RIFT VALLEY UNIVERSITY

GULELLE CAMPUS
Import and Export Group Project

Group members Id no
1. Fanuel Ephrem….……….0017/19
2. Tigist Abebe……...………0043/19
3. Mahlet Daba……………..0028/19

 Data collection related to the actual current practices of the

Ethiopian export and import policies and procedures

General Introduction
 1. INTRODUCTION
1.1 Background of the Report
Nowadays, export trade is vital for the nation’s economy. Export performance and economic
growth relations are becoming the main agenda in the international and regional development
programs around the world (International Labour Office, 2015). Ethiopia is a developing East
African country going through political, economic, social and technological transitions.
The country’s development strategy has the objectives of promoting rapid economic growth with
a stable economic atmosphere and enhancing the integration of country’s economy with a global
economy (Allaro, 2012). Ethiopia’s potential for export of manufactured goods lies in textile,
leather and leather products, as well as products of agro-processing.
Exporters have a good possibility of increasing export due to the availability of all-important
elements in the country at a reasonable price. These elements are, “raw materials, low wages and
low energy costs” (Abadi, 2015, p. 36). This is highly important for a country to attract the
industry investments and also it gives a comparative advantage of other countries.

1.2 Statement of the Problem

To generate sustainable growth in the country, the government has developed Growth and
Transformation Plan to bring about a shift in the export sector. Export items such as “flower,
fruits, vegetables, coffee, sesame and cereals” are the major exportable commodities of
agricultural sector; however, during the plan period, performance of these sub sectors fell short
of the planned targets (National Planning Commission, 2016, p. 65).
Export is regarded as the most common international market entry mode (Saravanavel, 2009).
While, countries want to achieve sustainable economy, it gives to priority for the export sector.
Ethiopia export sector is expected to serve as a key driver for Journal of Business and
Administrative Studies (2018), Vol. 10, No. 1 economic transformation through “expanding
output, employment creation, technology transfer and introduction of new products” (National
Planning Commission, 2016, p. 105).
Thus, aggressively expanding the export sector will be a key direction to ensure sustainable
economic growth and development. But, over the past three years, the weak performance of the
export sector was the main constraint in ensuring reliable and adequate supply of foreign
exchange required for imported capital goods and services that are “essential for
industrialization, infrastructure development and technological upgrading” (National Bank of
Ethiopia, 2017, p. 68).
Therefore, the paper has assessed and explored the challenges, opportunities and performance of
the country’s export market in the past three years from 2015 to 2017.
Consequently, attempts have been made to find answers for the following basic research
questions:
1) How is export trade performing during 2015-2017 and what is the level of performance?
2) What are the main factors that influence performance of the export market?
3) To what extent the opportunities available in the export sector?
4) What should be done to improve the performance of export trade?

2. Review of Related Literatures

2.1 Importance of Export Marketing
Exports are significant contributions for all developed or underdeveloped countries. The
International Journal of Fundamental Psychology and Social Sciences (2011) article listed out
the main advantages of export marketing at the national level are:
i. Foreign exchange earnings: Exports are very important for exporting countries by
earning foreign exchanges. It is vital for the country to pay for the import of raw
materials, components, spares, capital goods and advanced technical knowledge.
ii. Balance of payment: Potential exports in the country are a capacity to solve the
balance of payment problems and enables the country to bring favorable balance of
payment positions.
iii. Promoting economic development: Exports are required for encouraging industrial
development and economic growth. Rapidly rising of export business has bringing
fast and sustainable economic development in a country.

2.2 Overview of the Ethiopian Export Sector

Ethiopia is a developing East African country going through political, economic, social and
technological transitions (Allaro, 2012). The country’s development strategy has the objectives
of promoting rapid economic growth with a stable economic atmosphere and enhancing the
integration of country’s economy with a global economy. Ethiopia’s potential for export of
manufactured goods lies in textile, leather and leather products, as well as products of agro-
processing.
Clothing offers a good possibility of increasing export due to the availability of all-important
elements in the country at a reasonable price for the development of textile industry. These
elements are, “raw materials, low wages and low energy costs” (Abadi, 2015, p. 36). This is
highly important for a country to attract the industry investments and also it gives a comparative
advantage of other countries.

