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Determinants of Clove Exports in Zanzibar: Implications for Policy

Year 2022, Volume: 4 Issue: 2, 127 - 147, 29.12.2022
https://doi.org/10.54821/uiecd.1180312

Abstract

Clove is one of the high value spices that have supported the economy of Zanzibar for many decades since the 18 th Century. However, clove production and exports have been declining significantly and consistently since the 1980s. The declining of the clove exports most likely jeopardizes the Zanzibar efforts to improving human development with positive changes in living standards. This paper analyses factors for the declining trend in clove exports using time series data that were collected between 1980 and 2020 and analysed using the vector error correction model, complemented with qualitative data collected from 39 key informants. The time series results show that clove production, producer price, world price, Gross Domestic Product (GDP), and Exchange Rate had positive and statistically significant impact on clove exports in a long-run at 1% level of significance; while Foreign Direct Investment, human population and Cross Capital Formation showed significant negative impact. Only inflation showed insignificant negative impact. Based on qualitative results, there were two major determinants: (i) factors that affected clove production, and (ii) low and fluctuation of the clove price. The time series results coincided with qualitative information. We conclude that some factors affected clove exports indirectly through clove production. Other factors affected exports through fluctuation of clove price. Therefore, we recommend an integrated policy approach that aims at improving clove production and price stabilization in order to rectify the decreasing trend in clove exports.

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Zanzibar'da Karanfil İhracatının Belirleyicileri: Politika Önerileri

Year 2022, Volume: 4 Issue: 2, 127 - 147, 29.12.2022
https://doi.org/10.54821/uiecd.1180312

Abstract

Karanfil, 18. Yüzyıldan bu yana onlarca yıldır Zanzibar ekonomisini destekleyen yüksek değerli baharatlardan biridir. Ancak, karanfil üretimi ve ihracatı 1980'lerden bu yana önemli ölçüde ve sürekli olarak azalmaktadır. Karanfil ihracatındaki düşüş, Zanzibar'ın yaşam standartlarında olumlu değişikliklerle insani gelişmeyi iyileştirme çabalarını tehlikeye atmaktadır. Bu çalışma, 1980 ve 2020 yılları arasında vektör hata düzeltme modeli kullanılarak analiz edilen zaman serisi verilerini kullanarak karanfil ihracatındaki düşüş eğiliminin faktörlerini analiz etmekte ve 39 önemli bilgi kaynağından toplanan nitel verilerle tamamlanmaktadır. Zaman serisi sonuçları, karanfil üretimi, üretici fiyatı, dünya fiyatı, Gayri Safi Yurtiçi Hasıla (GSYİH) ve Döviz Kurunun karanfil ihracatı üzerinde uzun vadede %1 önem düzeyinde pozitif ve istatistiksel olarak anlamlı bir etkiye sahip olduğunu göstermektedir. Doğrudan yabancı yatırım, insan nüfusu ve brut sermaye oluşumu ise önemli ölçüde olumsuz etki göstermiştir. Sadece enflasyon önemsiz negatif etki göstermiştir. Analiz sonuçlarına göre i) karanfil üretimini etkileyen faktörler ve (ii) karanfil fiyatının düşük ve dalgalanması iki ana belirleyicisidir. Buna karşın diğer faktörler, karanfil fiyatındaki dalgalanma yoluyla ihracatı etkilediği tespit edilmiştir. Bu nedenle, karanfil ihracatındaki düşüş eğilimini düzeltmek için karanfil üretimini iyileştirmeyi ve fiyat istikrarını hedefleyen bütünleşik bir politika yaklaşımını öneriyoruz.

