Author : Tran Thi Thu Huong

Summary : 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 and competitive advantages of the coffee industry. To identify the key factors affecting comparative and competitive advantages, a sensitivity analysis was undertaken. A policy analysis matrix (PAM) of the coffee industry in the Central Highlands showed that the coffee industry in the Central Highlands was profitable in terms of both private and social prices. The utilization of resources in coffee production was efficient. Based on the RCR and Net social Profitability (NSP) estimates, the coffee industry in the Central Highlands had a comparative advantage in coffee production. In Daklak, coffee production was more favored than in LamDong province. Besides, RCR, and Net Private Profitability (NPP) showed that both Daklak and LamDong provinces had competitive advantage in the production of coffee. However, coffee in LamDong was not as competitive as it was in DakLak. 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 inputs prices, cost of labor and coffee productivity. Furthermore, it was found that world coffee price, shadow exchange rate and coffee productivity had positive relationship whereas imported inputs prices and labor cost had negative relationship with the comparative advantage of coffee. Besides, the relationship between labor cost and coffee competitive advantage was negative while it was positive relationship between coffee productivity and competitive advantage of coffee. The study recommended that some serious policies need to be implemented to reduce the risk and reinforce competitive advantage of Vietnam's coffee and it becomes more important within the trade liberalization context.