DEGREE OF GLOBAL COMPETITIVENESS: A CASE ON JUTE, KENAF &
ALLIED FIBRES INDUSTRY
Niraj Kumar Mahapatra
15PGPM11
Management Development Institute,
Murshidabad, West Bengal- 742235
Submitted to:
Dr. Paroma Mitra Mukherjee,
Faculty, Macroeconomics,
Management Development Institute,
Murshidabad, West Bengal- 742235
Abstract
Global competition is the services or products provided by competing companies that serve international customers. Competition on a local scale where people are competing against one another for one common goal - the best in their core competency. Global competition has allowed companies to buy and sell their services internationally, which opens the door to increased profits and flattens the playing field in business. Degree of competitiveness helps to examine the present status and future prospects of an industry.
This paper is an attempt to measure the extent of global competitiveness in world Jute,
Kenaf and Allied Fibres (JAF) industry. Roy (2006) (1-√∑
2)
the formula for degree of
competition is applied where Mi is the market share of each individual nation in global
JAF production, i ranging from 1 to k. For each year we can calculate one such measure, generating there by a time series data. Based on time series analysis one can indicate the
1
Degree of Global Competitiveness: A case Jute, Kenaf & Allied Fibres Industry 2
past trend and future direction. The position of India has also been indicted along with top ten nations.
Key words: Global competitiveness, world JAF production, market share, trend analysis, degree of competitiveness
INTRODUCTION
Jute ranks next to cotton as a natural fibre. Jute is a bast fibre crop along with a family of few other natural fibres together generally called as Jute & Allied Fibre Crops
(JAF). They mainly occur in the equatorial, the tropical and the sub-tropical zones. The main species of jute and kenaf, which are the major components of JAF, under cultivation include tossa jute (Corchorus olitorius), white jute (C. capsularis), kenaf
(Hibiscus cannabinus) and roselle/ mesta (H. sabdariffa). The preference for cultivation of one species or the other varies from country to country. Jute is preferred by Bangladesh, India and Nepal; and kenaf is mainly grown in China and Indonesia, while roselle/ mesta is preferred in Thailand. The cultural and other aspects of JAF crops are more or less the same while the fibre characteristics differ. The fibres of jute are relatively finer than those of kenaf and roselle; together these are called ‘raw jute’ because of vast similarity in majority of the characteristics and their use. Of the two jute contributes the major share of production.
Jute and Allied Fibres (JAF) are produced in many countries. India,
Bangladesh, China, Thailand, Myanmar & Nepal are the major producing countries.
Together they produce about 95% of the global production of JAF. India and
Bangladesh produce mostly jute, China produces mostly kenaf while Thailand produces kenaf and roselle. In Nepal, Jute is grown in about 11000 ha in Tarai belt of
Eastern part of Nepal. In Thailand JAF are cultivated in about 20,000 ha. In India Jute and Kenaf are grown in about 1,000,000 hectares. Most of the production comes from
Degree of Global Competitiveness: A case Jute, Kenaf & Allied Fibres Industry 3
the
States
of
West
Bengal,
Bihar,
Assam,
Orissa,
Andhra
Pradesh
&
Tripura. Bangladesh grows mainly jute, only about 10% kenaf and roselle in 500,000 hectares. China grows mainly kenaf and only about 10% jute in about 56,000 hectares.
In Indonesia JAF are grown in 10,000-20,000 hectares.
OBJECTIVE OF STUDY
The global picture of JAF industry can help us to know the position of Indian JAF industry with respect to its global competitors. The objective of this paper is to draw out the world production of Jute, Kenaf and Applied Fibres (JAF) and calculate the degree of global competitiveness.
LITERATURE REVIEW
The estimates presented by the Common Fund for Commodities (CFC) in 2006 regarding possible rise of demand for jute goods within ten years time by an annual amount of about
2829000 ton, the production of 2009-10 has already passed that estimate. The jute, kenaf and allied fibres sector touches the lives of more than 12 million farmers, about 1 million industrial workers, 0.6 million jute artisans in more 18 countries from Asia and Africa.
It is reported that in the 120 days of jute-growing period one hectare of jute plants can absorb about 15 MT of CO2 from atmosphere and liberate 11 MT of O2. And kenaf plant absorbs CO2 from the atmosphere more than any other crop. About 1.5 tons of CO 2 is needed for a production of 1 ton of dry matter of kenaf. It means that every hectare of kenaf consumes 30-40 tons of CO2 for each growing cycle. During a single growing cycle, each hectare of kenaf consume the amount of CO2 that exhaust from 20 cars in whole year.
