Ethiopia and Gulf Countries Trade Relations Flourishing –

by Zelalem

Realizing the objective reality of Gulf countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), it is important to utilize the region’s huge trade opportunities and obtain market for our exports.

Most of the Gulf countries are reliant on food imports due to unfavorable climatic conditions, poor soil and low water supply. Ethiopia’s largest economic partner in the region and the third biggest export destination, Saudi Arabia, for instance, imports around 80 percent of its food requirements from foreign countries and has set plan to stop producing wheat and other agricultural items in the near future.

On average, the GCC (Gulf Cooperation Council) countries are importing 90 percent of food products. Qatar topped the GCC independence on foreign imports at 97 percent, followed by Bahrain at 92 percent, Kuwait 91 percent and the UAE and Oman at 89 percent each, World Bank’s report indicated.

Ethiopia therefore, needs to prioritize trading agricultural products with Gulf countries by capitalizing on its huge potential and geographic proximity.

Ethiopia’s participation in various festivals, including the annual Riyadh Travel Fair and Gulf Food Exhibition,_among other things, aimed at seeking markets for its agricultural exports by creating contacts with potential stakeholders in the region.

True, the revenue obtained from agricultural exports to the region reached 306 million USD in 2015 from 184 million USD in 2013. The volume has also shown a double digit annual average growth during the first Growth and Transformation Plan, according to Ministry of Trade.

Ethiopia has also a lion’s share in delivering fresh goat and sheep meat to UAE and Saudi Arabian markets. The country provides in average 80 tonnes of meat during Ramadan (Islamic fasting month) and 50 tonnes in non-fasting period for the aforementioned markets.

While UAE is the leading destination for Ethiopia’s meat exports with 60 percent share, Saudi Arabia has a share of 38 percent and the rest is exported to other Middle East countries, according to Ethiopian Meat Producers-Exporters Association.

Despite this, there is a huge imbalance between Ethiopia’s potential for agricultural exports and its actual engagement with Gulf countries. Too much dependence on few exportable agricultural items coupled with issues in export quality and quantity are widely considered to be factors contributing to this.

In this respect, diversifying exportable items and improving quality and quantity are necessary tasks that narrow the gap in the country’s potential for agricultural export and the actual performance.

Economic analyst at the Embassy of the United Arab Emirates to Ethiopia, Dr. Fikru Deksisa stated that identifying the Gulf countries’ demand and keeping the quality of exports are the tools to bridge the gap between the potential and performance.

He said, ” The trade imbalance is not a result of low interest of the Gulf countries for our agricultural exports; rather it emanates from our weakness to meet the quality standards. If we provide them with exports at the desired quality level and appealing package, they have no reason to go far away to buy agricultural products.”

Apart from its geographic proximity, Ethiopia’s abundant livestock resource enables it to provide fresh meat to Gulf countries and overturn the current dominance of Brazil and other countries far away from the region.

Hence, in addition to efforts to increase meat exports during the Islamic fasting season, attention should be given to building certified abattoirs and improving quality of slaughtered cattle and availability of transport to win the competition.

Ethiopia has indeed of executed significant tasks to increase its competitiveness in the Gulf meat market in terms of building laboratories and chilled storages as well as increasing loading docks, expanding transport as well as certifying abattoirs.

The various trade missions and discussions held with Gulf countries are also believed to have played a big role in bolstering trade with the region. Dr. Fikru in this regard hailed the outcome of the trade mission UAE held in Ethiopia in 2014 to create opportunity for business persons from the two countries.

These kinds of forums are helpful to identify the interest of Gulf companies and aware about the potential of the country. The deliberations will also help to narrow the current trade gap and find new markets for Ethiopian products.

Diversification of hydrocarbon economies

Most of the Gulf countries have abundant petroleum resources that enable them to be among world economic powers with huge potential for Foreign Direct Dnvestment (FDI).

