Ethiopia’s export promotion and the misalignment of the tariff and exchange rate regimes
By examining how much aligned the tariff and exchange rate regimes are with the export promotion in Ethiopia, this study tries to shed some light on why the export performance of the country and particularly that of manufacturing sector remained poor despite continued government promotion and support. Toward this it quantifies the extent of effective protection and defacto anti-export bias generated by the existing tariff and foreign exchange rate regimes. The disaggregated (approximately 2-digit) industry level estimates of the NRP, ERP and anti-export bias in the manufacturing sector show wide difference among industries. With about 35% nominal duty rate, the export oriented sectors such as Textiles, Apparels, Leathers, Footwear industries are the most protected ones within the manufacturing sector. The anti-export bias estimates suggest that the value added obtainable in the domestic market vis a vis exporting is greater than 1.5 times for the Leather and Footwear industries and more than 70% for the Textile & Apparel industries. The anti-export bias in these sectors remained large, even after considering a 100% of duty drawback on imported inputs, making the domestic market lucrative relative to the export market. This study further shows that exporters are penalized by the increasing overvalued exchange rate of the Birr. Finally, it highlights the inconsistency of the tariff and exchange rate policies with the export promotion of the country and provides some recommendations to address these anomalies.
Keywords: Export promotion, protection, anti-export bias, macroeconomic policy, Ethiopia
Mulu Gebreyesus and Alekaw Kebede
Global Value Chains and Development of Light Manufacturing in Ethiopia
Development of manufacturing activity will be a key component of Ethiopia’s development program over the next decade, and probably well beyond. As the country remains relatively capital scarce, the focus is necessarily on light manufacturing, which covers sectors or activities that are relatively labor intensive. Although Ethiopia is the second most populous country in Africa, its low level of per capita income means that the domestic market remains very small by international standards. This factor is one important reason that GVC participation is attractive. GVCs are focused on global markets, and so offer the potential for serving much larger world markets for intermediates or final consumption goods. Although there is clearly scope for higher incomes within Ethiopia to support and grow domestic demand, the opportunities offered by the world market are much greater, which makes increased GVC participation a potentially attractive option for Ethiopia, building on the experiences of countries like China and Vietnam.
Developing Trade Consultants (DTC)
Why export promotion efforts failed to deliver? Assessment of the export incentives and their implementation in Ethiopia
This paper examines the effectiveness of the existing export incentives in reducing the anti-export bias and encouraging exports; both in terms of their sufficiency and implementation related obstacles. We used a qualitative method and triangulated different data sources and interviews with different actors in the sector. The study reveals that the incentives provided for exporters are insufficient to motivate the private sector engage in exports. Firms that produce for domestic market have almost comparable incentives through investment promotion. The additional incentives provided for exporters are, thus, mediocre in comparison not only to the challenges associated with exporting and anti-export bias created by the existing policies but also to the investment incentives that are available for all investors including firms producing for domestic market. More importantly, the study found that the effectiveness of the export incentives is substantially constrained by the lack of efficient export bureaucracy and coordination problem. This has made difficult to ensure exporters have access even to the limited level of export incentives and encouraging diversion and rent seeking by the private sector. All these suggest that overcoming the incentive administration hurdles would reward the government’s effort in promoting export in addition to making the export inventive attractive relative to the investment incentive.
Mulu Gebreyesus and Ashagrie Demile
Subjective Wellbeing and Institutions: The Case of Rural Ethiopia
This study focuses on the role of religiosity, general and political trust, local participation, and welfare metrics on wellbeing in rural areas using the Ethiopian Rural Household Survey. Ordered probit methods that account for Heteroscedasticity reveal distinctive correlates of overall life satisfaction and momentary happiness. Broader socio-economic factors such as religiosity and political governance strongly predict life satisfaction, while largely welfare metrics drive momentary happiness. The differential role of institutions on life satisfaction and momentary happiness is in comport with Deaton’s (2008) and Stevenson and Wolfers’s (2008) proposition that life satisfaction and happiness are not synonymous.
