BY SOLOMON DIBABA
Ethiopia is pursuing two sets of global and regional economic and trade negotiations that are of critical importance for the development of the country and to root and position it in international and regional economic systems.
On April 20, 2019, Ethiopia deposited the national instruments of ratification for joining AfCFTA and on January 1,2021, the nation will kick start the formal implementation of the free trade area reportedly making preliminary preparations that are required for full implementation. Ethiopia is also accelerating negotiations on WTO at accession which was going on for almost a decade now.
AfCFTA is expected to be the largest free trade area in the world with a combined GDP of 3.4 trillion dollar becoming one of the flagship projects of the first ten years of Agenda 2063 promoting reduction of tariffs and none tariff barriers as well as facilitating free movement of peoples and labor. For the first time in the history of Africa, AfCFTA will become a huge instrument of promoting economic Pan Africanism.
These negotiations are of critical importance for Ethiopia, a country which is in the peripheral spectrum of the world economy. For instance, joining the African Continental Free Trade Area will provide the country with ample opportunities to benefit from the economic integration through the expansion of the volume of trade, quantity and quality of goods and services. The nation can exploit the comparative advantages it possesses in agriculture, clean renewable energy, aviation, railway and land transport network, massive manpower, tourism by effectively competing in regional markets on aforementioned sectors and more.
Ethiopia is operating on 13 industrial parks with more to come on board. Further development of agro-processing industrial parks will open free markets for Ethiopia’s valued added agricultural commodities. Besides, the growing manufacturing sector, Ethiopia can benefit from its potentials in textile and apparel, beverage industries, electronics and other sub-sectors.
However, the nation faces several challenges that need to be resolved over time. This is applicable for her qualification in WTO accession as well. One of the most outstanding challenges is the lower level of the participation of the private sector in the national economy. In Ethiopia, the lion’s share of investment is still conducted by the public sector which accounts for more than 70% of the investment in the country. Private investment in the manufacturing sector is growing steadily but not in the desirable speed. The Ethiopian private sector needs strong and protracted government support to be able to compete both in the regional and global markets. Lower level of skills in financial management and marketing, production of quality products that effectively meet international quality certification, meeting international standards on EIA are several of the outstanding issues that require capacity building for the private sector.
Modernization the agricultural sector in terms of mechanization and provision of inputs on small scale farms meant for households would pause challenges for increasing bumper harvest and productivity.
Compared to many African countries, Ethiopia has a huge potential for horticulture and apiculture, by international quality and standards, the sector is still at its infancy both in management and quality control and production.
Although many African countries that have ratified AfCFTA face similar challenges that Ethiopia is facing, when it comes to competitive markets, they may even make a huge influx into the Ethiopian market.
Although Ethiopia possesses a huge potential in meat and dairy products challenges still exist in cold storage facilities for exports.
Despite the opportunities that AfCFTA has in providing opportunities for national and regional consumers, small scale producers could be out of market if they are not provided with enough incentives and capacity building schemes by the Ethiopian government and sector ministries.
A considerable number of private companies are mostly owned and managed by close families which would in many cases compromise quality management, legal accountability and professionalism. This is visible in many consumer industries across the country.
Now therefore, what is to be done to ensure maximum benefit for Ethiopia as the country joins AfCFTA? I cannot certainly claim to exhaust the possible range of solutions but I would just make few suggestions. The university-industry partnership that has been launched a couple of years back is not delivering the desired professionals for our manufacturing industries because manufacturers either suspect the professional excellence of graduates or are simply not interested in such formal commitments.
Ethiopia needs to focus on the establishment more industrial parks which are also expected to address the needs of the labor forces engaged in the sector. Besides, complaints by investors on electric power irregularities and issues raised on logistics need to be addressed.
Again, agricultural modernization and mechanization needs serious attention particularly on agricultural products selected for exports.
All told with its opportunities and challenges ahead, Ethiopia is expected to spearhead in AfCFTA both for the economic development of the country and for economic integration with the rest of Africa. Indeed, there is more to be done and no time should we wasted as future competition with member countries of AfCFTA will certainly be overwhelming.
THE ETHIOPIAN HERALD JANUARY 15/2021
