Download Azmera Andemo Thesis september 222 - Copy

International Faculty and Students Multi-Research Consortium
(IFSMRC)
PUBLISHER
IFSMRC INTERNATIONAL PUBLICATIONS (PVT)
ETHIOPIA, INDIA
www.ifsmrc.org
Copy Rights to Author
LANGUAGE: ENGLISH
2013-2014
EDITOR-IN-CHIEF
PROF. DR. CHINNIAH ANBALAGAN
Professor of Accounting and Finance, School of Management & Accounting,
College of Business & Economics, Haawssa University,
Hawassa City, Ethiopia, East Africa, Mobile No: +251-932319331,
E-mail:[email protected]. Website: www.ifsmrc.org
The Role of Government in Promoting Export: Comparative case
study of Ethiopia, South Korea and Vietnam
International Faculty and Students Multi-Research Consortium
(IFSMRC)
EDITORS
EDITOR (Marketing)
Dr. Brehane Borji
Associate Professor of Marketing
School of Management & Accounting
College of Business and Economics
Hawassa University, Hawassa, Ethiopia, East Africa
EDITOR (General Management)
Dr. N. R. V. Prabhu
Director, Sunshine Group of Institutions
Rajkot, India
EDITOR (Accounting & Finance)
Dr. Getenet (Accounting & Finance)
Assistant Professor in Accounting and Finance
School of Management & Accounting
College of Business and Economics
Hawassa University, Hawassa, Ethiopia, East Africa
Research Associates
Mr. S. Pradeep, M.Sc
Assistant Professor of CS & IT
NM Engineering College, Pudukkottai
Tamil Nadu, India
Mr. Mangesha Ayane , M.Sc
Auditor
Addis Ababa, Ethiopia, East Africa
The Role of Government in Promoting Export: Comparative case
study of Ethiopia, South Korea and Vietnam
International Faculty and Students Multi-Research Consortium
(IFSMRC)
The Role of Government in Promoting Export: Comparative case
study of Ethiopia, South Korea and Vietnam
수출 촉진을 위한 정부의 역할:
에티오피아, 한국, 베트남의 비교 사례 연구
2011, February
Azmera Andemo
The Role of Government in Promoting Export: Comparative case
study of Ethiopia, South Korea and Vietnam
International Faculty and Students Multi-Research Consortium
(IFSMRC)
The Role of Government in Promoting Export: Comparative case
study of Ethiopia, South Korea and Vietnam
A thesis presented
By
Azmera Andemo Kello
To
The Graduate Program in International Development Policy in
partial fulfillment of requirements for the degree of Master in the
subject of International Development policy
Graduate School of International Studies
Seoul National University
Seoul, South Korea
February, 2011
The Role of Government in Promoting Export: Comparative case
study of Ethiopia, South Korea and Vietnam
International Faculty and Students Multi-Research Consortium
(IFSMRC)
ACKNOWLEDGMENT
I must say that I am most grateful to my advisor, professor Bark Taeho whose invaluable
advice and guidance enabled me to successfully complete this master thesis.
I also would like to thanks my deepest gratitude to the Korea international cooperation
Agency which assisted me to join Seoul National University by giving scholarship fund.
I would like to express my thanks and appreciation to everyone in GSIS staff who
supported me in writing this thesis and all the course work more over I have no
reservation to give special thanks to Professor Kim Chong Sup who endeavor by teaching
research methodology and other class to upgrade my know how for my future academic
career.
I cannot forget the love, encouragement and support received from my friend Ephrem
Hassen Gossoma and IDP administrative staff. Above all, I am thankful to God almighty
for his grace and opening my understanding to do a lot.
I
International Faculty and Students Multi-Research Consortium
(IFSMRC)
TABLE OF CONTENTS
ACKNOWLEDGMENT ..................................................................... I
TABLE OF CONTENTS ................................................................... II
ABSTRACT ..................................................................................... IV
LIST OF FIGURES &TABLES ........................................................ V
ACRONYM ..................................................................................... VII
1
2
3
INTRODUCTION ....................................................................... 1
1.1
Background of the Study ....................................................... 1
1.2
purposes of research and question.......................................... 2
1.3
Objectives of the research ...................................................... 4
1.4
Methodology ......................................................................... 4
1.5
Organization of the research .................................................. 4
Background ................................................................................. 6
2.1
Export performance and promotion policies in Ethiopia ........ 6
2.2
Export performance and promotion measures of south korea 9
2.3
Export performances and trade reform in Vietnam ............. 13
LITERATURE REVIEW .......................................................... 18
3.1
The role of Government Policy in promoting export ............ 18
3.2
Export incentives as export promotion instruments ............. 18
II
International Faculty and Students Multi-Research Consortium
4
5
(IFSMRC)
3.3
Export diversification and export growth ............................. 21
3.4
FDI and Export growth ........................................................ 22
3.5
Domestic infrastructure ....................................................... 24
COMPARATIVE ANALYSIS AND RESULTS ....................... 25
4.1
Introduction ......................................................................... 25
4.2
Export diversification .......................................................... 25
4.3
FDI and export growth......................................................... 33
4.4
Participation of private sector and export growth ................. 37
4.5
Domestic infrastructure and export growth .......................... 41
4.6
Export promotion tools and export growth in Ethiopia ........ 44
CONCLUSION AND POLICY IMPLICATION ....................... 48
REFERENCES ................................................................................ 51
III
International Faculty and Students Multi-Research Consortium
(IFSMRC)
ABSTRACT
Ethiopia mostly exports agricultural products such as coffee, Gold, leather products,
and oilseeds and imports higher valued capital goods .The country runs a severe balance
of trade deficit, because the return from exports is far less than the expense needed for
the imports. This export and import unbalance leads the nation to the instable export and
weak macroeconomic management due the depletion of foreign currency, eventually the
nation is forced to look for additional finance to cost of its imports. Lack of own financial
source has led the country to the development of a significantly sized external debt.. this
paper tried to answer the main problems that why Ethiopia’s export is too weak in the
past decades, to see how korea and Vietnam has become successful in boosting export,
how is the link between private sector and government regarding financial credit, how
much FDI is important in export growth as well as what can be done to improve the
nation’s export performance. In this paper Herfindahl index, trend analysis and SWOT
analysis models has been used for three country case.
