in general, the export value of footwear in sub sectors is increasing over the years. In China, Footwear, upper of leather (6403), Footwear nes, outer soles and uppers of rubber or plastics (6402) and Footwear, upper of textile mat (6404) are the three major sub sectors respectively in terms of their shares in China's total footwear exports value. The major footwear's sub sectors in India are different as compared with those of Pakistan and China. Footwear, upper of leather (6403), Part of footwear romovable in-soles, heel heel (hel) calx; the hindmost part of the foot.
cracked heels pitted keratolysis.
1. cushion Cushion
In the context of project financing, the extra amount of net cash flow remaining after expected debt service.
See call protection. etc., gaiter etc. (6406) and Footwear, upper of textile mat (6404) are respectively three major contributors to the total footwear export of India. While comparing across countries it is observed that the sector (6403) is largest sector for all the three countries of analysis.
3.2. Major Problems Facing Footwear Industry
* One of the most important problems hindering hin·der 1
v. hin·dered, hin·der·ing, hin·ders
1. To be or get in the way of.
2. To obstruct or delay the progress of.
v.intr. the growth of footwear industry is higher energy prices. Increasing energy and inputs prices leads to an increase in the cost of production that influences the expected production of the industries and thereby exports.
* Industries do not have footwear training institutes of quality and repute and in result there is a lack of skilled labour force. Thus there exists a problem of absorption capacity The term absorption capacity (as a part of EU Cohesion Policy) stands for the degree to which a country is able to effectively and efficiently spend the financial resources received from the European Funds. in advanced machinery.
* Outdated out·dat·ed
old-fashioned or obsolete
Adj. 1. production methods are still prevailing in the shoe factories.
- In mathematics
- Improper rotation
- Improper integral
- Improper fraction
- Improper prior
- Improper distribution
- Improper point
- Improper limits
- Improper English
- Improper motion
- Improper noun
* There is no mechanism of collaboration Working together on a project. See collaborative software. between Industry units and other related research organisation and academic institution to improve their productivity.
* Transport and utility infrastructure facilities are not adequate.
* Industry is facing high competition from China providing cheaper footwear product in markets.
* Heavy taxes in the form of sales tax sales tax, levy on the sale of goods or services, generally calculated as a percentage of the selling price, and sometimes called a purchase tax. It is usually collected in the form of an extra charge by the retailer, who remits the tax to the government. and income tax on retail businesses.
3.3. Role of Entrepreneurs
Entrepreneurs can play a vital role in the development and progress of the footwear sector of Pakistan.
* They would employ the new techniques for production, design, marketing and management that can improve the business activity in footwear sector.
* They would focus on technical and managerial skills to improve production supply, consistency in production quality and level of production.
* Use of e-commerce strategies can broaden their product market.
* By increasing their supply network at national level and international level through better coordination with retailers and marketers.
* Entrepreneurs have to learn the preferences of domestic and foreign buyers, including quality of production and international standards for the price and delivery of export merchandise.
* By increasing the outlets at domestic level and refine deliver), to appropriate sellers.
* Participation in trade fairs can increase the opportunities to find market for their exports.
* They have to develop the research and development activities for improving quality, physical testing services to tanneries and shoe factories.
The revealed comparative advantage approach is one of the few formal methodologies to measure a country's comparative advantage and disadvantage in a particular industry. In theoretical models, comparative advantage is expressed in terms of relative prices evaluated in the absence of trade. Since these are not observed, in practice we measure comparative advantage indirectly. Revealed comparative advantage indices (RCA) use the trade pattern to identify the sectors in which an economy has a comparative advantage, by comparing the country of interests' trade profile with the world average. It defines the pattern in comparative advantage by using the trade flows, since this pattern in comparative advantage is revealed by the observed pattern of trade flows, therefore it is called 'revealed comparative advantage'.
The revealed comparative advantage has some merits and some demerits. The advantage of using the comparative advantage index is that it considers the intrinsic intrinsic /in·trin·sic/ (in-trin´sik) situated entirely within or pertaining exclusively to a part.
