WORLD TRADE
ORGANIZATIONWT/COMTD/IF/19
26 February 1998
(98-0789)
Committee on Trade and Development
Integrated Framework for Trade-RelatedTechnical AssistanceOriginal:  English
TRADE-RELATED TECHNICAL ASSISTANCE NEEDS-ASSESSMENT
PRESENTED BY ETHIOPIA
INTEGRATED RESPONSES BY IMF, ITC, UNCTAD,
UNDP, WORLD BANK AND WTO1
ETHIOPIA
                                                     
1 Published pursuant to the provisions of paragraph 5 (e) of the Integrated Framework for Trade-
Related Technical Assistance (WT/LDC/HL/1/Rev.1).WT/COMTD/IF/19
Page 2
TABLE OF CONTENTS
PREFACE
1. BACKGROUND
1.1 The Structure of the Economy
1.2 Current Trends of the Foreign Trade Sector
2. ECONOMIC POLICY REFORM
2.1 General
2.2 Trade Policy
2.3 Instruments of Trade Policy
2.4 Trade Policy Formulating, Implementing and Monitoring Organs
2.5 Follow-up Mechanisms
2.6 Familiarity with WTO Arrangement
3. CONSTRAINTS TO TRADE EXPANSION
3.1 Supply Side Constraints
3.1.1 Production Constraints
3.1.2 Institutional Constraints
3.2 Constraints Related to Trade Promotion and Trade Support Services
3.2.1 Technical Constraints3.2.2 Financial Constraints
3.3 Market Access Problems
3.3.1 Meeting International Standard Requirements
3.3.2 Regional Trading Arrangements (RTAs)
3.3.3 Trade Preferences
4. TECHNICAL ASSISTANCE
4.1 Technical Assistance Received and its Assessment
4.2 Need for Technical Assistance
4.2.1 Capacity Building
(a) Strengthening the Capacity of the Existing Firms(b) Strengthening Human Resource Development
(c) Strengthening Support Services Institutions and Facilities
(d) Training in ISO 9000 Standards
(e) Meeting International Sanitary Regulations
(f) Familiarity with International Trading System4.2.2 Regional IntegrationWT/COMTD/IF/19
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PREFACE
This paper tries to give detailed answers to the questions in the "Check-list for Conducting
Trade-Related Technical Cooperation Needs A ssessment" for LDCs (see Annex), prepared by
UNCTAD/WTO.  The paper is divided into four chapters as follows:
In chapter 1 the background of the paper is presented in which questions A (a and b) of the
Check-list are answered in detail.
Questions A (c through to m) are discussed in chapter 2 of the paper entitled "Economic
Policy Reform".  This section embodies a comprehensive account of the trade policy;  instruments of
trade policy;  formulation, implementation, enforcement and monitoring of trade policy;  and
familiarity with WTO agreements.
Chapter 3 provides a detailed discussion of section B of the Check-list.  In this chapter
constraints related to supply, trade promotion and trade support services and market access are
examined thoroughly.
In chapter 4 the core of the paper is presented where section C of the Check-list has been
discussed.  It deals with trade-related technical assistance received over the past five years and needs
for technical assistance in the coming years.  For the sake of simplicity, this topic has been treated
separately in the last chapter of the paper.WT/COMTD/IF/19
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1. BACKGROUND
1.1 The Structure of the Economy
The Ethiopian economy is dominated by agriculture which accounts for about 50 per cent of
the total Gross Domestic Product (GDP) and 85 per cent of export and total employment.  The
country's export is highly dependent on a single crop, coffee, generating nearly 60 per cent of the
foreign exchange earnings.  Agriculture is supple mented by manufacturing, mining, trade, tourism,
construction, services, etc. which have a combined share of about 50 per cent of GDP.
The industrial sector, which contributes about 12 per cent of GDP, supplies important
consumer goods both to the domestic and international markets.  The main manufacturing productsare textiles, foodstuffs, tobacco, beverages, cement, leather and leather products, wood, metallic and
non-metallic products, etc.  The main manufacturing export products include leather and leather
products and frozen meat.
Even though the mining sector currently contributes less than one per cent to GDP, there are
proven reserves of industrial minerals and previous metals such as gold, platinum, tantalum, nickel,
iron ore, marble, potash, copper and natural gas which can economically be exploited.
On the other hand, the service sector makes up about 38 per cent of GDP and its significant
contribution stems from the relatively large investment expended on the sector.
1.2 Current Trends of the Foreign Trade Sector
The foreign trade sector plays an important role in generating employment and income as
well as being a source of foreign exchange earning.  During the 1960's and the first half of the 1970's
some efforts had been exerted to expand exports and imports.  However, from the second half of the
1970's up to the early 1990's these efforts had been thwarted by the protracted civil war and erroneouseconomic policies of the past regime.  These threats have been averted by the new political change
that took place in May 1991, and since then the foreign trade sector has shown significant
improvements.
(a) Structure of export
A great part of the total export earning is account ed for by the agricultural sector in the form
of raw or semi-processed commodities.  The export sector is based mainly on agricultural products
such as coffee, hides and skins, oilseeds and pulses.  The following table summarizes the structure of
the export commodities.
TABLE 1
Export Structure
Category Major Commodities
Foods and live animals Coffee, live animals, sugar, fruits and vegetables, meat and meat products
Hides and skins Cattle hides, sheep and goat skins, leather and leather products
Oilseeds and pulses Sesame seed, niger seed, linseed, rapeseed, groundnuts, haricot beans, pea-
beans, horse-beans, chick peas and lentils
Miscellaneous Natural gum (gum incense), beeswax, cotton raw and cut flowers.  Textile
fabrics and garments, different types of mineralsWT/COMTD/IF/19
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While the present effort of the country concentrates on diversifying its exports, due
consideration has also been given to increase the volume and quality of exportable coffee, the major
source of the foreign exchange earning.  The gove rnment also takes note that improvements in the
volume and value of coffee exports can only be achieved by undertaking various activities including
measures to increase the share of washed coffee, exporting roasted and grounded coffee, and by
producing water soluble coffee extracts.
The leather and leather products sub-sector also occupies a special position in the economy
and yet with considerable potential for expansion.  The production potential for these products is
directly related to the production potential of cattle, sheep and goats rearing.  However, the export
potential is constrained by the relatively low level of investment in this sub-sector.  At present, efforts
are exerted to move from semi-processed leather to finished leather and leather garments.
Exporting meat and meat products naturally encourages the expansion of the leather and
leather products sub-sector, apart from generating more value-added and employment opportunities.However, lack of modern technology and high investment requirements as well as stringent quality
control and sanitary standards of improving countries have constrained the development of this sub-
sector.  In the export development efforts of this se ctor, foreign capital inflows either in the form of
direct investment and/or joint venture arrangements are needed.
Although most oil seeds and pulses are produced mainly for domestic consumption some of
them, particularly sesame seeds and haricot beans, are produced primarily for the export market.
While the productivity of oil seeds and pulses is currently at a relatively low level, there is
nevertheless a significant potential for increasing production and exports through the use of improved
farm practices, modern technology and inputs and improved infrastructure.
The original export potential for fruits and vegetables, first identified in the country, still
exists, but remains largely dormant and untested.  Though Ethiopia is endowed with immense natural
resources the horticulture export hardly plays a significant role in the country's effort to generate
foreign currency, and hence adequate investment is welcome in the production and infrastructural
services.
The domestic potential of cotton production, as a basic raw material to the textile fabrics and
garments, is already established and the availability of abundant and hard working labour force is the
major parameter for considering this sector as one of the strategic industries.  Textile export is a very
recent phenomenon for the country.  The factories were set up primarily for import substitution
purpose and as such were neither technically nor managerially equipped to enter the export market.
But they could easily be rehabilitated with an extension of marketing networks, and enhancing humanresource capability and financial strengthening.
Although there are diversified mineral deposits available in many parts of the country, to date
there has been very little exploitation of these resources owing mainly to lack of investment and
appropriate technology.  In addition to the efforts underway to increase the export supply of these
products and to improve their quality, investments in the exploration and export of other currently
unexploited mineral products is highly encouraged.  Recognizing that huge investment is needed to
exploit the country's mineral resources, so that the sector provides meaningful contribution to theforeign exchange earnings, various incentives ar e currently being provided to encourage foreign
investment.
(b) Direction of export
More than half of Ethiopia's external trade is with European countries.  A significant portion
of the remaining share is distributed between the continents of Asia and America.  A condensed
picture of the percentage distribution of Ethiopia's export to different continents is presented below.WT/COMTD/IF/19
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TABLE 2
Percentage of total value of exports by destination
No Continent 1984-1990 1992-1996
1 Africa 8.32 9.22
2 Europe 57.27 51.87
3 North America 12.83 7.52
4 Asia (includes Middle East) 21.33 31.23
5 Australia and New Zealand 0.04 0.13
6 Unspecified 0.21 0.03
Total 100.00 100.00
Major markets for Ethiopian exports in Europe are:  Germany, Italy, United Kingdom,
France, Belgium and The Netherlands.  While in Asia, Japan, Saudi Arabia and Yemen are principal
importers.  In Africa, the major ones are the neighbouring countries:  Djibouti, Kenya and lately,
Eritrea.
A very few African countries are strong partners for the Ethiopian export market.  For
instance in 1992, virtually all the African markets had been covered solely by Djibouti and Kenya,
with a combined value share of 98.4 per cent.  Howe ver, in 1996 there was some diversification of the
market.  Thus, the share of the above-mentioned two countries declined to 8 per cent of the total value
earned and new markets have apparently emerged on the scene.  These are Lesotho (19 per cent) and
Algeria (4 per cent).