2.3 Determining Factors of Ethiopian Export Performance

As NPC (2016) report identified the constraints of the export sector was shortage of investment
land, inputs, electricity; weak trade and custom services facilitations, regulations, weak
administrative and logistics support and monitoring system; the production capacity and the
investment flow to the manufacturing sub-sector was not sufficient and the performance of the
existing manufacturing industries was also weak in terms of volume and quality during the GTP I
period. Debas (2006) study concluded that, “market access, low level of private investment, high
transaction costs, infrastructural deficiencies, delays in service delivery, limited market
knowledge and shortage of skilled work force” are the main constraints and challenges of
Ethiopian export sector (p.103). The World Bank (2016), in a report entitled 3rd Ethiopia
Economic Update: Strengthening Export Performance through Improved Competitiveness have
considered exchange rate overvaluation, low level of investment in the economy, coffee surtax,
inadequate marketing infrastructure, high tariffs on imports of raw materials, high trade costs and
insufficient adjustment of producer prices are some of the limiting factors to the country’s export
growth.

2.4 Improving Market Access with Global and Regional Economic Integration
Agreements for the objectives of increasing export market and to reduce tariff and non-tariff
barriers between two and more countries in a regional, continental or worldwide level for
achieving a common goal of the free flow of goods and services between them is referred to as
economic integration. According to the World Bank, Country Department for Ethiopia (2014),
Ethiopia has market access to Common Markets for Eastern and Southern Africa (COMESA),
Access to African Growth and Opportunity Act (AGOA), for Everything But Arms (EBA) trade
and Generalized System of Preference (GSP) into the European Union. Especially, under the
AGOA program, like other countries in the region, Ethiopia has also eligible for the US market
as a duty and quota free access. In similar way, the country is entitled to get a free.
market access for many products in other countries market (United Nations Development
Program, 2014). Some of these countries are; Canada, Japan, Australia, Russia, United Kingdom
and most European Union member countries under different economic integration programs.
Africa is moving toward regional integration. There are eight Regional Economic Communities
approved by the African Union (AU).
These are: Community of Sahel Saharan States (CEN-SAD), Common Market for Eastern and
Southern Africa (COMESA), East African Community (EAC), Economic Community of Central
African States (ECCAS), Economic Community of West African States (ECOWAS), Inter-
governmental Authority on Development (IGAD), Arab Maghreb Union (UMA) and Southern
African Development Community (SADC) ( (Ethiopian Investment Agency, 2016). Ethiopia has
preferential trade agreements with key international markets.
Some of these are: The African Growth and Opportunity Act (AGOA) offers market access
privilege to the US market, Everything but Arms (EBA) of the EU offers market access privilege
and Duty free and quota free (DFQF) privilege extended by international markets of China,
India, Japan and Korea (Ethiopian Investment Agency, 2016).

2.5 Synopsis of Ethiopian GTP II Export Sector at a Glance

The export sector is expected to serve as a key driver for economic transformation through
“expanding output, employment creation and technology transfer and introduction of new
products” (Muhabaw, 2014, p. 76). It broadens market opportunities through serving as outlets
for local producers. Export is critical for sustainable economic growth and development by
enhancing competitiveness of the overall economy and expanding market opportunities. In the
long run, it leads to increased competitiveness in international markets, increases efficiency in
production and marketing, in the process showing other domestic producers the possibilities to
penetrate into the global market. Emphasis will be given to revamping the merchandize export
sector given its crucial role through boosting and sustaining overall economic growth and
development. Hence, efforts will be made so as to bring a significant shift in export performance
during the Growth and Transformation Plan II (GTP II) period (National Planning Commission,
2016).