Tsegay Gebrekidan Tekleselassie
Coffee Income, Food Security and Diet Diversity of Smallholder Coffee Growers in Ethiopia
A large primary survey was conducted to understand the status of food security and diet diversity of smallholder coffee farmers from within major commercial coffee producing zones in the country. We relied on data from almost 1,600 households that were randomly selected and then interviewed using a multi-stage sampling technique. The study applied both descriptive and econometric methods to analyse data from the household survey. As core findings indicate, income from coffee sales was found to be positively and significantly related to food security while better diet diversity is found to be associated with total household wealth. However, diet diversity has no positive or negative association with the share of coffee in total household income. In both cases of food security and diet diversity, land size, the total value of household assets and the value of livestock are found to have a positive contribution as predicted. This implies that cash crop production of coffee can help to assure improved food security in the country, although other additional measures are needed to obtain improved diet diversity of smallholder coffee growers.
Tadesse Kuma Worako, Mekdim Dereje and Bart Minten
An Economic Inquiry into Ethiopian Exports: Pattern, Characteristics, Dynamics and Survival
Using both aggregate and firm-level Customs data, this paper examines Ethiopia’s export performance and dynamics over the period 1995/1996 – 2014/2015 from various dimensions. Specifically, we attempt to address the following issues:
(i) How concentrated/diversified are Ethiopia’s exports in terms of exporters, products, and markets? Or, over the past decade or so, has Ethiopia added economically significant numbers of new products and markets to its export portfolio.
(ii) To what extent do Ethiopian exporters survive beyond their first year of entry to the export market?
(iii) And finally we decompose export growth/contraction into intensive and extensive margins to see what drives export change in Ethiopia.
Berihu Assefa and Kiflu Gedefe
State-inducement Versus Self-initiation: A Comparative Study of Micro and Small Enterprises in Ethiopia
The promotion of micro and small enterprises has been a centerpiece of the Ethiopian government’s strategy to alleviate urban unemployment among the youth since 2004. Since this time, the government has adopted twin strategies of creating a business environment conducive to start and operate MSEs while at the same time actively triggering the establishment of new MSEs. In this research, using a large dataset collected from 13 major cities in Ethiopia, we explore whether government-induced enterprises (cooperatives) differ from self-initiated enterprises (non-cooperatives) in various aspects of business productivity, business practices and performance.
The case for industrial policy and its application in the Ethiopian cut flower sector
The floriculture industry has been one of the most spectacular growth successes in Ethiopia. It has been driven by a dynamic mixture of government action, foreign investment, and local entrepreneurship. We build the case for the use of innovate industrial policy regimes to support processes of structural transformation in low income countries. Further to this, we demonstrate how a complex array of state institutions helped support private-sector engagement and success in floriculture.
Girum Abebe and Florian Schaefer
High Hopes and Limited Successes:
Experimenting with Industrial Polices in the Leather Industry in Ethiopia Downloads
As early as the 1950s the Nobel Laureate economist Arthur Lewis (1955) claimed that ‘No country has made economic progress without positive stimulus from intelligent government’. The roles governments assume in the economy have since been the source of heated debates among academics and policy makers alike.
Girum Abebe and Florian Schaefer
Total Factor Productivity and Technical Efficiency in the Ethiopian Manufacturing Sector
Economic growth is largely dependent on the availability of reliable sources of energy. As an importer of oil and petroleum products, Ethiopia’s economy is potentially vulnerable to fluctuations in the world price of crude oil. The recent oil price shocks adversely affected oil-importing developing countries such as Ethiopia.
Ownership, Management Practices, Upgrading, and Productivity in the Metalworking sector: Evidence from Ethiopia
Implications of Oil Price Shocks and Subsidizing Oil Prices to the Ethiopian Economy: A CGE Analysis
Birouke Tefera, Frehiwot Fantaw and Zewdu Ayalew
Environmental Resource Collection versus Children’s Schooling: Evidence from Tigray, Northern Ethiopia
Bahre Gebru and Sosina Bezu
Does Electricity Supply Strategy Matter? Shortage and Investment: Reflections based on CGE Analysis
Ermias Engida, Eyasu Tsehaye and Seneshaw Tamru
Economic and Environmental Benefits of Forage Legume-Cereal Intercropping in the Mixed Farming System: A Case Study in West Gojam, Ethiopia
Road Sector Development and Economic Growth in Ethiopia
Fertilizer Consumption and Agricultural Productivity in Ethiopia
Analysis of Changes in Food Consumption Patterns in Urban Ethiopia
Tourist Flows and its Determinants in Ethiopia
Yabibal Mulualem Walle