Industry Concentration and Supply Chains in CEFTA 2006

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Industry Concentration and Supply Chains in CEFTA
2006
Rainer Lanz Private Sector Development Division,
OECD

• SEE IC
• Sarajevo, 25 April 2012

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Outline

• Motivating Questions
• Industry Concentration
• Supply Chains
• Conclusions and Discussion

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Motivating Questions
Supply Chains
Industry Concentration

• How is manufacturing distributed over space in
  CEFTA?
• What is the size and hence importance of
  different manufacturing industries?
• Relative Concentration How are industries
  distributed over space compared to manufacturing?

What are the most important supply chains in
CEFTA economies? What is the position of CEFTA
economies in supply chains? How important are
intra-CEFTA versus extra-CEFTA supply chains?
Next Generation RCI
Sector Competitiveness
Trans-national Clusters
Regional Supply Chains
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• Industry Concentration

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• How is manufacturing distributed over space in
  CEFTA?

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Manufacturing Concentration in CEFTA Economies

• Serbia and Croatia account for 73 of turnover
  and 58 of employment in CEFTA

Manufacturing in CEFTA Turnover 42.5 bn EUR
Employment 1.07 m
Shares of CEFTA Parties (by turnover) Albania
1.2 bn BIH 4.2 bn Croatia
14.0 bn Kosovo 0.6 bn fYR Macedonia 3.6
bn Moldova 1.5 bn Montenegro 0.6 bn Serbia
16.8 bn
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Manufacturing Concentration in CEFTA Map

• Absolute concentration of manufacturing in CEFTA
  (based on turnover)

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Manufacturing Concentration in CEFTA Top 10
Regions

• The top 10 regions in CEFTA concentrate 43 of
  turnover and 27 of employment.

Top Regions of Manufacturing Agglomeration (by
turnover, EUR)
Belgrade SRB 4.6 bn
Zagreb (city) HRV 2.9 bn
South Backa SRB 2.0 bn
Skopje MKD 1.8 bn
Primorje-Gorski Kotar HRV 1.7 bn
Sisak-Moslavina HRV 1.3 bn
Zenicko-Dobojski BIH 1.0 bn
Podunavlje SRB 1.0 bn
Istria HRV 1.0 bn
Zagreb (county) HRV 1.0 bn
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• What is the size and hence importance of
  different manufacturing industries?

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Industry Specialisation of CEFTA 2006 Top 5
Industries

• The low tech food and beverages industry is the
  leading manufacturing sector in CEFTA, with the
  basic metals industry a distant second.

Top Manufacturing Industries (by turnover, EUR)
15 Food and Beverages Low Tech 11.8 bn 28 Belgrade (SRB), South Backa (SRB), Zagreb city (HRV)
27 Basic metals Medium Low Tech 3.5 bn 8 Podunavlje (SRB), Skopje (MKD), Hercegovacko-Neretvanski (BIH)
28 Fabricated metal products Medium Low Tech 3.4 bn 8 Zenicko-Dobojski (BIH), Belgrade (SRB), Hercegovacko-Neretvanski (BIH)
24 Chemical Products Medium High Tech 3.4 bn 8 South Banat (SRB), Zagreb city (HRV), Belgrade (SRB)
23 Petroleum Products Medium Low Tech 2.8 bn 7 Primorje-Gorski Kotar (HRV), Sisak-Moslavina (HRV), Skopje (MKD)
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• Relative Concentration How are industries
  distributed over space compared to manufacturing?

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Relative Concentration of Manufacturing
Industries in CEFTA
Top 6 industries which are the most concentrated
relative to overall manufacturing
Food products is the largest industry in CEFTA
and is therefore not surprisingly concentrated in
a similar way than manufacturing
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Within or between country concentration?
Differences in the distribution of turnover
between single industries and overall
manufacturing are mainly observed within
countries rather than between countries.
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• Supply Chains

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• What are the most important supply chains in
  CEFTA economies?

