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Comparative and Competitive Advantages of the Coffee Industry in the Central Highlands of Vietnam Under Trade Liberalization
Thesis Abstract:
The study estimated the comparative and competitive advantages of the coffee industry in the Central Highlands of Vietnam. The policy analysis matrix (PAM) was used to measure the comparative advantages of the coffee industry. To identify the key factors affecting comparative and competitive advantages, a sensitivity analysis was undertaken.
A PAM of the coffee industry in the Central Highlands showed that the coffee industry was profitable in terms of both private and social prices. The utilization of resources in coffee production was efficient.
Based on the resource cost ratio (RCR) and net social profitability (NSP) estimates, the coffee industry in the Central Highlands had a comparative advantage in coffee production. Coffee production was more favored in the province of Dak Lak than in Lam Dong. Besides, RCR and net private profitability (NPP) showed that both Dak Lak and Lam Dong provinces had competitive advantage in the production of coffee. However, coffee in Lam Dong was not as competitive as it was in Dak Lak.
Using sensitivity analysis, it can be concluded that comparative and competitive advantages of coffee were affected by the changes in world coffee price, exchange rate, imported input prices, cost of labor, and coffee productivity. It was found that world coffee price, shadow exchange rate, and coffee productivity had positive relationship with comparative advantage of coffee whereas imported input prices and labor cost had negative relationship. Furthermore, competitive advantage of coffee had negative relationship with labor cost and positive relationship with coffee productivity.
The study recommended that some serious policies need to be implemented to reduce risk and reinforce competitive advantage of Vietnam’s coffee; and it becomes more important within the trade liberalization context. The Vietnam government should pay attention to quality improvement, productivity enhancement, broadening the markets, and price stabilization.