On the other hand, it can be said that a relatively consistent market prevails in Europe and as
such as many as 15 countries show a significant share of the Ethiopian export products.  Up to 1996the leading countries were Federal Republic of German (58 per cent) followed by Italy with a share of
14.6 per cent.
The Asian market is also an important area for Ethiopia's products.  There is a noticeable
diversification, recently, in this vast Asian market as some additional 11 countries have opened their
markets for Ethiopia's products specially starting in 1992.  Some of these countries are the newlyindustrializing countries and those in the Middle East.  There are also well established markets over
the span of two decades of which Japan, Saudi Arabia, Israel and Yemen are the major ones.  In 1996,
out of the total value of Ethiopia's exports to the Asian market about 40 per cent was absorbed by
Japan and 36 per cent by Saudi Arabia and the balance was shared among 18 countries.
(c) Structure of importThe structure of the import sector has remained unchanged for a long period of time, virtually
with no significant shirt among the categories.  The following table shows the main categories and
major commodities of Ethiopia's imports.WT/COMTD/IF/19
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TABLE 3
Import structure
No. Categories Major Commodities
1 Food items Cereals1, pulses and flour;  milk, cheese and butter; tobacco and
tobacco products;  edible oil and margarine;  tea.
2 Textile Cotton clothing and manufactures;  silk and art silk manufacture.
3 Machinery and
transport equipmentIndustrial and agricultural machinery and appliance, electrical
machinery and appliance;  motor vehicles;  spare parts.
4 Manufactured articles Metals and metal products;  chemical products;  drugs and
medicine;  soap;  rubber tyres and tubes;  plastic and plastic goods.
5 Petroleum products Crude oil;  benzene;  lubricating oils and grease.
The following table compares the percentage share of the import structure before and after the
reform period.
TABLE 4
Value of imports, by end use
(value in million US$)
1995/86-1990/91 1991/92-1996/97
Ser.no. Commodity Group Value % Value %
1 Raw materials 172 2.8 131 1.9
2 Semi-finished goods75512.5 1007 15.0
3F u e l65810.8 1156 17.2
4 Capital goods251841.5 2156 32.1
5 Consumer goods 1935 31.9 1974 29.4
Cereals
Other food items
Other durable and non-durable
consumer goods662
344
29210.9
5.7
15.3691
244
103910.3
3.6
15.4
6 Miscellaneous 26 0.5 297 4.4
Total 6064 100.00 6721 100.00
Source: National Bank of Ethiopia, 1995/96  and 1996/97 fiscal years data are preliminary estimates by NBE
                                                     
1 Although wheat is one of the cereals grown in Ethiopia, cereals import substantially consisted of
wheat and wheat flour in the past.  Since the famine of 1984, the country has a structural food deficit andsignificant amounts of food continued to be imported.  However, at present import of wheat has decreasedsignificantly.WT/COMTD/IF/19
Page 8
The above table shows values of imported goods by end use during the last twelve Ethiopian
fiscal years, i.e. six years before and after the reform period.  Prior to the reform period, capital goods
followed by consumer goods had the highest shares.
During the post reform period, the share of semi-finished goods and fuel have shown
significant increase;  where as the shares of raw materials, capital goods and consumer goods have
shown declining trends.  In case of consumer goods the category of other food items decreased from5.7 per cent to 3.6 per cent while cereal import experienced marginal declining trends.
In general, during the last 12 years, the structure of Ethiopian imports has shown minor
changes.  This structural shift seems to have taken place in favour of fuel and semi-processed goods
deemed to be necessary for recent reactivation of the Ethiopian economy.
(d) Origin of import
Ethiopia imports various commodities predominantly from Europe and Asia, the former
accounts for more than half of the import transact ion.  The following table summarizes the percentage
value of imports for the years 1984 through 1994.
TABLE 5
Percentage share of value of imports by origin
No. Continent 1984-90 1991-94 Total
1 Africa (excludes Eritrea) 2.5 9.00 4.4
2 Europe 66.2 42.1 59.1
3 North America 14.1 12.1 13.5
4 Asia (includes Middle East) 14.3 33.0 19.8
5 Australia and New Zealand 0.9 0.4 0.7
6 Unspecified 2.0 3.4 2.5
Total 100.00 100.00 100.00
The major source of Ethiopian imports in Africa are:  Kenya, Egypt, Djibouti and Sudan;
where as Italy, Germany, United Kingdom, the Netherlands, France and Belgium are important
sources in Europe.  The USA, Japan, South Korea,  India and China are also principal sources of
Ethiopian imports.
2. ECONOMIC POLICY REFORM
2.1 General
The economic reform programme was initiated with the launching of the new economic
policy in November 1991.  The agenda of the reform consisted of transition from a command to amarket economy, economic stabilization and structural adjustment.  During the reform period policy
measures undertaken were mainly concerned with the correction of price distortions, lifting
restrictions on the private sector, instituting markets for factors of production, macro-economic and
trade liberalization.  In addition to macro-economic adjustment policies, it was necessary to alterWT/COMTD/IF/19
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drastically the role of the state so as to enable the private sector to play a pivotal role in the economic
development.  Some of the major economic policy measures undertaken are highlighted below:
(a) The overvalued exchange rate of the local currency (birr) per US dollar was
substantially corrected by devaluation followed by the introduction of a foreign exchange auction
system in May 1993.  The weekly foreign exchange au ction initially started with a large negative list
of goods which was progressively narrowed and fully eliminated in February 1995.
(b) The system of price control has been dismantled.  Retail price control of all goods
and services has been removed, except retail prices of petroleum products.
(c) Public enterprises have been made to operate on commercial basis with full financial
and management autonomy and with no right for subsidy.  Some state farms have been reverted to
peasant ownership, and some are being privatized.  All government retail outlets, several hotels and
factories have been offered for sale and some of them have already been privatized.
(d) The private sector has been freed from the fetters of the past command economy.
There is now no ceiling on the size of domestic private investment and no limitation on the number of
business activities that may be undertaken.  Implicit entry barriers into the business sector have been
removed, and procedures for trade registration and licensing have been improved by a new legislation.
(e) One-stop investment offices, both at federal and regional levels, have been
established.  The investment code has been revised to allow for greater domestic as well as foreigninvestors participation.  In order to encourage privat e investment and to promote the inflow of foreign
capital and technology into Ethiopia, incentives are granted to investors (both domestic and foreign),
engaged in new enterprises and expansions in areas qualified for investment incentives.
(f) The tariff regime has been overhauled with massive cuts of tariff brackets, and
tightening the scope of tax exemption.  The maximum rate was slashed from 230 per cent to 50 percent in order to mitigate the effects of the devaluation on import bills.
(g) Measures have also been taken to liberalize the financial sector.  These include:
(i) the restructuring and commercialization of the state-owned banks and
insurance corporation;  and
(ii) a Proclamation for the Licensing and Supervision of Banking and Insurance
Business.
Consequently, a number of private insurance companies and banks are established thus
creating a competitive environment in the business.
(h) In order to introduce a free labour market a new labour code has been promulgated.
The new labour code, which has been prepared in conformity with recognized international labournorms and standards, provides adequate provisions for the starting and terminating of employment
without infringing the rights of investors.
(i) The country is now a Federal Republic and regional states have autonomy in most
issues that are of regional concern.  Notable restructuring steps have been taken to decentralize the
civil service and to create an enabling environment for the private sector.  Matters of mainly defence,WT/COMTD/IF/19
Page 10
foreign affairs, overall national economic and social policies, currency and citizenship are handled at
the federal level and regional state have power on all other issues including imposition and collecting
of taxes, issuance of regional legislation and development programme, etc.
2.2 Trade policy
To pave the way for the country's overall accelerated economic development programme
through the new economic policy reform, one of the government initiatives for policy reform is thetrade sector.
The recent trade policy is believed to accelerate the process of economic development of the
country by augmenting its competitive capacity and effi ciency at the international level.  The current
trade policy, unlike those of the past, is also considered as the main catalyst for revamping the
economic activities of the country.  Consequently, th e policy helps to foster the participation of the
private sector by diminishing the role of the government in the trade sector.  The major trade policies
under the new framework are highlighted below.
2.2.1 Domestic trade
The government has taken corrective measures to pave the way for domestic private capital to
play a dominant role in the wholesale trade.  Laws and policies have also been issued and enforced to
regulate private wholesale trade practices.
In order to stabilize price the stage engages itself in the wholesale trade of basic goods of
mass consumption (such as petroleum and fertilizer) based on the principal of profitability.  Since the
state could not run retail trade efficiently, appropriate measures have also been taken to phase our the
role of the state from retail trade and necessary conditions are created for private capital to freely
engage in such activities.
Problems of inflation, scarcity of goods and related problems cannot be solved by merely
controlling price, but rather by increasing the production of goods and ensuring their even
distribution.  To this effect, the government's role in retail trade is limited to such activities as issuing
and enforcing appropriate regulations and directives.
2.2.2 Foreign Trade
To ensure adequate private capital participation in the foreign trade sector, the previous
monopoly of the state has been abolished.  Instead, the government's role is limited to creating the
enabling environment.  In addition, the government has issued foreign exchange and import-export
regulations.
