Unexplored Export Potential of Surgical Goods of Pakistan to Selected Countries

Abstract

This study quantifies and analyzes the Unexplored Export Potential (UEP) of Surgical Goods of Pakistan (SGP) to 42 selected countries that are leading export markets for these goods. The quantification of UEP of SGP is expected to help the concerned Pakistani exporters for setting right their export priorities towards selected export markets. The study differentiates the selected export markets on the basis of presence and absence of UEP of SGP. Thus, to serve the purpose and make the analysis more meaningful, out of total 42 selected export markets, top 9 markets have been classified as “TOP-9 Importers of SGP”. The remaining 33 markets have been classified with regard to their membership of different regional groups that are; ASEAN, EU, GCC, ECO, and SAARC. Current study is a disaggregate level research. It utilizes disaggregated level data of the surgical goods‟ industry of Pakistan. In fact, international trade literature is relatively limited for such disaggregate level researches, which is because of the reason that required data to accomplish such researches are found on discontinuous basis. The discontinuous availability of required data leads to missing values‟ problem, which refrains the accomplishment of such researches. Current study solves the missing values‟ problem by using Tobit model. Moreover, this study utilizes augmented Gravity Model of Trade for the used panel data (1990-2010) and ensures the statistical adequacy of the estimated parameters by applying unit root and co-integration tests. The results obtained through Augmented Dickey-Fuller test indicate that for each selected country at least two of the data series are unit root. Thus, for validation of regression results, Engel-Granger two-step co-integration test has been applied, which confirms the long run relationship between dependent and all the independent variables, in all 42 countries‟ cases. xii Moreover, UEP is usually quantified either by using the out-of-sample projection approach or the in-sample projection approach. However, researchers believe that both these approaches are inefficient in serving the purpose of quantification of UEP. Thus, current study employs Empirical Bayes (EB) method for the quantification of UEP of SGP. The EB methodology is especially useful for panel data that are with short time series dimension, as is the case in current study. The application of EB method for quantification of UEP of SGP is a pioneering attempt. Estimation results show that signs of all parameters are in line with the economic theory. Moreover, the results indicate that the export potential for surgical goods exists in Philippines, Singapore, Indonesia and Malaysia in ASEAN, only Thailand is over-traded in this group. The potential prevails in all selected countries of EU, only Czech Republic is over-traded; it exists in all selected countries of GCC. The potential is absent in case of Turkey, which is the sole selected member from ECO; it does not exist in all the selected countries of SAARC. Lastly, the export potential exists only in case of Italy in TOP-9 Importers of SGP, the remaining 8 members of this group are over-traded. In the light of empirical findings of this study, the exporters of SGP and concerned policy makers at government level could better set their priorities regarding export of SGP to selected export markets.