Lao People's Democratic Republic – Coffee Export Roadmap Assessment Results on Covid-19

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Lao People's Democratic Republic – Coffee Export Roadmap Assessment Results on Covid-19 LAO PEOPLE'S DEMOCRATIC REPUBLIC – COFFEE EXPORT ROADMAP ASSESSMENT RESULTS ON COVID-19 TRADE IMPACT FOR GOOD The designations employed and the presentation of material in this document do not imply the expression of any opinion whatsoever on the part of the International Trade Centre concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. This document has not formally been edited by the International Trade Centre. TABLE OF CONTENTS BACKGROUND METHODOLOGY AND DATA FINDINGS AND ANALYSIS 1. GENERAL PERFORMANCE AND OPERATIONS 2. IMPACTS OF COVID-19 ON COFFEE SECTOR FIRMS 3. FIRMS ADAPTATIONS TO THE CHALLENGES POSED BY COVID-19 4. FIRM PERSPECTIVES ON POLICY RESPONSES TO CURRENT CHALLENGES CONCLUSIONS AND RECOMMENDATIONS ANNEX BACKGROUND Responding to the changing environment caused by the global COVID-19 outbreak, ITC offered in the context of the EU funded ARISE+ Lao PDR project (ASEAN Regional Integration Support from the EU Plus – Lao PDR), to conduct two sector specific COVID-19 rapid assessments. These assessments offer an opportunity to better understand the new normal in the wood processing and coffee sectors, and reflect any changes appropriately in the two sector export roadmaps which are being developed as part of the project. This report highlights the key results of the assessment on the coffee sector of Lao PDR. Objective To assess the impact of COVID-19 on the business in the coffee sector. P A G E 0 1 METHODOLOGY AND DATA A) ONLINE SURVEY ITC launched a data collection effort during 7 July to 21 August 2020, contacting private sector representatives, requesting them to complete an online survey. A total of 35 coffee sector firms responded to the call. Reflecting the geography of the Lao coffee sector, most respondents are located in Champasak Province (71%) and Luang Prabang Province (17%), though Vientiane Prefecture (9%) and Salavan Province (3%) are represented as well (Figure 1). Figure 1. Most respondents are located in Champasak and Luang Prabang Source: ITC calculations based on Lao PDR COVID-19 Rapid Assessment of the Coffee Sector. Data collected 7 July – 21 August 2020. P A G E 0 2 The questionnaire asked for information on respondents’ firms, their usual business operations, and questions tailored to their firms’ experiences and perspectives on the impacts of COVID-19. The rapid assessment for the Lao coffee sector is aligned with ITC’s corporate COVID-19 business impact survey[1], which will allow for comparison at global and sectoral level. B) TYPOLOGY OF FIRMS The information collected was then organised based on the size of the firm, categorising enterprises in small, medium and large: Micro firms: 1-4 employees Small firms: 0-29 employees Medium firms: 30-99 employees Large firms: 100 or more employees These definitions are aligned to ITC’s SMECS categorization[2]. Most respondents are among the smaller categories; 37% are micro firms and 49% are small firms, while just 11% are medium-sized and 3% are large (Figure 2). Figure 2. Firm’s size Large Medium 3% 11% Micro 37% Small 49% Source: ITC calculations based on Lao PDR COVID-19 Rapid Assessment of the Coffee Sector. Data collected 7 July – 21 August 2020. Most respondents are active in agriculture (51%) or agri-processing (29%), though others represented retail and wholesale (9%), accommodation and food services (6%), information technology (3%) and other services (3%). Most firms are led by men at least 35 years old; 63% of the top managers of respondent firms are male, and 91% are aged 35 years or above. Respondent firms are overwhelmingly registered businesses; just 6% were unregistered. P A G E 0 3 FINDINGS AND ANALYSIS P A G E 0 4 Firms were asked questions about their general performance and operations, as well as questions about how they have been affected by COVID-19 and their views on responses to the crisis and future prospects. The results of this analysis will support the development of the Coffee Sector Export Roadmap and the design and implementation of other activities under the ARISE Plus- Lao PDR programme. GENERAL PERFORMANCE AND OPERATIONS Firms were asked about general business performance issues, including their involvement in trade, understanding of markets, views on sustainability standards, and types of support received. Coffee is an important component of Lao agricultural exports, and thus contributes to growth and diversification. Lao coffee exports totalled USD 96.7 million in 2018, representing 1.7% of the value of all Lao exports, and making it one of the country’s most important agricultural exports. In international comparison, Lao PDR was the world’s 34th largest coffee exporter by value and the 32nd largest exporter by volume in 2018. The sector’s exports have been growing in absolute terms