To promote foreign trade and use foreign exchange prudently, incentives such as duty
drawback scheme, foreign exchange retention scheme, etc., to exporters are being provided,quantitative restrictions are replaced with tariffs, and investment in export-oriented activities is highly
encouraged.  Moreover, there is provision for fiscal incentives, bureaucratic procedures are minimized
and use of trade information is being promoted.
2.3 Instruments of Trade Policy
2.3.1 Business licensing
All businessmen who are involved in foreign trade are required by law to obtain licences from
the Ministry of Trade and Industry.  The issuance of import/export trade licences is drasticallyWT/COMTD/IF/19
Page 11
simplified by a new legal provision (Commercial Registration and Business Licensing Proclamation
No. 67/1997) which requires only marginal administrative procedures and formalities.  The new
Commercial Registration and Business Licensing Law is part of the government's trade liberalization
measures which notably attempts to ensure the active involvement of the private sector in the national
economy.
2.3.2 Import regulations
All import businesses in Ethiopia require perm its from the Exchange Controller of the
National Bank of Ethiopia.  These permits are required to enable the National Bank of Ethiopia
mainly to check cases of over invoicing and under invoicing.  Permits are obtainable upon
presentation of valid import licenses and provisions of satisfactory information on costs and payment
terms with foreign companies.  Foreign exchange is indiscriminately allocated by the National Bank
of Ethiopia to importers on the basis of a weekly auction.
2.3.3 Import restrictions
Except those items which are socially and morally harmful (e.g. drugs, arms and
pornographic materials), there is no import ban nor quantitative import restriction.  Nevertheless,
some imports have to fulfil the standards of the Ethiopian Authority for Standardization.
2.3.4 Sales tax
The rate of sales tax is 5 per cent for a selected list of agricultural goods such as live animals
and products, vegetables and fruits and unprocessed cereals, food, pharmaceuticals, books and printed
materials, hides and skins, and cotton when either produced locally or imported.  The rate is 12 per
cent for all other products.  Sales tax is collected from the producer, importer or the person rendering
services as the case may be, and paid to the Inland Revenue Authority.
2.3.5 Excise tax
Excise tax is levied on selected items when produced locally or imported from abroad.  The
tax rate ranges from 10 per cent in the case of textile and television broadcasting receivers to 200 per
cent in the case of alcohol.  Excise tax is payable on goods imported from abroad by the importer at
the time of clearing the goods from the customs area.
2.3.6 Export regulation
All export businesses also require permits from the Exchange Controller, which are
obtainable upon presentation of valid export licences.  When applying for an export permit an
exporter must specify the goods to be exported, its destination and selling price.  This exercise is
required to avoid under invoicing.  The granting of a permit by the Exchange Controller enables the
goods to pass through customs.
In order to enhance the export performance, various policy measures have been taken, among
which the major ones are:
- all taxes on exports (except coffee) and subsidies to parastatals exporting enterprises
are eliminated;WT/COMTD/IF/19
Page 12
- a duty drawback scheme, to refund duties paid on imported inputs used for the
processing or manufacturing of export products, is also introduced in order to
encourage exporters by promoting their competitive capacity in international markets;
and
- a foreign exchange retention scheme has also been introduced in order to encourage
exporters.
2.4 Trade Policy Formulating, Implementing and Monitoring Organs
Overall trade policy formulation, implementation, enforcement and monitoring is the duty and
responsibility of the Ministry of Trade and Industry.  On the implementation phase of the trade policy
other ministries and agencies such as the Ministry of Health (on pharmaceuticals), the Ministry of
Agriculture (on veterinary drugs), the Federal Go vernment Revenue Board (on tariffs), Ethiopian
Authority for Standardization (on quality control) and the National Bank of Ethiopia (on price
verification) are also involved as regulatory bodies.
Coordination, when found necessary, to implement the trade policy among the
aforementioned organs and the private sector is carried out by the Export Promotion Committee.  The
private sector has been participating in the formulation and conduct of trade policy through its
representing body, viz the Ethiopian Chamber of Commerce.  At the local level, implementation of a
trade-related project is carried out by trade bureaux, city chambers and business and manufacturingassociations.
An export strategy is being worked out involving consultants provided by the World Bank.
2.5 Follow-up Mechanisms
The government is aware of the fact that the export activity should be closely guided by
stripping away policy and regulatory constraints.  To this effect, an Export Promotion Committee(EPC), chaired by the Prime Minister, has been set up in order to bring the export promotion activity
under the concerted effort of the key line ministries and those directly involved in the operation.  The
EPC members are drawn from government organs and private exporters.
The Committee gives special attention to the development and diversification of exports.  The
objective is to make the exporting process as transparent as possible providing both the exporter andthe producer an enabling environment in which to operate.  Due attention is given to foster the
development of other commodities in addition to coffee.  These are hides and skins, livestock and
meat, textile and horticulture, so that their share in foreign exchange earning becomes significant,
thereby reducing the heavy reliance on one or two export commodities.
The Committee coordinates and encourages export expansion by tackling existing constraints.
Generally, the prime move is to attain sound international competitiveness by vigorously exposing the
economy to external competing forces through the introduction of appropriate policy measures.
Moreover, to encourage exporters and create a spirit of competition among themselves,
various awards are given annually to those with excellent performance by the Ministry of Trade and
Industry.  The forum gives an opportunity to bring together policy initiators with the business sector
and enables them to discuss constraints encountered and to formulate possible solutions.WT/COMTD/IF/19
Page 13
2.6 Familiarity with WTO Arrangement
A preliminary study document regarding the final Act of the Uruguay Round and the
establishment of the WTO was prepared and submitted to the Prime Minister's Office and the relevant
ministries as well as institutions.  The study has assessed the objectives, the functions and main rules
of the GATT;  the conditions that led to the in itiation of the Uruguay Round MTNs;  main objectives
and functions of the WTO;  the main Agreements and Understandings in the WTO Agreements andthe implications of adopting these Agreements in Ethiopia.
The WTO framework is familiar among government and government related agencies such as
the Prime Minister's Office, the Ministry of Trade and Industry, the Ministry of Foreign Affairs, the
Ministry of Finance, the Ministry of Economic Development and Cooperation, the Customs Authority
and the National Bank of Ethiopia.
Among the private sector only a few are familiar with the framework of the WTO.
Ethiopia has never been a party to GATT/WTO.  However, the present policy directions and
tendencies pursued by the country are consistent with the main WTO rules and principles together
with their exceptions.
The country's capacity in terms of understanding the WTO legal document and negotiation in
respect of the organization rules and regulations is low.  Particularly, the country lacks institutional
and professional capacity to assess the Multilateral Agreements on Trade in Goods (i.e. WTOAgreements on Agriculture, applications of Sanitary and Phytosanitary measures, Technical Barriers
to Trade and Trade-related investment measures) and the General Agreements on Trade in Services
(i.e. Agreements on Trade-related Aspects of Intellectual Property Rights and the Settlement of
Disputes);  as well as the standing issues like competition policy and environment.
3. CONSTRAINTS TO TRADE EXPANSION
3.1 Supply-side Constraints
Of all the impediments to expand trade in Ethiopia, the supply side constraints are the most
noted ones.  For the sake of clarification, the constraints are classified into two, viz production and
institutional aspects.
3.1.1 Production constraints
An examination of the export list of Ethiopia indicates predominance of primary products
with one or two commodities assuming high proportion of the total export earnings.  The contribution
of coffee is so great that in 1996 it accounted for 60 per cent of the total earnings.  However, heavy
reliance on it has continuously made the foreign trade prospect of the country very precarious.
Moreover, this high concentration of exports into a few products dominated by one export item(coffee) subjects export earnings to wide fluctuations on account of instability of world prices and
output of this commodity, and susceptibility to the vagaries of nature.
Apart from a marked commodity concentration of exports, a great proportion of Ethiopia's
total exports have been destined for a few industrialized nations, its major markets being Germany,
Japan, Italy and the USA.  Out of the total export in 1996, more than 62 per cent was absorbed by
only six countries, viz, Germany, Japan, Italy, the USA, France and the UK.  This makes a further
concentration in the geographic distribution of exports.  By virtue of their bargaining strength,WT/COMTD/IF/19
Page 14
organized procurement practices and stockpiling capacity, these developed economy markets could
put the Ethiopian exporter at a great disadvantage.
Another important production constraint relates to modernization, so essential for effecting
improvements in quality and for curtailing cost of productions.  A major proportion of production
activity is undertaken with obsolete equipment which does not lend accuracy, precision and perfection
to the finished product.  New methods to improve the quality or the quantity of the export productshas not been sufficiently introduced.
Product diversification is yet another impediment for the exporters of Ethiopia.  Narrow and
inadequate product range in export items poses a limitation in meeting the specific as well as exacting
requirements of overseas buyers.  In addition to this, because of their limited capacity, most of the
Ethiopian exporters cannot provide the required amount of the export items to their overseas buyers.
Acute shortages of key inputs, both indigenous and imported, is another major problem in the
production size.  The producers engaged in agriculture or small and medium-sized manufacturingactivities do not get raw materials of the right type in adequate quantities and at competitive prices in
the domestic market.  Moreover, they lack the know-how in supply sourcing of these raw materials at
competitive prices.
To reduce the level of dependency and to increase the supply of locally required technology,
the development of a planned technical infrastructure became a necessity and, in 1993, Ethiopia hasissued the Science and Technology Policy.  The policy accords priority to agriculture, natural resource
development and environmental protection, water resource development, energy and industry.
However, in seeking improved technology from developed countries to meet the required
standard in the international market, Ethiopia lacks the resources, capacity and competence for
absorption and adaptation of appropriate technology.
