News

tralac’s Daily News Selection, with an Ethiopian special focus

tralac’s Daily News Selection, with an Ethiopian special focus
Photo credit: Simon Davis | DFID

21 Jan 2019

16 minute read

AfCFTA could be in force by mid-year: STC of the Ministers of Trade, Industry and Mineral Resources

The Rwandan Department of Trade and Industry last week held the 2nd Ordinary Session of the Specialized Technical Committee of the Ministers of Trade, Industry and Mineral Resources. The objective of the meeting was to consider draft continental strategies which included the AU Commodity Strategy, AU Small and Medium Enterprises Strategy and Trade Facilitation Strategy. The meeting also took note of the various technical reports and presentations in the areas of trade, customs, industry and minerals; which are critical to supporting the AfCFTA. The Executive Secretary of UNECA, Dr Vera Songwe, observed that on the basis of the rate at which ratifications were being deposited, the chances of the AfCFTA entering into force by mid-2019 were brighter. AU Commissioner for Economic Affairs, Prof. Victor Harrison, stressed that integration is the only solution for Africa to become an emerging continent. According to Harrison, African countries need viable financial institutions such as the African Investment Bank, the African Central Bank and the African Monetary Fund, which are provided for in the Constitutive Act of the African Union.

AfCFTA receives further support from Pan-African organisations (New Times)

TradeMark East Africa and the AfroChampions Initiative (ACI) have signed a partnership agreement committing to provide support to governments and the private sector in realising the AfCFTA. The agreement was signed by Frank Matsaert (TMEA CEO) and Ali Mufuruki (Regional Chair, ACI). The two organisations will identify projects of regional or pan-African importance that require investment from African or foreign investors. Both TradeMark East Africa and ACI will then promote and participate in the successful projects which will be designed to support the regulatory and technical implementation of the Agreement on the AfCFTA. [An African Business interview with Jean-Louis Billon, AfroChampions Vice Chair for Western Africa]

The EAC: New dawn for regional relations? (The East African)

Burundi has confirmed that it will attend the EAC Heads of State Summit scheduled for 1 February, in Arusha, giving fresh hope that the bloc will carry on programmes key to the integration agenda. A disgruntled Bujumbura pulled out of the 30 November 2018 summit, citing unresolved matters, forcing a last minute cancellation. A subsequent meeting planned for 27 December 2018 also failed to take place. Now, there is expectations that the February meeting will help unlock programmes and foster EAC integration at a time when observers have predicted a collapse akin to the 1977 one. EAC Secretary General Liberat Mfumukeko was upbeat last week, admitting to reporters in Arusha that the past year was the darkest, but the events at the end of the year heralded a new dawn. [New Year Address 2019EAC still on the right track, says Secretary General]


Ethiopia

Trade, infrastructure and innovation postings:

  1. Arkebe Oqubay, Taffere Tesfachew: The journey of Ethiopian Airlines. Despite sceptics who believed Ethiopia lacked the comparative advantage to adopt the latest aviation technologies, Ethiopian Airlines (EAL) has in the past seven decades narrowed the gap between itself and leading global players in the aviation industry by upgrading its technological, organizational, and management capabilities. This paper reviews EAL’s journey to build an internationally competitive airline, explores the challenges and complexities of learning for African firms, and examines implications for capability building and catch-up in late-latecomer countries. One key to EAL’s success was the partnership with a leading global player, TWA. Another was a strong commitment to “Ethiopianization” from an early stage, which increased learning intensity and highlighted the industry’s narrow latitude for poor performance. In the early 21st century, EAL embarked on Vision 2025, at the heart of which are technological capability development, skills formation, aggressive new market development, and commitment to Pan-Africanism. The story shows that African firms can successfully move closer to the productivity frontier in a particularly challenging industry. Extract from the conclusion (pdf): The EAL experience presents a unique example of firm-level learning and catching up in an industry considered alien to a late-latecomer country struggling to reach middle-income level. The relevance of the Ethiopian experience to other 21st century late-latecomers is less clear, depending on country specificity, government commitment, institutional development, and the internal and external policy environments. Broadly, however, a review of the ups and downs in the transformation of EAL from a simple domestic airline into an internationally competitive aviation industry reveals five critical factors.

  2. Ministry manoeuvres toward digital economy. The Ministry of Innovation and Technology is revising its 15-year-old policy in a bid to digitise the nation’s economy. Revising the national science, technology and innovation policy in collaboration with UNCTAD, the Ministry aspires to lead the economy toward tech-led growth. Failure to align with different sectors, coordinate the sectors and support the nation’s move toward the industrial economy as well as an inability to comply with the current economic reforms are the major reasons for the revision of the existing policy, according to Desta Abera, director of policy, strategy and future planning in the Ministry. The first policy was enacted in 2004 when the government announced a shift in the economic revolution. It identified 11 directions including technology transfer, human resource building, manufacturing and finance. The new policy will be focusing on 24 sectors including agriculture, textiles and information technology. Hence, the UN-organ UNCTAD is assessing 50 sectors including SMEs, manufacturing and foreign direct investment that need to be digitised. The Ministry itself is also conducting a prior assessment for the revision. Finally, the two assessments will be merged to come out as a final draft policy to be sent to the Council of Ministers for approval. The Policy is expected to be approved and implemented, starting September. [UNCTAD Leapfrogging brief: Look before you leap]