After analyzing this paper there is finding that revealed the Ethiopian economy
remains highly dependent upon coffee production; during 1995 to 2010, coffee accounted
for an average of about 44 percent of the country's total value of exports, both FDI
inflow and the role of private sector in the export sector economy is too low compare to
South Korea and Vietnam. To solve those problems found in this paper , Ethiopia should
promote export through encouraging FDI, by setting multi incentive and introducing EPZ,
badly encouraging domestic private sector by supporting through financial instruments.
Key words:
Export concentration, Role of private sector, Export promotion,
market seeking FDI and Economic growth.
IV
International Faculty and Students Multi-Research Consortium
(IFSMRC)
LIST OF FIGURES &TABLES
List of figures
Figure 1: RESERCH FLOW ................................................................................... 5
Figure2:Export by sector %( 1990-2000/2001). ..................................................... 8
Figure 3: Vietnam’s export by sector.................................................................... 15
Figure 4: Average export share of GDP (%). ....................................................... 16
Figure 5: Merchandize Export of Ethiopia vs. RoK and Vietnam. ....................... 17
Figure: 6 HI indices of total export from 1962-2009. ........................................... 27
Figure 7: Share of dominant export and its HI in Vietnam & Ethiopia. ............... 29
Figure 8: Share of dominant export items and total Hi indices of Vietnam
&Ethiopia....................................................................................................... 29
Figure: 9 FDI inflows since 1970-2009. ............................................................... 33
Figure 10: Vietnamese export from 1995-2008 by ownership. ............................ 34
Figure: 11:- 5 year average saving %of GDP. ...................................................... 37
Figure 12: Trends of 5year average savings rates %of GDP in three country case.
....................................................................................................................... 38
Figure: 13:- 5 year average credit provided to the private sector %of GDP......... 38
Figure: 14:-Trends of 5 year average credits provided to the private sector. ....... 39
Figure 15: Roads, paved (% of total roads). ......................................................... 41
Figure 16: Air transport, freight (million ton-km). ............................................... 42
Figure 17: Electricity production (kWh)............................................................... 43
Figure 18: Telephone lines (per 100 people). ....................................................... 43
Figure 19: SWOT matrix for Ethiopia current status and Government policy ..... 44
V
International Faculty and Students Multi-Research Consortium
(IFSMRC)
List of Tables
Table 1: Export performance share of GDP in % (1960-2009). ............................. 7
Figure 1:Export by sector %( 1990-2000/2001).
............................................. 8
Table 2: Export share % of GDP (1962-2009). ................................................... 10
Table 3: Export by commodity group. .................................................................. 11
Table 4: Export share of GDP and annual growth of export Vietnam.................. 14
Table 5: Comparative HI indices progress............................................................ 27
Table 6: Ethiopia’s top export basket in % during 1995 to 2010. ........................ 30
Table 7: Vietnamese top export basket in (%) during 1997 -2009. ...................... 30
Table 8: Korea’s export basket in %during1962-2000 5 years intervals. ............. 30
VI
International Faculty and Students Multi-Research Consortium
ACRONYM
ADB:
Asian Development Bank
AGOA:
African Growth Opportunity Act
COMTRADE: Commodity Trade data base
EBA:
Every things But Arms
ECSA:
Ethiopia Central Statistics Authority
EIA:
Ethiopia Investment Agency
EAL:
Ethiopian Air Lines
EEPCO:
Ethiopian Electric Power Corporation
EO:
Export Oriented strategy
EP:
Export Promotion
EPRDF:
Ethiopian people’s Revolutionary Democratic Front
ETB:
Ethiopian Birr (1 birr=100cent)
ETC:
Ethiopia Telecommunication Corporation
FDI:
Foreign Direct Investment
GDP:
Gross Domestic Production
GOE:
Government of Ethiopia
HHR:
Haussmann, Hwang & Rodrik
HI:
Herfindahl Index
IS:
Import Substitution
LDC:
Least Developed Countries
MOE:
Ethiopia Ministry of Education
MOFD:
Ethiopia ministry of Finance and Economic Development
MNE:
Multinational Enterprise
MOTI:
Ethiopia ministry of Trade and Industry
NBE:
National Bank of Ethiopia
VII
(IFSMRC)
International Faculty and Students Multi-Research Consortium
OECD:
Organization for Economic Cooperation and Development
ROK:
Republic of Korea
SITC:
Standard International Trade Classification
SWOT:
Strength, Weakness, Opportunity Threat Matrix
UN:
United Nation
UNCTAD:
United Nation Conference on Trade and Development
VGSO:
Vietnam Government General Statistics Office
WB:
World Bank
WTO:
World Trade Organization
VIII
(IFSMRC)
International Faculty and Students Multi-Research Consortium
1
(IFSMRC)
INTRODUCTION
1.1 Background of the Study
The Ethiopian economy remains highly dependent upon agriculture mainly coffee
production with 25 percent of the population deriving its livelihood from this agricultural
product. Coffee accounted for an average of about 44 percent of the country's total value
of exports during 1995 to 2010. Gold, leather products, and oilseeds constitute some of
the country's other important exports.
