Ethiopia has strong historical ties with the Kingdom of Saudi Arabia. Diplomatic relations between the two countries began in 1948, when Saudi Arabia opened its embassy in Addis Ababa, placing it among the first Arab countries to do so. After recuperating from a siege mentality that deepened during the previous governments, Ethiopia is no longer an isolated culture country. On the sidelines of the Saudi-Africa Summit held in Riyadh recently, Prime Minster Abiy Ahmed exchanged views with Saudi Arabia’s Crown Prince Mohammed bin Salman on ways to strengthen the two countries’ multifaceted relations and partnership.
Its socio-cultural relations with the country are being used in a very meaningful manner. This has led to the diversification of culture, and the revival of an economy based on trade, technology, and global dynamics that enhance the Ethiopian economy at large. These developments keep political, religious and other conflicts at bay. Moreover, one may derive stable relations from the Ethiopia’s long tradition of relative tolerance. Over the years, its common and friendly relations have proved to be stronger than her religious differences.
Experts are of the opinion that if the Ethiopians are left on their own, one may expect a process of constructive transformation in the country. Nevertheless, this process does not take place by Ethiopians alone. It demands a rapid integration into the economic, cultural, and strategic circles at the global level. But, this again depends on level of external influences affecting the country. In this case, a major determinant factor is the nature of involvement of friendly countries in the current development process in Ethiopia.
Ethiopia and Saudi Arabia have been engaged in positive economic relations, particularly in external trade. Foreign trade has become increasingly significant to Ethiopian economy, but Ethiopia’s foreign trade with Saudi Arabia depends mainly on agricultural produces and petroleum oil. On its part, Ethiopia exports coffee, sesame seeds, animal products, meat, live animals, cereals, spices, fruits and vegetables. It imports petroleum products, detergents, and other manufactured goods. Experts argue that the structure of Ethiopia’s export is a direct reflection of an underdeveloped economy. As a least developed country, its exports are dominated by agricultural commodities that are sold at low prices.
Agricultural and mineral raw materials are subject to dealers pay low prices but charge high cost of operation. At the same time they charge higher prices for imported industrial manufactures, intermediate inputs and oil. Such unbalanced transaction greatly affects Ethiopia’s trade balance. Experts explain that there are several factors that facilitate this trade. These are clannish social relations that play a critical role in mediating the high levels of risk and uncertainty found in rural settings.
Also, the reluctance of neighboring countries to control contraband trade is a crucial factor. Due to the benefits they obtain in terms of domestic consumption and re- export they deliberately abstain from monitoring illicit trade. The Horn region is also prone to resource based conflict. There are also conflicts in the Somali region of Ethiopia that hamper control of illicit export of livestock to the Middle East, including Saudi Arabia, all year round.
Experts reveal that most of the Ethiopian commodities are exported to these countries in their raw forms. The reason for that is the status of the agro-processing and manufacturing industry in the country that is in its infant stage. Also, health and sanitary conditions in the country are poorly managed. It is reported that the animal feed and animal transport facilities operate at the low level of standards. One should, therefore, not expect that the export market to be competitive under such conditions. This fact is especially observed in meat and related products.
Ethiopia has the largest cattle population in Africa and the tenth largest in the world. It has a proven export potential for live animals and livestock products to the Middle East and Saudi Arabia. Experts believe that this comparative advantage has not yet been converted to its economic benefit. The reason for that is the country’s export market for these commodities are dominated by raw and semi-processed products. These products fetch lower prices as compared with manufactured goods.
On the other hand, Saudi’s export products to Ethiopia are primarily manufactured goods in addition to petroleum and petroleum products. Most of these imports from Saudi Arabia are manufactured agricultural products. This indicates that Ethiopia exports large quantities of fresh fruits and vegetables in their raw form, but the country imports agro-processed produces such as tomato ketchup and other tomato sauces, and juice of citrus fruits. In addition, Ethiopia exports sesame seeds and natural gums; but it imports prepared glues and other adhesive glue. Ethiopia has recently started exporting manufactured commodities, but it faces some marketing problems.
Other elements that erode comparative advantage are the manner in which most domestic animals are raised in Ethiopia. These animals are still handled traditionally by small-scale farmers or pastoralists, who do not have the skills to manage commercial operations. They are rather small holder farmers that produced in traditional systems. The export items are limited to few commodities which are susceptible to the mood of the global market.
