“As the [African] continent moves towards deeper integration, illicit trade is set only to increase. Porous borders facilitate the illegal flows that form a very real threat to Prime Minister Abiy Ahmed’s modernization agenda and the wider region. More than ever, there is a clear business imperative to fight illicit trade. The African response so far, has been limp as public-private sector players struggle to stay ahead of a moving target.”
wrote the Economist Events in a prelude statement to the summit it held recently in Addis in a joint collaboration with Addis Ababa Chamber of Commerce. The Economist Events, a part of the Economist Group, boast of bringing the rigor of informed analysis and intelligent debate that The Economist is known for to life on stage in international forums.
Advancing the conversation that began in 2017, the fourth installment of Global Illicit Trade Summit brought together stakeholders from governments, the private sector, international organizations, law enforcement agencies and civil society for a series of action-driven dialogues about combating illicit trades well as sharing experiences and thought leadership on how to tackle the multifaceted global problem.
Unfortunately, the timely international summit was overshadowed by the unforeseen political turmoil that flared up in the country, the failed coup d’état and related incidents, and the summit seemed to received lesser attention by the media than it should deserve, given the importance of the agenda it discussed.
Among the topics in the summit’s agenda that directly focuses on Ethiopia was the study presented by Fenta Mandefro, assistant professor at AAU, indicates that the textile, tobacco and pharmaceuticals are the leading supplies at which the worst level of illicit trade activities were observed. According to the Amharic weekly, Reporter, Fenta’s study shows quite alarming illicit trade statistics in the sector.
The study asserts that of all trade activities in the country, 40 percent is categorized as illicit trade. Forty percent of the textile and apparels trade sector, 45 percent of the tobacco trade and 30 percent of pharmaceuticals trade is considered to be an illicit trade. Based on the evidence he gathered, the scholar estimates that some 18 billion worth of illicit trade has been conducted in the country during the five years between 2013 and 2017/18.
He also mentioned the government had lost 9 billion dollars in uncollected revenue from textile and apparel illicit trade in the period. Dwelling on the illicit tobacco trade, Fenta has been quoted as saying that over 90 percent of tobacco product entering the country market illicitly were counterfeits. Similarly counterfeits and expired pharmaceutical products are going rampant in the country’s market.
The alarming illicit trade figures presented by the scholar were hard to believe and debatable for some of the participants of the summit. Reporter quoted, Tilahun Esmael Kassahun, senior policy advisor to Ethiopian Investment Commissioner as saying that he doubts the validity of the figures especially those concerning the pharmaceutical illegal trade.
The Fenta underscores Ethiopia has become a fertile ground for unchecked proliferation of illicit trade more than ever before due to several existing issues. The first is traders both in formal and non-formal sector mix legally supplied and genuine products with those obtained illicitly and that are counterfeits.
The other main issue is corruption. There are security and law enforcement officials as well as custom officers and executives who join hands with illicit traders, making shadowy under table deals. Regarding corruption Fenta further disclosed that there were cases where trafficking of illicit trade goods were being backed by a military convoy.
It was also mentioned in the Summit that in addition to illicit import trade, Ethiopian economy is also heavily hemorrhaging due to the illicit export trade. Coffee, oil seeds, live animals, gold, and other commodities are illegally slipping into neighboring countries in a staggering quantity.
Making treaties with neighboring countries with a view to creating legal channel for cross border trading as well as introduction of digital system of control of the movement of vehicles transporting commodities are some of the solutions mentioned. The Economist Events underlines cross-border cooperation is integral to the fight against illicit trade.
Of all its borders, it says, Ethiopia’s eastern one with Somalia is a key challenge. As the continent reforms its tax regimes at different speeds, criminals are quick to take advantage of the opportunities for arbitrage. Furthermore as Free Trade Zones mushroom, the pressure is on how to ensure they are a source of legitimate economic growth.
The Event further explained that heightened volatility in the region has shone the spotlight on the link between terrorist organizations and illicit trade – especially as a source of funding. In Northwest Ethiopia, interceptions of illegal firearms from neighboring Sudan are becoming more frequent. As Africa becomes the new terrorist battleground for ISIS and Al Qaeda, the sense of urgency for combating illicit trade is real.
African leaders should give priority and be committed to win the flight against illicit trade despite its heavy challenges and complexity. The Economist Event has also emphasized the need to deliberate on ways of prioritizing and incentivizing multi-stakeholder actions across the government, financial institutions and civil society to fight illicit financial flows in Africa.
Illicit financial flows (IFFs) are estimated to surpass levels of development aid. This poses a multidimensional threat to Ethiopia. According to Global Financial Integrity, in Ethiopia, IFFs lead to an average loss in GDP growth of 2.2% per year. The Fourth Industrial Revolution, the ICT era, is revolutionizing how illicit trade happens.
Technological breakthroughs continue to equip both perpetrators and those combating it with a new toolkit to circumvent traditional barriers. Regulatory bodies and stakeholders need to bring their heads together to explore solution to stay ahead of the moving target, illicit trade criminals; and ensure fair trade, peace, consumer safety and prosperity.
The Ethiopian Herald Sunday Edition 7 July 2019
BY SOLOMON WASSIHUN
