Determinants of global competitiveness of the Philippine coconut oil industry

Based on values of RCA [revealed comparative advantage] of Philippine coconut oil [PCO] during the period 1980-2000, PCO was highly competitive in the world vegetable oil market. However, PCO exhibited a downward trend in its level of competitiveness from 1980 to 2000. It is notable that the average RCA value of PCO from 1980 to 2000 was significantly higher than that of the Indonesian coconut oil based on results of the t-test of means. Nevertheless, the RCS of Indonesian coconut oil showed an increasing trend (249.09%/year) from 1980 to 2000. Indonesia evidently poses a threat as the RCA of Indonesia coconut oil is rising while that of PCO is declining. Results of regression analysis showed that the key determinants to export competitiveness of PCO were the 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 coconut oil were inversely related to export competitiveness. Based on DRC* [domestic resource cost] and RCR* [resource cost ratio] 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 affected copra quality were drying procedure and type of dryer used, non-adoption of PCA [Philippine Coconut Authority] grading standards for copra, and the complicated copra pricing scheme. Good quality copra could be produced using the Los Banos and kukum dryers. However, the costs of these dryers was higher than that of the tapahan [smoke-drying]. Copra producers were also not motivated to invest in these type 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