The current government has embarked on a cautious program of economic reform
including privatization of state enterprises and rationalization of government regulation.
While the process is still going on, so far the reforms have attracted only meager foreign
investment.
Ethiopia‘s export is tiny fraction of the GDP due to dominancy of less diversified
and less productive agricultural products. Also the yield of agriculture is highly plagued
by various factors which include periodic drought, underdeveloped water resources and
poor, infrastructure & expensive transport for supply of goods to market. Eventhough
Ethiopian Agricultural sector is not modernized, yet it is the source of country’s most
promising resources. More over potential exists for self-sufficiency in food security and
for export development in livestock, cut flowers, grains, oil seeds, sugar, vegetables and
fruits and large mineral resources which are hardly exploited yet.
Being dependent on a few and vulnerable agricultural products for its foreign
exchange earnings and spending much on oil import, Ethiopia is suffering a severe lack
of foreign exchange while simultaneously battling high inflation. The economy is highly
subsistent and therefore struggles to meet the budget requirements for drought relief in
addition to realizing growth.
1
International Faculty and Students Multi-Research Consortium
(IFSMRC)
In general, Ethiopia has many problems which hurt its export expansion and economic
growth. The most important problems in the country related to this research are discussed
below.
Low levels of productivity and living which resulted in low income lead to low
investment in education and health as well as plant and equipment manufacture and in
overall infrastructure development. This in turn led to low productivity and economic
stagnation. Problems intertwined one with another could be listed as follows. These
include dependence of export on primary and traditional sector products and their low
volume of supply, land lockedness of the country; under developed financial and other
markets, low levels of private sector’s role in sectors with exportable and value added
products in the economy, low saving or capital formation share of GDP, low level of
financial service facility for the private sector, low administrative and financial support,
low inflow of FDI in the country and a few engaged in service and non-exportable
industry.
All these lists of issues are supposed to be a good research problem; however this
paper does not address the entire set of problem listed here due to time and resource
limitation. However, the overarching of the problems mentioned above are investigated
and discussed in details using different models.
1.2 purposes of research and question
Since 1992 the government of Ethiopia has introduced a variety of reforms aimed
at improving macroeconomic stability, accelerating economic growth, and reducing
poverty. Tariffs have been cut, quota constraints relaxed, licensing procedures simplified,
foreign exchange controls eased, compulsory grain delivery and forced membership to
cooperatives discontinued. Privatizations have been introduced where private banks
2
International Faculty and Students Multi-Research Consortium
(IFSMRC)
officially authorized, interest rate control deactivated, and an inter-bank money and
foreign exchange market introduced.1
The nation has also introduced foreign direct investment policy in some sectors
though still there are some restricted sectors. The current regime is working towards
changing economy from its command nature to market based. Despite these facts
mentioned, still Ethiopia’s export sector is too weak eventhough there is annual increase
in absolute terms in the past 5 years. Potentially it would have been by far better than its
current position. Ethiopia’s total exports were higher than that of Vietnam in the 1981 but
now have become just a tiny fraction: $2 billion in Ethiopia versus $65 billion in
Vietnam in 2010.2
In general, in dealing with Ethiopia’s export the following questions are addressed and
attempted to be answered in this paper.
-What are the main factors that hamper the Ethiopia’s export?
-How Korea and Vietnam has been successful in international trade specifically
in export while Ethiopia is still lagging behind?
-What can be done to improve export sector and export expansion in general
-Could export promotion via encouraging FDI and increasing role of private
sector yield positive result in Ethiopia’s export? While attempting to answer these
questions, lessons from Korea and Vietnam will be drawn.
For detail Please see
1
Alemayehu Seyoum and Tadele Ferede (2004). The Structure of the Ethiopian Economy
- A SAM-based Characterization. Paper prepared as a background paper for the Ethiopia Country Economic
Memorandum: World Bank, "Ethiopia-A Strategy to Balance and Stimulate Growth".
2
Ethiopia Export performance review , Ethiopia Revenue and Custom authority,(2010)
3
International Faculty and Students Multi-Research Consortium
(IFSMRC)
1.3 Objectives of the research
The main objectives of the research is to determine the main issues that are
hampering Ethiopia’s export sector, in both policy aspects and productivity issues
determined by volume effects
To analyze the main reason for Ethiopia to lag in export performance compared to
countries with almost poor condition in the past, i.e. Ethiopia was much better exporters
of merchandizing products than South Korea in 1960 and also larger exporter than
Vietnam in 1981.
To compare the relevant policy issues which have been used by Vietnam and
Korea in respective of Ethiopia, and finally to forward policy issues and strategies that
will improve the country’s export based on lessons of the comparison.
1.4 Methodology
In this research various methods are used to analyses the export determinants of
three country cases basically through comparative analysis using Herfindahl index, trend
analysis and SWOT analysis. In addition to these tools the paper includes reviews about
the role of government in promoting export in three country cases. Due to the different
government and country situation different implementation mechanisms has been used
but policies are somehow similar. Finally data for this paper has been entirely taken from
international data base like IMF, WB development indicator, government websites
related to the export and investment, UNCOMTRAD, UNICTAD, and various
publications.