3. Methods Followed
A descriptive study explores and describes the way things are. It is also concerned with the
assessment of attitude, opinions, performance, demographics, practice and procedure (Kothari,
1990). For these reasons, to answer the basic research questions, this study adopts a descriptive
survey method. The study used both quantitative and qualitative data that will collect from both
primary and secondary data sources. The primary data was collected by self-administered
questionnaires including both open and close ended questions and interviews by purposive
sampling methods of the country’s major valuable exportable commodity exporting companies
which is represented by their associations.
The secondary sources such as reports, magazines, different published and unpublished
materials, journals and articles from National Planning Commission, Ministry of Trade and
Industry, Ethiopian Customs Authority, National Bank of Ethiopia, Ethiopian Investment Agency
and Ethiopia chamber of commerce sources will be utilized. To conduct this study, the
researchers chose the non-probability sampling techniques. This method is appropriate when the
study places special emphasis upon the control of certain specific variables.

4. Results and Discussions

4.1 Characteristics of Firms
1) Firm Competencies and Characteristics
Many of exporting companies are established from 1990 – 1997, these are 64% of the total. The
other 7%, 18% and 11% are before 1990, between 1998-2007 and 2008-2017 respectively. On
firm size, 79% are more than 100 employees and 21% of them are below 100 employees
responded as rarely feedbacks. From these exporting companies 82% of them are certified by
quality management system and 18% has not certified.

2) Firm’s Level of Access

Firm’s level of access is one of the measurements between company and external bodies who is
involved in the export sector. In the modern theory of international trade, the Heckscher–Ohlin
theory stated that; the capital rich countries are export capital intensive goods and import labor
intensive goods. On the other hand, labor rich countries are exporting labor intensive goods and
import capital intensive goods (Verter, 2015). This theory is absolutely true for Ethiopia, because
Ethiopia exports labor intensive goods and imports capital intensive goods. Because, exporting
companies in Ethiopia had shortage on capitals.
As the World Bank (2016) Ethiopia economic updates report identifies that, poor access of
finance, low level of investment, inadequate marketing infrastructure, high tariffs on imports of
raw materials are stated as some of the limiting factors to the country’s export growth (The
World Bank, 2016). So, as the data explained, export companies access to the necessary sources
of supply was in convenient access only by 14%. The other firms are not getting sufficient access
for exporting their products. In addition, government agencies access to exporting companies are
by 79% of convenient. This means, the rest 21% are not access in the right time and right quality
of services from them. Similarly, exporting company’s access to export related activities such as
finance, fright, insurance services and networking opportunities are not in convenient levels.
Insufficient access of government service was listed the prior determining factors of the
country’s export performance reported by National Planning Commissions in 2016 (National
Planning Commission, 2016).

4.2 Firm's Strategy and Export Performance

1) Firm’s Export Marketing Strategy
Firm’s position compared to their competitors in the safety of production and products, average
cost of production, uniqueness of the product and company reputation are the major advantages
by 79, 93, 82 and 86 percent’s respectively. Proximity to foreign markets are 57% advantage in
the company’s competency. In addition, quality of personnel in the exporting companies is very
essential. As stated in the Heckscher–Ohlin theory, labor rich countries are exporting labor
intensive products. For exporting these products, the quality of personnel was very critical for the
firms by 80%. For other 20% firms were not that much advantage, because those firm’s higher

2) Firm’s Export Performance

Firm’s performance on their export objectives in the market share are dissatisfied by 29%. Only
21% are satisfied by their performance. These results are also similar in the market share growth.
In the firms export sales value, volume and growth 75% of them are dissatisfied. Only 14% are
very satisfied and 11% are satisfied. The firms export profitability and its growth is very
satisfactory by 39%, but 25% of them are dissatisfied. By new country market penetration, 82%
are satisfied and very satisfied. Only 18% are dissatisfied. Like country’s plan in export sector,
every exporting firms were their own objectives for the total turnover and export division
turnovers.
The firm’s export sales performance was different from company to company and there were its
own goals depending on their characteristics. But, all the companies were engaged in export
business, they are expecting to all sales.
4.3 Firm’s Export Challenges
1) Similarity on export and domestic markets
Depending on the similarities between export and domestic markets, 94% of consumer products
behavior is not similar. In buying characteristics of the consumer 96% are not similar, only 4%
were similarities between them. In purchasing power (89%), socio-economic characteristics
(93%) and distribution channel characteristics (94%) are not similar. But legal frameworks
between export and domestic market were similar by 15% and not similar by 67%. 18% were not
sure their similarities. To explore market similarity was very essential for expanding export
markets in different countries.