Jute-made carbon materials are achievements of jute resources after comprehensive exploration and utilization. Usually, activated carbon is made of charcoal and coal. Using jute as a raw material for activated carbon will not only help to improve the added value of the jute industry chain but also save valuable timber and coal resources. It is estimated that the market
Degree of Global Competitiveness: A case Jute, Kenaf & Allied Fibres Industry 4
size of bio-composite will increase from the level of USD2.1 billion in 2010 to USD3.8 billion in 2016. According to the Redbud, China, currently the global annual vehicle production is between 6,000 and 7,000 million. On the suppositions that average usage is 8 m 2 per vehicle, its interior materials required is 0.8 kg, the demand of jute will be up to around 10 million tons, assuming half of vehicles linen uses jute-based composite as its interior linen material. Mercedes
Benz, Daimler Chrysler, Ford Motors, Toyota, Hyundai and Suzuki are using about 10 to 20 kg of jute and blending it with plastic to make interior body parts. According to International Cocoa
Organization (ICCO), the present requirement of food grade jute bags is about 32 million while at present both Bangladesh and India are supplying only 12 million bags. Similarly over 100 million (60 kg) coffee beans are produced in about 70 countries which should require as many bags. In total, the global annual demand for all kinds of industry-use textiles is one (1) billion square meters. Assuming that the demand accounts for one billion square meters and the average square meter values 0.4 kg, it will need 40 million tons of jute annually. For information, the annual consumption of jute geo-cloth in United States is more than 5 million square meters to prevent soil erosion. Similarly, the consumption in Europe is up to 1 million square meters. It has been estimated that annual world demand for shopping bags is approximately 500 billion pieces whereas the supply of jute shopping bags is almost negligible in comparison.
RESEARCH METHODOLOGY
Secondary Research Approach is used to assess the world production of JAF. Evaluating this data is the pivotal point to achieve required results. Cross-Checks from different sources is the only way to validate this data acquired about any particular sector. Fact Finding Research design will help this dissertation to identify the pattern of growth potential and determine a viable solution. Trend Analysis is the another aspect of fact-finding that will provide observation and analysis of trends in industry volume and brand share over time, i.e. market tracking.
Degree of Global Competitiveness: A case Jute, Kenaf & Allied Fibres Industry 5
Environmental scanning entails information gathering and fact-finding designed to detect indications of environment changes in their initial stages of development. The internet can be used for environmental scanning; however, there are other means, such as periodic review of contemporary publications and reports are used to find a conclusion of the data.
Period of Study
It is a statistical study where we use data from 1991 to 2011, where the world production index and the top ten countries production index is used.
Scope of Study
This study will help students, researchers, economists and other company planner to carry out their research work. It will also help them to know about global competitiveness and to calculate global competitiveness in their respective field.
Technique used for Analysis
The analysis deals with descriptive analysis and statistical analysis. The statistical analysis is to find out the trend in degree of competition among the global competing countries in the production of JAF. The corresponding hypothesis follows the null hypothesis Ho that there is no increase in the global competition in the production of against the alternative hypothesis
Ha that there is increase or decrease in the same. To find out the global competitiveness , we have calculate market share of each country every year . Then Roy (2006), the formula for degree of competition (1-√∑
2)
applied, where Mi is the market share of each country in
global JAF production. We have taken the data from year 1991 to 2011 of top ten countries.
Next calculated squares of these individual market shares for a particular year and then added those squares to get ∑Mi2 for that year. The entire process can be repeated for obtaining ∑Mi2 for all the years. Next, we have calculated the value of (1-√∑
2)
to obtain the degree of
competition for all the years. At last trend line is drawn by taking the competitiveness index of every year.
Degree of Global Competitiveness: A case Jute, Kenaf & Allied Fibres Industry 6
DESCRIPTIVE ANALYSIS
Table 1 : World Production Data of JAF IN 1000MT
Degree of Global Competitiveness: A case Jute, Kenaf & Allied Fibres Industry 7
Then we calculate the market share of the data given and highlight the country with highest market share.
Table 2 : Market Share Data of JFA (Mi)
Total Jute, Kenaf
& Allied Fibres:
Global Competitiveness: A case Jute, Kenaf & Allied Fibres Industry
India: Share of jute production in total agriculture in 09-10: 0.183% by value and 1.6% by volume. The production value has increased from 1991 to 2011 13.88%, with an increase in the market share of 14.5 %.
Bangladesh: Production of raw jute: 1.5 million MT by volume in 10-11 and USD261 million by value in 09-10. Share of raw jute production in agriculture in 2010: 1.401% by value. The production has increased by 41.03 % and market share increased by 42.35%.
China: Production of raw jute in 2010: 40 thousand MT (volume) and USD 11 million
(value). The production index has decreased by a massive 84.79 % and market share by
86.8 %.
Sudan: Production of raw jute in 2010: Int $906,000 by value and 3,200 MT by volume. The far east production data has decreased by 0.8%.
Thailand: Production of raw jute in 2010: 2,300 MT by volume and Intl. $651,000 by value, Yield (fibre): 1.6 MT/ha.
Vietnam: Production of raw jute in 2010: 12,448 MT by volume and Int. $3,525,000 by value.
