Ethiopia: Ensuring Sustainability of the Under Revival Export Trade

There have been widespread concerns that a number of countries' tight measures to curb the spread of corona virus could put significant strain on Ethiopia's exports. This concern has not come from vacuum; it takes into account the realities of the world. World trade and commerce have been hit hard by the closure of many countries.

The number of countries that have stopped trading with foreign countries is also significant. Even those who have not stopped trading have reduced their imports. With this in mind, economists have been voicing concerns that Ethiopia's exports, which have been declining year-on-year, could be in serious trouble.

Export revenue over the past 10 months, however, is contrary to the forecast. According to a recent report from the Ministry of Trade and Industry, recession in export trade, which has been continued for six consecutive years since 2015, is halted this year. In the last 10 months, the export sub sector has shown remarkable results.

Wondimu Flate, Communication Affairs Director at the Ministry of Trade and Industry said in a recent statement to the media: "Over the past 10 months, the export business has generated 2.4 billion USD. This indicates an increase over the same period of last year's record which was 2.15 billion USD. It has shown 271 million USD, or 12.6 percent increase."

Wondimu did not hide the fact that the plan has not been achieved in the last 10 months. He said the plan was to generate 3 billion USD, but the achievement is a shortfall of 600 million USD.

Flowers, fruits and vegetables, as well as khat exports, accounted 50 to 99 percent of the foreign exchange earnings over the amount set for the past 10 months. He said coffee, textiles and garment, oilseeds, pulses, spices, meat and gold have also performed better, Wondimu further explained.

According to data from the Ministry of Trade and Industry, compared to the same period last year, exports have increased by 84 percent for flowers, 10 percent for oilseeds, 7 percent for khat, 22 percent for textiles and garments, 144 percent for gold, 22 percent for livestock, 16 percent for coffee and 46 percent for fruits and vegetables.

The Prime Minister, Dr. Abiy Ahmed, while addressing parliament some weeks ago in response to questions from members said that corona virus is having a wide range of side effects, but it is also having some positive effects. Ethiopia's export sector has shown positive performance over the past 10 months as a result of corona virus threat among other exporters. The export trade of coffee, flowers, minerals, and meat has shown promising outcome.

Stating that Ethiopia, unexpectedly, has been accounting high score in export trade for the past ten months since 2015, the Prime Minister said the great deal the country has achieved in terms of this sub sector has not come by chance, rather it is attained through various efforts.

Noting that market linkage of coffee producing countries has declined due to the impact of the Corona virus, he said that Ethiopia's coffee export trade has increased significantly due to utmost efforts exerted to supply coffee to the world market. Thus, the export of coffee has reached 667 million USD in the last 10 months and this is an increase of 16 percent compared to the same period of last year, he added.

In an interview with Addis Zemen daily, Negash Haile, a lecturer in economics at Dilla University, said that various factors have contributed to the positive impact on export revenue over the past 10 months.

According to Negash, the impact of the corona virus on other countries may have created a favorable environment for Ethiopia is among them as stated by Prime Minister Dr. Abiy Ahmed. The fact that countries with similar exports to Ethiopia are taking strong measures against the coronavirus and that Ethiopia is taking relatively relaxed measures so far may have contributed to the improvement in exports.

In particular, he said, if the positive impact on exports has been recorded since March, it could be said that the effects of corona virus have contributed to Ethiopia's increase in export earnings. To this end, it is important to identify the months in which positive successes have been achieved in the export business.

Negash mentioned that there are also other reasons positively contributed to Ethiopia's export sector in addition to the impact of the Corona virus on other countries' exports. He believes that the reduction in the purchasing power of Ethiopian Birr has contributed to the revival of the export trade.

Mentioning the act to decline purchasing power of Ethiopian Birr, Negash said that the decline in purchasing power of the Ethiopian Birr and the rising value of the dollar would make Ethiopian products lower in the world market. This will increase the demand for Ethiopian products in the world market. Most buyers buy cheap products. Thus, he believes that this has contributed to the revitalization of the export sector.

As explained by Negash, establishing good diplomatic relations and signing trade agreements will greatly contribute to the revitalization of export trade. When strong diplomatic relations are established and trade agreements are signed, restrictions and controls on each other's products are reduced. Decreasing restrictions and controls will help boost exports. The agreements signed by the Ethiopian government with various countries may have contributed to the success of the past ten months in terms of export trade performance.

While saying improving product quality contributes to positive success in business, Negash recalled that potential companies from various countries have entered Ethiopia's industrial parks. These companies are mainly producing products that take into account the global market. Textiles and garment companies in particular are doing something that could be exemplary. He explained that the fact that these companies started producing and exporting quality products could contribute to the success of the sector.

Recalling the exports have been declining for the past six years, though was expected to increase year by year, Negash said that the positive results during this difficult period have not been achieved much in the past several years. This success after six years should not be underestimated and special attention should be paid to sustaining the current growth, he underlined.

Negash said it is important to look at the experience of other countries to ensure the continued growth of the sub-sector. He cited China, Korea, Japan and other countries as examples. These countries have stimulated their exports by encouraging export industries. In addition to mobilizing, they have been able to ensure the sustainable development of the sector. Similarly, Ethiopia needs to encourage investors in the export sector to continue the good start.

As explained by Negash, it is very important to create a conducive environment to encourage investors engaged in export trade. Companies in this field work hard for themselves if they are comfortable and secure. Therefore, it is important to create a conducive environment by improving the gaps in investment policy and by providing the necessary infrastructure for investment.

In the 21st century, all countries have open borders. In addition to open borders, there is competition between countries. Countries compete with each other to attract foreign investors. Foreign investors also choose countries that are in a better position by comparing countries. They choose the country that has the best infrastructure and policy. Therefore, Ethiopia needs to do with its utmost capacity to solve the security, infrastructure and policy problems and become the best country for investors, he said.

Negash said that sustainability of export trade can also be assured by encouraging local investors. He pointed out that versatile support and monitoring needs to be provided to local investors in order to produce massive products for export.

Stable security is one of the most important factors for investment so that the government should provide the necessary protection for investors. Companies, especially in areas with security problems, should be protected as much as possible, he added.

As explained by Negash, unnecessary government intervention is one of the challenges for the growth of investment. Government intervention should be moderate. Reducing unnecessary government intervention is crucial for sustainability in the export sector. Therefore, government intervention should be minimized at the policy level.

More From: Ethiopian Herald

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