1.5 Organization of the research
This paper is organized as follows ; chapter two addressed , back ground of export
performance in three country ( Ethiopia, south korea and Vietnam), chapter three
addressed about literature review of export promotion, export determinants, the role of
4
International Faculty and Students Multi-Research Consortium
(IFSMRC)
government in promoting export , export diversification, domestic infrastructure, FDI
promotion and export financing;
chapter four addressed comparative analysis and
discussion of results, chapter five deals with conclusion and policy implication for the
country’s export growth and how to address export promotion.
Figure 1: RESERCH FLOW
INTRODUCTION
ETHIOPIA
BACK GROUND
(COMPARIOSON OF EXPORT
PERFORMANCE)
SOUTH KOREA
VIETNAM
FDI
EXPORT
DIVERSIFIC
ATION
LITERATURE REVIEW
(EXPORT DETERMINATS
&EXPORT PROMOTION
POLICY)
COMPARATIVE
ANALYSIS
CONCLUSION
&POLICY
IMPLICATION
5
DOMESTIC
INFRASTRUCTURE
EXPORT
promotion
instruments
International Faculty and Students Multi-Research Consortium
2
(IFSMRC)
Background
2.1 Export performance and promotion policies in Ethiopia
Like other African countries, Ethiopia has faced deep rooted structural problems,
weak policy frameworks and institutions, protection at domestic level and abroad for a
long time. For instance, in 1983 the Provisional Government of Socialist Ethiopia noted
that the basic constraints for Ethiopian exports include the low volume of exportable
products, the limited degree of diversification of exports mainly due to unprocessed
primary products, frequent economic crisis which substantially reduce the demand for
and prices of primary products, artificial trade barriers by trading partners etc. (cf. Abay
and Zewdu 1999). Moreover, after the downfall of the Derg regime, the Transitional
Government of Ethiopia stated that “it is essential to increase and diversify exports”
(1991: 33, as cited in Abay and Zewdu 1999).
Owing to this policy shift some improvements in export performance have been
registered. Trade statistics show that export earnings have increased during the post
reform period. According to the Ministry of Trade and Industry (MOTI), the real value of
export earnings increased from ETB 5 billion during the first six year period of the Derg
regime (1973-1978) to ETB 39.7 billion in the last six years of the EPRDF regime
(2000/1-2006/7) (Abay and Zewdu, 1999).
Regarding the composition of exports, until the 1990s the Ethiopian export sector
could be characterized as a ‘three-commodity sector’ consisting of coffee, hides and
skins, and oilseeds and pulses. Between 1966 and 1996, on average 59% of the country’s
export earnings came solely from coffee (Abay and Zewdu, 1999). According to MOTI
data, although coffee is still the dominant export item, since 2001/02 its contribution to
total export earnings has declined to 36.3% in 2007 and it became 30 % by 2010. On the
other hand, the share of non-coffee agricultural exports and major manufacturing export
commodities (leather and leather products; textile; and agro processing products) has
increased remarkably.
6
International Faculty and Students Multi-Research Consortium
(IFSMRC)
However, Ethiopia’s share in total world exports is still very low, amounting to
0.01% in 2006 (WTO, 2007). In this regard, Alemayehu (1999) and Abay and Zewdu
(1999) argue that Ethiopia’s external trade has major problems both on the supply side –
due to its dependency on few primary products characterized by large fluctuations in
volume; and a very high degree of concentration of exports on few commodities. On the
demand side – a low income elasticity for the type of commodities that Ethiopia exports,
declining prices for its exports, and limited destinations for Ethiopian exports. Both
supply and demand side problems are typical African problems: For example, more than
50% of African countries’ export earnings are derived from only three principal
commodities such as coffee, tropical beverages and cocoa (Alemayehu, 2006).
Table 1: Export performance share of GDP in % (1960-2009).
Period
Export share to the GDP in %
Export growth
1960-1973
10.9
8.2
1974-1990
10
4.7
1991-2000
12.8
22.5
2001-2009
13
9.8
1960-2009
11.7
11.3
Sources: During (1960-1990) is from MoFD.
(1991-2009) is from IMF.
7
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Figure2:Export by sector %( 1990-2000/2001).
Source: Ethiopia Ministry of Finance and economic Development.
Trade policy reforms and export promotion measures in Ethiopia
In 1991 the transitional government of Ethiopia (TGE) together with the IMF and
the World Bank has undertaken liberalization and structural adjustment program to
address the internal and external imbalances of the economy. In particular trade policy
reform was undertaken which aimed at promoting exports through diversifying the
country’s commodity exports.
According to Joosten (2007) and Weissleder (2009), some of the major
implemented export promotion policies and regulations in favor of FDI are the following:
Devaluation of the Ethiopian currency by more than 140 percent in terms of US dollar to
make exports competitive and promote export trade. The tariff regime was continuously
revised and was reduced from a maximum of 230 percent to currently 35 percent, the
import and export licensing system were simplified, a duty draw back scheme was
introduced where by exporters are re-funded the tax and duty they paid on the inputs and
raw materials used in export production, State exporting enterprises were provided a
8
International Faculty and Students Multi-Research Consortium
(IFSMRC)
managerial autonomy but deprived of a monopoly power, the Ethiopian Export
Promotion Agency is established, and various foreign direct investment policies were
introduced
2.2 Export performance and promotion measures of south
korea
South Korea has shown rapid economic growth since the 1960s. The government
has provided various incentives to promote exports, expecting export-led economic
growth. Export values increased from US$87 million in 1963 to US$17.5 billion in 1980,
and then to US$363.5 billion in 2009.3
Export expansion has been believed to be possible by aggressive export promotion
(EP) policies, in particular in the early stage of economic development. The Korean
government provided tax and financial incentives in addition to incentives such as
establishment of organizations to promote exports. Thus, the experience of economic
growth of Korea has been regarded as an example of pursuing the export-led economic
growth strategy
By the early 1960s, the Korean government had pursued import substitution policy.
