By Staff Reporter
October 21, 2019 (Ezega.com -- Ethiopian Ministry of Trade and Industry has introduced a new “Export Contract Registration and Performance Directive” as part of its effort to address fraud in the country’s export business.
Briefing journalists on Monday, October 21, 2019, State Minister of Trade and industry Misganu Arega said the absence of legal document that governs the export business has left a significant number of Ethiopian exporters engaged in unfair competitions and setting lower prices to the country’s export items at international markets.
Reports reveal that Ethiopia’s earnings from foreign trade has declined over time, mainly attributable to poor quality or uncompetitive export items, volatile global market prices, contraband trade, absence of well-organized institutions and legal document to manage the export sector.
Accordingly, the country’s trade balance gap is expanding, leaving the nation with a high trade deficit. Last year, for instance, the nation earned $3 billion from exports of goods, mainly agricultural products, while it spent $18 billion on imported commodities.
The majority of Ethiopian exporters sell their commodities far lower than the average global prices and, at times, even below the real cost of a given product, the state minister said
The exporters compensate the lost money from their export commodities by setting exaggerated prices on their imported goods, which are mostly luxurious, the minister said. By doing so, the minister said, they contribute to growing inflation in the country.
The absence of a legal document also encourages the exporters to report losses and present fake financial statements to the ministry of revenue, the minister added.
According to the new directive, exporters will be required to report their export commodities, price, quality, quantity and contractual agreements to the National bank of Ethiopia and those exporters who quote a lower price than their purchase price would be accountable and blacklisted, the minister stated.
Surprisingly, many Ethiopian exporters were found to disappear after they had received advance payment form their customers abroad. This practice has blemished the country’s image and, if not addressed, would push Ethiopia out of global trade, Mesgenu warned.
Many importers from different countries are filing complaints through their embassies in Addis Ababa, he recalled
According to the minister, the new directive would require the exporter to notify the Ministry of Trade and industry about their export commodity, including price, quality, and quantity, and contractual agreement with the buyer.
The contracts of all commodities that pass through the Ethiopia Commodity Exchange (ECX) will be registered and approved by the ministry and sent to the National Bank of Ethiopia for export license to be issued starting October 28, 2019.
So far, there was no regulation mechanism, “so, there was no system to control exporter’s quality, price, and contracts, which destination countries complain with exporters in completion of contracts,” he pointed out.
According to Misganu, the newly introduced directive enables the government to supervise, control, and regulate contracts and agreements and build a positive image for the country’s export sector.
The Ethiopian export structure remains undiversified and the sector is dominated by coffee, oilseeds, gold, chat, and pulses. These commodities account for 70 percent of the total merchandise exports from the country.
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