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Asian Journal of Agriculture and Development (AJAD) - Call for papers!

Determinants of global competitiveness of the coffee industry in Lao PDR

(Lao PDR), Master of Science in Agricultural Economics (University of the Philippines Los Baños)

Thesis Abstract:

This study aimed to identify the determinants of global competitiveness of the coffee industry in Lao PDR. Results of t-test of means indicated that the average revealed competitive advantage (RCA) value of Lao PDR coffee improved between the pre-ASEAN Free Trade Agreement (AFTA) and during the AFTA periods. The country also registered a greater RCA value of coffee than Thailand. Multiple regression analysis showed that domestic production and consumption of coffee were the significant determinants of export competitiveness of Lao PDR coffee. Domestic production was positively related to export competitiveness while domestic consumption was negatively related to export competitiveness of coffee.
 
Domestic resource cost (DRC) and resource cost ratio (RCR) estimates revealed that Lao PDR had competitive advantage in producing coffee. Results of the sensitivity analysis showed that DRC was sensitive to changes in the cost of electricity, border price, and quantity of coffee purchased. For quality competitiveness, coffee exporters in Lao PDR had followed the local standards set by Lao PDR Federation of Chambers of Commerce and Industry (LFCCI), which were less strict as compared to the International Coffee Organization (ICO) standards.
 
The problems encountered by the coffee industry in Lao PDR included: (1) high cost of chemical fertilizer used in coffee farming, (2) low yield of coffee, (3) prevalence of antiquated or old coffee mills, (4) stiff competition with major coffee exporters in the international market, and (5) local coffee standards are not in harmony with the ICO standards.
 
Based on the results of the study and the problems encountered by the coffee industry, the following policy reforms were recommended: (1) promotion of the use of organic fertilizer and adoption of the integrated pest management; (2) provision of training on proper methods of storing coffee; (3) investment on modern coffee mills; (4) strengthening of linkages among coffee farmers, wholesalers, and exporters; and (5) harmonization of the local coffee standards with the ICO standards.