1. Of or relating to the essential nature of a thing.
2. advantage of a particular export commodity and is consistent with changes in an economy's relative factor endowment The introduction to this article provides insufficient context for those unfamiliar with the subject matter.
Please help [ improve the introduction] to meet Wikipedia's layout standards. You can discuss the issue on the talk page. and productivity. Demerit de·mer·it
a. A quality or characteristic deserving of blame or censure; a fault.
b. Absence of merit.
2. A mark made against one's record for a fault or for misconduct. of using the comparative advantage index is that it is a partial equilibrium equilibrium, state of balance. When a body or a system is in equilibrium, there is no net tendency to change. In mechanics, equilibrium has to do with the forces acting on a body. framework and a static situation for analysis. It provides general direction of movement and do not predict the potential future comparative advantage in particular sector of economy or of a country. The index is affected by anything that distorts the trade pattern, e.g., trade barriers.
The RCA index is defined as the ratio of two shares. The numerator numerator
the upper part of a fraction.
see additive genetic relationship.
numerator Epidemiology The upper part of a fraction is the share of a country's total exports of the commodity of interest in its total exports. The denominator denominator
the bottom line of a fraction; the base population on which population rates such as birth and death rates are calculated.
denominator is share of world exports of the same commodity in total world exports. RCA takes a value between zero and positive infinity infinity, in mathematics, that which is not finite. A sequence of numbers, a1, a2, a3, … , is said to "approach infinity" if the numbers eventually become arbitrarily large, i.e. . A country is said to have a revealed comparative advantage if the value exceeds unity. A country therefore has a revealed comparative advantage only in those products for which its market share of world exports is above its average share of world exports.
Based on the basic concept of revealed comparative advantage, many different RCA indices have been suggested [Bowen Bow·en , Catherine Drinker 1897-1973.
American writer of semifictional biographies, such as The Lion and the Throne (1957), a life of Sir Edward Coke. (1983); Yeat (1985); Vollrath (1991); Lafay (1992); Memedovic (1994); yet the one most widely adopted in empirical studies remains to be the standard Balassa's RCA index [Balassa (1965)] that is as follow
[MATHEMATICAL EXPRESSION NOT REPRODUCIBLE re·pro·duce
v. re·pro·duced, re·pro·duc·ing, re·pro·duc·es
1. To produce a counterpart, image, or copy of.
2. Biology To generate (offspring) by sexual or asexual means. IN ASCII ASCII or American Standard Code for Information Interchange, a set of codes used to represent letters, numbers, a few symbols, and control characters. Originally designed for teletype operations, it has found wide application in computers. ] (1)
Where s is the country of interest, d and w are the set of all countries in the world, i is the sector of interest, x is the commodity export flow and X is the total export flow. The numerator is the share of good i in the exports of the country s, while the denominator is the share of good i in the exports of the world. Mainly the data sources are world development indicators developed by World Bank and UN COMTRADE.
In this study, we are measuring the revealed comparative advantage indices for the footwear industry. The analysis is divided into two parts. In the first part of analysis, we examine the pattern of comparative advantage at aggregate level. The 2 digit-level of Harmonised Adj. 1. harmonised - involving or characterized by harmony
consonant, harmonical, harmonized, harmonic
harmonious - musically pleasing System (HS-1996) classification is used to measure the RCA indices at aggregate level. In the second part of our analysis, the 4-digit level of HS-1996 classification is used to measure the RCA indices at disaggregated level. The disaggregation dis·ag·gre·ga·tion
1. A breaking up into component parts.
2. An inability to coordinate various sensations and a failure to observe their mutual relations. at 4-digit would show the pattern of RCA and the fact that it may differ across the industry at different level. We have calculated indices in both analysis for Pakistan and compare with the other Asian countries specially China and India.
