19 April 2017

Ethiopia: Boosting Export for Currency Earning

editorial

Agriculture is the mainstay of the Ethiopia's economy and plays a crucial role in creating employment opportunities for about 80 per cent of the population. It contributes 45 per cent for the Growth Domestic Production. And it is also the largest export earner with a share up to 85 per cent.

Hence, to rise the nation's currency earning capacity paying attention to the agricultural sector, collecting the export items properly, setting competitive price and developing efficient transport network are essential. The major agricultural export commodities are coffee, pulses and oil seeds,Chat and coffee. All have been serving for a long time as export items. Hides and skin are among in the traditional export items.

Currently meat and live animals have been playing crucial roles in this regard. Flower is the non-traditional export commodity and the volume is growing from time to time. As both crop and animal farming is dominated by traditional mode of production and characterized by small scale farmers and livestock production, less input utilization with less output is the major feature of the sector. The vulnerability of the sector to herbs, insects and diseases make it more fragile. The current global warming and climate change also makes the sector to stay less glamorous.

If the weather proves good, bumper harvest is registered. At the same time, more foreign currency inflows. The reverse is true in times of adversity. During erratic rainfall, the fate of the livestock sub sector is similar to that of the crop sector.

The number of animals will be downsized. The shortage of water and fodders has its own negative impact on this sub-export sector. Also the outbreak of disease in times of drought has its own impact on exporting meat and live animals. Hence, to enhance the role of agriculture in the nation's export earning, improving the sector with better farming,utilizing more inputs and making the sector climate resilient is vital.

The government is striving to boost the nation's foreign currency earning capacity. As such, in addition to the above mentioned items, it has resorted to exporting industrial outputs such as textile and garments, leather and leather products, sugar and pharmaceuticals. Such a scheme can bring various benefits to the nation. It triggers the expansion of manufacturing sectors which create job opportunities for tens of thousands, involve the private sector, attract foreign investment, facilitate technology transfer, substitute import and integrate agriculture with the industry through creating value chaining for agricultural products.

However, due to various reasons the nation's currency earning capacity from these industrial commodities is below the desired level. To begin with, the traditional slaughtering mechanism is outdated.

This inhibits the leather industries not to get sufficient raw material from the producers. According to recent studies, only half of skin and hides reach to factories to be used as input for leather products and the remaining half is either put for domestic use or dumped elsewhere.

The outbreak of animal diseases in the rural parts of the country also leaves a significant amount of hides and skin underutilized and in this regard we can imagine how the nation inadequately benefits from the sub sector. The textile industry has also its own inherent problem which slackens the nation's hard currency earning capacity.

The major one is that, unable to satisfy demand for cotton, which used as an input in textile factory from domestic market, the nation is forced to import cotton from foreign market dwindling the nation's modest resource.

It is repeatedly reported that, due to insufficient production of textile, the nation has missed chances to benefit from the AGOA which invites African countries to sell textile products in the US markets free of tariffs. Hence not to meet the chance and opportunity, redoubling the effort to tackle the sector's weakness should be prioritized. In this regard, expanding cotton farms in order to satisfy the local cotton demand from local sources should be underlined.

The other inherent problem of the textile and leather industries which need remedial action is working below capacity due to power interruption, lack of modern technology and dearth in skilled labour force.

As a result the nation's hard currency earning capacity is stagnated. Currently, the nation is aspiring to transform the economy from agriculture-led economy to an industry led one. GTP 2 also clearly underlines this and to achieve the goal, the nation should expand the importation of capital goods such as machinery and equipment used for the installation of manufacturing industries. These means the nation need more hard currency to service the importation bill.

Therefore, unless the nation's export-earning capacity is doubled attaining the set goal is very hard. Both the quality and quantity of the export commodity must be improved. Currently, most export items are sent to foreign market in a raw form without value addition. Contrary to this, the nation imports value added goods to meet its development aspiration and these all indicate how much sacrifice is ahead of us to meet the transformation demand.

Hence, addressing the problems which hinders the export sector should be a task the country ill-afford to put for tomorrow. The country must step up efforts towards boosting export for currency earnings.

Ethiopia

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