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CEFTA Exports of Manufacturing Industries (2009)

• Top 3 Exporting Industries
• Textiles
• Food Products
• Basic Metals

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CEFTA Exports Intermediate and Final Goods

• Top 3 Exporting Industries for Intermediates
  (Value)
• Basic Metals
• Chemical Products
• Coke and Petroleum Products

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• What is the position of CEFTA countries in supply
  chains?

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Supply Chains and Revealed Comparative Advantage
Revealed comparative advantage (RCA) captures
relative trade specialisation dividing an
industry market share by the manufacturing market
share for exports (or imports)

• An RCA higher than 1 implies that country c has a
  RCA in industry k.
• For example, CEFTA has a RCA in exports of
  intermediate food products, if its share in world
  exports is greater in intermediate food products
  than in overall manufacturing.

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What is a Countrys Position in Supply Chains?
RCA in imports of intermediates and in exports of
final goods
RCA in imports of intermediates and in exports of
intermediate goods
No RCA in imports of intermediates but RCA in
exports of final goods

• Low Tech Industries

Food, Beverages and Tobacco
Textiles, Leather and Footwear
Wood and Products of Wood
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Examples of Potential Intra-Industry Supply Chains
Pulp, Paper, Printing and Publishing

• Medium-Low Tech Industries

Basic Metal Products
Fabricated Metal Products
Medium-High Tech Industries and ICT
Motor Vehicles
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• How important are intra-CEFTA versus extra-CEFTA
  supply chains?

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CEFTA Manufacturing Exports (2009)
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CEFTA Exports Intra- vs. Extra-CEFTA
Overall Shares for Manufacturing Exports
Intra-CEFTA 28 Extra-CEFTA 72
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CEFTA Exports of Intermediates Intra- vs. Extra
CEFTA Shares
Overall Shares for Manufacturing Exports of
Intermediates Intra-CEFTA 29
Extra-CEFTA 71
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Conclusions

• How is manufacturing distributed over space in
  CEFTA?
• Manufacturing activity is highly agglomerated,
  i.e. the top 10 regions (out of 102) in CEFTA
  concentrate 40 of the manufacturing activity
• What is the size and hence importance of
  different manufacturing industries?
• Low and medium-low tech industries account for
  about 80 of manufacturing activity, e.g. Food
  and beverages account for 28 of manufacturing
  turnover
• Relative Concentration How are industries
  distributed over space compared to manufacturing?
  
• Industry concentration occurs mainly within
  countries rather than between countries

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Conclusions

• What are the most important supply chains in
  CEFTA economies?
• Medium-low tech industries, i.e. basic metals
• What is the position of CEFTA economies in supply
  chains?
• Entire supply chain Food products as well as
  Basic metals (first and intermediate stage) and
  fabricated metal products (intermediate and final
  stage)
• Intermediate and final stage Textiles, Wood
  products and cork, Paper and publishing
• No specialisation in medium-high tech industries
  and ICT

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Conclusions

• How important are intra-CEFTA versus extra-CEFTA
  supply chains?
• Extra-CEFTA exports dominate accounting for 71
  of intermediate exports
• For Food products, beverages and tobacco, intra-
  and extra-CEFTA supply chains are of similar
  importance
• For Basic metals and Fabricated metal products,
  intra-CEFTA supply chains account close to one
  third of intermediate exports
• For Paper products and publishing, and Wood
  products and cork, intra-CEFTA supply chains
  account for 26 and 34 of intermediate exports.

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Thoughts for Discussion

• Common interests and scope for cooperation of
  regional working groups will vary by sector
• Not to forget Importance of inter-industry
  linkages and supply chains
• Services are often significant inputs for
  manufacturing production and hence crucial for
  sector competitiveness
• Is extra-CEFTA trade of higher quality than
  intra-CEFTA trade? Where is more value added
  incorporated?
• Where do SEE countries have the potential to
  move up the value chain? Between sectors or
  along stages or functions within a given sector?

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• Thank you for your attention!
• Rainer.Lanz_at_oecd.org