Does the Export Competitiveness of Coffee Improving So far?

Abstract

The general objective of the study is to examine the export competitiveness and determinants of export performance of the Ethiopian coffee sector. In analyzing competitiveness of the country in its coffee exports, data from UNCTAD-ITC is used for the periods 1991-2016. The Revealed Comparative Advantage (RCA) and Revealed Symmetric Comparative Advantage (RSCA) measures of competitiveness were used for the analysis. Furthermore, a multiple regression (OLS model) has also been employed to investigate the determinants of coffee export competitiveness and performance as well. Results for the RCA and RSCA showed that Ethiopia has comparative advantage in exports of coffee.

The regression analysis revealed domestic consumption level of coffee affects export competitiveness adversely and this relationship is statistically significant. All other variables including domestic production level, world price of coffee, exchange rate and export volume were found to affect export competitiveness positively and the effect is significant. Though domestic producer price affects the export performance of the sector positively, the effect is statistically insignificant. The government of Ethiopia should put measures in place to address current inefficiencies on the supply side, most importantly management of price risk, resulting from the volatile nature of coffee prices, both domestic and international and the gap between the time of purchase of beans from buyers and the sale to exporters, quality control, smuggling, illegal dealers and transaction costs