Ethiopia’s economy has been registering double digit economic growth over the last two decades. This made the nation to be one of the fastest growing countries in Africa without oil dependency. However, due to the political unrest that broke out over the last couple of years there are scenarios of economic stagnation. The export trade is among the sectors which need rejuvenation.
What are the export opportunities and aspirations that Ethiopia needs to harness? How should the export trade be enhanced to support the economy and realize its renaissance? What kind of export trade policy should be implemented? What are challenges confronting the export sector?
Ethiopia has been tirelessly striving to diversify its export items and to enhance the quality of the existing export commodities to create competitive advantage in the global market, according to Tiruwork Tizazu, Import and export Trade Promotion Directorate as well as Acting Director at the Ethiopian Chamber of Commerce and Sectoral Associations (ECCSA).
She adds that the government pursues consistent and prudent macroeconomic policies that could strengthen the manufacturing industry which could lend muscles to the country’s export trade. Ethiopian export trade was dependent mainly on agricultural commodities such as coffee, oil seeds, livestock, hides and skins for several decades. As the nation has a huge animal population in Africa, it has
been exporting live animals to Middle Eastern countries. According to ECCSA, in nine months of 2017, the country had exported 232,228 live animals to earn foreign currency. These commodities have played their fair share in the fastest economic growth.
‘‘Agricultural commodities have been the backbone of Ethiopian export sector by covering more than 90 percent. Nevertheless, the nation wasn’t beneficiary since it has not been exporting value added and processed goods,’’ Tiruwork states.
The acting director added that in 2016/2017 fiscal year, Ethiopia’s major export included coffee (30%), oil seeds (12%), cut flowers (11%), pulses (10%), gold (9%) and khat (9%) and the major destinations in the specified fiscal year are Asia 37% (China accounted for 20%), Europe 32.4% and Africa 21.5%. while the vast majority of the nation’s imports come from Asia, Europe, Africa and the United States respectively.
Having understood that Ethiopia’s export trade is still at an embryonic stage, the government has paid huge attention for manufacturing-oriented export policy. As a result, many industrial parks have been built at various parts of the country.
Tiruwork stressed that Ethiopia has been committed to heavily invest in large-scale social, infrastructural and energy and manufacturing sectors to downsize agriculture dependency.
The government has been offering incentives to encourage export trade. Tiruwork notes that facilitation of profit, ease in hiring expatriate personnel, temporary income tax exemptions for investments in selected sectors and duty-free imports of capital goods, components and raw materials for exporting industries and manufacturers are among the incentives being given to encourage foreign investors.
Mewael Desta, economics lecturer at Mekelle University for his part said that the country’s ambition of transformation from agriculture to manufacturing industry would have massive advantage for enhancing export trade.
You cannot compete in the dynamic global village with traditional export commodities, the lecturer highlighted. He insisted that strengthening manufacturing and agro-processing industries would be an integral move to substitute the common agriculture commodities.Thus, if the nation intends to enhance its export performance, it should implement best policy that would make it competitive in the global market.
Increasing value addition and quality, doing away with constraints related with power supply, ?? credit and foreign exchange, redressing bottlenecks, revising policies related with high start-up capital requirements and pre-registration bank deposits and ensuring transparency and accountability are among the basic issues the government needs to address, Mewael recommends.
The lecturer emphasizes that exporting value-added commodities would have massive contribution for boosting foreign trade. ‘‘There is a conspicuous difference in gaining foreign currency when one exports processed and unprocessed agricultural products. When one export value-added products, one will compete in the global market and one you will maximize one’s foreign currency earnings. To realize this more agro-processing industrial parks should be constructed,’’ he points out.
The agriculture sector has been serving as the backbone of the economy for decades. However, it has not been changing the life of the Ethiopian people. Hence, the government has decided to shift its economy from agriculture to manufacturing sector in a bid to ensure export-oriented economy. Taking 70 percent young and energetic demographic base into consideration, it could realize the ambition of being a manufacturing hub and the manufacturing sector would massively transform foreign trade.
The Ethiopian Herald, June 16/2019
BY TSEGAY HAGOS
