Ethiopia cannot expect to register robust economic growth or structurally transform its economy without enhancing its underperforming export sector. According to recent reports, last year Ethiopia earned 3 billion USD from exports of goods, while it spent 18 billion USD on imported commodities. It shows the country’s trade balance gap is expanding, leaving it with a huge trade deficit.
This is not sustainable; and if Ethiopia’s economic reform agenda is to achieve the goal and ambition it set out to do, the pursuit of a private-sector led and export-oriented economic policies is critical. In other words, Ethiopia must vastly improve its export performance; enhance its export goods.
Accordingly, one of the things the government has been doing is to enhance productivity and encourage exporters to improve the amount and diversity of export items. The government is looking beyond traditional export sectors, like agriculture, into sectors like tourism, mining and other components of the service sector to boost the country’s export productivity. And it so happens that Ethiopia’s ongoing economic reform zooms into the aforementioned underutilized sectors in order to realize sustainable economic growth.
In addition to diversifying and improving the quality of export items, the government has been working on other fronts to boost export performance as part of the reform efforts.
Recently, the incumbent has introduced a new export products performance directive in a bid to significantly increase earnings from exports by addressing fraud in the country’s export business. While factors like volatile global market prices and poor quality export items have been the major ones behind the poor performance of the sector, illegal trade and absence of legal document that oversee the export business have also hugely contributed.
Like it would happen in any other circumstance, lack of legal directives that governs the sector meant that traders (exporters) could exploit the system for their personal gains. There is this trend where exporters sell their goods far lower than global prices, sometimes even lower than their real cost, and compensate for it by setting exaggerated prices on their imported goods. They also tend to report losses and present fake financial statements to Authorities.
The repercussion of these acts on the economy is easy to see. It seriously harms the export performance and revenue of the country as it forcefully lowers the prices of the country’s export items at the international market. Not only that, but it also contributes negatively in other economic issues as well, like in growing inflation in the country.
By introducing this legal directive – which requires exporters from now on to report the price, quality and quantity and contractual obligations of their commodities – what the government will be doing is not only put a stop to such illegal acts. But it will also ensure a healthier and sustainable benefit amongst all market units within the export supply chain. And already, there have been encouraging reports coming out.
All in all, in addition to the legal initiatives the government initiated which will surely pay dividends immediately, side by side, efforts should be exerted to create an enabling environment for producers and exporters.
The Ethiopian Herald, December 25/2019
