Export promotion involves creating a favorable market environment for exports and aligning promotion policies with domestic industrial strategies, especially for high-tech products with proprietary rights. Export promotion strategy comprises policy interventions including exchange rate policies to any ‘specific measures that generally amount to the government bearing a portion of the private cost of production of export.
With a view to further substantiating this notion; The Ethiopian Herald approached Samrawit Gobena, an economist graduated from Hawassa University in economics and agro-economics.
She said, “Export promotion refers to the shift from providing direct support to implementing a more market-oriented approach to enhance the export activities of enterprises, companies and organizations working on the area.”
Ethiopia has started enjoying export promotion with a view to achieving economic growth and development. The very thing that needs to be taken into account in this regard is the strategy in the country could be used to match up the regional, continental and even international competition and the nation has to consolidate inward looking strategy and shifted to export promotion strategy to make a difference within the shortest time possible, Samrawit opined.
According to Samrawit, country’s Gross National Product (GDP) has still been minimal though the economy of Ethiopia has grown from the export promotion strategy. True, the government is highly initiated to adopt the strategy and practically implementing towards economic growth. Since Ethiopia has currently been a country that is highly dependent on imports and insignificant amount of production, it has to well embark on promoting productivity and production as well as boom exports accordingly in a bid to having positive balance of trade as its imports have been more than its exports.
As to her, export credit agencies play an important role in providing access to capital. Traditionally, mostly supporting public Ethiopian or/and African buyers, there is a growing number of transactions with private businesses. But to support private sector development, a comprehensive policy framework is crucial.
Ethiopia is feeling extraordinary economic growth and myriads of companies have been creating jobs by developing the potential of numerous different sectors. Truly speaking, in Ethiopia, there is a fundamental change of communal thinking regarding the future of economic growth, which is closely associated with the private sector.
She said, “As part of development thinking, export promotion strategies have been considered by the nation to stimulate economic growth. Export promotion strategy comprises policy interventions including exchange rate policies to any ‘specific measures that generally amount to the government bearing a portion of the private cost of production of export. Definitely, Ethiopia has pursued export promotion policies in defiance of prescriptions of import substitution, achieved remarkable economic success. The economic growth in the nation resulted from shift from import substitution to export promotion policies.”
The main products for exports in Ethiopia include coffee, sesame, minerals like gold, among others have been given due emphasis. Export promotion schemes can play an important part in the development strategies of countries, especially of developing countries like ours that seek to make exports an engine for economic growth. Membership in the World Trade Organization (WTO) is a critical tool for participation in the multilateral trading system. To design successful export development strategies, it is fundamental that the government of Ethiopia and private exporters have a clear understanding of the applicable WTO rules and their implications for their specific individual characteristics.
The advantages of promoting exports are really numerous. Such a lucrative strategy could be of benefit not only to a limited group of citizens and the nation at large. Large capacity in the sector is required to convince importers to pay high prices. Ethiopia therefore needs to develop its infrastructural capacity, improve its financial and tax incentives, diversify its markets and exports, develop digital technologies and innovations, build the country’s human capacity, and also develop favorable and consistent trade policies.
True, the country has adopted various development strategies such as import substitution industrialization (ISI) and export promotion strategies to come up with real change. Industrialization in the countries that adopted ISI led to its economic growth. Generally, the export promotion strategy entails all steps and programs focused on aiding current and potential exporters.
It is well recognized that Ethiopia is intensifying efforts to increase its export destinations across the continent as AfCFTA brings new opportunities to realize its ambitions, according to the Ministry of Trade and Regional Integration. As to her, the country has intensified its efforts to promote the export trade and expand destinations as the nation’s trade balance has big gaps between import and export.
She said, “Ethiopia’s import spending is much higher than our revenue from export. We are working on plenty of promotion activities under the ongoing reform to increase export destinations. Noting that bilateral talks and negotiations towards reaching most of the African countries are underway, she said the government is working with commitment to expand the export destinations of Ethiopia beyond the usual ones, both at the global and continental level.”
Stressing that increasing production and productivity with quality is crucial for Ethiopia’s export trade; she said: “production and export trade are inseparable. If you don’t produce, you do not have the goods to export.”
“In spite of periods of disruption for export trade due to local and international challenges, the export trade is now reviving following the restoration of peace in the northern part of the country, which is key to increase production and productivity,” she pointed out.
As to her, the Ministry of Trade and Regional Integration is undertaking promotions with priority to boost the export destinations. It is well recognized that AfCFTA is one of the opportunities for expanding Ethiopia’s trade destination across the continent. Ethiopia, as a host of the African Union (AU), strongly supports continental integration, including through AfCFTA.
All industries in Ethiopia will considerably benefit from the AfCFTA in terms of exports or imports from the rest of Africa. Obviously, she said Asia, Europe and America, have been Ethiopia’s main export destinations, and now AfCFTA brings huge opportunities to expand the country’s export in many fellow African countries.
Samrawit further stated that the objective of the AfCFTA is to significantly boost intra-Africa trade, particularly trade in value-added production and trade across all sectors of Africa’s economy by eliminating barriers to trade in Africa.
She further stated that protagonists of the AfCFTA underline the enormous opportunities of the free trade area, among others, increasing economic growth, forex generation, growing flow of FDI and create jobs.
As to Samrawit, Coffee, in particular, is Ethiopia’s major export commodity. Ethiopia, which is known as the origin of arabica coffee, is recognized worldwide for its rich coffee quality, variety of flavors and aroma. The strategic geographical location with proximity to Middle East, Europe and Asia, the recent Homegrown policy and strategy have provided opportunities for boosting the country’s FDI in agricultural, manufacture and mineral exports and stimulate Ethiopia’s economy.
She said, “The effectiveness of the export promotion strategy has been adopted in cases of Ethiopia’s manufacturing. Given the importance of political commitment and motivation for the success of industrial policy, impacts have been evaluated with reference to the Growth and Transformation Plan (GTP) in which the country had set ambitious targets and means of achieving the targets. The export performances of many manufacturing firms have increased significantly when compared to those of firms in other industries in the nation.”
As to her, improving access to raw materials through securing adequate supply of foreign currency, reducing transportation cost, directing importing and distributing of essential raw materials by the government, providing special support to domestic production of raw materials with the required quality standard has to be well fostered.
She said, “There should be flexible and prompt support by the government with minimum bureaucratic difficulties. True, creating market linkages both locally and globally, the government has been giving financial and technical support for exporters to promote products and participate on international trade fairs. The government has to make fundamental change if the country would like policies to bring about real change.
Yes, export promotion is of significantly useful in cultivating the working culture so that current foreign companies as well as newly incoming firms would not see working culture as one of the problems, and improving the production capacity of local input suppliers in terms of technology, quality, timely delivery and operational flexibility.”
Supporting innovation oriented activities of domestic companies and creating external linkages with other local and foreign firms would help mitigate capability limits.
As to her, it is extremely useful for Ethiopia to exploit the emerging inter-African trade opportunity initiated by African Union (AU) and other existing regional cooperation. This would help build comparative advantages and build better capabilities to compete regionally, continentally and even globally. It would also improve raw material supply.
Besides, providing effective and genuine support in the due processes of production and exporting through establishing regular consultation with private firms is really promising, and undertaking subsequent evaluation on their performances is important.
BY MENGESHA AMARE
THE ETHIOPIAN HERALD FRIDAY 27 DECEMBER 2024