5.1. Revealed Comparative Advantages Analysis at Aggregate Level
The estimations for the years 1996 to 2006 provide evidence on the movement in the pattern of revealed comparative advantage for Pakistan, China and India. At HS-2 level, Pakistan has an increasing movement in comparative advantage in footwear industry. The revealed comparative advantage index is greater than unity (RCA > 1) for Pakistan's footwear industry since 2003 and increasing over the year. The reported results in Table 4 show that RCA for pakistan's footwear industry was less than in 1990's till 2002. The increasing export volume and value have shifted Pakistan's position from disadvantage to advantage in footwear and related industries. It indicates that Pakistan footwear industry has a great potential for growth. It has showed a good export performance that is reflected in changing comparative advantage in footwear industry.
In this study, although we are concerned with the changing pattern in comparative advantage of footwear sector in Pakistan, we are also comparing the movement in comparative advantage in footwear industry with China and India. Batra (2005) provides evidence that China and India hold comparative advantage in footwear sector at HS-2 level however China is more advantageously placed than India. Our estimated results are consistent with Batra (2005). China has comparative advantage since 1980's in footwear industry. The RCA indices for China are greater than one since 1996 however they show a decreasing pattern from the year 2001. It decreased from 4.86 in 2001 to 3.55 for the year 2006. India's comparative advantage in footwear industry is revealed since 1990's and the RCA index continued to increase till the year 2002. After that India witnessed relatively less growth in exports of footwear industry that decreased the RCAs since 2002. The RCA indices show that China and India still have comparative advantage in this industry but with the decreasing pattern.
The grey area represents the changing pattern of comparative advantage. It clearly shows that Indonesia Indonesia (ĭn'dənē`zhə), officially Republic of Indonesia, republic (2005 est. pop. 241,974,000), c.735,000 sq mi (1,903,650 sq km), SE Asia, in the Malay Archipelago. , Thailand Thailand (tī`lănd, –lənd), Thai Prathet Thai [land of the free], officially Kingdom of Thailand, constitutional monarchy (2005 est. pop. 65,444,000), 198,455 sq mi (514,000 sq km), Southeast Asia. , India and China have comparative advantage with a decreasing pattern of RCA indices. From the estimated results, we assessed that Pakistan has potential for higher growth in this sector. It has not only one of the top winning countries by giving 6 percent production growth (1) in this sector but it has also shifted its position from disadvantage to comparative advantage.
5.2. Revealed Comparative Advantage Analysis at Disaggregated Level
In the second part of analysis, we measured the RCA at disaggregated level to observe the difference in exports performance within the footwear sub-sector for Pakistan and compared them with China and India. At 4-digit level HS-1996 classification, there are further 6 sectors in footwear industry. Pakistan is enjoying the comparative advantage since 2005 in the sectors of foot, outer sole/upper of rbr/pla(6401), footwear upper of leather(6403) and footwear nes(6405). It has revealed disadvantage in the sectors of footwear nes outer soles and uppers of rubber or plastics(6402), footwear upper of textile mat(6404) and part of footwear removable in-soles, heel cushion etc gaiter etc. (6406).
From the RCAs trend, we can predict that Pakistan may have revealed comparative advantage in the sector of footwear nes outer soles and uppers of rubber or plastics (6402) within next two years. Table 6 shows that the RCA are greater than 1 for all sub-sectors of China's footwear industry. It indicates that China not only enjoys the comparative advantage in the overall footwear industry but also in all the sub-sectors within the industry. All sectors have similar movement in the revealed comparative advantages except the sector, of footwear, nes (6405). The RCA indices trend in Table 7 present the pattern of comparative advantage in footwear industry of India. The results shows that the three sectors have RCA > 1 and the other three sectors have RCA < 1 that represent the comparative advantage and disadvantage respectively within the footwear industry.
India has comparative advantage in the sub-sector of W/p foot, outer sole/upper of rbr/pla(6401), footwear upper of leather(6403) and part of footwear romovable insoles, heel cushion etc; gaiter etc. (6406). Whereas it has disadvantage in the sub-sectors of footwear nes outer soles and uppers of rubber or plastics(6402) and footwear upper of textile mat(6404) and footwear nes (6405).