The fall in global oil prices has; however, caused significant revenue shortfalls in many energy exporting nations and there is a growing demand among them to reduce the dependence on oil revenue. The Gulf states are also aiming at lessening their dependency on the oil industry.

While Saudi Arabia is implementing a restructuring plan known as Vision 2030 that reduces its reliance on oil and transform the economy to become the top investing in the world, UAE is working to become commercial and tourism hub of the Middle East.

Same is true for Kuwait and Qatar that are taking investment as a means to diversify their hydrocarbon economies.

Ethiopia on the other hand offers wide investment opportunities that are crucial for Gulf countries in order to meet their goals of economic diversification in the agriculture, health care, retail and infrastructure sectors.

As pointed out earlier, due to their limited water supply and the cost of desalination, agriculture has become the Gulf countries’ priority for overseas investment. Governments have set various platforms, including King Abdullah’s Initiative for Saudi Agricultural Investment Abroad and Abu Dhabi Fund for Development, to encourage investors engaged in the sector while eyeing Africa as a primary destination.

Currently, Saudi Arabia and the UAE are two of the top countries investing in Africa’s agriculture and the involvement of Saudi Star Agricultural Development in Ethiopia, Kenana Sugar Company in Sudan and Al Dahra Agriculture in Egypt are the manifestations for the trend.

Meanwhile, Ethiopia’s high soil fertility, the amenability of its climate towards the cultivation of diverse range of crops and the comparative abundance of water supply make it an ideal place for agricultural investment.

The government of Ethiopia has also been hugely investing to improve the country’s infrastructural networks and set policies that create favorable investment climate. The efforts have bored fruits by attracting large- scale Gulf agricultural investment, including Saudi Star Agricultural Development and the UAE-based Maaza Mango Bottling.

Yet, this is insignificant when compared with Ethiopia’s potential and geographic proximity to the Gulf as well as the desire Gulf countries have shown for agricultural investment.

The road ahead

Most Gulf companies have shown a tendency to engage in Ethiopia’s agriculture sector, followed by hospitality, energy and pharmaceutical industries. In recent years, the country has succeeded in attracting high profile Gulf investment, including Sheikh Mohammed Hussein Ali Al Amoudi’s multi-sector corporate MIDROC and UAE-based companies like Julphar Gulf Pharmaceutical Industry and Al Ghurair Group’s aluminum factory.

Some 22 investment projects implemented between 2010 and 2015, with an aggregate capital of 6.7 billion birr, make Saudi Arabia the 4th largest country investing here, stated the Ethiopian Investment Commission.

Besides, Gulf countries investment in Ethiopia hit 7.1 billion Birr during the stated period.

Despite this, the investment of Gulf companies in Ethiopia is still low.

In its endeavor to make Ethiopia attractive to FDI globally, the government has made various investment policy amendments; and studies were also conducted to find out specific interests of Gulf investors and the reasons for abandoning projects.

In this regard, the construction of industrial parks is believed to play a big role in easing bureaucracy and infrastructural setbacks investors have been encountering in Ethiopia. The economic analyst at the UAE Embassy, Dr. Fikru agreed on this fact. He stated that industrial parks are the tools to fill the missing link in Ethiopia’s investment opportunities and Gulf companies’ capital by cutting the tedious bureaucratic process. Dr. Fikru said, “Industrial parks development is a solution to Gulf investors’ low involvement in Ethiopia’s market. The parks will cut short the ups and downs investors face in the operation phase by providing them with land, sheds and infrastructural facilities.”

Currently, the government has built 12 specialized industrial parks for the agriculture, manufacturing and hospitality sectors across the country. Those expected to give momentum for Gulf investment.

Embassies in Gulf States need to extend the leading role in promoting Ethiopia’s investment opportunities and hold discussions with investment authorities of the respective countries to encourage potential investors from the region to come and do business in the country.

Signing investment protection and promotion agreements, addressing bureaucratic challenges and improving infrastructure as well as offering land in competitive lease price are also measures Ethiopia has to undertake to lure more investment from the region.

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