__..
/, ,.
• UNli'ED NATIONS . ~
••
.J..FJllC !\N IJITSTITUTE FOR ECONŒUC . DEVEL0PMENT AND PLANNING
AKAR
IDEP 2nd Semest~r.1 . ..1964-6_2
IDEP/ET/Vll/342 D. Carney
Lecture î
- 1
FOREIGN TRADE
Im~ort and Export Projections
1. Import Projections: Principles
•
A •.. Input-Output Framework
How may a country make the projections of its import requirements for a given period of years? One general procedure is to make such projections within the framework of an Input-Output Table if one is available for the
country.. Such a Table will gi'\ie _:the following information~~
a) Final goods by industrial sectors
b) Interindustry relations between the sectors in terms of technical input-output coefficients
c) The volume of int~rmediate goods required per unit of outpu-t of ru:zy given final commodity, namely,
(l) raw materials (ll) capital goods
(111) skilled technicians required Given the planned (or assumed) production target for each final good, it is possible on the basis of the Input-Output Table to do the following:
a) work out the volume of requirements of intermediate J?roQ.ucts.
... -
b) separate the intermediate products on the basis of · domestic components and imported componerits
-'o) project the imported compcinents at the planned or
assumed rate of growth of the relative industrial sectors.
•
•
, IDEP/ET/Vll/342 Lecture î
Page 2
E.g. an increase of 1 ton of peanut oil may require: 5 tons of peanuts
(i) (ii) (iii)
(iv) He then proceed to (i) (ii) (iii)
50 kilogrammes of rice to maintain the workers 2 matchets
20 me-ii-res of-·cloth ·for the ·mYrke.r·s, etc. break down these requirements into:
10 kgs of rice produced a,t homë; -Ao kgs-·imported One matchet produced a_t home __ ·. _ _.· 1 matchet imp'orted 5 metres of cloth produced at home,
15 metres imported and so on.
Totalling~ -vre find that the import requirements for an increase cf 1 ton of peanut oil are:
(i) 3 tems of ricé (ii) match et
(iii) 15 metres of cloth, and so on
If the production target for peanut oil is 5% per annum, we then project our import requirements at 5% per annum, gi ving the f'ollo-iv-ing~
Required Rice imports= 40(1.05)n kilogrammes
il matchet imports=î ( 1.05)n
11 cloth imports = 15( 1. 05 )n metres, etc.
where n= number of years ·
This process is repeated with every final commodity in the input--
output Table and the sum of such requirements .will represent the import programme (including techniciansy where these must be imported to
maintain the p~oduction programme).
Practical Illustration of the method(Dr. Gamal Elèish in two week~ 1 time)
B. Empirical Me~È;_~<}_-_
lfuere a country does not possess an input-output table a less sophisticâted me~hod l·muld have to be employed. One could use
regressi_~_2na1y~~~--of time series of principal im~orts in the ammal
trade statistj_c:::; ~ on the assumption that past trends could safely be pro jected
IDEP
/FJr
/Vll/342Lecture î Page 3
into the future; or hone could use simple -geometric h·pi>O-ject-ions -on the basis of high, medium or low assumption of thg ·growth ·:ratë, jüst as population projections are frequently made.
Thus ·one· could assume, · in the latter case, that a gi ven increase in imports of a certain commodi ty is associated -vri th a gi ven percent age
· r:Lse· in the gross domestic product set high ·medium and low rates cf growth of total output and project the cbmmodity import on these three alternative rates. Alternatively, import rèquirements may be projected on the basis of development projects in additioh to the normal impcrt require~ents of the country~
II• Ji!:x:port Project.ions
Unlike import projections which are made :m the basis of domestic demand, export projections are commonly made on the basis of external demand for
· a.
givèn countzy1s experts. Thus one way is to lihk domestic exports of a country to world demand in general for such types of experts. In effect this b'lils down to the demand by majr'r industrial users of the experts, but experts may also be morespecifically linked to the demand by major customets.
Given the likely trend of world demand for a counl;ry's principal experts (or demand by its major customers)', and the share of the country 1 s experts in such dem'Emd, the required exports of each major éxport commodity of the given country canbe projected at the world rate of .export demand (or at the rate of g'rowt·h of·demand of the country's principal customers). Here also, regression analysis or simple geometrie methods may be used.
These national projections of exports assume:
(a) maintenance of a give.n set of world (or market) priees (b) maintenance and, if possible, increas6 of efficiency of
production of a given country vis-a-vis that of its principal competitùrs, in particular the ability to hold costs down or reduce them.
ITIEP/ET/Vll/342 Lecture
........
Page 4
III. Conditions for successful Projections of Imports and Ex.ports (in· termê~~ realiz-~ticm)
(a) Fairly accurate knovrledge of:
(i) Conditions of production and supply (including priee trends) of imports
(ii) Income-elasticity of the country's demand for importe (iii) Import requirements ;of development projects
(iv) Trend of import substitution wi thin the country "Yri th
. . . \'" .
a view to releasing foreign exchange for more essential imports
(b) Fairly ac cura te kn01vledge of:
(i) Price-elasticity of exports
(ii) Conditions of production of agricultural and other primary exports- e.g. crop fc:-recasts on basis of acre age sovrn~ yield per acre~ probable adverse yield-- reducing factors, such as.drought, insect and fungus dise ases, etc.
In short, it is not enough just to make forec'3.sts, hoping they wiLL be realized. One of the .main reasons for making them is to set out the magnitudes involved, and to devise the appropriate policies for making the projections come true. This implies. that a very vital condition for realizing such projections is the existence of
regulated~. not free, markets and of bilateral .or multilateral trade arrangements. -::: ___ !_.;·· .
~~ (1) Although imports and exports bear sorne relationship we can tre-at them as if they 1-iere separate --and-make our projections acc6rdingly. Eventually e·xports must be for imports and -under a colonial regime-the volume of imports depends on the volume of exports. However, in an independant country, the availability of'loans, gra~ts
and technical assistance, makes possible a higher rate of growth than
• IDEP/Er/Vll/342 Lecture 1
Page
5
... · .?
would be possible under a colonial J~gima, Renee it is possible to import more th an can be paid for cy ::: .~. :)rts. Therefore, one
mey legi timately in this context 7 tref'.'j , ~,.Jort and export projections as if they were separate. However, ir projecting experts, allowance must be made for an increase to cover O})ected loan repayments and debt aervicing charges.
(2) Limitations and usefulness of projections of world demand for
primary commodities for a developing country seeking to transform its economy.