In this study, we have analysed the performance of footwear industry of Pakistan and made its comparison with China and India. The revealed comparative advantage index has been employed to analyse exports of footwear industry at both two-digit and four-digit level of industrial classification. Our estimated results highlight the pattern of comparative advantage in the footwear sector for the time period 1996 to 2006.
At two-digit level of classification of footwear industry in Pakistan, there have been shifts in the comparative advantage since 2003 and the RCA are increasing over the years. China and India have comparative advantage since 1990, however, their revealed comparative advantages are decreasing in terms of level since 2001. Since 2003, Pakistan experienced an increase in its volume as well as in value of footwear exports that has caused a shift in the position of industry from disadvantage to comparative advantage.
At four-digit level of industrial classification of footwear sector, Pakistan has experienced a strong growth in the industries of sole/upper of rbr/pla (6401), Footwear, upper of leather (6403) and footwear nes (6405). Whereas India has comparative advantage in the sector of W/p foot, outer sole/upper of rbr/pla(6401) and footwear upper of leather(6403) and part of footwear romovable in-soles, heel cushion etc; gaiter etc(6406). On the other hand, China has comparative advantage in all sub-sectors across the industry.
The changing revealed comparative advantage in Pakistan's footwear industry i.e., its shift from disadvantage situation to comparative advantage indicates that there is a potential in this sector for higher growth and the industry can become a source of higher exports earnings. There is a growing perception that the increasing cost of doing business in Pakistan is eroding the competitiveness of the footwear industry in Pakistan. Thus in the rapidly changing global economic environment, there is an urgent need to strengthen the competitiveness of the footwear industry.
Appendix Table 1 Pakistan: Footwear Industry's Exports at HS-4 Level of Industrial Classification 2006 Exports Growth of HS Value (USD Exports in Codes Industries Thousands) Value (%) 6401 W/p foot, outer sole/upper of rbr/pla 2705 -5 6402 Footwear nes, outer soles and uppers of rubber or plastics 15704 67 6403 Footwear, upper of leather 58357 10 6404 Footwear, upper of textile mat 4658 9 6405 Footwear, nes 52040 30 6406 Part of footwear;romovable in- soles, heel cushion etc; gaiter etc. 1749 34 2005 2004 Exports Growth of Exports Growth of HS Value (USD Exports in Value (USD Exports in Codes Thousands) Value (%) Thousands) Value (%) 6401 1611 15 89 49 6402 3575 75 1571 116 6403 52834 17 51777 17 6404 4367 12 5230 15 6405 89084 35 45960 97 6406 3020 35 791 40 2003 Exports Growth of HS Value (USD Exports in Codes Thousands) Value (%) 6401 109 72 6402 264 162 6403 52527 18 6404 2301 21 6405 33065 176 6406 1938 58 Source: COMTRADE Database. Appendix Table 2 China: Footwear Industry's Exports at HS-4 Level of Industrial Classification 2006 Exports Growth of HS Value (USD Exports in Codes Industries Thousands) Value (%) 6401 W/p foot,outer sole/upper of rbr/pla 219475 16 6402 Footwear nes, outer soles and uppers of rubber or plastics 7860345 19 6403 Footwear, upper of leather 8697711 16 6404 Footwear, upper of textile mat 2876681 19 6405 Footwear, nes 1360422 