Inadequate investment is also one of the bottlenecks in the production of goods and services.
To attract both domestic and foreign investment in the economy a New Investment Code has been
enacted in 1992 following the new market-orientated economic policy.  Since then, the code has been
refined and eased in the light of practical experiences.
Investments in pioneer and promoted activities including export-related investment
opportunities are provided with extra attractive and generous special incentives.  These, inter alia,
include one hundred per cent exemption from import duties on machinery and equipment required for
an enterprise, locational incentives in the form of extra tax holidays, duty-free import of raw materials
for further processing and re-export.
Foreign investors are also guaranteed to repatriate profits, dividends, principal and interest,
proceeds from sale to liquidation of an enterprise, principal and interest payment on external loans,
proceeds from the sale or transfer of shares or assets and compensation paid to a foreign investor.
Guarantees against measures of expropriation and nationalization are also provided in the investment
proclamation.
The Ethiopian Investment Authority is the responsible organ for reviewing, drafting and
negotiating contractual agreements with foreign investors.
Ethiopia is a signatory to the Multilateral Investment Guarantee Agency (MIGA), an affiliate
of the World Bank, which issues guarantees against non-commercial risks to enterprises which investWT/COMTD/IF/19
Page 15
in signatory countries.  Ethiopia has further signed the International Convention on Settlement of
Investment Disputes (ICSID).
Ethiopia has bilateral investment production agreements and treaties with Kuwait and Italy
and is doing all it can to enter into such agreements with as many countries as possible.
Despite these efforts from the national side, foreign investment in the production of goods and
services is still inadequate.  A number of explanations can be given to this situation.  Among otherthings, the following inadequacies are always at th e finger tips of many nationals and foreigners:
undeveloped infrastructure facilities (road, railway, telecommunication, etc.), paucity of skilled
domestic manpower, undeveloped domestic market or low purchasing power, inadequate promotional
activities, etc.
3.1.2 Institutional constraints
(a) Financial services
The need for credit and other financial facilities is very decisive to exporters and producers so
as to enable them to penetrate new markets, to handle established markets and to face competition
against imports.  To support service providers, a new Banking and Insurance Law has been
promulgated which allows the establishment of private financial institutions.  As a result, a number of
private banks and insurance companies have been set-up and become operational.  However, export
financing in Ethiopia is still insufficient.  Some of the major problems in this area are:
- the banking experience is virtually limited to risk free operations;
- term loans are given against physical collateral or guarantee;  and
- the absence of export credit agency which would facilitate export credit insurance or
guarantee.
(b) Transport and communication facilities
Ethiopia has started an extensive infrastructural development programme.  The government
has earmarked some US$4bn for the road sector during the next 10 years under the Road Sector
Development Programme (RSDP).  The following prob lems currently affect the expansion of exports:
- limited refrigerated trucks for meat, vegetables and fruits carriage;
- inadequate railway infrastructure.  The existing operating record is poor in terms of
capacity, frequency and reliability.  Especially, the trains are not suitable for the
transportation of fruits and vegetables;
- lack of container handling facilities at Assab Port and absence of any inland container
port;
- lack of adequate cargo handling facilities in airport operations;  and- although telephone and facsimile connections are adequate with improvements
scheduled for the near future in the capital city, telephone connections to areas out or
the city are still limited.
(c) Trade information centre
Trade information is indispensable for many of the decision areas associated with selling and
buying abroad.  In addition, information on such issues as packaging, transport, insurance, storage and
the completion of export and import formalities and regulations is highly important.WT/COMTD/IF/19
Page 16
Realizing the absence of an independent tr ade information centre, which would provide
reliable and up-to-date information to the busines s community, efforts are underway to establish a
trade point with the assistance of UNCTAD.
3.2 Constraints Related to Trade Promotion and Trade Support Services
3.2.1 Technical constraints(a) Trade information
A reliable and timely trade information is very essential to determine both the export and
import priorities and targets, to identify and exploit foreign market opportunities as well as to plan
production for export.  The country's effort to build-up its trade promotion strategy is highly
correlated with the availability of substantial and up-to-date trade information.
Notwithstanding a promising effort to provide exporters with valuable information on the
timely world prices of major export items, trade inform ation service in Ethiopia is still in its infancy.
The National Bank of Ethiopia, which happens to be the only institute that provides Ethiopianexporters with trade information, is not properly equipped to greatly increase the quantity and even
the quality of trade information service's output.  To overcome this deficiency, a trade point is now
being established.
(b) Export culture (skill in business)
The country had for a long time been subjected to stringent controls, rules, regulations and a
bureaucratic style of functioning.  A well functioning market economy requires government laws and
regulations as well as a market friendly modus operandi of the civil services.  The government is
currently addressing this issue.
The knowledge of the emerging private sector on the rules and operations of the changing
international market is limited.  The public sectors, which are in the process of privatization, engagedin actual commercial operations remain inadequately equipped to discharge the responsibilities vested
in them.
These sectors, including the private ones, lack a professional approach to indulge in the
international business activities.
This emanates from the fact that Ethiopia's export companies are by and large small and
medium-sized enterprises.  Due to their size, ma nagerial skills and entrepreneurial exposure, they
have been incapable of contributing significantly to the development of exports of the country.
Moreover:
- most exporting companies lack systematic and aggressive marketing strategy which
requires knowledge of selection of target market and the determination of the product,price, promotion and distribution policies;
- most exporters have no export marketing plan.  A typical export marketing plan
focuses on marketing objectives, market segmentation and positioning, characteristics
of the product line, distribution channels, export pricing and promotional strategies;
- almost all Ethiopian private sector organizations lack experience in export business.
Especially, they have limited knowledge in international marketing.WT/COMTD/IF/19
Page 17
The exporting community should be professionally manned and run strictly on commercial
lines in order to cope with the existing world competitively, an ever changing economic atmosphere,
especially with international purchasing and inventory management.
(c) Research and development
Research and Development (R&D) has an important role to play in achieving competitiveness
in world markets through quality upgrading and cost reduction.  It has been gainfully employed astools of production, processing and marketing in many countries.
Unfortunately, R&D has become another weak area in expanding the export sub-sector in
Ethiopia.  The extent of this problem ranges from near total absence to inadequate facilities.  For want
of research and development facilities, various im portant aspects of export production and marketing
of the country which include productivity, quality of production, cost competitiveness, packaging and
aggressive sales strategies are adversely affected.
Due to this inadequacy of R&D services, the exporting enterprises face the difficulty of
offering products of internationally acceptable design, quality and packaging to overseas buyers.
Efforts aimed at capturing foreign markets in the absence of R&D services have met with limited
access.
(d) Trade support services
The different components of the existing trade support institutions encompass the apex policy
formulation body, namely, the Ministry of Trade and Industry;  the Ethiopian and city Chambers ofCommerce;  the National Bank of Ethiopia;  the Export Promotion Committee and the commercial
representatives abroad.
Through coordination among these different trade support institutions has been promising,
they encounter difficulties in providing efficient se rvices to the business community.  The most noted
problem is the absence of a training institute whic h would cater for the export sector, among others,
train export management personnel;  undertake market surveys and research studies on export, as well
as advise private and public enterprises, on measures to promote export.  Establishing such an institute
would help to inject professionalism in the countr y's international trade by developing competent and
professionally trained executives to undertake systematically export/import operations.  Moreover, the
financial constraint is another bottleneck for these trade support institutes in providing their services
to export/import enterprises.
In developing the export of services the foll owing problems could be anticipated:  lack of
professional manpower, inadequate infrastructure, financial constraints and insufficient support
services.
(e) Commercial representatives
Commercial representatives abroad constitute an important component of the country's
institutional set-up relating to trade promotion.  With growing trade and international competition,
export/import business itself having acquired a complex dimension, Ethiopia's trade representatives
have been given an onerous task to help the trad ing community in its promotional and developmental
activities.
Their principal functions and duties comprise an advisory role in relation to the respective
missions, provision of feedback information to the relevant Ministries, supply of commercial
intelligence to trade and industry, private and public sector organizations and other service support
institutions.WT/COMTD/IF/19
Page 18
The commercial representatives suffer from certain serious limitations.  These relate to
inadequacy of resources in terms of professional  staff with proper commercial background and well
established libraries containing latest trade-related directories as well as statistical publications.  These
deficiencies act as bottlenecks in the proper and efficient functioning of these otherwise important
institutions of service support infrastructure.
In order to ensure result-oriented action and especially to discharge efficiently the
responsibilities devolved on the commercial representatives after the economic liberalization at home,
it is of utmost importance that the Trade Missions are to be properly equipped with enough
professional staff.
3.2.2 Financial constraints
It is understood that the development of the financial sector is a pre-requisite for export
promotion.  In Ethiopia the two financial institutions  which are concerned with the financing of trade
and manufacturing sectors are the Developmen t Bank of Ethiopia and Commercial Banks.
Particularly, the commercial banks extend their financing services to all sectors of the
economy including exporters in the form of overdrafts, business loans, merchandise loans andadvances against export documents.  However, there are a number of impediments in these financial
sectors which have been repeatedly raised by Ethiopian exporters, especially non-traditional or small-
scale exporters.
These are:
- access to long-term credit is problematic due to limited collateral base;
- virtually all the financial sectors do not have a special scheme for developing and
promoting exports;
- loans are based on collateral, and not on the presence of firm orders or contracts of
sales and credibility of importers as well as on the exporters capability and integrity;
- absence of export credit guarantee scheme;  and
- limited services in areas of non-financial facilities like counselling exporters on
shipping documents, foreign exchange regulations, forward exchange cover, contract
documents, customs regulations, credit rating of buyers and agents and relatedmatters.
