For several centuries, Ethiopia's economy was dependent on agriculture. The country is blessed with suitable climate, abundant water and land resource which could grow various cereal species. But since it had been practicing subsistence farming, the country was not able to produce sufficient harvest that could satisfy domestic needs let alone the production of agricultural commodities which could compete in the international market. The Ministry of Trade indicates that the Ethiopian export sector has been depending mainly on gold, coffee, khat, livestock products, oil seeds and pulses, fruits, vegetables and flowers, textile, natural gum, spices and mineral products. Gold accounts 21 percent of total exports while coffee 19 percent in the first quarter of this Ethiopian fiscal year.
According to the book entitled 'Ethiopia's Export Trade' published by Government Communication Affairs Office, Ethiopia has exported various products that worth 2.6 billion USD the global market in 2016 fiscal year. When we see the preferable trade partners of Ethiopia, 1.1 billion USD or 43.7 percent export items were exported to Asian countries while 28.4 percent was delivered to European Union countries. It has also shipped 17.5 percent of the export items to African countries and 7.4 percent exported to North America.
Apart from gold and coffee, the leather and leather industry is one of the industries which has seen tremendous growth since 2005. The main factor for its development is due to the large scale private investment endeavors which have been flourishing as a result of government's feasible policies and strategies.
Thus, Ethiopia is shipping various leather products to different countries of the world. Another major means of foreign exchange to the nation is floriculture and it accounts 11 percent of the total export volume. Germany is Ethiopia's prime horticulture products' destination.
Assefa Mulugeta, Director General of Foreign Trade Expansion at the Ministry of Trade indicates that the export sector is developing despite setbacks. The export trade products are classified into three. These are agriculture, manufacturing and mineral products. The products lay under the supervision of various ministries. He said that the government is diligently working to upgrade the sector so as to balance the export trade with that of the import. "The import and export trade balance is not proportionate. There is still trade deficit in the Ethiopian side. We are striving to fix it once through taking measures in our export policies."
Though the export sector has shown encouraging improvement over the last few years, Assefa claimed that still it accounts for about 1.3 percent of the total economic output. But the nation has been striving to expand and diversify its export commodities. There are many factors that are accounting for the ever growing export sector. The main reason is the government's swift policy towards the manufacturing sector. Ethiopia started to produce semi-processed export items.
In addition to this, the policy has encouraged investors who engage in the sector and the international workshops, exhibitions, bazars and conferences which have eventually played their part in boosting the export sector of the nation.
It is encouraging scenario that Ethiopia has shown huge improvement in its export trade. However, it should alleviate the hindrances facing the sector. The most noted challenges include low quality products, illegal trade, lack of competitive supply chains, and lack of modern logistics and in ability to produce cash crops.
The government has already identified the problems and is trying to solve them. It has been boosting its supervision, regulation and intervention mechanisms regarding export commodities. It has been working with stakeholders on ways of tackling contraband and other illegal trade activities. Supporting farmers, investors, suppliers and exporters was one of the policies being designed by the government to promote the sector.
Besides, there are initiatives to create supply chains which could consolidate linkage with global companies. In addition, basic infrastructures and logistics have been and are being constructed to facilitate the sector. Roads, airports, dry ports and railway lines have been constructed. The Addis-Djibouti railway which was inaugurated last year can be cited here. It will contribute immensely to enhance the export trade.
To sum up, the Ethiopian government is tirelessly working to sustain the fast double digit economic growth, that is why it has given due attention to the manufacturing sector. The industrial parks which have been built in various state of the country are best example that shows the government's commitment to diversify the economy. Moreover, the policy of developing industry-led economy would have significant role in promoting the export market.