31 6406 Part of footwear; romovable in-soles, heel cushion etc; gaiter etc. 798743 18 2005 2004 Exports Growth of Exports Growth of HS Value (USD Exports in Value (USD Exports in Codes Thousands) Value (%) Thousands) Value (%) 6401 196273 17 153914 12 6402 6667186 19 5554458 19 6403 7990087 19 6248522 15 6404 2380480 19 1874334 15 6405 1199665 38 795133 31 6406 618811 15 576253 19 2003 2002 Exports Growth of Exports Growth of HS Value (USD Exports in Value (USD Exports in Codes Thousands) Value (%) Thousands) Value (%) 6401 136703 11 4753075 13 6402 4653986 19 3924579 12 6403 5279301 11 1418663 -- 6404 1612084 14 461265 -- 6405 807740 75 409443 -- 6406 464991 14 123060 -- Source: COMTRADE Database. Appendix Table 3 India: Footwear Industry's Exports at HS-4 Level of Industrial Classification 2006 Exports Growth of HS Value (USD Exports in Codes Industries Thousands) Value (%) 6401 W/p foot, outer sole/upper of rbr/pla 13465 32 6402 Footwear nes, outer soles and uppers of rubber or plastics 11886 36 6403 Footwear, upper of leather 908778 23 6404 Footwear, upper of textile mat 40119 15 6405 Footwear, nes 16482 25 6406 Part of footwear; romovable in-soles, heel cushion etc; gaiter etc. 243946 6 2005 2004 Exports Growth of Exports Growth of HS Value (USD Exports in Value (USD Exports in Codes Thousands) Value (%) Thousands) Value (%) 6401 17466 58 24083 134 6402 5854 19 5178 22 6403 751793 24 565320 20 6404 31116 10 39155 30 6405 23253 50 19106 67 6406 219773 5 197157 1 2003 2002 Exports Growth of Exports Growth of HS Value (USD Exports in Value (USD Exports in Codes Thousands) Value (%) Thousands) Value (%) 6401 6213 40 4463 -- 6402 4428 27 3516 -- 6403 501907 28 392982 -- 6404 31720 36 23316 -- 6405 16173 138 6830 -- 6406 197852 3 191482 -- Source: COMTRADE Database.
Authors' Note: We would like to thank Dr Rashid Rashid: see Rosetta, city, Egypt. Amjad, Vice-Chancellor VICE-CHANCELLOR. The title of a judicial officer who decides causes depending in the court of chancery; his opinions may be reversed, discharged or altered by the chancellor. , Pakistan Institute of Development Economics Pakistan Institute of Development Economics (PIDE) is a think tank in Islamabad, Pakistan.
Pakistan Institute of Development Economics was established at Karachi in 1957 and in 1964 accorded the status of an autonomous research organisation by the Government of Pakistan. , Islamabad for his encouragement to explore this important issue, valuable suggestions and providing relevant background knowledge of the subject.
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Naseem Akhtar <firstname.lastname@example.org> and Nadia Zakir <email@example.com> are Staff Economist and Ejaz Ghani <firstname.lastname@example.org> is Chief of Research at Pakistan Institute of Development Economics, Islamabad.
(1) An analysis of world leather value chain and footwear market, Report by TATA international.