References

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  • Engle, R. F., Hansen, M., & Lunde, A. (2011). And now, the rest of the news: Volatility and firm specific news arrival. Unpublished Working Paper, CREATES.
  • Francois, J., & Manchin, M. (2013). Institutions, infrastructure, and trade. World development, 46, 165-175.
  • Fugazza, M. (2004). Export performance and its determinants: supply and demand constraints. Policy Issues in International Trade and Commodities Study Series, (26).
  • Gasheja, C. A. S. H. E. J. A., Joseph, M. A., Joselyne, I. N. G. A. B. I. R. E., Napoleon, N. J., & Felix, H. A. G. E. N. I. M. A. N. A. Applying vector error correction to model export in Rwanda. International Journal of Mathematics and Physical Sciences Research, 4(2), 53-63.
  • Gbetnkom, D., & Khan, S. A. (2002). Determinants of agricultural exports: The case of Cameroon (AERC Research Paper).
  • Granger, C. W., & Newbold, P. (1974). Spurious regressions in econometrics. Journal of econometrics, 2(2), 111-120.
  • Gujarati, N. D. (2003). Basic Econometrics 4th edition McGraw Hill United states Military Academy. West Point.
  • Heckscher, E. (1919). The effect of foreign trade on the distribution of income 1919. Readings in the theory of international trade, 272-300.
  • Helleiner, G. K. (Ed.). (2002). Non-traditional export promotion in Africa: Experience and issues. New York: Palgrave.
  • Helpman, E., & Krugman, P. (1987). Market structure and foreign trade: Increasing returns, imperfect competition, and the international economy. MIT press.
  • Hervé, D. B. G., Amoro, G., Mahfoudh, R. S., & Constant, N. G. B. Z. S. (2014). The Determinants of export performance: The case study of Zanzibar export. International Journal of Economics and Finance, 6(6), 95-102.
  • Hikmany, A. N. (2015, September). The Many land acquisition laws of Zanzibar: Is there an innermost objective?. In International Conference on Advanced Research in Business and Social Sciences.
  • Hilal, Z. A. (2013). The Implication of prevailing marketing system in production and export: the case of clove production in Zanzibar’. Unpublished Master’s dissertation. Rotterdam, The Netherlands: International Institute of Social Studies.
  • Hoekman, B., Ng, F., & Olarreaga, M. (2004). Agricultural tariffs or subsidies: which are more important for developing economies?. The World Bank Economic Review, 18(2), 175-204.
  • International Trade Centre (2014). Tanzania spices sub-sector strategy. Geneva. Available at: https://www.intracen.org/uploadedFiles/Tanzania-Spices%20Roadmap%20_final.pdf (accessed 18 December 2021).
  • Johansen, S. (1988). Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control, 12(2–3): 231–54.
  • Jongwanich, J. (2007). Determinants of export performance in East and Southeast Asia. Asian Development Bank. Available at: https://www.adb.org/sites/default/files/publication/28367/wp106.pdf (accessed 17 September 2021).
  • Juma, A. (2010). Zanzibar clove growers association: Final clove advocacy report. Zanzibar. Available at: http://www.best-dialogue.org/wp-content/uploads/ZAPCO-2010-07-Zanzibar-Clove-Advocacy-report-Juma.pdf (accessed 7 February 2022).
  • Kingu, J. (2014). Cloves Export response to trade liberalization in Tanzania: A cointegration analysis. Journal Economics and Sustainable Development, 5(1): 99–120.
  • Krugman, P. (1979). A model of innovation, technology transfer, and the world distribution of income. Journal of political economy, 87(2), 253-266.
  • Maddala, G.S. (1992). Introduction to econometrics, 2nd Edition, Prentice Hall, New Jersey.
  • Martin, P. J. (1991). The Zanzibar clove industry. Economic Botany, 45(4), 450-459.
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There are 84 citations in total.

Details

Primary Language English
Subjects Agricultural Policy
Journal Section Research Articles
Authors

Samwel J. Kabote

Jires Tunguhole This is me

Publication Date December 29, 2022
Published in Issue Year 2022 Volume: 4 Issue: 2

Cite

APA Kabote, S. J., & Tunguhole, J. (2022). Determinants of Clove Exports in Zanzibar: Implications for Policy. International Journal of Business and Economic Studies, 4(2), 127-147. https://doi.org/10.54821/uiecd.1180312


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BES JOURNAL-International Journal of Business and Economic Studies is licensed with Creavtive Commons (CC) Attribution 4.0 International Licence (CC BY 4.0).