  3. Kenya-Ethiopia agricultural trade corridor study. The USAID East Africa Trade and Investment Hub partnered with New Markets Lab to conduct a study on the Kenya-Ethiopia agricultural trade corridor, also known as the Moyale Corridor. The study, conducted in 2018, was designed around four key objectives: To collect and synthesize existing information on agricultural trade corridors, growth clusters, and similar initiatives in the context of agricultural development and regional trade; To identify the existing business environment, partners, stakeholders, ongoing activities, and milestones achieved along the Corridor; To analyze the obstacles, opportunities, and frameworks of the institutions, partners, and activities that enable or inhibit development along the Corridor; and To assess the potential impact of improved agricultural trade on regional food security and propose policy recommendations that would eliminate obstacles and multiply opportunities along the Corridor. Recommendations (pdf): Focus the Moyale Corridor on agriculture and food security, creating a true agricultural development corridor that incorporates good practices from other corridors; Improve data analysis related to the Corridor’s role in food security; Assess potential for developing priority clusters along the Moyale Corridor, including grains, livestock, beans, and sorghum; Establish an integrated governance structure for the management of the Moyale Corridor; Develop interventions to engage small businesses along the Corridor; Support formalized trade relationship between Kenya and Ethiopia to enhance regional integration; Prioritize additional infrastructure at the Kenyan-Ethiopian border in support of the Corridor.

  4. Government to overhaul logistics sector. The Ministry of Revenues is planning to launch a customs single windows service. The administration of Prime Minister Abiy Ahmed, whose focus is on economic liberalization, expressed commitment to enhance the participation of the private sector in the entire logistics supply chain. There is also an initiative taken by the administration to diversify the country’s port access. The expected outcome of the logistics turnaround strategy is to reduce the import-export transit time by half by 2020. “Reduce the number of documents required for import and export by half, reduce the average duel time of imported goods to two days in dry ports and increase general cargo carried by multi-modal transport system coverage to 90%” the document stated.

  5. Towards a new Ethiopia National AGOA Strategy. The USAID Hub’s lead AGOA strategy consultant visited Ethiopia last week to gather supply-side information and conduct a sector analysis for a new Ethiopia National AGOA Strategy. The Ethiopian government requested the Hub to provide technical assistance on the Strategy, which will set strategic actions and targets for significant growth in exports from Ethiopia to the United States by 2025. The Hub began the strategy in October 2018 with a review of the macro-economic environment and Ethiopia’s trade performance globally and with the United States. The Hub is now refining competitive export sectors and reviewing supply-side capacity. The Strategy process will include stakeholder validation meetings in Ethiopia before concluding the drafting process at the end of March 2019, when the Hub will submit a completed draft to the Ethiopian government.

  6. Related quick links: Finnovation Ethiopia 2019 (11 March, Addis Ababa); Ahead of a planned Qatari-Ethiopian Business Forum: Ethiopia woos Qatari investors; Ethiopia embarks on electronic trading system for soybean, chickpea; How investment in irrigation is paying off for Ethiopia’s economy; Ethiopia’s sugar sector: high on resources, low on strategy; UN agencies hosts workshop to support Ethiopia’s policy coherence for SDGs; Moving further on civil service reforms in Ethiopia: findings and implications from a civil service survey and qualitative analysis


ECCAS-CEMAC Harmonized Preferential Tariff regime training workshop in CAR (UNECA)

A total of 83 leaders from the public and private sectors of the CAR have completed a three-day training programme to appropriate rules of origin procedures for accrediting national industrial products into the ECCAS-CEMAC Harmonized Preferential Tariff regime. Facilitated by the UNECA’s Subregional Office for Central Africa, the training took place in Bangui as part of a series that has already benefitted local investors and administrative officials in Cameroon, the Republic of Congo, Gabon, Chad and the DRC. Tariff and non-tariff barriers as well as limited economic diversification and product complementarity among Central African states have contributed to the lower performance of the subregion in terms of intra-Africa trade, which stands at about 3% against the African average of 17%.

Guinea-Bissau: Public Expenditure Review (World Bank)

The objective of the Guinea-Bissau Public Expenditure Review is to analyze government expenditure, fiscal revenue, and public financial management in selected sectors (education, health, and security). The PER is a follow-up to the World Bank’s (2017) Public Expenditure Analysis that provided an overall review of public finances in Guinea-Bissau (see Annex I). It contains a wide range of analyses, with some chapters examining public spending trends and outcomes, while others are more process oriented and place a strong emphasis on PFM systems, at macro- and micro-levels. The education and health chapters go beyond the confines of traditional World Bank PERs - namely the efficiency, effectiveness, and equity of spending. Both of these chapters also review the PFM systems in the respective line ministries with a view to identifying options for reform. Further, the PER analyzes the fiscal implications of continuing to spend over 15% of the budget on the security sector and nearly 9% of GDP on wage and nonwage compensation.

Global value chains: what are the benefits and why do countries participate? (IMF)

We use the Eora MRIO database to compute different measures of GVC participation for 189 countries and illustrate global patterns of supply chains as well as their evolution over time in order to contribute to this topic. We find that GVC-related trade, rather than conventional trade, has a positive impact on income per capita and productivity, however there is large heterogeneity and the gains appear more significant for upper-middle and high-income countries. We document that “moving up” to more high-tech sectors while participating in major supply chains does take place but is not universal, suggesting other factors matter. We confirm the findings of the standard gravity literature for GVC trade; highlighting the key role of institutional features such as contract enforcement and the quality of infrastructure as determinants of GVC participation.

Digital opportunities for trade in agriculture and food sectors (pdf, OECD): this report explores ways in which digital technologies can support trade in the agriculture and food global value chains, in particular in relation to market access, traceability and trade facilitation.