Foreign Trade is an ancient practice in Ethiopia. The Axumite Empire expanded its overseas trade wings up to the Middle East and India. Gold, ivory and incense and the like are the then commodities exported to the outside markets.
At the beginning of the 20th century, during emperor Menelik’s era, the oversee trade picked steam and flourished due to the introduction of better infrastructural facilities of transport. But the export products still remained at their embryonic stages. They were being exported with no value addition.
Currently, the international trade scene is totally changed. There is a red-hot competition among countries to penetrate the market. Commodities on which value is added have comparative advantages. Therefore, developing countries like Ethiopia, which still relies on natural resources, should strive to actualize a paradigm shift on their exports in a bid to render their commodities demandable in the market.
To this effect, various measures have been taken. Among others, modernizing the trade and preserving market security for fair trade can be mentioned, said Bereket Meseret the market and storage facility service security chief in the Ethiopian Commodity Exchange.
As to him, to monitor some irregularities and illegal activities which recurrently occur and to govern the market based on supply-and-demand trend ensuring market security is essential.
Some of the objectives of the establishment of the ECX are transforming the trade system from a traditional one to a modern one, improving the pace of transaction, raising effectiveness, enhancing public trust and providing market information to all stakeholders fairly and transparently.
As to Bereket, previously market information was not provided to all stakeholders in a fair manner. Information was accessed only by the few privileged. As a result, most stakeholders were cornered.
Sabotages and uncouth trends were rampant during commodity exchange. Some traders, with huge financial muscles but with ill motives, used to disrupt the normal transaction and manipulate things.
The absence of viable rules and regulations helped them to press ahead with their misdeed with impunity.
To address the mentioned problems, the department of market security is working for the prevalence of fair market governed by demand and supply in such a way price setting could be determined by internal factors rather than external ones.
Creating an enabling environment to the market actors starting from receiving products from farmers’ granaries, setting the product standard, storing the product in the ECX warehouses play a crucial role for achieving a win-win situation.
In addition, setting price according to the quality of the product with the consensus between suppliers and exporters are some of the achieved results since the establishment of market security department.
In general, the department strives to establish the system, in which all market forces will be accommodated in a fair game. It aspires to make the trade environment free from injustice.
Reaching market actors with latest information is one of the tools to ensure market justice because stakeholders make decision based on the information they get.
They assess the market the day before, examine how the transaction went, the latest prices tagged to commodities and finally predict and set the next price.
Currently, hurdles are cleared from the scene. One can prove that pricing is real and checks whether the price-fixing task takes into account factors of production and transportation cost or not.
For example, if the Sidama coffee is sold in a given price, the information will be provided to all market actors.
Next time, when traders come to ECX based on the information they received and they set their new price by adding the cost they spend for purchasing the product and transportation cost.
These make market actors to play pivotal role in decision making on transaction.
If few individuals control and monopolize the market, the healthy movements of commodities will be disrupted and many might be barred from the game.
Currently the playing field is leveled for all actors.
An exporter with 300 million Birr can never get advantage over the exporter with 5 million Birr. An exporter with less capital can compete with an exporter who has huge money and who could export commodities with equal price. Such situation encourages businessmen to involve in the export sector.
In the traditional trade system, the value chain is characterized by redundancy. Such a situation encourages illegal brokers to unfairly amass wealth at the expense of farmers’ livelihood. Now the situation is rapidly changing.
Asked what measure could be taken in case rich men amass the whole commodity by over pricing and going against free market rules, Bereket said that the objective that necessitated the establishment of ECX is to take corrective measures in case irregularities occur rather than intervention on the free market.
For example, when a trader brings coffee from Harrar or Sidama he pays the money based on the agreed price and stores the commodity in ECX warehouse. Later, he negotiates with his customers abroad and sells it as per the set price. He can sell the product by considering the local price.
This indicates a commodity exchange determined by supply and demand rather than by the ECX.
Looking things from a different angle, for example, the seller can tag a marked price for his commodity say 3000 Birr and the buyer can also bargain and offer 1000 Birr for that product. Through negotiation they can agree to exchange the product for 2000 Birr. The price fixed this way can serve as a baseline for next market.
Market security plays a crucial role in avoiding abnormalities and stepping up product competency in foreign market.
The Ethiopian Herald Sunday June 9, 2019
BY ABEBE WOLDE GIORGIS
