More recently Ethiopian Flower Producers and exporters used to describe themselves as they are not Price Maker, rather they consider themselves as Price Taker in the global flower market dynamics. They claim that they have no control over the price in market and forced to accept what the market has given. In global market place, like flora Holland, there are large numbers of buyers and sellers who used to come from every corner of the world. Large numbers of European wholesalers, breeders and re-exporters, who have a patent of innovation, remote buying technology, value addition, logistical facility and enough marketing strategy have a big power to influence the price in the flower market and often considered as Price maker. Thus, the influence of a single country seller on the selling price is indeed minimal.
The implication what Ethiopian flower producers and exporters said are crystal clear. They have a feeling of trapped and becoming rapt in a state of affairs where they might not compete in global market unless some measure is taken toward fine-tuning of the existing legal minimum floor price set by National Bank Of Ethiopia. These contest were not been felt so long until Flora Holland , in July 4,2024, formulate a new standard that oblige flower exporters to set their own minimum selling price or a price that they are willing to accept for their flowers product price by taking into account their production cost and overall strategy .
But there is counter argument that do not accept the claims of flower exporters. Many critiques argue that, there is under invoicing. The value of hard currency repatriated to the country is by far lower than the actual value received in global market. The actual selling price in auction and other market channel is either hidden or not shared by market players. Detailed record of flower exchange in market, including their quantity, varieties, stem length, thickness, color description, real time price information, and terms of sale and other evidence are not easily accessible to regulatory agency. Thus according to this arguments fine tuning of the existing minimum floor price set seems irrational
So far many efforts has been made to set minimum floor price more responsive to global market situation by analyzing both what the market offered to our flower exporters and what the National Bank of Ethiopia set. Nevertheless, the attempt has remained futile for various reasons. The first and the most important reason is the existence of two different standard unit of measurement of flower sales in market (price per stem and price per kg).
It is evident that in global market, the selling price of certain set of flower is often measured in terms of stems or price per stem. Fresh flower is commonly sold at the Dutch auction market and other retail channels in stem, in fact anywhere else in the world the sell is on basis of price per stem.The buyer, who is willing to buy flower in auction or other retail channel usually offer its price per stem. Even the Ethiopian flower producer and exporter who supply their product to auction received real time selling price information in terms of price per on stem on daily bases. That means the standard unit of measurement in global flower market is price per stems. In contrast the unit of measurement that are widely used for conceding of flower sale & determination of minimum selling price in Ethiopia is price per Kilo gram. Many Iindustry players argue that the kilogram measurement mechanism comes in direct incongruity to the accepted instrument in the global market.
When the floriculture export business began in Ethiopia, there had not been any threshold floor price to system enacted to monitor and regulate foreign currency repatriations, it worked under good faith and honesty system, where the National Bank solely rely on the self declaration, invoice or contractual agreements. During this time there was not much noise on market price side, as the bank accepted whatever price taker or the flower exporter repatriated for the volume of flower exported and sold. However, many people were suspicious about the risk that the honesty system would expose the country to under-invoicing practice. Deliberate declaring a lower value for flower exported than their actual value was the concern of many.
It had been in April 16, 2007 that stem unit of flower measurement introduced in Ethiopia for the first time under National Bank Directive No FXD/32/2000. The directive state that flowers to be supplies to global market should be sold with minimum price set 0.1 USD/Stem. The Ethiopian Custom commission there by entitled to register the number of flower stems exported and report to Bank to control and manage the Repatriation of Foreign currency.
However the National Bank Directive that set Stem Standard unit of measurement or 0.1 USD/Stem had taken the sector to nowhere. Quite a number of Flower producers and exporters complained that the Ethiopian airport Custom inspection technique and technology was very poor to implement the directive. Opening of flower cartoon at check point and counting of stems number at cargo terminal was considered as regressive practice which spoiled the quality of flowers and its packaging materials. This situation made the government regulatory and supporting institution to look after other alternative of setting threshold selling price. Overtime changing stem to kilogram unit of measurement is found to be the available alternative means during that time. However, changing stem unit as parameter for selling, in to kg was not found as an easy task.
