The government of Ethiopia is currently in the process of privatizing many of the state-owned enterprises, and moving towards a market economy. The main aim behind this move is to generate much needed foreign currency. Apart from generating foreign currency, the government is also eyeing to boost export sector.
Export is considered as one of the very important accelerators of growth. Development requires economic growth to alleviate poverty, and greater access to world markets is a necessary condition for rapid growth.
Ethiopia’s export has been limited to few primary products, which are mainly agricultural commodities, such as coffee, hides and skins, oilseeds and pulses. Coffee still remains the country’s dominant export commodity. Though Ethiopia’s total exports have been growing at an average rate of 3 percent during the ten years between 2008 and 2018, it falls way short of the planned target, which is expected to be 37 percent.
Besides the dependency on agricultural commodities, the fact that the mining sector; which is expected to be the engine of the economy, is still underperforming contributed to such an unsatisfactory performance.
Thus, identifying and examining the factors that significantly affect Ethiopia’s export performance helps to know what explains variation in Ethiopian export performance that should facilitate the design of policies to improve the sector’s performance, and ultimately, the overall economic growth.
In its recent 10 year report, Ministry of Trade and Industry disclosed that Ethiopia’s export earnings continued to decline for the past ten years. With this in mind, the Ministry is working to identify challenges and hindrances in the export sector, and boost the sector by maximizing joint efforts of every relevant stakeholder, from government to private sector, including domestic and foreign investors.
According to the Minister of Trade and Industry Fetlework Gebregziaber, the country’s export performance for the past ten years continued to decline due to various issues, including lack of meaningful diversification of export items. She indicated that despite the fact that the sector is the main source of foreign currency earning, it is unable to bring the desired result.
As per the report, Ethiopia’s export performance has been declining due to various reasons. The country’s export earning has been continuously declining from year to year, and still the majority of the earning (close to 73 percent) has come from export of agricultural commodities. On the other hand, other potential export sectors like mining and manufacturing have not been able to put a huge mark on the country’s export portfolio.
Ethiopia’s export performance for the past ten years have continued to decline; and with the manufacturing sector under-performing, the gap between import and export has continually widened over the past few years. This is according to Teka Gebreyesus, State Minister of Trade and Industry.
For the past ten years the Ministry has planned to increase export by 37 percent and achieved only 3 percent, which resulted 15.4 USD$ billion losses, he added.
Reports reveal that Ethiopia’s earnings from foreign trade has declined over time, mainly due to factors ranging from shortage of foreign currency, to finance, and electric outage and interruption, among others. Also, as logistics performance has become a decisive factor in export competitiveness, issues related to logistics have contributed their share for low performance of the sector.
Ethiopia sees strong manufacturing export performance as the sector is key to boost the country’s under-performing export sector. To this end, there have been efforts to accelerate the growth of an export-led and labor-intensive manufacturing sector in a bid to elevate its export competitiveness and performance. It is implementing an ambitious industrial park program. As a consequence, there has been a large growth of manufacturing in Ethiopia, and several industrial parks have been built with a focus on textiles.
However, there have been challenges in this regard. Very low university-industry linkage, poor quality export items, skill gap, contraband trade, absence of well-organized institutions and legal document to manage the export sector are some of the issues that need to be overcomed.
Also, the government should take immediate action towards supplying quality supply of raw materials, creating possible ways to get capital for working and others through possible ways in order to bolster the involvement of the private sectors.
As a way forward, Teka suggested for producers and exporters to work together in order to boost productivity and generate the desired foreign currency. Improving the marketing system, supporting industrial parks, controlling contraband, financing and logistics supply for export-oriented industries are the measures the Ministry is thinking of taken in its bid to elevate the country’s fledgling export.
The Ethiopian Herald January1, 2019
BY HAILE DEMEKE
