Trade

1) The Overall Policy Environment

Since 1992, major structural reform programs has been undertaken to reorient the economy from command to market economy.

• Creating legal, institutional and policy environment for private sector development.
• Liberalization of prices and markets.
• Removal of subsides and reduction of tariffs.
• Privatization of public enterprises.

1.1 Macroeconomic Policy

The main premise of macroeconomic policy is rapid and sustainable economic growth along with macroeconomic stability (low budget deficit, low and stable prices, and adequate and predictable exchange rates).

1.1.1 Fiscal Policy: is aimed at

• Improving the government revenue base.
• In developing a stringent and transparent system on revenue use.
• Ensuring the use of government budget mainly focus on priority sectors such as agriculture (food security), road, education, health.
• Strengthening the tax administration system and creation of awareness among taxpayers.

1.1.2 Monetary and Exchange Rate Policies: are aimed at

• Achieving low inflation and liberalization of the external current account.
• Fostering export diversification and rebuild net foreign asset.
• Improving the culture of saving.
• Establishing efficient financial system.
• Ensuring stable and market determined exchange rate.
• Improving banking services.

1.2 Trade Policy: is aimed at

• Liberalization of the trade regime to integrate Ethiopia in to the global market.
• Progressive reduction of the import tariff.
• Liberalization of exchange regulation for foreign trade in goods and services.
• To improve contract enforcement mechanism.
• Expand product standardizations and other market infrastructure.

2) Conducive Environment for Export Development

2.1 Export Incentives:

• Export tax: there is no export tax, in whatever form on products destined for export markets.
• Access to inputs: exporters are relieved from paying tax on inputs purchased both in the local as well as foreign markets.

2.2 Preferential Market Access

Ethiopia has quota and duty free market access for garment exports to the US under AGOA and to all exports items (except arms) to the EU under EBA initiatives.

2.3 Free Trade Area

Ethiopia joining the Common Market for Eastern and Southern Africa (COMESA), which has 21 members with a total population of 370 million, will create duty and quota free access to domestic as well as foreign investors operating in the country.

3) Product Specific Export Opportunities

Coffee

• Origin of Coffee Arabica.
• More than 95% is grown organically.
• Rich in acidity and body and is aromatic and sweet-flavored, with winery, spicy, flora or mocha taste.
• Currently used for blending.
• Harrar, Yirgacheffe, Limu and Sidamo are some of the internationally known brands.
• Only a small portion of suitable area is currently covered by coffee.
• Major markets are Germany and Japan.

Leather and leather products

• Abundant livestock population (35 mil. Cattle, 24 mil. Sheep, 18 mil. Goat).
• Supplies 16-18 million pieces of hides and skins per annum.
• Ethiopian goat skin is ideal for the production of high-class wearing apparel.
• An Ethiopian hair sheepskin is used world wide for the production of high value gloves.
• Currently there are 21 tanneries and many small and medium sized factories that produce leather garments, footwear and small leather articles.
• Joint-venture and non-equity collaboration of foreign investors is highly sought to tap this potential.

Oilseeds and Pulses

• The long sunny summer days and mild winter prevailing in the country is highly suitable for the cultivation of oilseeds and pulses.
• Cultivation is usually done without the use of pesticides and fertilizers.
• The major oilseed is sesame seeds, but nigger seeds, sunflower seeds; groundnuts, rapeseeds, castor seeds and pumpkin seeds are also produced in significant quantities.
• Horse beans, chickpeas, lentils and pea beans are the major pulses produced.
• Annual production of oilseeds and pulsed in 2001 were estimated at 2.38 million quintals and 8.74 quintals respectively.
• The major export markets are The Gulf States (Saudi Arabia, Yemen, Israel), EU and Japan.

Horticulture

• Suitable agro-ecological conditions, proximity to major markets (EU, Middle East) and low labor costs allows the competitive production of horticulture in the country.
• Ethiopian high land roses are among high priced varieties.
• Suitable also to grow beans, red onion, asparagus, mango, avocado, papaya, orange and several other fruits and vegetables.
• Large state farms (with a total land holding of 9000 hectares) are available for privatization or other partnership arrangements.
• Easy access to investment land around the vicinity of Addis Ababa.

Spices

• Ethiopia grows many indigenous (Ethiopian Long pepper, Korarima Cardamom) and several other exotic spice varieties.
• Mainly collected from naturally grown plants and many small scattered peasant holdings.
• Currently, only very small amount is processed in factories in the form of oleoresin essential oils.

Textiles and Garments

• The existing capacity as well as the perceived potential to expand the supply of cotton.
• The availability of a large reservoir of young and easily trainable labor force.
• The preferential market access the country enjoys to EU and US are some of the favorable conditions that existed in the country.
• At present, there are eight integrated textile mills with a combined capacity of 140 million square meters of fabric.
• Produce fabrics of varying width, 91 cm – 2 meters.
• There are also garment factories with standard industrial sewing machines suitable for labor intensive type of production.
• Major markets are Italy, Sweden, Belgium and Djibouti.
• Investors in the area enjoy preferential access to industrial buildings and land.

Minerals

• Ethiopia’s green stone belts offer one of the finest areas for gold mineral development anywhere in the world.
• Ethiopia is also blessed with good deposits of tantalum, platinum, nickel, potash and soda ash.
• Construction and industrial minerals available are marble, granite limestone, clay, gypsum, gemstone, iron ore, coal, copper, silica, diatomite, bentonite, etc.
• There are significant opportunities for oil and natural gas development in the four major sedimentary basins, namely the Ogaden, the Gambella, the Blue Nile and Southern Rift Valley.