2) Export Trade barriers

The firm’s trade barriers of tariffs (78%), social and cultural barriers (50%) and lack of adequate
distribution channels by 57% are important. The political situation of export target country
(61%) and social & cultural barriers (46%) are very important barriers for export trade. But quota
is not important by 68%.

3) Challenges encountered during exporting

In the firms export activity, highly repeated problems are: insufficient information for overseas
market (68%), difficulty to identify capable collaborators in the host country (57), strong
international competition (78%), high transportation costs (78%), ability of the company to adopt
new challenges (53%) and ineffective national export promotion programs by 78%. As Debas
(2006) study about the main constraints and challenges of Ethiopian export sector was limited
market knowledge and delays in service delivery.
In addition, the World Bank (2016) study also identified that inadequate marketing infrastructure
is one of the factors. In the export firm’s response also showed that, there was no any
government or private agencies in the country to interpret and analyze international marketing
data in continual bases.
On top of the above challenges, the researchers investigated from interview that lack of export
management experience, poor systemization of export planning and lack of price
competitiveness as challenges faced by firms. In addition to this, minimum production level and
growth, poor communication facilities, different legal norms in the exported country, different
customs and cultures, and finally the firm’s low quality, high price and poor promotional
activities are the main drawbacks of those companies.
The most common problems, which were also identified by the international organizations are:
poor quality and high cost of products, inadequacy of trade information systems, unfavorable
world prices and lack of competitiveness with limited production capacity, inability to produce to
potential client’s standard, lack of reliable suppliers of inputs or raw materials and poor quality
of institutional supports. Furthermore, lack of finance, differences in weights, measures and
technical specifications, intense competition and fluctuating of costs are the main determinants
of the export sector in Ethiopia.

5. Summary
The main objective of the study was to assess challenges, opportunities and performance of
Ethiopian export market from 2015‒2017. Based on data collected, the research attempted to
explore the recent export performance of the country. Depending on results and analysis of the
study, the following major conclusions are identified. Most employees in the export sector are
young and middle-age peoples. But those are mostly male and first-degree graduates. And also,
there work experience is under 10 years. Many firms are established before 27 years, but many
employees working experience are under 10 years, it showed that, employees’ turnover is very
high in the sector. In addition, many employees are working under the top management position.
This may cause to lack of industry experiences in high positions.