In 1964, the government announced pursuing export promotion policies with the slogan
“Export Number One”, i.e. export promotion is the most important policy. The
government began to increase the amount of export subsidy, placing emphasis on exports
of the products of the labor intensive Light Industries (LI), in particular textile and
garment industry where the Korean economy had a comparative advantage. The
government introduced 50 percent reduction of profit tax relating to exports and export
finance schemes at low interest rate in 1964. Exchange rate devaluation introduced
continually. Under the export-import link system, the government granted the exporters
the right to use foreign exchange necessary for imports, which was intended to promote
3
Jai S. Mah , (2010) “Export Promotion Policies, Export Composition and Economic Development of
Korea”
9
International Faculty and Students Multi-Research Consortium
(IFSMRC)
exports under the situation of extreme foreign exchange shortage. The government
developed land sites for industrial complexes and provided them cheaply to the firms
entering those businesses. Together with various tax and financial measures to promote
exports, the government established the institutions to support EP.
During the 1970s, the main drive of the industrial policy of Korea shifted from the
LI to developing the high value-added. The government chose iron and steel, non-ferrous
metal, shipbuilding, electronics and chemical industries as the most important HCI. The
share of the HCI in all industries increased from 23 percent in 1960 to 39 percent in 1970,
and then to 54 percent in 1980.4
Table 2: Export share % of GDP (1962-2009).
year
Export share of GDP
1962-1966
7.7
1967-1971
13.7
1972-1976
27.8
1977-1981
31.5
1981-1986
34.4
1987-1991
32.1
1992-1996
28.7
1997-2002
42.8
2002-2006
31.2
2007-2009
42.2
Source: (cf Jai S Mah, 2010).
See details on
4
Kim, Jeongryum, From a Least Developed Country to a Developed Country, 2006 (in Korean), pp. 115116.
10
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Table 3: Export by commodity group.
Export item
1965
1975
1985
1994
Food
17.5
14.1
4.4
2.8
Textile, clothing and 30.9
43.9
32.1
22.7
5.6
0.7
1.1
0.7
2.0
5.7
0.3
6.4
7.2
20.8
& 0.2
1.6
3.6
7.1
1.0
2.1
4.0
3.0
5.7
6.7
foot wear
Wood
&paper 11.1
product
Non
electrical 1.5
machinery
Electrical machinery
Chemicals
pharmaceuticals
product
Computer
&office 0
equipment
communication
0.9
equipment
Source: (cf J.Weiss, 2005).
Export promotion instruments in South Korea
The EP measures of Korea have comprised tax incentives, financial incentives,
establishment of free trade zones and the supporting organizations. The government
provided huge amount of subsidy to promote export-related industries. The export
subsidy ratio of Korea during the aggressive EP period, i.e. the mid-1960s to the early
1980s. Among export measures the followings are strongly used in the Korea’s
development period. Tax incentives: In December 1961, the Tax Exemption and
Reduction Control Law began to provide export firms with tax deduction measures, again
11
International Faculty and Students Multi-Research Consortium
(IFSMRC)
the Tax Exemption and Reduction Control Law amended in 1975 granted investment tax
credits and accelerated depreciation to designated key industries 5 . Policy loan: The
government control of interest rates provided the strategic industries preferential access
at subsidized interest rates. As a result of the HCI drive in the 1970s, the HCI sector not
only had better access to capital, but also faced significantly lower average borrowing
costs. The export industries enjoyed preferential access to capital. 6 Export financing:
Export finances have been provided to exporters in various stages of export-related
activities since 1961. The export finance system is one of the currently used export
promotion measure in Korea. The Korea EXIM Bank has lent to the export firms.7 Export
finance covers mainly capital goods, such as industrial plant, machinery, and ships. As of
2009, lending of up to 100 percent of contract value is available provided that the
minimum foreign exchange earnings ratio is not less than 25 percent. Export insurance:
The export insurance scheme (Fund) was introduced into Korea in 1969 under the Export
Insurance Act to help exporters increase their exports by protecting them against losses.8
Free trade zone: FTZs are exclusive areas outside the national customs boundary,
exempt from customs requirements, upon request from regional governments. Activities
in the FTZs are subject to streamlined import procedures and exemption from import
tariffs, and receive tax relief, e.g. value-added tax and reduced corporate tax. Foreign
cargo may enter and leave freely from the FTZs. Since Korean goods entering the FTZs
Please see for details on
Joo-Young, “Tax Support System”, in Choi, Kwang and Jin-Kwon Hyun, eds., The Fifty Years History
of Tax Policy in Korea, Korea Institute for Public Finance: Seoul, 1997 (in Korean), Vol. 1 and Bae, JinYoung, “Incentive Structure and Its Changes in the Korean Industrial Policy Regimes from 1962-1997”,
Journal of the Korean Economy, Fall 2001, Vol. 2, No. 2.
5Lim,
6
Bae, Jin-Young, “Incentive Structure and Its Changes in the Korean Industrial Policy Regimes from 19621997”.
7
Korea Export-Import Bank, http://www.koreaeximbank.go.kr, 2004
8
Mah, Jai S. and Yunah Song, “The Export Insurance System of Korea: Its Implications on the Trade
Regulations in the Global Trading System”.
