Mozambique ’ s Inter-Industry Comparative Advantage

The authors investigated inter-industry comparative advantage in Mozambique. In Mozambique, industries lack comparative advantage. However, in comparison between industries (inter-industry), machinery/electric tops in Mozambique followed by vegetable product industry. Foot wear/head gear demonstrates lack of comparative advantage and it is followed by plastic/rubber industry. In general, Industries in Mozambique show lack of comparative advantage. It is recommended that Mozambique should enact policies that encourage foreign direct investment (FDI). It is further recommended that Mozambique should be investing in exploring undiscovered endowment which when discovered can boost comparative advantage. Mozambique should consider accepting these results and come up with a concrete industrial policy which can improve export capabilities of Mozambique’s industries on the international market.


INTRODUCTION
A number of studies have been done on Mozambique including Mzumara (2011).That study dealt with products in which Mozambique has comparative advantage in.The study was exhaustive but did not tackle inter-industry comparative advantage in Mozambique.From a policy point of view, policy makers are in a better position to enact industry specific policies.However, without knowing how various industries are fairing in international trade the exercise may be futile.Mozambique is a member of the Southern African Development Community (SADC) hence the role its industry as played both at regional level and international level is paramount.The objective of this paper is to investigate Mozambique's inter-industry comparative advantage.On the onset the classical theory of comparative advantage will be used as a conceptual framework of this paper.
The classical theory of comparative advantage has explained that gains from exchange of goods improve welfare significantly and that trade without barriers leads to prosperity of the global economy (Bender & Li, 2002).Ricardo invalidated the Principle of Absolute Advantage as advanced by Adam Smith.The logic in the Absolute Advantage was that big countries will have a straight win in international trade while small and insignificant countries will have a straight loss in international trade.The benefits arising from absolute advantage in international trade were very clear.However, Ricardo argued that countries in order to benefit from international trade did not necessarily need to demonstrate absolute advantage instead what they need is comparative advantage.No matter how small a country is will have some sort of comparative advantage in some of its products it exports to the world market hence in trading each country will benefit from exchange (Mzumara, 2006).
Hescheker-Ohlin-Samuelson theory attributes comparative advantage as originating from factor price differentials.Further, the Neo-Factor-Proportion Theory concludes that comparative advantage is a result of factor efficiency.Then the technology gap and product cycle theory affirms that comparative advantage comes from the use of soft technological innovations (Bender & Li, 2002).According to Mzumara (2006) he Hescheker-Ohlin theory is not a separate trade theory rather it must be viewed as an extension of Ricardo's Theory of Comparative advantage.They did not demolish the Principle of Comparative advantage rather added the aspect that countries would possess comparative advantage due to international differences in costs of factor endowments.They advocated specialization.Those countries with an endowment of a particular factor will use the abundant factor and export products which use such a factor most intensively.They will therefore import the products which use their scarce factor less intensively.
According to Lee (1999) comparative advantage encourages nations to make up their mind whether it will be rewarding to produce as opposed to importing the product.When countries make such rational decisions, the world welfare would improve.The Principle of Comparative Advantage has been received well as a significant determinant of international output and trade pattern (Neary, 2002).
The empirical works done by researchers on Heckscher-Ohlin theory or model have focused on factors of production.In that the factors of production are less mobile between nations and that they are used in different combinations in order to produce different goods (Goldin, 1990).A nation therefore has a comparative advantage in those industries that use intensively the factors of production that are abundant in a given nation (Widgren, 2005).

METHODOLOGY
The methodology used in this paper is Balassa (1965) revealed comparative advantage (RCA).According to Deardorff (2010) the RCA remains valid in revealing true comparative advantage.It is also useful as a guide in trade policy making.Balassa's method takes the form:

/
With: X i , j denoting country i's exports of product j; X i,tot denoting country i's total exports; X w,j denoting the world's (all countries) export of product j; and X w,tot denoting total exports in the world.
An RCA ≥ 1 demonstrates that the country has revealed comparative advantage and that it is relatively specialised in producing and exporting the product line under investigation.An RCA <1 demonstrates that the country has no revealed comparative advantage and is therefore not specialised in the product line (Balassa, 1965;Krugell & Matthee, 2009).
The authors have used export trade data of Mozambique and the world obtained from International Trade Center's Trademap.The data was obtained on 6-digit level the most disaggregated and accepted international product classification.