Myanmar: Production of raw jute in 2010: 3,800 T by volume and USD 1,076,000 by value. Nepal: Production of raw jute in 2010: Intl. $5,937,000 by value and 20,965 MT in volume, Yield (fibre): 1.6 MT/ha.
Indonesia: We can see that there is 70.37 % decrease in the production , and the market share has decreased by 99.72 %.
Combodia: The data availability of this region is out of the scope of this paper, but is assured that the region is not meant to produce JAF.
9
Global Competitiveness: A case Jute, Kenaf & Allied Fibres Industry 10
Table 3 : The Degree of Global Competitiveness (1-√∑Mi 2 )
Year
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Figure 1: Graph for the Degree of Global Competition Along With the Trend Line
Global Competitiveness: A case Jute, Kenaf & Allied Fibres Industry
STATISTICAL ANALYSIS
The data set on global JAF production have used to study the time series analysis from 1991 to 2011. In Table 3, we have calculated the Mi 2 where i varies from
1991 to 2011. To examine the trend of competition over the years for detecting any change in the degree of competition in global JAF production, we would like to plot the values of (1-√∑
2)
over the years, which can be observed in Table 3. In view of
Figure 1, we propose to go for linear regression analysis. We shall consider the hypothesis Ho as null hypothesis that there is no change in the degree of global competition in JAF production over the years against Ha as alternative hypothesis that there is an increase or decrease in the same over the years. Let the linear trend equation of Global Competitiveness of JAF producing countries be represented by
Gt = a + b t + εt , (1)
Where Gt is the global competitiveness during the period t, a and b are the regression parameters, t is the time variable, and εt is the error term. Using the least square method one can estimate a and b using time series data using IBM SPSS, the corresponding analysis is presented below:
11
Global Competitiveness: A case Jute, Kenaf & Allied Fibres Industry
Gt = 12.611 + 1.523 t + εt
(ε: -.879)
To examine the significance of b value, the regression coefficient of this linear regression curve, we like to test the null hypothesis, h0: b = 0 against the alternative hypothesis that b is greater or lesser than zero, i.e. ha : b > 0 or ha : b < 0. The observed value of t is –8.031, with a tail probability of .000, which is less than .05. Hence rejecting the null hypothesis at 5% level of significance i.e. the global competitiveness of world JAF production is “significantly decreasing over time” as the coefficient of time is negative. The multiple correlate on, i.e. r value, is 0.879 which is also on the higher side. The corresponding analysis of variance table provides with f ratio as
64.497 for which the upper tail probability is 0.000, which is less than 5% level of significance. So, we conclude that, the linearly decreasing trend equation is a good fit.
12
Global Competitiveness: A case Jute, Kenaf & Allied Fibres Industry
CONCLUSION
Thus, we finally conclude that the global competition for JAF production is decreasing over the years, whereas, the market share of India is also fluctuating, but is higher in 2011 than 2010; this indicates a threat for Indian Plantations. Among the top ten producing countries of global JAF production the market shares of only Bangladesh is favorable compared to other nine countries. India is one of those countries whose market share is steadily increasing or fluctuating. The performance of India is also is highest in 2002 and not up to the mark in the years 2005, 2006 & 2007. While the world JAF output & trade has grown multifold, the Indian production and exports have not been experiencing any spectral upheaval. There have been falling prices, reduced exports and sluggish consumption growth. Long gestation period, high labour costs and, climatic changes critically affecting demand-supply imbalances, have led to these causes. The problem just does not end here, surging competition from countries like
Bangladesh, Sudan, Thailand & Uzbekistan is also on all time high, which has further weakened Indian exports. The steps government is taking are tremendously essential for the production of JAF like establishing Research facilities, deploying modern technology for the industry, empowering public sector enterprises, marketing the value and profitability of the product. So, on the whole it is a great threat to Indian JAF industry as Bangladesh is doing well and degree of competition is decreasing over the years. The Government is committed to providing a conducive environment to enable the Indian jute and jute textile sector to realize its full potential, to achieve global excellence, and to fulfill its obligations to the different sections of society. It is now the responsibility of government and private players to join hands and establish institutions to help JAF industry grow.
13
Global Competitiveness: A case Jute, Kenaf & Allied Fibres Industry
BIBLIOGRAPHY
Annual
Report,
Ministry
of
Textiles,
Govt.
of
India.(2011).Retrieved
From.www.ministryoftextiles.gov.in.
CIA,The World Fact book. ( 2013). Retrieved From. https://www.cia.gov/library/publications/the-world-factbook/index.html.
Country Profile, FAOSTAT.(2012). Retrieved From. http://faostat.fao.org/site/666/default.aspx.
FAO Bulletin of Jute, Kenaf and Allied Fibres. (June 2011).
India/World Bank.(2012). Retrieved From http://data.worldbank.org/country/india.
Indian Jute, Bulletin of National Jute Board (NJB),.(2010). Vol. XXII no. 1.
International Jute Study Group (IJSG). (2012). Retrieved From. http://www.jute.org/wjp/cp_india.htm http://www.jute.org/price.php.