12
International Faculty and Students Multi-Research Consortium
(IFSMRC)
are treated as exports, they are entitled to duty drawback9. Export promotion agency: In
Korea, Korea International Trade Association (KITA) and Korea Trade Promotion
Corporation (KOTRA) have worked as the institutions helping firms overcoming the
export barriers such as the motivational, informational, and operational/resource
barriers.10
2.3 Export performances and trade reform in Vietnam
Doi Moi innovation (1986-1996)
Doi Moi was the beginning of great changes in the Vietnamese economy, during a
time when the country still was a part of the communist world. It included institutional
and structural changes and a development towards market economy. In the long run, the
reforms had mainly two broad economic effects; Vietnam became outwardly oriented
instead of focusing on import substitution and changed from a centrally planned system
into a market economy. The reform meant that state-owned enterprises could make own
price decisions instead of using prices fixed by the state. Furthermore, companies became
free to decide over inputs used. These two reforms were combined with a hardening of
the soft budget constraints and an increasing pressure for efficient use of the available
resources. As a consequence, the general level of competition in the economy increased.
Naturally, so did efficiency. Moreover, the view on private enterprises started to alter in a
liberal direction. Profits generated were no longer confiscated and the owners got power
to decide over fundamentals such as labor and salary (Hakkala & Nilsson, 1997:20-22).
Doi Moi also had great impact on trade policy. Before 1989 the system of trading
rights were characterized by state monopoly (Thanh 2005:77). Now the state started to
Please see for details
9
Jai S. Mah , (2010) “Export Promotion Policies, Export Composition and Economic Development of
Korea”
10
KOTRA, “About KOTRA - History” (available at http://english.kotra.or.kr, accessed April 20, 2009).
13
International Faculty and Students Multi-Research Consortium
(IFSMRC)
abandon the monopoly of trade and change import substitution towards export oriented
policies. The policy of export subsidies was launched. Export quotas were replaced by
tariffs and the number of goods concerned was decreased. Export zones were introduced.
Between 1989 and 1991, Exchange rate reforms were carried through. Among other
things this meant that one single exchange rate replaced many different rates, which
made trade costs easier to calculate (Hakkala & Nilsson, 1997:28-29). These changes
combined made it easier for companies to export.
10 years after it was launched, Vietnam experienced extraordinary GDP growth
rates, on average almost 10 percent per year. Despite this, inflation had been successfully
reduced. Further effects of the reforms were large increases of exports and foreign direct
investments (FDI), and sharp reduction of poverty (Thanh 2005:75). Nevertheless,
liberalization and export-promoting reforms continued, in 1998, the system of foreign
trade based on licenses was abandoned. Since then, trade with foreign countries has in
general become easier which has resulted in a large increase in the number of companies
engaged in this activity. Recent reforms include export credits and zero export duty.
Table 4: Export share of GDP and annual growth of export Vietnam.
Export share of GDP
Annual export growth
1986-1990
34.4
18.8
1991-1995
49.6
19.2
1996-2000
65
12.8
2001-2005
71.6
13.958
2006-2009
74.25
0.95
Notes: Export share of GDP data from World Bank development indicator.
Annual export growth data from IMF.
14
International Faculty and Students Multi-Research Consortium
(IFSMRC)
FDI and export expansion in Vietnam
A stabilized economy, abundant cheap labour and rich natural resources, together
with an improved legal environment, have transformed Vietnam into a popular
destination for multinational enterprises (MNEs) in Indochina. Foreign invested
enterprises (FIEs) have made a significant contribution to export expansion in Vietnam
from the early 1990s. Their share in total merchandise exports (non-oil) from the country
increased persistently from 4% in 1991 to 8.8% in 1995 and 33.8% in 2000. By 2000,
over a half of non-oil manufacturing exports of Vietnam originated in FIEs, up from an
average share of 19% during 1991-95. During the early years of market-oriented reforms
in Vietnam, much of FDI investment in manufacturing was in production for the
domestic market. During 1988- 90, less than 20% of total approved projects had exportoutput ratios of over 50%. From 1997, there has been a clear upward trend in the share
of export oriented projects in annual FDI approvals. By 2000, over 70% of approved
FIEs had Export-output ratios of 50% or more (Thanh, 2005).
Figure 3: Vietnam’s export by sector.
Source: General statistics office of Vietnam.
In the changing world environment there are no standard and unique instruments
that could lead to increase export, however every country can use different strategies and
tools that can help to boost its export sector.
15
International Faculty and Students Multi-Research Consortium
(IFSMRC)
As described above each of the three countries have used different export promotion
instruments, for instance korea has used aggressive export promotion by applying export
financing, and administrative support establishing, whereas Vietnam has applied by
starting economic reform and abandoning state monopoly in the trade sector, through
time introducing FTZ, as well as promoting FDI that did not appear in Korea during
1960s. Ethiopia has also tried to use export promotion in 2000s and trade reform in the
year 1990s after collapse of military regime, more over currently the nation is applying
aggressive promotion on FDI, never the less the export performance of Ethiopia is not
much satisfactory in comparisons with korea and Vietnam. Please see the following
figure showing the share of export in the entire GDP.
Figure 4: Average export share of GDP (%).
Source: World Bank Development Indicator.
16
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Figure 5: Merchandize Export of Ethiopia vs. RoK and Vietnam.
Merchandize exports of Vietnam &
Ethiopia
Merchandize exports of ROK &Ethiopia
140000000
120000000
500000000
100000000
400000000
80000000
300000000
60000000
200000000
40000000
100000000
20000000
0
0
1960
Ethiopia
1964
Korea, Rep.
