Addis Fortune (Addis Ababa)

24 August 2014

Ethiopia: World Bank Scolds As Ethiopia's Man'g Export Performance Falls Dismally Short

Ethiopia's export performance has fallen increasingly short of GTP targets, reaching a new low of just 25pc.

As the Growth & Transformation Plan (GTP) period draws to a close, Ethiopia continues to lag far behind its lofty ambitions. The latest Ministry of Industry(MoI) report, yet to be released, indicates that the country, which targeted an export revenue of 1.6 billion dollars from the manufacturing sector in 2013/14, ended up with a dismally low 398 million dollars - just 25pc of the target. The revenue, nevertheless, does show an improvement of 41.5pc compared to the performance of the previous year.

A damning report from the World Bank(WB) released in July, 2014 - the Third Ethiopia Economic Update, which focused on the export sector - claims that Ethiopia's overall Doing Business performance was on the decline and that it "lagged behind its peers in Global Competitiveness rankings and trade restrictions are biased against exports". The Update added that Ethiopia is under-tapping available trade preferences, offering "a narrow window of opportunity for diversification".

According to the WB, recent drops in commodity prices have meant that Ethiopia just had its worst export performance in a decade. The Ministry had expected nothing more than a minor disappointment, and thus only revised its target down to 1.3 billion dollars at the beginning of the fiscal year - a sum still 900 million dollars above the actual performance. The woes of the sector still remain, with the country's inability to deliver basic inputs, such as cotton and skin; persistent power outages, and poor management and labour productivity, among others, according to the Ministry's own report.

Ever since the beginning of the GTP in 2010/11, government plans for the sector have grown contrary to its actual delivery, with performance falling progressively shorter of targets - from 58.6pc in the first year to 54pc and 51.8pc over the following two years. It has now reached a new bottom of 25pc. During these four years, Ethiopia's manufacturing export revenue has been growing sluggishly - up from 207 million dollars to 255.5 million dollars, then 281.2 million dollars and finally 398 million dollars - up by nearly 117 million dollars from the previous year.

The Ministry has compiled its report in six categories - textile & garment; leather & leather products; meat & milk products; food, beverages and pharmaceuticals; chemicals & construction inputs and metal products. Last on the list is a curious item, with a target of 203 million Br - nearly 16pc of the revised target of 1.3 billion dollars - without any information as to where this revenue is to come from. Consequently, the Ministry's data has a blank space for all the relevant statistics in this category.

The lowest target for the year was set for chemicals and construction inputs, with a plan for 10 million dollars and a performance of 10.6 million dollars - overperforming. Outside this category, it is a long list of underperformance, ranging from just 7.8pc for metal, where the target was 26 million dollars and the performance just two million dollars, to 58.9pc for food, beverages and pharmaceuticals, where the target was 110 million dollars and the performance 64.8 million dollars. The other three categories where the government had pinned its hopes were textiles and garments, with a target of 350 million dollars; leather and leather products, 347 million dollars, and meat and milk, 250 million dollars. The performance in these areas, all below 40pc, were 111 million dollars, 133 million dollars and 76 million dollars, respectively.

A reason for the low performance in textile and garment export was poor quality and quantity of cotton, according to the Ministry. It was expected that cotton farms would supply 504,500tns of raw cotton during the year, whereas the actual supply was just 83,284.3tns, just 16.5pc, according to data from the Textile Industries Development Institute (TIDI). This was even lower than the actual supply of 118,970tns in the previous year. The shortage led to three factories having to import processed cotton during the year, according to Mengistu Hiluf, director of Evaluation & Monitoring of Plan & Budget at the Ministry.

Ayka Addis Textile & Investment Group imported 2,000tns from India, whereas Elsey Textile Factory imported 860tns from Turkey and India. Bahr Dar Textile also imported 500tns from Sudan.

"Cotton was the biggest challenge of the year," says Amare Teklemariam, chief executive officer (CEO) of Ayka Addis Textile & Investment Group. "We believe cotton should not be imported, while the country has a suitable climate for its production."

Similarly, the low performance for the leather and leather products sector was attributed to the low supply of raw skins, both from the domestic and international markets. The local supply was 17 million tonnes, down from a plan of 21 million tonnes. The plan to import 10 million tonnes also totally failed, according to the recent report.

The World Bank's update says that Ethiopia's export sector is not big enough to contribute to structural transformation and that the manufacturing sector remains relatively small. Ethiopia has the lowest ratio of merchandise exports to GDP among populous countries in the world, according to the report, and the number of exporting firms are half those in Kenya - despite a population that is twice size. There is a favourable environment for incumbents, said the Update, but "they are yet to emerge as multi-product and multi-destination export superstars".

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