Export Promotion:
Three Policy Directions for Ethiopia

Kenichi Ohno (GRIPS)
January 2012

Export Promotion under PASDEP
2005/06-2009/10
 Export drive was top priority for nationaldevelopment.
 The monthly export steering committee wasset up and used fairly effectively for policy
monitoring.
 A few export-oriented sectors were targeted
for policy attention, incentives and ODA
support. Sector-specific institutes werecreated and master plans were drafted.
 However, industry’s export performance wasless than expected and its GDP share did
not expand greatly (stagnant around 13%).

Suggested Policy Directions
Based on past policy experience, the scopeof export promotion should be expanded.
1.

2.

3.

Integrated policy—export promotion
should be an integral part of an overall
industrialization strategy.
Demand orientation—policy must be
designed to meet specific needs of buyers,
not just for general improvements on
supply-side.
Re-formulating export policy—modality ofincentives must be improved, and policy
menu should be expanded. Government
should offer customer-oriented policy
services.

(1) Integrated Policy Export promotion should not be the final

goal, but one of the key policy tools forachieving broad-based industrialdevelopment.
 Export policy should be linked closelywith other policy tools.
 All policy tools, including export
promotion, should be strengthened
greatly for producing results.

GTP:

Targeted industrial
growth: 20.0% (base),
21.3% (high) per year

“Building an industrial sector that plays
a leading role in the economy”

MSEs:

MLEs:

jobs & urbanrural linkage

eight targeted
sectors

Industrialzone
development

Publicenterprise
policyExisting and forthcoming policy tools in Ethiopia
TVETMSEpromotionExportpromotion

KaizenMutual linkageand consistency
must be ensured
Industrialclusters

Strategic
FDI & ODA

Engineeringuniversities

Technologytransfer

GTP: Industrial policy organization?
Monthly, chaired by PM
Meles; policy monitoring
and trouble-shooting

National Export Steering Committee

Customs &logistics

Financecoordination

Infrastructure

Supply &marketing

Revenue & Customs
Authority

National Bank

Min. of Industry

Min. of Agriculture

Subcommittees
for interministerial
coordination

Officially connected (reporting)? Role differentiation?
Ethiopian Economic & Business Diplomacy
National Coordination Committee (NCC)

Monthly, since 2011;chaired by DPM
Hailemariam Dessalegn;
For trade expansion, FDI
attraction, tech. transfer?

Infrastructure& technology
transfer

Foreign trade
Facilitation &promotion

FDIrecruitment &facilitation

Tourism
recruitment &facilitation

Min. of Transport

Min. of Trade

Min. of Industry

Min. of Culture &Tourism

Subcommittees
for interministerial
coordination

Malaysia: Institutional Structure
Ministry of Int’l Trade and Industry
MITI’s key departments
Strategic Planning
Entrepreneurship
Development
Sectoral Policy &Industrial Service

Implementing agencies under MITI

-SME Corp. Malaysia (SMEs)-Malaysian Ind. Dev. Authority (FDI)-Malaysia Productivity Corp. (research,training, consultation)-SME Bank (finance)-Malaysian Ind. Dev. Finance (finance)-MATRADE (trade)

Investment Policy &Trade Facilitation

Private sector partners

Services Sector
Development

Service & training providers (privateconsultants & companies)

Malaysia: Policy Structure
Third Industrial Master Plan (IMP3), 2006-2020
25 chapters, 247 pages
2 preliminary chapters

15 sectoral chapters

1. Performance & challenges
2. Macro-framework

7. Growth areas in manufacturing
20. Growth areas in services

8 issue chapters

8. Electrical & Electronics
9. Medical devices
10. Textiles & apparel
11. Machinery & equipment
12. Metals
13. Transport equipment
14. Petrochemicals
15. Pharmaceuticals
16. Wood
17. Rubber products
18. Oil palm
19. Food processing
21. Halal industry

3. External trade
4. Investments
5. SME development
6. Branding
22. Enhancing domestic
capabilities
23. Human resource
24. ICT & other technology
developments
25. Logistics

(2) Demand Orientation
 Kaizen, TVET, local procurement, andengineering universities are supply-sidemeasures (enhancing human & enterprise
capacities).
 More attention should be given to buyers
and users; capacity building should be finetuned to meet their needs.
 By listening to and fulfilling their tough andconcrete requirements, industrial capability
should be strengthened and foreign markets
should be secured.
 Producing what customers want, not selling
what you have produced.