It was on February 14 2012, the stem unit of measurement was changed to kg. By NBE (directive FXD/41/2012) and subsequently the price per kilogram is revised in .April 1, 2022. Despite unit of kilogram regulation introduced in Ethiopia, those who activity involved in flower trading business argue that kilogram unit of measurement was neither familiar nor widely work in global flower marker practice. The motive of changing stem to Kg is thought by many as an excuses of implementing agency for their inefficiency to safely count, register and control number of stem exported and lack of capacity to closely survey, monitor and follow the global market price by themselves or by other credential third party like in Kenya. Despite Kenya do not have a system and practice of setting minimum floor price , for domestic tax and levy purpose they used to gain access to global flower selling price information (per stem ) from International Credible data service Providers.
Today there is perceived limitation on kilogram unit of measurement for flower in Ethiopia. For instance in mid altitude cluster like Beshofu the average number of stem per kilogram of rose flower is roughly estimated to be 33 stems. The minimum price set for rose flower for this cluster is 4.334 USD per Kilogram which means 0.131 USD/Stem. But according to recent survey (DLV PLANTS) there are more than 8 different type of rose varieties that have different selling price in the market for stated cluster .If we take Mariyo and Sonrisa varieties that widely cultivated in this cluster ,the average selling price of Mariyo in Auction in 2022 was found to be is 0 .248 per stem whereas for sunrise varieties it was 0.155 per stem. This indicates that, the selling price per stem of some varieties is by far greater than the cluster floor price average per stem. Despite its importance, the existing floor price regulation did not consider the price variation of same flower varieties in given cluster rather it consider only agro-ecology and the type of flower ( Rose or summer flower that existed in given agro ecology)
The most tricky things is in one kilogram of rose flower in one cluster or agro ecology there existed different type varieties with range of different stem length and other characteristics that significantly influence market price. At the same time one kilogram of rose contains different number of stems depending on varieties stem length, thickness and customer orders.
Unfortunately, our Minimum selling price formulation was not considering the inherent characteristics of this rose flower that contribute for variation of selling price per stem. Due to these reasons the probability of getting different selling price in market per kilogram of rose flower in one cluster and even with in individual company shipment is very high.
Some critiques argued that it is more advantageous for the country to set a minimum selling price per stem than setting threshold level in kg .This is because of the flowing reasons. 1st Since the global market is exchange is in terms of stem there is a good opportunities to raise or lower the floor selling price of flower based on the observed actual market situation both to increase foreign currency repatriation and to protect our exporters from sudden price shock .2nd The room for under invoicing is minimal as there would be digital market plat form that provide required market price information for of different type of flowers varieties through online system .3rd our flower export performance can easily compared with our competitors as we adopt the same unit of stem standard measurement. 4th there is adequate room to benefit from high value varieties of flower which otherwise could not be realized under kg unit of measurements.
The conclusion is that kilogram standard unit of measurement is not the feasible means of regulating minimum threshold price and ensuring adequate repatriation of foreign currency earning. Kilogram standard unit of measurement is also not a convenient means of overcoming malpractice that emanate from under invoicing. The only solution to way out from this unfamiliar practice and uncertainty of under invoicing thus seems three : First introducing an innovate technology that easily count stems of flowers at custom check-point in Ethiopian Cargo wing which enables the regulatory agency to determine the actual volume of flower exported. Second accessing digital flower market and price information of each flower varieties by own means or through third party to control and manage the foreign currency repatriation .Third clearly identifying the flower type that has different market price with clear criterion like varieties ,color, stem length, stem thickness, bud size, leaf index
BY MEKONEN SOLOMON
THE ETHIOPIAN HERALD SATURDAY 22 JUNE 2024
