According to data from the Ministry of Trade and Industry, Ethiopia’s revenue from export trade has highly been decreasing. The gap that existed between the import and export trade in the last two years is the significant indication of it.
The nation had planned to earn more than 4.7 billion USD from agriculture and manufacturing product exports and other export items, nevertheless it earned only 2.9 billion dollar in 2016. Similarly, in the fiscal year in 2017, it was planned to generate more than 5.2 billion USD revenue. But 2.8 billion USD was generated. Though several resolutions have been set to solve the problem, the income is not as such encouraging compared with country’s potential.
According to the experts, there have been many different reasons for the falling in the export trade and they suggest solutions to solve related problems prevailing in the export market. Berhanu Danu, Assistant Professor at the Addis Ababa University, Faculty of Business and Economics, argues that the supply and demand side should be considered with the trade export. He also noted that the country needs to take into account the types of products it supplies and the demand for purchasing the products. The demand side for the products ought to grow in order to sustain the proper equilibrium in the market, he remarked.
According to the Assistant Professor, one of the reasons the country is facing a huge challenge in the international market could be most of its supply are agricultural and animal products, besides lack of properly identifying potential market destinations. He also added that these products have less demand in the global market which directly causes the weakening of the export trade.
“Moreover, the absence of an economic structure that would add value to increase demand for commodities in the world market would hurt the export earnings of the country,” he said adding that the country’s exports are still in the hands of a few individuals so far, and when the individual faces difficulties, the trade will be affected. As to Berhanu, there are more relative advantages that the nation did not exploit which are additional reasons for the slowing down of its export trade. He indicated that Ethiopia, for instance is quite rich in livestock as compared to other world countries; but it did not make use of it to the extent needed.
The demand and supply of the major agricultural and animal products that Ethiopia exports to the international market is limited. So, if the products are really to be sought at the global market thereby generate more income, it is advisable to diversify them and add value to products. Moreover, if the sector’s productivity is to increase and be improved, it requires an enabling environment to build an economic structure and policy change.
This can be accomplished by taking a good lesson from the experiences of other countries in this regard. It is possible to support the economy of the nation by producing import substituting products domestically. On the other hand, if it is must to import goods and services, the country should create a foreign market that it similarly exports to through negotiation.
Ethiopia should be able to use modern technology if it really has to enhance the income it generates from the export of its animal products by adding values. Preventing the negative impact of imported goods over the trade balance, substituting highly imported technology related goods with local products, inviting foreign investors and creating conducive conditions are must, he notes. Solid controlling system should be applied to mitigate the badly increasing contraband trade as to the Assistant Professor. To come up with this, concrete and efficient finance policy should be set. Besides, an agreement with neighboring countries should be made and applied targeting on controlling contraband.
Awareness creation among the public not to purchase illicitly imported goods is crucial on top of applying various controlling mechanisms. Overall, establishing tough legal frame work is necessary. According to Assefa Mulugeta, Foreign Trade Expansion Directorate Director General with Ministry of Trade and Industry, though several causes to be mentioned for the drawback of export trade, the major ones are lack of solving problems appropriately and at the level of expectation. Amid the tackles of efficient export trade, insufficient supply of products in terms of quantity and price and poor research outcomes in the agricultural sector in particular are challenging the sector.
The effort exerted regarding solving the problem to reach the expected quality is not satisfying as the Director stated. He added that there are also high ranked problems in terms of logistic and exchange system. Because of these extended problems, the negative impact over export trade lasts for long. Relying on agricultural products and the fluctuated price of these products in the international market time and again take upper hand for the infirmity of the export trade. In order to break through these bottlenecks sustainably, efforts are being exerted to supply value added products, as to the Director.
Herald January 16/2019
BY STAFF REPORTER
