COMCEC Trade Outlook 2016
17
The resilience of a country against external economic shocks varies depending on among others
the degree of export diversification. One common measure of concentration is Herfindahl-
Hirschmann Index (HHI) 8 which can take values between 0 and 1 where being close to 0
indicates well diversified exports while a higher value indicates greater concentration of exports
on a few commodities. Figure 15 illustrates the evolution of product diversification in the OIC
geographic regions for the period 2005-2014 measured by HHI. This measure shows a little
tendency towards increasing product diversification across all the regions and there is
considerable disparity among regions. Africa has the highest HHI with 0.65 in 2014 which points
to a high export product concentration. On the other hand Asia which has the lowest HHI with
0.28 in 2014 has a more diversified export product base. Turkey has the most diversified export
product structure with a HHI of 0.07 in the OIC. In the Arab region HHI takes the value 0.57 in
2014, however when looked closely within Arab region some major oil exporters have a very
concentrated export product structure measured by HHI such as Iraq (0.97), Libya (0.76) Saudi
Arabia (0.74) and Kuwait (0.66).
Figure 15: Herfindahl-Hirschmann Index (Product HHI) Index by region 9
Source: Author’ calculations based on UNCTADSTAT data
8 The Herfindahl-Hirschmann Index (HHI) is calculated by taking the square of export shares of all export
categories in the market:This index gives greater weight to the larger export categories and reaches a value of
unity when the country exports only one commodity.
9 Note: Regional concentration ratios are trade weighted averages of country concentration indices where
country’s share in regional exports used as weights.