RESULTS AND DISCUSSION
Inter -industry results are shown in table 1. Column 1 is the rank of industry and column 2 is industry code, column 3 is the description of industry and column 4 are number of product lines in which industry has comparative advantage in.The comparative advantage of the industry depends on the number of firms in the industry.
The industry which is ranked number 1 in Mozambique compared to other industries in terms of comparative advantage is machinery/electrical.It has 65 product lines in which it has comparative advantage in.It is followed by vegetable products industry with 41 product lines.In the third rank is metal industry with 32 product lines.The industry that is least comparative advantage in Mozambique is foot wear/head gear with only 1 product line.This is followed by plastic/rubber industry with 2 product lines.In the third place are two industries namely: stone/glass and raw hides, skins, leather and furs.They both have 4 products lines.
Generally the industries in Mozambique show less comparative advantage.However, comparative advantage in the machinery/electric is significant and the least in the foot wear/head gear industry.Table 2 shows top 3 products codes in the machinery/electric industry in which Mozambique has comparative advantage.In table 2, letter press printing machinery except flexographeric has the highest index in the machinery/electric.It has an index of 1624.In the second place is printing machinery with an index of 164.In the third place are machinery parts, non-electrical with an RCA index of 73.Table 3 shows top 3 products codes in the vegetable industry in which Mozambique has comparative advantage.In table 3, beans dried, shelled in the vegetable industry has the highest RCA in this industry with an RCA index of 152.It is followed by cashew nuts in shell dried with an RCA index of 143.In the third rank are cotton seeds with an RCA index of 119.Table 3 shows top 3 products codes in the metals industry in which Mozambique has comparative advantage.Source: From the results.
In table 4, lead bars, rods, profiles and wire in the metals industry have the highest RCA with an index of 322.7.The next in line is aluminium unwrought, alloyed with an index of 111.In the third position is aluminium unwrought, not alloyed with an index of 99.Table 5 shows top 3 products codes in the textiles industry in which Mozambique has comparative advantage.In table 5, sisal and agava, processed but not spun, tow and waste in the textiles industry has the highest RCA in this industry with an index of 3888.In the second position is silk-worm cocoons suitable for reeling with an RCA 1901.8.In the third position is coconut (coir) fibre, raw with RCA index of 629.9.Table 6 shows top 3 products codes in the animal and animal products industry in which Mozambique has comparative advantage.In table 6, live reptiles, including snakes and turtles in the animal and animal industry has the highest index in this industry with an index of 77.In the second place is salmonidae, not trout or salmon, fresh or chilled with an index of 61.In the third place is shrimps and prawns, frozen with an index of 31.Table 7 shows top 3 products codes in the mineral products industry in which Mozambique has comparative advantage.Pumice stone, worked in table 7, belonging to the mineral products industry has the highest RCA in this industry with an index of 939.Titanium ores and concentrates have the second highest RCA in this industry with an index of 217.6.Quartzite, slabs is the third with an RCA index of 111.Table 8 shows top 3 products codes in the wood and wood products industry in which Mozambique has comparative advantage.Oriented strand board and wafer board of wood, unworked/not further worked in table 8 in the wood and wood products industry has the highest RCA in this industry.It has an index of 1380.In the second rank is lumber, tropical wood with an index of 87.5.In the third place are Ties, railway or tramway, wood not impregnated with an index of 71.9.Table 9 shows top 3 products codes in the miscellaneous industry in which Mozambique has comparative advantage.Instruments for measuring length, hand use in table 9 in the miscellaneous industry has the highest RCA index in this industry of 5.7.They are followed by parts and accessories for cinematographic cameras with an index of 5.6.In the third rank are paper feeders for the photocopying apparatus with an index of 5.3.Table 10 shows top 3 products codes in the foodstuffs industry in which Mozambique has comparative advantage.Maize bran, sharps, other residues in table 10 have the highest RCA in this industry with an index of 214.3.Tobacco, unmanufactured, stemmed or stripped is in the second place with an index of 114.6.Wheat bran, sharps, other residues are in the third place with an index of 56.4.Table 11 shows top 3 products codes in the transportation industry in which Mozambique has comparative advantage.Floating, submersible drilling or production platform in table 11 has the highest RCA in the transportation industry of 6.7.It is followed by vessels in 89.01 8906.10 including lifeboats other than rowing boats with an index of 4.5.In the third rank are buoys, beacons, coffer-dams, pontoons, floats with an index of 3.9.Table 12 shows top 3 products codes in the chemicals and allied industry in which Mozambique has comparative advantage.Retreaded pneumatic tyres of rubber of a kind used on aircraft in the plastic/rubber have an RCA index of 9.4.The other product code is conveyor belts with an RCA index of 1.1.Table 16 shows only one products code in the foot wear/head gear industry in which Mozambique has comparative advantage.Wigs, false bears, eyebrows etc of other material in table 16 are the only product code in this industry with an RCA index of 86.9.The inter-industry results of Mozambique are consistent with theory as advocated by David Ricardo that a country will have some industries and products in which comparative advantage will exist.