Table 1 Trends in Footwear Exports Value Exports Value (USD Thousands) at HS2 Level 2002 2003 2004 Pakistan 75,307 90,204 105418 India 622,589 758,292 849999 China 11090,084 12954,806 15202,613 Exports Value (USD Thousands) at HS2 Level 2005 2006 Pakistan 154,490 135,213 India 1049,255 1234,676 China 19052,503 21813,377 Source: ITC, COMTRADE data. Table 2 Growth in The Value of Footwear Exhorts Pakistan China Growth of Growth of Growth of Exports in Exports in Exports in Value (%) Volume Value (%) (%) 2006 14.00 3.00 18.00 2005 19.00 9.00 20.00 2004 24.00 16.00 17.00 2003 28.00 16.00 17.00 India Growth of Growth of Growth of Exports in Exports in Exports in Volume Value (%) Volume (%) (%) 2006 11.00 19.00 -1.00 2005 10.00 19.00 -1.00 2004 3.00 17.00 -2.00 2003 5.00 22.00 -2.00 Source: ITC, COMTRADE data. Table 3 Footwear Exports Shares in Total Exports and World's Total Footwear Exports Pakistan China Exports as Exports as Exports as Share of Share of Share of Total World Total Exports Exports Exports (%) (%) (%) 2006 0.80 0.18 2.25 2005 0.96 0.23 2.50 2004 0.79 0.18 2.56 2003 0.76 0.17 2.96 2002 0.72 0.16 3.41 India Exports as Exports as Exports as Share of Share of Share of World Total World Exports Exports Exports (%) (%) (%) 2006 29.19 0.98 1.65 2005 28.59 1.01 1.57 2004 25.39 1.06 1.42 2003 23.97 1.20 1.40 2002 22.83 1.19 1.28 Source: ITC, COMTRADE data. Table 4 Revealed Comparative Advantages Analysis at Aggregate Level Years HS Code Pakistan China 2006 64 1.61 3.55 2005 64 1.47 3.89 2004 64 1.17 3.88 2003 64 0.98# 4.15 2002 64 0.71 4.56 2001 64 0.G 4.86# 2000 64 0.338 5.25 1999 64 -- 5.28 1998 64 -- 5.07 1997 64 -- 4.8 1996 64 -- 4.3 Years India Indonesia Thailand 2006 1.414 2.74 1.36 2005 1.505 2.64 1.29 2004 1.63 3.15 1.22 2003 1.71 2.74 1.44 2002 1.63# 2.7 1.71 2001 1.96 3.43 l.64# 2000 1.94 3.57# 1.78 1999 1.99 4 1.78 1998 1.99 3.24 -- 1997 1.6 3.34 -- 1996 1.58 4.03 -- The grey area represents the changing pattern of comparative advantage indicated by #. Table 5 Revealed Comparative Advantage Analysis at Disaggregated Level: Pakistan HS Codes Industries 2006 2005 2004 2003 6400 All industries in sector 64 1.3 1.5 1.2 0.98 6401 W/p foot, outer sole/upper of rbr/pla 2.7 1.3 0.1 0.1 6402 Footwear nes, outer soles and uppers of rubber or plastics 0.7 0.2 0.1 0.02 6403 Footwear, upper of leather 1 0.9 1.1 1.1 6404 Footwear, upper of textile mat 0.4 0.4 0.5 0.3 6405 Footwear, nes 13.2 20.1 12.3 8 6406 Part of footwear; romovable in-soles, heel cushion etc; gaiter etc. 0.2 0.4 0.1 0.2 Table 6 Revealed Comparative Advantage Analysis at Disaggregated Level: China HS Codes Industries 2006 2005 2004 2003 2002 6400 All industries in sector 64 3.6 4.1 3.9 3.9 4.5 6401 W/p foot, outer sole/upper of rbr/pla 3.9 4.1 3.6 3.5 5.2 6402 Footwear nes, outer soles and uppers of rubber or plastics 6.3 7.6 7.3 6.9 8.5 6403 Footwear, upper of leather 2.6 3 2.9 3 3.4 6404 Footwear, upper of textile mat 4.7 5.1 4.4 4.4 5.5 6405 Footwear, nes 6 5.3 4.8 5.7 5.1 6406 Part of footwear; romovable in-soles, heel cushion etc; gaiter etc. 1.6 1.4 1.5 1.4 1.6 Table 7 Revealed Comparative Advantaee Analysis at Disaggregated Level: India HS Codes Industries 2006 2005 2004 2003 2002 6400 All industries in sector 64 1.6 1.6 1.6 1.7 1.6 6401 W/p foot, outer sole/upper of rbr/pla 1.8 2.3 4.1 1.3 1.2 6402 Footwear nes, outer soles and uppers of rubber or plastics 0.1 0 0.2 0.1 0 6403 Footwear, upper of leather 2.1 2.1 2 2 1.7 6404 Footwear, upper of textile mat 0.5 0.4 0.7 0.7 0.6 6405 Footwear, nes 0.6 0.8 0.9 0.7 0.5 6406 Part of footwear; romovable in-soles, heel cushion etc; gaiter etc. 3.7 3.7 3.8 4.2 4.6
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|Title Annotation:||TRADE AND INDUSTRY|
|Author:||Akhtar, Naseem; Zakir, Nadia; Ghani, Ejaz|
|Publication:||Pakistan Development Review|
|Date:||Dec 22, 2008|
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