and in comparison with other coffee exporters, though more slowly than other Lao export products. Most respondents (68%) are exporters. Of the exporters, 48% export and import and 52% export but do not import. Of the non- exporters, 18% import but do not export and 82% buy and sell only domestically. In total, 38% of respondents turn to imports for at least some of their purchasing. Micro firms are underrepresented among exporters (Figure 3). Figure 3. Most firms are engaged in exporting Medium Non-exporters 17% 31% Small Micro 57% 26% Exporters 69% Source: ITC calculations based on Lao PDR COVID-19 Rapid Assessment of the Coffee Sector. Data collected 7 July – 21 August 2020. Trade information, including an understanding of market trends, is crucial for exporters’ success and for producers to anticipate future prices. Few firms judge their understanding of how coffee prices are set to be “low” – just 14% of firms – while 60% judge their understanding to be “moderate” and 26% judge it to be “high” (Figure 4). However, the smallest firms were most likely to face difficulties in this regard; 31% of micro firms stated that they had a “low” level of confidence, while only 6% of small firms and none of the medium or large firms judged their level of understanding similarly. Figure 4. Most firms report having a moderate understanding of how coffee prices are set Low 14% High 26% Moderate 60% Source: ITC calculations based on Lao PDR COVID-19 Rapid Assessment of the Coffee Sector. Data collected 7 July – 21 August 2020. P A G E 0 5 Respondents are most likely to look to buyers and traders (33% of respondents), Internet and social media (26% of respondents), and other professional sources (16% of respondents) for market information (Figure 5). Some differences are apparent by firm size. Micro-firms are most likely to use direct information from buyers and traders, small firms tend to use these sources and Internet and social media equally, medium firms mostly use Internet and social media, and large firms use buyers and traders and the media for information. Figure 5. Buyers and traders and the Internet and social networks are common sources of market information for firms Source: ITC calculations based on Lao PDR COVID-19 Rapid Assessment of the Coffee Sector. Data collected 7 July – 21 August 2020. “Administrative requirements for trade need to be streamlined; the process of exporting coffee involves five government offices, wasting our time and resources”, survey respondent. Advisory services are a common form of support for firms in the coffee sector. Most respondents received have support in the form of technical advice on production and processing (31% of respondents), market price information (23% of respondents), advisory support on trade and marketing (23% of respondents), and support on sustainability and environmental issues (23% of respondents) (Figure 6). Figure 6. Technical advice is the most commonly received form of support Source: ITC calculations based on Lao PDR COVID-19 Rapid Assessment of the Coffee Sector. Data collected 7 July – 21 August 2020. P A G E 0 6 Sustainability standards are becoming increasingly important in the global coffee sector. Between 2008 and 2016, the volume of sustainable coffee produced in the world increased by 800% to reach an estimated four million MT. At least 25% of all cultivated coffee area is certified by a voluntary sustainability standard, more than for many other commodities Across all respondents, sustainability standards (such as organic certification, UTZ, Fairtrade, or 4C) were judged to be of “high importance” to 47% of firms, of “moderate importance” to 31% of firms, and of “low importance” to 11% of firms (Figure 7). Exporters place only a little more importance on these standards; 9% of exporters judged the importance of these standards to be “low”, compared with 17% of non-exporters, though similar proportions of exporters and non-exporters judged sustainability standards to be of “high” importance to their businesses. Figure 7. Voluntary sustainability standards are only slightly more important to exporters Exporters Non-Exporters Low importance Low importance 8.7% 16.7% Moderate importance High importance Moderate importance High importance 34.8% 56.5% 58.3% 25% Source: ITC calculations based on Lao PDR COVID-19 Rapid Assessment of the Coffee Sector. Data collected 7 July – 21 August 2020. P A G E 0 7 COVID-19 IMPACT Since early 2020, the outbreak of COVID-19 has caused an unprecedented human crisis with a growing impact on the global economy. There is great uncertainty about the severity and length of the crisis and this may differ from country to country and region to region, as the full effects of the pandemic are still largely unknown. As across all sectors around the world, the outlook for the global coffee sector has been made more uncertain by the effects of the COVID-19 pandemic and associated economic downturn.
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