CONCLUSIONS AND RECOMMENDATIONS
In Mozambique, industries lack comparative advantage.However, in comparison between industries (inter-industry), machinery/electric tops in Mozambique followed by vegetable product industry.Foot wear/head gear demonstrates lack of comparative advantage and it is followed by plastic/rubber industry.In general, Industries in Mozambique show lack of comparative advantage.
It is recommended that Mozambique should enact policies that encourage foreign direct investment (FDI).It is further recommended that Mozambique should be investing in exploring undiscovered endowments which when discovered can boost comparative advantage.Mozambique should consider accepting these results and come up with a concrete industrial policy which can improve export capabilities of Mozambique's industries on the international market.

Table 8 : Top 3 product codes in the wood and wood products industry in which Mozambique has comparative advantage Rank Product code
Source: From the results.

Table 11 : Top 3 product codes in the transportation industry in which Mozambique has comparative advantage Rank Product code
Source: From the results.

Table 12 : Top 3 product codes in the chemicals and allied industry in which Mozambique has comparative advantage Rank Product code
Hevachlorobenzene and DDT in table 12 have the highest RCA in chemicals and allied industry with an RCA index of 691.5.Sodium hexafluoroaluminate (synthetic cryolite) with an RCA 4 is in the second position.In the third rank are alkali metals other than sodium with an RCA of 2.7.Table13shows top 3 products codes in the raw hides, skins, leather, and furs industry in which Mozambique has comparative advantage.

Table 13 : Top 3 product codes in the raw hides, skins, leather, and furs industry in which Mozambique has comparative advantage Rank Product code
Sheep or lamb skins, raw, except pickled, no wool in table 13 have the highest RCA index in the raw hides, skins, leather and furs industry of 15.7.They are followed by bovine (including buffalo)/equine hides and skins (excluding of 4101.20 and 4101.50) with an RCA index of 3.7.Raw hide/skins except bovine/equine/sheep/goat/reptile are in the third place with an RCA index of 1.3.Table14shows top 3 products codes in the stone/glass industry in which Mozambique has comparative advantage.

Table 14 : Top 3 product codes in the stone/glass industry in which Mozambique has comparative advantage Rank Product code
Articles of asbestos or cellulose fibre cement in table 14 in the stone/glass industry have the highest RCA in this industry with an index of 40.73.It is followed by Tubes pipes etc of asbestos, cellulose fibre cement with an index of 15.7.Precious, semi-precious stones unworked, partly worked with an index of 4.7.Table15shows all 3 products codes in the stone/glass industry in which Mozambique has comparative advantage.