Furthermore, the quality of export items is low and has only a small share of the total exportable items. The Ethiopian exporters are, therefore, simply price takers in the global market and they suffer from price fluctuations. They also face the same problems in Middle Eastern markets, including Saudi markets, where exports of primary produces are cheap. Ethiopia may not have the chance for exporting items of high value-added to these countries without preferential treatment. In this regard, there is a limited progress for manufactured exports, including leather products, processed meat, or clothes that are facing greater domestic obstacles in the importing countries.
This trade imbalance indicates that Ethiopia needs support in terms of finance and technology from economically advanced countries like Saudi Arabia to accelerate its effort of transforming the economy from agricultural led to industry led.
In good faith, it is helpful to note the notable success of flower exports from Ethiopia. Although an agricultural product, the improvement in the export of flowers to the Middle East and Saudi needs high capital. It involves green houses, cold stores, refrigerated trucks, and timely air freight systems. This reflects the technical cause of trade imbalance with petroleum producing countries, including Saudi Arabia. The trend in the global market shows that the demand for fuel has increased dramatically. Rising import prices of fuel have eroded the benefits that accrued from higher export revenue. Ethiopia may, therefore, need a special trading partnership with Saudi Arabia in order to reduce its fuel import burden and trade imbalances.
Experts are of the opinion that a minor change in oil prices will definitely lead Ethiopian export-import economy into unprecedented crises. In order to meet the need for Ethiopia’s livestock in Saudi market, Ethiopia needs to work on quality and quantity of its exports. The cooperation between the two countries has to consider that as an emerging economy, Ethiopia demands technical and financial support to improve quality of its livestock in terms of health, sanitary and quantity to hit the required amount by the market and Saudi Arabia can show its friendship to Ethiopia via providing fund and investing in the sector.
On the other hand, Saudi Arabia has to cooperate with Ethiopia in fighting illegal trades in which Ethiopian animals are smuggled to Saudi through alternative routes while it imposed ban on legal trade under the guise of low quality. This action must be part of the agreement between the two countries for the reason that, unless reversed, it has adverse impact on the bilateral trade putting Ethiopia in a disadvantageous position.
In line with this, as of experts, Saudis’ ban on Ethiopia’s livestock import must have scientific base. If not, the experts believe that this raises some questions about the influence of different interest groups. These groups wanted the control of access to such markets driven by factors other than health risks.
Regarding the important Saudi Arabian market, some have suggested this control is more related to protectionist policies in response to large numbers of animals brought across the sea illegally, depressing market prices. Being a member of WTO may help to avoid this arbitrary import bans. Import bans on live animals and meat from Ethiopia and from other countries in the Horn of Africa is very discouraging.
As there has been no officially recognized case of Rift Valley Fever (RVF) in Ethiopia, the importing countries have only exercised “precaution”. Also, the import bans have not been consistently applied to all African countries in the region. Within Ethiopia, the ban has seriously affected pastoralists and traders in Afar and Somali regions.
Another problem of animal export is that Ethiopian exporters have little knowledge about the market structure, rules and regulations as well as consumer tastes and preferences in importing countries like Saudi Arabia. Also, sufficient knowledge of the changing market conditions in the importing countries, including Saudi Arabia, is not available to the Ethiopian exporters by the concerned agencies. As a result, suppliers from other countries who were better prepared to meet the market demand and conditions entered the market gradually replacing Ethiopia as a supplier.
It is also noted that health and sanitary conditions in Ethiopia are poorly developed. Also, animal feed and transport facilities operated at the lower standards. It is, therefore, unfair to expect exporters to be competitive under such difficult conditions. Thus, animal products exported from Ethiopia fetched lower prices.
Moreover, supply conditions in Ethiopia have remained practically unchanged to meet the rapidly changing market demands in the importing countries, including Saudi Arabia. Thus, cooperative work between the two countries to alleviate the problem needs commitment from both sides. In this regard, Ethiopia, as a part of its policy, is diligent to work with Saudi Arabia expecting equal response from the other party to improve its export trade in the way it benefits the first hand producers and animals’ herders as well as the country by large. It is hoped that trade, labor and other related issues could be resolved soon.
BY GETACHEW MINAS
THE ETHIOPIAN HERALD SATURDAY 18 NOVEMBER 2023
