Identifying the Sources of Chemical Export Diversification: Application of Economic complexity and product space

The chemical and petrochemical industries are among the industries with high complexity and an important part of the global value chain. This industry (with the ISIC code 24) accounts for 11.7% of the production and 24.7% of the world's industrial exports. Despite its rich oil and gas resources, Iran ranks 22nd in the world with an average production of $ 8.31 billion during the period 2016-2014. Although about 33% of the products of Iran's chemical and petrochemical industry have been exported, due to the lack of attention to production diversification and focus only on the export of a small number of products, the impact of this industry on economic growth has been negligible. In this paper, in order to determine the new areas for export diversification in Iran's chemical and petrochemical industries, two approaches of "economic complexity" and "product space" were used. Five indicators were used to identify high-priority commodity groups for export: "product complexity", "opportunity benefit", "density", "value of global product demand (import volume)" and "global demand growth". The results indicated that in the four-digit HS classification level, despite the existing capabilities, the Iranian petrochemical industry was focused on producing less complex products. Based on the size of the above-mentioned indicators, out of 194 commodity groups in this industry, the production of 60 commodity groups in the Iranian petrochemical industry has priority. At present, Iran's petrochemical industry has a comparative export advantage in only 13 commodity groups out of the above 60 groups. Relying on the existing capabilities, it is suggested that while continuing to support the production and export of these goods, the necessary planning to invest in the development of production and export of other commodity groups (47 other groups) should also be considered.