Customer’s perception in the country of origin effect is very high rate. This is a negative impact
in the country’s export product categories. Because, Ethiopia is the under developed country and
their export product on the consumer perception is highly negative effect by their country of
origin. However, the exporting companies knew this effect and tried to solve it by improve the
product quality management system. About 96% company has a general awareness about the
importance of this certification and more than 80% of this are already certified. This is one step
to ahead for decreasing the consumer perceptions about the products effect in country of origin.
To achieve in company base or country wide of the exporting objectives, the exporters should get
the full access for many facilities.
In the report, the convenient access is only 42%. This result shows that, without the radical
improvement and change about the facility access for all exporters, the country exporting sector
will be in slow move and the company also have no significant contribution in the country’s
GTP. The important issue that the study identified about the product is product quality and price
competitiveness in the export market.
As the result, quality and price competitiveness of the product has a challenged for the firm as
well as for the country. Currently, there are plenty of market opportunities around the globe, this
is most important for the developing countries like Ethiopia for needs of export market. 86% of
the firm knew this market opportunity as a global wide. But, the current export destination
countries are small. 75% of the exporting countries are under 10, which is mostly Europe. As the
result showed that, coffee is the most exported product in the country and the number of
countries is small, the country’s export performance in general is in trouble.
As the report general result about the firms export performance in terms of market share, sales
volume, its growth and export strategic goals are extremely dissatisfied by 94%. This shows that,
the firm as well as the country has major challenges about the sectors performance. The export
firm has many internal and external challenges. More than 78% of the firm’s challenge is internal
especially related to the quality and price of their products. In addition, the government’s poor
support and minimal monitoring and evaluation in the sector has a negative impact of the export
performance.
But the exporting companies are failed to use properly the incentive packages those initiated by
the government to strengthen the export. The country’s export performance was incapacity to
finance the import expenditure was forced the country to suffer from shortage of foreign
currency which is crucial to import capital goods and other intermediate inputs that are required
to sustain growth. All data and reports showed that, how the country’s export sector is going to in
trouble. Without sufficient export trade, the country will be in big problems as the shortage of
foreign currency and high inflations.
These effects will be showed up directly in the manufacturing industry, because, more of inputs
used by many industries are importing from other countries. The industries are waiting longer
time to get foreign currency could be a direct impact on operations of the company and not far to
see closing of such industries. Furthermore, the country will work strongly for increasing export
destination countries around the world. When the country will reach many countries by their
export items, it will increase the volume and congruently raises export value.
This will help to attract foreign currency inflows to the country. However, the government has an
interest to strengthen the sector by establishing different strategies for the local and international
exporting companies through the country. Some of the strategies are promoting different
incentive package and implementing the country’s export strategy by GTP II. More than this the
government also tries to implement trade free zone, regional coordination for trade improvement
with other countries throughout the world.
Based on the findings of the study the following recommendations are forwarded:
 The firm’s top management should work to balance the male and female employees’ ratio at
least to 60:40. There are a superior talent and skill in female employees special in the
promotional campaign activities.
 Top management of the company should work on the improvement of their product quality
and uniqueness. In addition, the firm should be cost sensitive for their products by minimizing
costs and increase their competitive advantages in the global market.
 The firm will establish a separate promotion and advertising team and implement unique
strategy for increasing promotional campaign in the existing and new markets around the world.
 The government should work with the major business stakeholders and partners to facilitate
the ambitions to join World trade organization (WTO) for helping the international trade benefits
to reduce tariffs and other challenges in the exporting sector and maintains the country export
growth.
 To develop and improve different facilities, policies and procedures in the export sector is
very crucial. Government services for the firms should be very accessible and convenient for all
exporting participants, this helps to increase production capacity and quality products with a
competitive price in the global market for exporters.
 To Advance and upgrade the knowledge, experience and skills of the key members on the
export sector like, supplier, processors, exporters, associations, commercial chambers and the
regulatory bodies are very essential for the growth of the sector. Without the strong private sector
economic participation in the economy, the government will be paralyzed.

The government, exporters association and export companies could be establish bi-annually or
annually meeting schedules to assess, evaluate and experience sharing with other stakeholders in
finding solutions for their challenges and barriers.

 The government has responsibility to aware the quality certification and control
mechanisms and also will assess continuously for fully certified exporting
companies in the country.
 The government will restructure the export sector policy and strategy for giving
the fully convenient access for all exporters in terms of many facilities what they
want from them.
 The government should asses the implementation procedure about the incentive
packages. Some policy and strategies are good for the exporters but, there is a big
problem in implementing the policy. When the government assigned a separate
institution for the exporting sector, this institution will have a regular contact with
the exporters and it will be easy for supporting and strengthen the firm’s activity in
the regional or international markets with a continual base.
 Increasing the availability of credit facilities: the availability of credits
especially long -term credit is very important to exporters. The government will
consider these facilities for aiming to increase the country’s overall economy
growth.
 Simplifying export sector regulations: the government should shorten the export
sector regulations in every aspects of the operations. It also increases their capacity
about the collection and dissemination of the global market’s information as a
continuous base.
Establishing and improving cooperation with the regional and global economic
actors: export growth is getting by the cooperation activities with many
stakeholders. The government will facilitate the cooperation programs and increase
their connection with the highly experienced global companies.
 Formulation short-term and long-term export growth policies: the formulation
of short- and long-term policies is crucial for the growth of export performance in
the country. Especially the government support for the sector including the
incentive packages is important.
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Appendices
Ethiopia's recent trade performance
 Exports hit $4.1bn in 2021-22, up 14% and driven by coffee, gold, and
flowers; growth mostly reflected price effects
 Imports reached a historic high of $18bn, with fuel, fertilizers, and food
making up the top three commodities
 Gross FX inflows rose to $23bn, but reserves still fell due to the increased
import bill and high debt service dues