3.3 Market access problems
3.3.1 Meeting international standard requirements
In the context of international trade liberalization, Ethiopia has to meet, as a priority, the
challenge of raising quality which is demanded by major markets.
(i) Difficulties in understanding and applying ISO 9000 standards
Although the concept of ISO 9000 is a relatively recent phenomenon, the
government of Ethiopia has a firm belief that implementation of ISO requirements
will enable export enterprises to offer products or services that satisfy consumerexpectations, comply with applicable standards and specifications, as well as conform
to statutory and other requirements for health, safety and the environment.  However,
Ethiopia's industrial sector lacks mode rn technology, adequate maintenance and
calibration services and skilled manpower.  Due to these deficiencies, it becomes
difficult to understand and apply ISO 9000 requirements.WT/COMTD/IF/19
Page 19
Hence, training assistance in the benefit and implementation of ISO 9000
standard is required to change the existing situation and to come up to the
expectations of international requirements.
(ii) Sanitary barriers
(a) Livestock
Exports of live animals (mainly cattle, sheep and goats) have always taken
place, albeit confined to only a few countries due to sanitary regulations.
Unfortunately, Ethiopia's livestock is not well developed and properly exploited due
to livestock diseases which are endemic.  Hence, medium to long-term measures
should be taken to change the current situation of the country's livestock in order to
play more actively in the international market.
(b) Meat and meat products
Most of the meat plants in Ethiopia have produced a range of products for the
domestic and export markets.  Currently, Ethiopia exports frozen meat to the Middle
East market.
It is understood that countrywide implementation of international sanitary
standards is a long-term goal.  As part of their export strategy, meat plants may
consider to raise their own cattle according to strict sanitary standards or to engage instrictly controlled livestock raising and fattening schemes with neighbouring farmers.
To this end, foreign direct investment and technical assistance are needed.
(iii) Technical barriers - the case of gum arabic
Acacia is one of the various plant species grown in the arid and semi-arid
areas of Ethiopia yielding marketable gum.  Gum Arabic (Gum Acacia) derived fromacacia species is the major gum product produced mainly for the export market.
Ethiopia has benefitted from this product for a long period of time.  However, due to
adverse interests created recently by some groups who want to distort the market of
this product, the world price of Gum Arabic has drastically declined as a result of
which the export activity has been affected.
The government of Ethiopia has brought the issue to the attention of the
concerned international organizations.  The government's attachment is to the
universal definition of Gum Arabic as being the gum from all the Acacias and as
defined by the Food and Drugs Administration in the United States of America and
by the European Union (with a designated number E-414).
The government has also learnt that the Joint Expert Committee of Food
Additives (JECFA) of the FAO/WHO has proposed a monograph keeping the terms
of the universal definition which, unfortunately, has not been adopted by the Codex
Alimentarius due to the adverse comments in stigated by the interest groups.  In the
final analysis, the government of Ethiopia strongly believes that these comments are
directly influenced either by competitors who want to see Gum Arabic disappear and
replace it with their substitutes, or by an important African producing country whichwould like to have the monopoly of the production with only one variety, thusWT/COMTD/IF/19
Page 20
eliminating all other countries not producing this variety.  The government, therefore,
asserts that this Act contravenes the spirit of international competition.
Hence, AID Gum and other concerned international organizations have to
convince the FAO/WHO experts of the JECFA to ratify the last monograph
Compendium 52, Addendum 3, so that our participation in the international gum
market is fully restored and respected.
3.3.2 Regional Trading Arrangements (RTAs)
Ethiopia is a member of the Inter-Governmental Authority on Development (IGAD) and
Common Market for Eastern and Southern Africa (COMESA).  The performance of these RTAs is
not satisfactory.  The problems are more or less the same in both cases.  The major problems which
could be cited are:
- limited trade flows among the members of the region;
- poor infrastructure:  road, railway transportation and telecommunication are very
backward to interconnect the members among themselves;  and
- lack of trade information about member's potential trade.
3.3.3 Trade preferences
The basic objective of trade preferences such as the Generalized System of Preferences (GSP)
is to accelerate the pace of economic development and industrialization in the developing countries.Under GSP, exports from these countries into the industrialized countries were either made duty free
or subjected to duty concessions.  Other things being equal in terms of quality, delivery schedules,
rules of origin criteria and price competitiveness, developing countries which are at a fairly advanced
level of industrialization could initially take advantage of the GSP.
Although Ethiopia has not utilized the advantage of GSP to any substantial degree due to its
own supply deficiency, the GSP has been greatly diluted/eroded by the protectionist practices and
non-tariff barriers which have been applied by GSP-offering countries.  In may cases, quotas and
cumbersome procedural formalities have become stum bling blocks to take advantage of GSP.  Lately,
some donor countries introduced certain new conditionalities such as measures on the protection of
environment in order to benefit from more favourab le GSP treatment.  Selling in these markets for
LDCs is getting tougher, generating deep pessimism.
On top of these, trade liberalization resulting from the Uruguay Round has significantly
diminished the export earnings of ACP countries with respect to the EU.  One of those ACP states
which is particularly adversely affected by the outcome of the Uruguay Round in Ethiopia.
According to one estimate
1 Ethiopia had lost 10.62 per cent of its total earnings from the EU market
in 1992 due to the preference erosion.
It can be said that the conclusion of the Uruguay Round, which resulted in the globalization of
the world economy and the liberalization of world trade, has made the so far enjoyed preferences
more inaccessible and impracticable.
                                                     
1 Davenport, M. et al, The Impact of the GATT - Uruguay Round on ACP States, Overseas
Development Institute, August 1994.WT/COMTD/IF/19
Page 21
Because of these reasons many developing countries including Ethiopia hold the view that the
realization of the initial objective of the GSP has remained a dream and the scheme has been more
beneficial to GSP-offering countries.
The net result of all these constraints, viz supply side, trade promotion and trade support
services and market access, manifests in under-utilization of capacities thus increasing the per unit
cost of production and affecting competitiveness in the world markets and this is where the technicaland financial assistance from the international community are expected to play a pivotal role.
4. TECHNICAL ASSISTANCE
4.1 Technical assistance received and its assessment
Trade-related technical assistance that Ethiopia has received over the past five years are
Foreign Trade Development Programme (FTDP), Automated System for Customs Data
(ASYCUDA), GTZ/Protrade-Horticultural Programme and UNIDO-National Leather and Footwear
Industry Scheme.
Foreign Trade Development Programme (FTDP)
The FTDP was a project of the Ethiopian Ministry of Trade and Industry between 1992-1996.
This programme was sponsored by the European Union under the sixth European Development Fund,
and subsequently extended under STABEX 91 funding.
The programme was originally designed to support Ethiopian efforts in implementing a
comprehensive National Export Strategy, an initiative started in the latter years of the previous
regime, viz 1988-90.  However, the programme, which was to cover market surveys, promotional
activities and to a generic product sector, has operated in the new economic environment of Ethiopia
with a different orientation.  Therefore, hitherto objectives of FTDP had been revised over the
extended period.  These were:
- provision of more direct technical assistance to targeted companies;
- introduction of regional marketing approach;
- concentration on sub-sectors with potential;  and
- introduction of an export infrastructure programme such as export finance, packaging
and transport, which was to have insight into the changes needed to accommodatethem.
During the life span of FTDP five major projects were covered.  These are in the areas of
leather products, regional marketing programme, horticulture, essential oils/natural gums and human
resource development.  Apart from these projects, studies on export packaging, internal transport,
export finance and institutional framework for export activities have also been carried out.
The total capital invested on the project was more than ECU2.6m.  The estimated initial cost
was ECU1.5m with a targeted incr emental value of ECU28m exports.
Despite the generality of its original objectives and the period the programme covered, the
overall result of FTDP was positive if not attractive to attain its objectives to any sustainable extent.
This means that Ethiopia has drawn lessons from this type of programme in terms of:
- a programme which was designed for one economic system can not work effectively
for entirely different economic circumstances;  andWT/COMTD/IF/19
Page 22
- any assistance in trade development for small and medium-sized enterprises should
be need based and targeted.
Automated System for Customs Data (ASYCUDA)
ASYCUDA is a computerized customs management system which covers most foreign trade
procedures.  To install this package in Ethiopia a technical assistance agreement was signed between
the government of Ethiopia and UNCTAD in June 1996.  The financial assistance has been drawnfrom UNDP.
The system is expected to give the following advantage to Ethiopia:
- increases government revenue;
- improves clearance procedures for trade;  and
- provides more precise external trade statistics.
Currently, the project involves provision of training for both users and controllers of the
system, installation of the computerized system at main custom offices and eventually all otherbranches of the Customs Authority, installation of computers at the customs headquarters to manage
the system and the radical simplification of procedures, laws and documentation.
The budget for ASYCUDA execution in Ethiopia is US$1.5m.
Protrade - horticultural programme
GTZ/Protrade has participated in the promotion of horticulture exports in collaboration with
the Ministry of Trade and Industry (MTI).
The sample of three private farms of horticulture and other similar state farms have been
visited by consultants from Protrade and a report which assessed the situations of the farms has been
prepared by a local consultant.
After a joint agreement between MTI and Protrade an export promotion workshop was
conducted to create awareness for the need of developing the sector through technology transfer.  The
workshop also brought together the major actors in the horticultural development activities to discuss
and appreciate the major problems encountered by the sector and to propose recommendations for
future action.
