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Preparing Ethiopia for the Global Trade

Being one of the developing countries with great untapped opportunities, Ethiopia presents itself as the potential market to the continent and the globe as a whole. It introduced economic reform through liberalization of sectors and policy changes towards a more open economic system, encouraging foreign direct investment.

The country still retains supply of utilities services prohibiting foreign ownership on banking, insurance, and other financial sectors with the justification of protecting the growing local business from massive international companies; that might take the small companies out of business. With so many obstacles to be solved, Ethiopia is working towards achieving a middle income status in the coming ten years. Among the challenges, foreign exchange remains the biggest challenge due to poor level of export and high level of import which swallows most of the available foreign currency reserve of the country.

On the other hand, promising projects are taking place particularly in the area of large scale hydro power generation to boom export performance of Ethiopia. The hydro power generations are aimed at satisfying the domestic demand as well as the regions especially to neighbouring countries. Ethiopia has been massively investing to develop its energy sector launching mega projects including the Great Renaissance Hydroelectric Power Project (6000MW), Gilgel-gibe III (1,870MW) and Genale-Dawa III (254MW) and other wind power projects (Adama and Ashegoda). These projects are entered to meet the local demand as well as support Ethiopia’s export economy supplying to East African countries.

At the same time the country had made progress improving custom clearance process and eased doing business. It has improved the time consuming doing business especially during the business registration stage including legal and policy reforms that are directing Ethiopia to the attention of potential investors. According to Doing Business 2017, starting a business in Ethiopia requires 14.0 procedures, takes 35.0 days, costs 69.3% of income per capita for men, while it requires 14.0 procedures, takes 35.0 days, costs 69.3% of income per capita for women. A requirement of paid-in minimum capital of 121.5% of income per capita. This has made Ethiopia to stand at 179 in the ranking of 190 global economies on the ease of starting a business.

To aid its ambitious economic development, the country shifted its gear to trade and attracting foreign direct investment (FDI) subsisting the massive imports that are coming to the country. The biggest emphasis given to FDI is to bring economic development and job opportunities minimising export dependence on primary goods. This is also expected to bring more export potentials taking the country out of the import dependency reducing the trade deficit of the country. Experts point out that Ethiopia’s trade deficit is mainly due to policy matters, high trade cost and poor logistics and bureaucratic requirements and slow development of the private sector. On the other hand, experts at Jumia Travel say that infrastructure development along with overall country development initiatives supported by macroeconomic policy will enable Ethiopia to use its untapped potential to bring the aspired economic development in short period of time.

Certainly, trade and investment can speed up development programs by providing easy access to investment from domestic and international entrepreneurs supporting economic development initiatives through increased trade and employment opportunity. Such investment openings will create modern industrial shift from solely dependent on primary products which has massive competition from other African countries. Hence diversifying exports focusing on available resources is a great quick fix for trade shortcomings and to bring long term sustainable economic development. This will realistically take Ethiopia out of poverty opening markets in Africa and beyond.

 By Eden Sahle. She can be reached at eden.sahle@jumia.com
Preparing Ethiopia for the Global Trade Preparing Ethiopia for the Global Trade Reviewed by IFEDAYO AKINWALERE on 7:32:00 am Rating: 5