BY ABEBE WOLDEGIORGIS
Due to various factors, illegal trade and contraband activities are rampant in Ethiopia.
Illegal trade is mainly characterized in Ethiopia by the importation of foreign goods and exportation of local products to and via neighboring countries without paying the necessary tariffs.
The major weakness of illegal trade may be attributed to the inherent weakness of customs institutions in the border areas, the presence of uncontrolled territory adjacent to the neighboring countries, the lower price of the illegally imported products compared to the local ones, shortage of goods in markets and corruption.
Since recently, the Ethiopian Customs Commission has come up with a new approach which it said would make a significant contribution to controlling illegal trade. Mulugeta Beyene, deputy commissioner of the Customs Commission in charge of customs compliance said that in the past, illegal trade had been practised openly and it was difficult to control it due to the fact that politics and business were intermingled. Imported goods packed by government vehicles from the border areas found their way to urban areas and sold in the open market. This put the legal traders in an unfavorable position.
“Nobody was held accountable for such kind of misdeeds. People involved in such malpractice had a strong chain and network with higher officials in the government. This enabled the culprits to conduct their illegal activity with impunity,” the Deputy Commissioner told a local media recently.
Most of the population meets its demand using the illegally imported and untaxed goods which forced the government to lose a significant amount of revenue.
As to Mulugeta, to reverse the situation for the better, two years ago, the authority began to take radical measures by restructuring institutions. Accordingly, it replaced all managers working in the lower level and checkpoints, who were found to be involved in illegal activities. In addition, the institution has also amended various laws and directives in order to effectively discharge its responsibility of controlling illegal trade effectively.
As a result, more than 1000 illegal traders were arrested and prosecuted and this, in turn, resulted in a significant reduction of illegal activities.
The public is building confidence on the authority and providing information regarding illegal activities prior to their occurrence frequently. Unfair business practices have also been reduced and traders who pay taxes also began to enjoy fair competition in the market.
The number of illegal traders who were put in custody has also been significantly higher than the previous two consecutive years. “In the past confiscation of untaxed goods was a common punishment but now arresting the suspects is taken as a mechanism to deter illegal trade,” he said.
Nevertheless, the political upheavals and ethnic violence witnessed in the last two years to some extent posed a challenge to the authority’s effort to control illegal trade. Unemployment in the remote areas forced people to engage in contraband hence, creating job opportunities should be taken as a strategic option.
As to Mulugeta, in fact, the illegally imported goods are produced in economically advance countries with better technology, with high productivity rate and with less production cost and traders can gain a lot of profit by selling the products at a cheaper price.
Contrary to this, the price of locally manufactured goods is higher than imported goods due to the fact that they are produced using a relatively obsolete machine and with high production cost as the result. That is why people prefer to purchase relatively cheaper contraband goods.
As to economists, one of the solutions in this regard is to develop a habit of consuming local products by society. When the demand for local products rises, it enables investors to import and introduce cutting edge technology to their manufacturing industries.
Accordingly, when the production cost of local products is reduced, so do their prices, and ultimately consumers will change their attitude towards consuming local products. Purchasing domestic products is a price paid for growth and this will gradually enable to avoid dependence on illegally imports products.
Asked whether border closing should be taken as an option to control contraband goods, Mulugeta said the question is related with protecting local products from illegally imported goods which have been invading the market.
But for a landlocked country with mountainous landscape such as Ethiopia, it is difficult to close borders in a bid to control illegal trade. Border management needs the cooperation of the neighboring countries to establish a common border post.
Such efforts are well underway in cooperation with the Kenyan and Djibouti governments but it must be scale upped. Efforts are also underway to establish a common border post between Ethiopia and Sudan. The Somaliland government also showed interest to establish a new post.
But the most feasible way of deterring illegal trade is creating public awareness to know that illegal activities are harming the national economy and purchasing illegally imported goods minimize government revenue which could be allocated for development. Side by side with these, it is vital to strengthen the coordinated efforts with all stakeholders to properly manage border areas is crucial.
The effort must be supported with technology such as cargo tracking, cargo scanning and CCTV. In addition, drone technology should be introduced and utilized to gather information. To that end, a strategic document has been prepared and the authority allocated budget and had discussed the issue with the Ministry of Finance to be able to access additional finance, it was learnt.
Other countries introduced the online system for the provision of customs service to traders.
It enables the authority to do the job efficiently. The sampling technique of the supervising institutions must be digitalized. The Commission is finalizing preparations to install the technology soon.
By confiscating contraband goods, it will be possible to give lessons to the public that such practice is a not viable option which will make participants accountable before the law.
As to the Deputy Commissioner, there is a parameter to check whether the rate of contraband trade is reduced or not. When the rate is reduced, the government’s revenue will show increment, and export will flourish. Currently, the country’s export is increasing by 9.8 to ten percent.
This can be used as proof for the fall of illegal trade and the illegal export of goods. What matters now is to scale it up. On the other hand, one can still witness loopholes in regional security institutions in patrolling the border.
The Federal Custom Commission delegates its criminal investigation authority to the regional offices but there are still shortcomings in successfully discharging its responsibilities.
The custom authority incentivizes whistleblowers by providing 10 to 40 percent of the captured contraband goods as a prize and last year the Customs Commission confiscated goods that were estimated to have a value of 2.4 billion birr.
The Ethiopian herald December 26/2020