Protrade has also assisted jewellery designing and Ethiopian jewellers to participate in a trade
fair held in Germany.
UNIDO - National Leather and Footwear Industry Scheme
The national leather and footwear industry project is part of an overall programme developed
in Ethiopia and put forward by the government.  The government programme is strongly supported by
the UNIDO regional leather programme and closely linked to its implementation.
Phase I has focused on the early states of the leather industry operations like improvements of
raw hides/skins and semi-processed products.  The continuation of the scheme under Phase II will
emphasize on the next stages, namely, finished leather and leather products.WT/COMTD/IF/19
Page 23
The following results have been achieved:
(a) a standard and formal agreement for `Revolving Fund' operations has been prepared.
Negotiations on the contents of the agreement have been finalized between the parties
involved, i.e. the Ethiopian Tanneries Association (ETA) and the recipients of
equipment/machinery.  Although equipment and machinery are supplied by the
project to the beneficiaries, agreement has not yet been signed between ETA and thebeneficiaries to start the instalment payments towards the "Fund";
(b) equipment for the effluent treatment plan ts (ETPs) and chrome recovery plant have
been imported for two tanneries.  Training for the operators and technicians of the
ETPs has already been given.
(c) promotion of environment awareness among tanning industries and environmental
protection authorities through organization of a seminar on tannery pollution control
and cleaner technologies is still being undertaken, and more will be done aftercommissioning of the plants and become operational.
(d) an international footwear marketing expert has been assigned at two shoe factories
and the following activities have already been carried out:-
- introduction of modern working practices;
- reduction of technical problems in shoe manufacturing;- introduction of management control on the production process;
- quality enhancement on shoe production;  and
- upgrading the capability to compete internationally for export business.
In addition to the above projects and programmes, Ethiopia has received training assistance
Germany, India and the WTO focusing on international trade and marketing.
4.2 Need for Technical Assistance
Technical assistance to Ethiopia must be geared to strengthen and intensify support of the
country's effort to meet the new challenges posed by globalization and competitive forces, and thereby
enhance its capacity to capture potential benefits arising from new trade opportunities.  The technical
assistance should lay special emphasis on targeting the private sector with priority being given to thecreation of international partnership networks, jo int investment promotions, improvement of supply
capacities of existing export-orientated firms, and development of support service institutions.
Therefore, technical assistance to Ethiopia in the following areas, in terms of their priority, is of
paramount importance.
4.2.1 Capacity Building
In the face of accelerated globalization and liberalization, one of the country's key weaknesses
is institutional capacity building.  Institutional capacity is an essential and indispensable ingredient to
induce remarkable change in the export sector.
(a) Strengthening the capacity of the existing firms
One of the symptoms of the low level of trade development in Ethiopia is the
technological and managerial limitation of the existing industrial sector.  In order to boostWT/COMTD/IF/19
Page 24
export, the promotion of industrial development, mainly at the level of SMEs, is very
essential.  The technical assistance should target the economic operators directly, particularly
at the level of production process to assist them in the improvement of entrepreneurial skills
through:
- productivity improvement;
- quality enhancement;- creativity and product design;
- information acquisition and dissemination;  and
- packaging technique.
(b) Strengthening human resource development
The development of human resources is highly important to the process of sustainable
development in general and to the expansion of trade in particular.  The technical assistance
in human resource development should involve upgrading the knowledge of policy-makers,entrepreneurs and exporters on the rules and operations of international markets, on
systematic and aggressive marketing strategies and on the use of new
information/communication technology tools such as CD-Rom, the Internet, etc.
(c) Strengthening support service institutions and facilities
An effective trade promotion strategy requires support from various service-giving
institutions such as trade points, research and development centres, training institutes
specializing in foreign trade, export inspection councils, export/imports bank and well-
equipped trade representatives abroad.  Moreover, access to export credit guarantee, effective
duty drawback schemes and bonded warehousing management are also key pre-requisites for
promoting export.
Establishing these important service support institutions and offering those facilities
are costly for Ethiopia, at least in the short run, and therefore technical assistance in this area
is badly needed.
(d) Training in ISO 9000 standards
Meeting the challenge of raising product quality is a priority area for virtually all
Small and Medium Enterprises (SMEs) engaged in export markets.  International markets in
the European Union are increasingly insisting on compliance by their suppliers with ISO 9000
series of standards.  Similar trends are developing in North America.  Export enterprises in
Ethiopia should therefore develop quality assurance systems, based on the ISO standards to
maintain and improve their positions in these and other markets.
Understanding and applying ISO 9000 standards is one area in which extensive
technical assistance should be extended to thes e exporting enterprises.  They, as a result, will
achieve sustained sales in the international markets on the basis of good quality and at a
competitive price.
Hence training on ISO standards is essential to exporting enterprises on the following
topics:
- concept of the ISO 9000 quality systems so that improved quality awareness is
instilled throughout the enterprises;WT/COMTD/IF/19
Page 25
- training of employees in marketing, research and development, purchasing,
engineering and production, quality control and testing, so that their involvement is
increased in quality goals;  and
- certification of conformity to ISO 9000 and quality improvement planning to sustain
the standard requirements.
(e) Meeting international sanitary regulations
(i) Improving livestock raising
Improvement in the health of livestock is a necessary condition not only to
change the lifestyle of the rural population, but also for the enhancement of the
quality as well as the quantity of by-products for export markets.  The large livestock
resource of the country is under-utilized and undeveloped due to the traditional
methods of animal husbandry, and the livestock diseases which are endemic.
Disease Free Zones are non-existent which rendered the country unable to
fulfil the stringent sanitary regulations of importing countries.  However, investment
opportunities are potentially attractive in the areas of modern commercial livestock
breeding.
The country has a great concern to meet he stringent sanitary requirements of
the international markets and to promote legal exports of live animals.  Realizing this,a Livestock Development Strategy is designed.  Therefore, technical assistance in the
following areas will be required:
- support to implement the strategy;
- training in the field of animal husbandry, especially in strengthening the on-
going national endeavours in animal health and feed improvement;
- establishing a Disease Free Zone (DFZ) which would help improve the health
of the national herd to facilitate acceptance by foreign markets;  and
- in the highland areas of the country cattle are primarily kept for their draught
power.  There is, therefore, a need to carry out profound research to
investigate alternative suitable technologies for the farming system so as tofree cattle for their improved hides and meat.
(ii) Upgrading the meat industry
During the last two decades, the viability of the meat factories has declined
due to insufficient throughput, machinery and plant difficulties, inadequate training of
personnel and availability of suitable livestock.
These factors limited the output and quality of export products which, in turn,
seriously affected the viability of the factories in world markets.
Moreover, the meat factories have little knowledge of market opportunities
and no effective market intelligence.  Effective participation of the meat plant in the
world market would not be possible due to impending changes in legislation within
the developed countries.  Without adequate knowledge of either the market or these
impending changes, it will be impossible for management to determine medium oflong-term strategy.WT/COMTD/IF/19
Page 26
To alleviate these deficiencies technical assistance is needed in the following
areas:
- capital investment requirements for refurbishment of equipment of meat
factories;
- capital investments in refrigerated vehicles to shuttle products from factories
to ports and cargo handling facilities in airport operations;
- training of personnel in market research and intelligence, legal and hygiene
standards of importing countries;
- training requirement for expertise to uplift their knowledge to meet current
market requirements;
- uplifting of hygiene standards to comply with current and future legislation of
importing countries;
- investigation on the aspect of commercial diversification within the
framework of overall export promotion and potential viability of meat
canning operations;  and;
- execution of a thorough investigation into the market opportunities and
requirements, particularly appertaining to potential importing countries'
legislative standards of hygiene and price sensitivity.
(f) Familiarity with international trading system
In order to remain integrated within the international trading system, Ethiopia has to
be familiar with the rules and regulations of the multilateral trading arrangement, i.e. the
WTO which represents 90 per cent of the world trade.
Ethiopia, therefore, needs technical assistance to be familiar with international trading
systems, including its ever-changing purchasing and inventory management.  More
specifically, the technical assistance in this area, inter alia , include:
- continuous training of personnel;
- organizing workshops and seminars;
- reinforce the negotiating capacity of the country for the WTO membership;  and- consultancy services.
Building such institutional capability is, however, expensive and complex, and
requires both financial and technical assistance.  Therefore, Ethiopia needs assistance to foster
its institutional capabilities necessary for integration into the world economy.
4.2.2 Regional integration
Nowadays there is widespread belief that regional economic integration is a basic element for
socio-economic development, and is essential in orde r to strengthen LDCs' roles in the international
context and help to fuse and promote economies of scale.  This view has gained increased credibility
with the conclusion of the Uruguay Round, whic h has acknowledged the compatibility between
regional integration and multilateralism.
In fact, the economic success of a growing number of developing countries has demonstrated
that integration into the world economy is possible and beneficial.
However, RTAs such as COMESA in which Et hiopia is a member are not a success story due
to, inter alia , the lack of technical and financial backing from the international community.  There is,WT/COMTD/IF/19
Page 27
therefore, a need to pool resources and enhance cooperation in order to make RTAs in the sub-region
more effective.
