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Determinants of Global Competitiveness of the Philippine Coconut Industry
Abstract:
The study assessed the global competitiveness of the Philippine coconut oil industry. Revealed comparative advantage (RCA), competitive advantage measures, and comparison of quality competitiveness of Philippine coconut oil with international standards used to measure the global competitiveness of Philippine coconut oil. To identify the key determinants of the export competitiveness (RCA) of the Philippine coconut oil, multiple regression analysis was conducted.
Based on the RCA values of Philippine coconut oil during the period 1980- 2000, Philippine coconut oil was highly competitive in the world vegetable oil market. However, Philippine coconut oil exhibited a downward trend in its level of competitiveness from 1980 to 2000. It was notable that the average RCA value of Philippine coconut oil from 1980 to 2000 was significantly higher than that of the Indonesian coconut oil based on the results of the t-test of means. Nevertheless, the RCA of Indonesian coconut oil showed an increasing trend (249.09%/year) from 1980 to 2000. Indonesia evidently poses a threat, as the RCA of Indonesian coconut is rising while that of the Philippine coconut oil is declining.
Results of regression analysis showed that the key determinants to export competitiveness of Philippine coconut oil were the General Agreement on Tariffs and Trade (GATT) dummy variable, domestic production of coconut oil, domestic consumption of coconut oil, and volume of exports of Indonesian coconut oil.
Domestic production of coconut oil was positively related to export competitiveness whereas GATT dummy variable, domestic consumption of coconut oil, and volume of exports of Indonesian coconut oil were inversely related to export competitiveness.
Based on domestic resource cost (DRC*) and resource cost ratio (RCR*) estimates, the Philippines has a competitive advantage in the production of crude coconut oil. Moreover, it was found that Mindanao was more competitive than Bicol in crude coconut oil production. The sensitivity analyses revealed that DRC* was sensitive to changes in copra cost, border price, and oil yield.
Improving the quality of copra is vital to the Philippine coconut oil industry because this would translate into a better quality of coconut oil. Among the factors that affect copra quality were drying procedure and type of dryer used, non-adoption of the Philippine Coconut Industry (PCA) grading standards for copra, and the complicated copra pricing scheme. Good quality copra can be produced using the Los Baños and kukum dryers. However, the cost of these dryers was higher than that of the tapahan. Copra producers were also not motivated to invest in these types of dryers since the existing copra pricing scheme does not provide an incentive to produce good quality copra.
Findings of the study also revealed that the quality of coconut oil exported by the coconut oil-miller exporters interviewed in this study met the PCA and international quality standards.