Customer Orientation as the Most
Basic Business Principle
 In a market economy, demand dictates

supply—unlike a planned economy wheresupply shortage is common and consumers
cannot choose or complain about quality.
 Government should not be a regulator but
a service provider for exporters:
Providing market and industry information
 One-stop service for export facilitation
 Introducing global standards and technology
 Business matching between buyers and sellers
 Responding to private sector requests, etc.
 Toyota: “Delivering what customers want,when they want it, in quantities they want.”

Risk of Overproducing Unwanted
Skills and Products Even if human and enterprise capacities

improve generally, they may not find jobs ormarkets due to (i) small demand; or (ii)mismatch between wanted and offered skills
or products.
 This may cause business slump, brain drain
or social discontent.
 Given limited time and resources, it is betterto target skill and technology improvements
to specific areas demanded by customers
rather than general improvements.

(3) Re-formulating Export Policy
 Modality of incentives must be improvedfor effectiveness, transparency andfairness, and future WTO compatibility.
 Incentives should not be the only or main
tool for export promotion; many othertools should be added.
 Direct export subsidies are prohibited
under WTO. But support for human &enterprise capabilities, which indirectly
strengthen export, are not only accepted
but widely practiced.

Lessons from Korean Experience,
1960s-1970s
 Export targets were set for products andmarkets only; individual export firms werenot given targets and thus were notmonitored or penalized for missing them.
 Incentives were given for past export
performance, not for future promise. No
firm could receive them without actuallyexporting.
 Financial incentives were only a small partof Korea’s export policy. They cannot beevaluated independently from the overallpolicy package.
Sources: correspondence with Dr. Wonhyuk Lim, Dr. Yeon Seung Chung,and HE Mr. Lee Sun-jin in response to the question raised by HE Mr.
Mekonnen Manyazewal.

Korea’s Export Policy Package,
1960s-1970s
 Korea Trade Promotion Corporation (KOTRA) Monthly export promotion meetings
 Medals and national recognition for excellent

performers
 Export credit system and export insurance Export Information Center Export Promotion Special Account Fund tosubsidize trade fair participation, etc.
 Export Idea Bank
 Automatic import rights for exporters
 Network of exporters’ associations(Cont.) Creation of general trading houses
 Incentives and subsidies (many of these are

now prohibited under WTO)
 Promotion laws for heavy-chemical industries(1970s only)
Note: In the 1960s, Korea’s export promotion
emphasized general export growth without
specifying sectors or products. In the 1970s,
capital-intensive industries were targeted
and strongly promoted.
Sources: Wontack Hong (1977); Wonhyuk Lim (2010).

Subsidies That Indirectly Enhance
Export Performance
Below are practiced widely around the world
even today without violating WTO/FTAs/EPAs:
 Subsidies for worker training Subsidies for improving management,technology, R&D, product development
 Privileged financial access for SMEs
 Trade-related information, surveys,seminars, enterprise consultation
 Support for marketing, branding, IT,
insurance, joining trade fairs and missions
 Cheap rents and one-stop services inindustrial estates
 Start-up and incubation support

How to Expand Export Policy Menu
Ethiopia should expand export policy menu
step by step, based on sufficient studies.
 Re-formulate export incentives for costeffectiveness, selection criteria, effective
monitoring, future WTO conformity…
 After comparing policies practiced abroad,selectively learn and introduce newexport policy tools.
 After studying various foreign models,create an agency that specializes export
promotion. Strengthen its capacity overtime with more study and international
cooperation.