The financial and technical assistance required in this area are:
- infrastructural development in the sub-region;
- adequate transport equipment;
- adequate cold storage facilities;- Upgrading Trade Information Network (TINET) modules and services;  and
- training for effective regional trade promotion techniques.WT/COMTD/IF/19
Page 28
INTEGRATED RESPONSES BY IMF, ITC, UNCTAD,
UNDP, WORLD BANK AND WTO
ETHIOPIA
Technical assistance needs identified in the
questionnaireOrganization Response
In reply to question A(k) :
Technical assistance requirements as
regards compliance with WTO Agreements
Country lacks institutional and professional
capacity to assess the WTO Agreements.UNCTAD Will provide assistance, through studies and
seminars, to assess the overall impact ofglobalization and liberalization on Ethiopia
in order to facilitate adaptation to the
various WTO Agreements and to enable it to
maximize its benefits from the new trading
opportunities.*
UNCTAD/
UNDP
(WIPO )Regional workshop in the COMESA region
to train government officials and private
sector representatives and NGOs in policy
and rule-making under WTO.
World Bank/
WTOArusha regional seminar on trade policy in
the WTO environment and negotiation skills
held in November 1997 has addressed these
issues.
* Funds are requestedWT/COMTD/IF/19
Page 29
Technical assistance needs identified in the
questionnaireOrganization Response
In reply to question A(l) :
Technical assistance needs as regards
specific WTO Agreements
The country's capacity in terms of
understanding the WTO legal document and
negotiation in respect of the organization
rules and regulations is low.  Particularly,the government lacks institutional and
professional capacity to assess the
following Agreements:  (these specific
Agreements should be addressed separately
and their application to the Ethiopianeconomic context be given special
emphasis).WTO - A three-week trade policy course for
African English speaking least-developed
countries will be held in 1998 and 1999.
- Specialized regional seminars and/or
workshops on WTO provisions will be
organized in 1998 or 1999 for English-
speaking LDCs.
Further details can be worked out in
preparation for these activities.
World Bank/
WTOSee A(k).
Agriculture WTO See immediately above.
Application of Sanitary and Phytosanitary
MeasuresWTO See immediately above.
Technical Barriers to Trade WTO See immediately above.
Trade-Related Investment Measures
(TRIMS)WTO See immediately above.
General Agreements on Trade in Services UNCTAD Assistance will be provided to develop
indigenous national policy-making capacityin areas of domestic service sector policy
and multilateral negotiations on services.*
WTO See WTO entry immediately above.
Agreements on Trade-Related Aspects ofIntellectual Property Rights (TRIPS)WTO See WTO entry immediately above.
Dispute Settlement WTO See WTO entry immediately above.
* Funds are requestedWT/COMTD/IF/19
Page 30
Technical assistance needs identified in the
questionnaireOrganization Response
Question A(l) (cont.):
Standing issues, such as competition policy
and the environmentWorld Bank These issues have been addressed in the
Export Development Strategy Study(FY97-98);  FIAS report “Ethiopia:
Improving the Investment Approval
Process” Jan. 1997; Financial Sector Study
(FY97-98);  IDF grant on privatization
(ongoing); PSD mission (FY98).  These
activities address both the long-term aspects
of competition policy and the propereconomic environment for development.
They do not address specific WTO issues
which may be forthcoming in the short term.
If the term "environment" is meant to
indicate natural resources, no on-goingprojects on environment exist, but there is a
planned study in the year 2000 that may
meet that need.WT/COMTD/IF/19
Page 31
Technical assistance needs identified in the
questionnaireOrganization Response
In reply to question A(m):
Assessment of the existing trade analysis
and negotiating capacities
Since Ethiopia is not a member of the
WTO, the existing trade analysis and
negotiation capacities are believed to below.World Bank Trade analysis is one component of the
Export development strategy study
(FY97-98).
WTO The three week trade policy course will
reinforce the capacity building. During such
Trade policy course negotiating capacities
will be addressed and a training for a better
participation in multilateral trade
negotiations will be undertaken.
ITC/
UNCTAD/
UNDP
(African
Economic
ResearchConsortium,
AERC )In the period 1997-2000 Ethiopia will
benefit from the regional Capacity Building
Programme for Trade and Development
(RAF/96/001) aimed at strengthening the
capacity of Institutions in charge of
formulating trade policies, includingnational and sub-regional sectoral studies, to
enhance government capacity for analysis
and negotiation.WT/COMTD/IF/19
Page 32
Technical assistance needs identified in the
questionnaireOrganization Response
In reply to question B(g) :
Technical assistance needs as regards
supply constraints
Production constraintsEthiopia seeks assistance to diversify its
export markets and export base.ITC Ethiopia will benefit from a number of
on-going projects aimed at diversifying theexport base by developing products and
markets (these are listed under B(q)2).
In addition, a new technical cooperation
project which is being formulated will
address these issues.*
World Bank The World Bank is assisting the
Government in this domain with its Export
Development Strategy (FY97-98).
Institutional constraints
1. Financial services:
The need for credit and other financial
facilities is very decisive to exporters and
producers so as to enable them to penetratenew markets, to handle established markets
and to face competition against imports.
Export financing in Ethiopia is still
insufficient.  Some of the major problems in
this area are:
- The banking experience is virtually
limited to risk free operations
- Term loans are given against physical
collateral or guarantee, though a new law is
underway to address this problem
- Absence of export credit agency which
would facilitate export credit insurance or
guarantee.ITC Under the on-going project, ITC is planning
to carry out an Export Financing Survey and
a Trade Financing seminar in cooperationwith PTA Bank.  Advice on the
Harmonization of Bank Guarantees will also
be provided (additional funds are requested).
World Bank The World Bank addresses these issues
through its Financial Sector Study
(FY97-98), an Export Development Strategy
(FY97-98) and a possible export
development project (FY99-20).
* Funds are requestedWT/COMTD/IF/19
Page 33
Technical assistance needs identified in the
questionnaireOrganization Response
Question B(g) (cont.):
2. Transport and communication facilities
Ethiopia has started an extensive
infrastructural development program.  The
Government has earmarked some USD 4
billion for the road sector during the next
ten years under the Road Sector
Development Program (RSDP).  The
following problems currently affect the
expansion of exports:
- Limited refrigerated trucks for meat,
vegetables and fruit carriage.
- Inadequate railway infrastructure.  The
existing operating record is poor in terms of
capacity, frequency and reliability.Especially, the trains are not suitable for the
transportation of fruits and vegetables.
- Lack of container handling facilities at
Assab port and absence of any inland
container port.
- Lack of adequate cargo handling facilities
in airport operations.
- Although telephone & facsimile
connection are adequate with improvement
scheduled for the near future in the capitalcity, telephone connections to areas out of
the city are still limited.World Bank The World Bank has addressed, and
continues to address, these issues in its
Transport Sector Memorandum (Dec. 1996);
Road Sector Investment Programs
(ongoing); Telecommunication Policy Note
(August 1997)
3. Managerial capacity
Most of the exporting enterprises are small
in size, and have inadequate managerial
capabilities and insufficient entrepreneurial
exposure.ITC See A(m).  Training in business
development is foreseen under the on-goingprojects mentioned under B(q).WT/COMTD/IF/19
Page 34
Technical assistance needs identified in the
questionnaireOrganization Response
In reply to question B(q) :
Technical assistance needs in the area of
trade promotion and support services
1. Trade Information
Although efforts are underway to establish
a Trade Point with the assistance ofUNCTAD, the absence of an efficient
information center is still perceived as a
major constraint.
The National Bank of Ethiopia, which
happens to be the only institute thatprovides Ethiopian exporters with trade
information, is not properly equipped to
greatly increase the quantity and even the
quality of trade information service's
output.ITC/
UNCTAD/UNDPContinued support will be provided by
UNCTAD for the establishment of a TradePoint.  ITC will provide specific
components in trade information
management.
In addition, ITC/UNDP will provide trade
information support under the COMESAprogramme.  Information on current world
market prices and trends of horticultural
produces will continue to be provided under
the ITC Market News Service.
UNCTAD will continue assistance through
the TRAINS CD-Rom.
Assistance in the use of the TRAINS
CD-Rom will be provided.*
World Bank/
WTOWorld Bank/WTO joint web-site is available
on the Internet.
2.  Strengthening the capacity of existing
firms:
Technical assistance should target the
economic operators directly, particularly at
the level of production process to assist
them in the improvement of entrepreneurial
skills through:
- Productivity improvement
- Quality enhancement
- Creativity and product design
- Information acquisition and dissemination
- Packaging techniqueITC To strengthen the capacity of
export-oriented enterprises, the following
activities will be carried out (1998-1999)
under the on-going ITC projects.
* Funds are requestedWT/COMTD/IF/19
Page 35
Technical assistance needs identified in the
questionnaireOrganization Response
Question B(q) (cont.):
ITC/
UNDP
ITC
ITC
ITC-  Participation in pan-African buyers-sellers
meeting on leather products, and on foodand beverages of selected enterprises, under
the Intra-African trade promotion
programme.
-  To improve the export performance of
Agro-based products, market research on
organic products will be carried out with a
view to identifying product groups that offermarket potential for commercial production.
Findings and recommendations will be
presented and discussed in selected
dissemination seminars/workshops.
-  The Gourmet Coffee project will
demonstrate the profitability to market and
export gourmet coffee and Developing
techniques for gourmet quality development
as well as marketing strategies, for local
enterprises.  In addition, ITC will explorethe market potential for organic coffee from
Ethiopia and assess the relevance of an
organic coffee project in Ethiopia.