1960
1964
Ethiopia
Vietnam
1981
Source: world Bank development indicator.
The major reason for this difference in performance is the dramatic shifts of Korea
export policy from inward to export oriented industrialization. This helped the country to
boost its export since 1962, while in those times Ethiopia encountered different sitaution.
First, the imperial regime used to rule with inward policy and there were internal civil
war as well as external war with somalia in 1970s which extended upto the time of the
military regime.Partly with simlar to Ethiopian case vietnam was also communist block
allie focusing on socialist ideology and the divided country
until 1976. However,
vietnam had dramatically boosts its export since 1980s due to Doi Moi innovation
17
International Faculty and Students Multi-Research Consortium
3
(IFSMRC)
LITERATURE REVIEW
3.1 The role of Government Policy in promoting export
International trade has played a crucial role in the historical development of the
third world. In the second half of the 20th century, the tremendous economic performance
of the "four tigers"- South Korea, Taiwan, Hong Kong and Singapore has been largely
attributed to the performance of the external sector where the export sector was given a
greater emphasis. Strong political commitment towards export promotion and the
application of appropriate policies together with efficient institutional mechanisms helped
these countries to attain a higher growth rate of exports and hence of the overall economy.
Over the past two decades, developing countries have progressively increased their
share in global trade from just less than one quarter to about one third. Asia and
particularly China account for most of the change, which has been facilitated by
diversification of exports. While developing Asia’s share in total world exports increased
from 11.7% in 1985 to 21.5% in 2005, Africa’s share decreased from 4.3% to 2.9% over
the same period (Bacchetta, 2007). Deep rooted structural problems, weak policy
frameworks and institutions, protection at home and abroad (IMF and World Bank, 2001),
and the structure of African exports, which is characterized by dependence on primary
commodities (Alemayehu, 2006; Biggs, 2007; UNCTAD, 2008) are considered as the
reasons for Africa’s poor export performance.
3.2 Export incentives as export promotion instruments
Returns from trade sector depend up on accelerating growth of exports. According
to the orthodox classical economists as well as the modern liberal economists the trade is
equivalent to engine of economic growth. Export promotion strategy is often in
accordance with the principles of comparative advantage, when a country specializes in a
product, which it can produce competitively. The goods become available to the
18
International Faculty and Students Multi-Research Consortium
(IFSMRC)
community of the world at cheaper prices. In outer layer, putting more emphasis on the
promotion of exports would permit the optimal allocation of country’s resources.
Some more clarification regarding the EP strategy is as follows. Firstly, the
definition of EP strategy relates to average incentives (Krueger (1997a). The EP strategy
can coexist with IS strategies in some sectors as has been the case in many successful
East Asian countries.
Secondly, the EP strategy does not imply the absence of
government intervention. Thirdly, the EP strategy relates, to trade incentives, therefore,
the countries that follow this strategy are not necessarily out ward oriented in their
foreign investment policy. Trade orientation is also defined in terms of effective exchange
rate for exports, relative to that of effective exchange rates for imports. These effective
exchange rates measure the incentives to exports and to substitute for exports respectively.
The IS strategy is the one where effective exchange rate for export is less than effective
exchange rate for imports and so called biased towards import.11
An out ward oriented trade strategy is recognized to have a number of advantages.
Firstly ,this Strategy brings incentives for domestic resource allocation closer to
international opportunity costs and hence, promote the efficient use of resources.
Secondly , EO is better policy because it involves incentives rather than controls. The
rationing of import license , credit , and foreign exchanges has invariably generated
premiums and , inturn rent seeking under the IS strategy.
Please see for detail
11
Bhagwati, J, (1978), Anatomy and consequence of exchange rate control regimes. Cambridge, mass,
Ballinger publishing company for national bureau of economic research
Krueger, Anne O. (1978) Foreign Trade Regime and Economic Development: Liberalization attempts and
consequences,
19
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Thirdly, it gives industries the opportunity to enlarge their markets and achieve
greater economies of scale.12 Fourthly an out ward oriented strategy forces industries to
compete in the international market and achieve greater export efficiency( Balassa(1981)
Fifthly , there is increasing evidence that adoption of new technology has been
faster in out ward oriented than inward oriented trade in developing countries. Exporting
firms often benefits from a considerable transfer of technology from abroad , including
advice on production engineering and aid in product design and marketing. 13 Sixth, out
ward oriented regime provides self correcting mechanisms to allign the macroeconomic
variables that affect growth. Finally , it is well known that, out ward oriented economies
have achieved spectacular growth in saving rate. 14 A shift from in ward to out ward
orientation should generate additional real income , partly by reducing the misallocation
of resources and partly by raising income through multiplier efffects as rising exports
bring spare capacity in to use.
The export incentives include export credits, tax rebate scheme, premium from the
“support & Price stabilization fund”, duty free imports of intermediates and raw materials,
and exemption from the value added tax, foreign exchange allocations, exemption from
the corporate income tax and other subsidies and improving domestic policy for foreign
firm attraction to the economy.15
All the above mentioned success story of Asian country and over all theory and
rational behind the government’s export promotion intervention, export growth, and
12
Krueger, Anne O. (1981) Export Led industrial growth –Reconsidered. In W. Hong and L.B. Krause (ed)
Trade and Growth of the Advanced Developing countries in the pacific Basin. Seoul: Korea Development
Institute.
13
ADB (1997) Emerging Asia: changes and challenges. Manila: Asian development bank.
14
ADB (1997) Emerging Asia: changes and challenges. Manila: Asian Development Bank.
