Our Research posts are about the latest academic research being done in the School of Economics. This week:
THAILAND’S EXPORT OPPORTUNITIES AND EXPORT POTENTIAL IN THE WORLD: A QUANTITATIVE ASSESSMENT USING THE DSM APPROACH
by Ludo Cuyvers, Ermie Steenkamp & Wilma Viviers
Since the early-1980s Thailand has aspired to become a new “Asian tiger”, following an outward-oriented development strategy. This strategy has been strengthened in the last two decades by the deepening regional integration process under AFTA.
In the present paper, we endeavor to make a quantitative assessment of Thailand’s export opportunities in the world, based on international statistical data of 2003 up to 2008.
The DSM methodology is rooted in the international marketing research literature. It allows to identify an exporting country’s realistic export opportunities (REOs) in the world at large, which is instrumental in bringing about a more efficient use of scarce public resources devoted to export promotion. The DSM output is per import market and at detailed product level, and can immediately be translated into export promotion strategies.
It was found that the present DSM results for Thailand show that a surprisingly high share of the REOs (both in terms of potential export value as in sheer number) is in the EU-15 and the Central and Eastern European Countries, which dramatically brings down the share of the REOs in Southeast and East Asia which was found in previous studies (Cuyvers, 1996; Cuyvers, 2004). This high European share evidently reflects the impact of increased European economic integration, particularly in 2003-2007. At the same time, however, it points to a serious fallacy if Thailand’s export promotion policies would be based on the REOs detected by the latest run of the DSM only. These policies should rather be based on the REOs that show sufficient stability over a time period of, say, five years, both in terms of presence, as in terms of major import market characteristics. The identification of these stable REOs can only be achieved by subsequent yearly “runs” of the DSM.
It was found that Thailand’s REOs in the world are much concentrated in the broad product categories of machinery and electrical apparatus, and in transport equipment. This is particularly true of we consider the “actual” REOs, i.e. the REOs for which Thailand has already achieved some comparative advantage (as evidenced by a Revealed Comparative Advantage (RCA) Index of at least 0.7). Transport equipment production and marketing in the world being one of the major “playgrounds” of multinational enterprises, the REOs of this product group can hardly be considered as “true” REOs, which can be tapped using appropriate public export promotion strategies and activities. The same argument holds for major chemicals and even for machinery and electrical apparatus, although in the latter case probably to a lesser extent. It is evidently pointless to waste scarce public resources to the promotion of products in markets that the relevant multinational enterprises are either already catering to, or are outside of reach of their producing and assembling affiliates in Thailand. Therefore, before translating the REOs identified into action, additional circumstances have to be investigated, such as the exposure of the relevant exporting sectors to multinational business.
An additional warning is appropriate. The present results are based on international statistical data up to 2007, which means that the REOs identified are according to data which are four years old. This drawback is unavoidable and implies that if Thailand’s export promotion agency were to use them, they should be supported by additional evidence, such as the opinions of e.g., key experts.
The full CAS discussion paper nr 83, is available here.