-  In cooperation with the Ethiopian Tanners
Association, ITC will provide accordinglytechnical assistance to improve quality and
design of leather products in the whole
process from raw material to the finished
products.WT/COMTD/IF/19
Page 36
Technical assistance needs identified in the
questionnaireOrganization Response
Question B(q) (cont.):
3. Strengthening support service institutions
and facilities
An effective trade promotion strategy
requires support from various service-
giving institutions such as trade point,
research and development centers, training
institutes specializing in foreign trade,
export inspection council, export-import
bank and well-equipped traderepresentatives abroad.  Moreover, access to
export credit guarantee, effective duty
drawback schemes and bonded
warehousing management are also key
prerequisites for promoting export.
Establishing these important service support
institutions and offering those facilities are
costly for Ethiopia, at least in the short run,
and therefore technical assistance in this
area is badly needed.ITC The new ITC project will include
components aimed at institutional capacity
and trade support service strengthening.*
World Bank The World Bank provides support in the
context of the Export Development Strategy
report (FY97-98) and a possible exportdevelopment project (FY99-2000).
*Funds are requested.WT/COMTD/IF/19
Page 37
Technical assistance needs identified in the
questionnaireOrganization Response
Question B(q) (cont.):
4. Commercial Representatives
The commercial representatives suffer from
certain serious limitations.  These relate to
inadequacy of resources in terms of
professional staff with proper commercial
background and well-established libraries
containing the latest trade-related
directories as well as statistical
publications.  These deficiencies act asbottlenecks in the proper and efficient
functioning of these otherwise important
institutions of service support
infrastructure.
In order to ensure result-oriented action and
especially to discharge efficiently the
responsibilities devolved on the commercial
representatives after the economic
liberalization at home, it is of utmost
importance that the Trade Missions are tobe properly equipped with enough
professional staff.ITC See B(q).  In addition, the planned new
project will include qualidata management
and dissemination for utilization at
enterprise level.
5. Provision of information on standard,
quality, price and other requirements of theexport items of the country.
Meeting the challenge of raising product
quality is a priority area for virtually all
small and medium enterprises (SMEs)
engaged in export markets.  Internationalmarkets in the European Union are
increasingly insisting on compliance by
their suppliers with ISO 9000 series of
standards.  Similar trends are developing in
North America.  Export enterprises inEthiopia should therefore develop quality
assurance systems, based on the ISO
standards to maintain and improve their
positions in these markets.
6. Finding new markets
7. Creating joint venturesWT/COMTD/IF/19
Page 38
Technical assistance needs identified in the
questionnaireOrganization Response
In reply to question B(v) :
Technical assistance as regards market
access
1. Difficulties in understanding and
applying ISO 9000 standards:
Ethiopia's industrial sector lacks modern
technology, adequate maintenance and
calibration services and skilled manpower.
Hence, training assistance in the benefit and
implementation of ISO standards isessential to exporting enterprises on the
following topics:
- Concept of the ISO 9000 quality systems
so that improved quality awareness is
instilled throughout the enterprises
- Training of employees in marketing,
research and development, purchasing,
engineering and production, quality control
and testing, so that their involvement is
increased in quality goals.
- Certification of conformity to ISO 9000
and quality improvement planning tosustain the standard requirement.ITC See B(q).  The new project* will provide
assistance for:
-  installation of database on ISO 9000 and
other quality issues;
-  dissemination of quality information;-  training in total quality management;
-  accreditation and certification.
World Bank Export Development Strategy report
(FY97-98) and FIAS report (Jan. 1997)
address foreign equity investment (FDI and
joint ventures) as well as foreign non equity
collaboration with Ethiopian firms (such as
international subcontracting andtechnical/marketing agreements), which
would help exporters’ access to world
market.
*Funds are requestedWT/COMTD/IF/19
Page 39
Technical assistance needs identified in the
questionnaireOrganization Response
Question B(v) (cont.):
2. Meeting international sanitary regulations
a. Improving livestock raising
- Support to implement the Livestock
Development Strategy
- Training in the field of animal husbandry,
especially in strengthening the ongoing
national endeavours in animal health and
feed improvement.
- Establishing a disease free zone (DFZ)
which would help improve the health of the
national herd to facilitate acceptance by
foreign markets
- In the highland areas of the country, cattle
are primarily kept for their draught power.There is, therefore, a need to carry out a
profound research to investigate alternative
suitable technologies for the farming
system so as to free cattle for their
improved hides and meat.ITC See above.  However, ITC will not be in a
position to provide assistance for the
establishment of a Disease Free Zone
(DFZ), nor to strengthen the on-going
Livestock Development Strategy.WT/COMTD/IF/19
Page 40
Technical assistance needs identified in the
questionnaireOrganization Response
Question B(v) (cont.):
b. Upgrading the meat industry
- Capital investment requirements for
refurbishment of equipment in meat
factories
- Capital investments in refrigerated
vehicles to shuttle products from factories
to ports and cargo handling facilities in
airport operations
- Training of personnel in market research
and intelligence, legal and hygiene
standards of importing countries
- Training requirement for expertise to
uplift their knowledge to meet current
market requirements
- Uplifting of hygiene standards to comply
with current and future legislation of
importing countries
- Investigation on the aspect of commercial
diversification within the framework ofoverall export promotion and the potential
viability of meat canning operations
- Execution of a thorough investigation into
the market opportunities and requirements,
particularly appertaining to potentialimporting countries' legislative standards of
hygiene and price sensitivity.ITC See above.
3. Technical barriers: Gum arabic marketWT/COMTD/IF/19
Page 41
Technical assistance needs identified in the
questionnaireOrganization Response
In reply to question C(b) :
Technical assistance needs according to
priority
Technical assistance to Ethiopia must be
geared to strengthen and intensify the
support of the country's effort to meet the
new challenges posed by globalization andcompetitive forces, and thereby enhance its
capacity to capture potential benefits arising
from new trade opportunities.  The
technical assistance should lay special
emphasis on targeting the private sectorwith priority being given to the creation of
international partnership networks, joint
investment promotions, improvement of
supply capacities of existing export-
oriented firms, and development of support
service institutions.  Therefore, technical
assistance to Ethiopia in the followingareas, in terms of their priority, is of
paramount importance.IMF Ethiopia's current three-year ESAF
arrangement with the Fund focuses on tariff
reform; liberalization of the exchange
system; reform of the financial system; andliberalization of the investment regime.
Over the past five years, Ethiopia has
received Fund trade-related technical
assistance on tax administration; monetary
affairs, banking and exchange; and balanceof payments and trade statistics.  In
principle, it is envisaged that technical
assistance on the liberalization of the
exchange system and the reform of the
financial system will continue.
UNCTAD Please refer to A(k) and A(m).
World Bank See B(v).
1. Strengthening the capacity of existing
firms:
Technical assistance should target the
economic operators directly, particularly at
the level of production process to assist
them in the improvement of entrepreneurial
skills through:
- Productivity improvement
- Quality enhancement
- Creativity and product design
- Information acquisition and dissemination
- Packaging techniqueWT/COMTD/IF/19
Page 42
Technical assistance needs identified in the
questionnaireOrganization Response
Question C(b) (cont.):
2.  Strengthening human resource
development
The technical assistance should involve
upgrading the knowledge of policymakers,
entrepreneurs and exporters on the rules and
operations of international markets, on
systematic and aggressive marketing
strategies, and on the use of new
information/communication technologyITC/
UNCTADPlease refer to B(q) 1.
WTO See A(l) and A(m).
UNCTAD/
UNDP(WIPO )See A(l).
3. Strengthening support service institutions
and facilities
4. Training in ISO 9000 standards
5. Meeting international sanitary regulations
a. Improving livestock raising
b. Upgrading the meat industry
6. Familiarity with international trading
system
Ethiopia needs technical assistance to be
familiar with the international trading
system, including its ever changingpurchasing and inventory management.
More specifically, the technical assistance
in this area, inter alia, include:
- Continuous training of personnel
- Organizing workshops and seminars- Reinforce the negotiating capacity of the
country for the WTO membershipWTO See A(k) and A(m).WT/COMTD/IF/19
Page 43
Technical assistance needs identified in the
questionnaireOrganization Response
Question C(b) (cont.):
ITC/
UNCTAD/UNDP
(WIPO )See A(k) and A(m).
World Bank/
WTOSee A(k).
7. Regional integration:
- Infrastructural development in the sub-
region
- Adequate cold storage facilities
- Upgrading Trade Information Network
(TINET) modules and services; and
- Training for effective regional trade
promotion techniques.1Agencies are willing to organize activities to
respond to this specific need but would
require funding as well as additional
clarifications on the exact nature of the
request by the Ethiopian authorities.
                                                     
1 Issues related to regional integration are bei ng addressed in the COMESA project entitled "COMESA
Trade Development and Promotion Programme".WT/COMTD/IF/19
Page 44
Technical assistance needs identified in the
questionnaireOrganization Response
In reply to question C(d) :
Technical assistance needs in the area of
information technology including training
of human resources
The development of technological capacity
and human resource to make use of these
tools are under way.  Yet, a lot remains tobe done.  The technological set up for the
use of such tools is established.  What
remains behind is the affordability and
awareness of the business community.
Thus, a wide range of technical assistance isrequired on how to promote the use of these
tools.  As regards to human resource
development, it is quite a critical issue.
Ample human resource development
programmes should be extended if the use
of such tools is to bear fruit.UNDP Through project RAF/97/021 will assist the
Government to design a strategy to promote
the use of Internet.
WTO One computer will be provided to the
Department of Trade Industry &
Employment.  This will include a link to the
Internet.
Training on access and use of Internet
resources and CD-Roms will also be
provided.
__________