15
Togan, S. (1993). “How to Assess the Significance of Export Incentives”: An Application to Turkey”.
20
International Faculty and Students Multi-Research Consortium
(IFSMRC)
overall economic growth are assessed in extensive and logical flow. Based on the
reviews made in this section, this paper discussed the models selected for the analysis
part of the research in the following sections.
3.3 Export diversification and export growth
The degree of export diversification can be considered as a function of both the
number of commodities in a country’s export mix, and distribution of their individual
shares. When using the measures of export earning focusing on a wider variety of exports
will lead to increased stability or growth in export earnings.
Consensus now seems have been built around the belief that export diversification
leads to economic growth. In a seminal paper, Imbs and Wacziarg (2003) showed that the
relationship between export diversification and economic development (measured by per
capita GDP) is broadly positive for countries with per capita incomes of $10,000 (2000
US dollars). Countries with incomes higher than $10,000 tend to specialize in goods. This
is evident from the export structures in upper middle income countries such as Korea,
Hong Kong and the OECD countries.
In a significant departure from the conventional view of export diversification and
economic growth, Hausmann and Rodrik (2003), and Hausmann, Hwang and Rodrik
(2006) have contended that, in addition to physical and human capital, natural resources
and institutional quality, market failures also play an important role in affecting export
diversification. Asserting that “what you export matters,” HHR have demonstrated how
the income level of a country’s exports is a good predictor of economic growth. They
conclude that in the presence of market failures, there is a role for governments to spur
export diversification.
21
International Faculty and Students Multi-Research Consortium
(IFSMRC)
3.4 FDI and Export growth
Insufficient domestic capital investment and outdated technologies greatly impede
the economic growth of developing countries. FDI is often emphasized as a shortcut to
solve the problems in development policies.
FDI is another important factor affecting the export supply capacity of a country.
There is consensus among development economists that FDI inflows are likely to play an
important role in explaining growth of recipient countries (De Mello, 1997, 1999;
Buckley et al., 2002; Akinlo, 2004; Seetanah and Khadaroo, 2007). By increasing capital
stock, FDI can contribute to a more efficient use of existing resources and absorb
unemployed resources and thus increase a country’s output and productivity (De
Gregorio, 1992; Seetanah and Khadaroo, 2007).
The new trade theory emerging in the early 1980s basically classifies FDI into
horizontal and vertical ones. In the case of vertical FDI, MNEs decompose the production
process into stages according to factor intensity and locate production activities in
different areas so as to exploit differences in factor cost, therefore minimizing production
costs. Through production fragmentations, MNEs vertically integrate product designs,
production and marketing across different countries. Disintegration of production leads to
more trade as intermediate inputs cross borders several times during the manufacturing
process. Rising outsourcing activities by MNEs are a direct consequence of production
fragmentations, which allow firms to optimally allocate their manufacturing processes
along their production value chains (Feenstra, 1998). On the other hand, horizontal FDI
means MNEs are locating production close to final markets. The production process is
duplicated, and demand in foreign markets is served by local production. Unambiguously,
horizontal FDI tends to reduce trade volume while vertical FDI stimulates trade.
Markusen (1984) analyzed the case in which an MNE optimized its operation with
horizontal FDI. Brainard (1997)
16
empirically showed that trade barriers, high
Please see for additional detail
22
International Faculty and Students Multi-Research Consortium
(IFSMRC)
transportation cost and the similarity between home and foreign markets are factors
driving MNEs to expand overseas horizontally. Markusen and Maskus (1999) modeled
the choice of the MNE’s affiliates for local market versus exports as a function of country
characteristics, such as market size, size differences and relative variations of
endowments. In particular, utilizing developing countries as an export platform has
emerged as another motivation for MNEs’ FDI.
A widely debated aspect of the trade-FDI nexus developing countries concerns the
role export processing zones (EPZs). According to the ‘new view’, the early studies,
given their narrow focus on the direct economic impacts (or national profitability), have
ignored important catalytic effects of EPZs on potential domestic exporters, operating
through exposure to marketing know-how and technology, direct demonstration effects
and linking, and bringing international buyers to the country. In many countries EPZs
failed to generate these externalities and to provide a conducive setting for an export
takeoff, not because of any intrinsic limitation of the zones but because they were used as
a supplement to a highly regulated domestic economy. Moreover, the ‘footloose industry
argument’ against EPZs (i.e., that they possessed shallow linkages with the rest of the
economy and would quickly migrate in response to rising domestic costs) ignored the
inevitable time lags involved in the process of linkage formation with the domestic
economy by new entrants to EPZs.
There is convincing evidence that EPZ firms tend to increase their local purchases
and shift over to more sophisticated production process as their operations in the host
country mature, provided the local business environment is conducive to such behavior
( Athukorala and Menon 1996, Lim and Pang 1991).
16
Brainard S.L., (1997),On PP American Economic Review 87 (4), 520-544.
23
International Faculty and Students Multi-Research Consortium
3.5
(IFSMRC)
Domestic infrastructure
One of the major factors affecting export supply capacity is the domestic
infrastructure such as transport, communication and power (energy). It is likely to play an
important role especially at the early stages of export sector development (UNCTAD,
2005). Most African countries are characterized by poor transport infrastructure, with
insufficient communication and energy which are major impediment to trade,
competitiveness and sustainable development (UNCTAD, 2005; Mbekeani, 2007;
Bacchetta, 2007).This isolates countries inhibiting their participation in global production
networks (Limão and Venables, 2000). Due to poor internal transport infrastructure
African transport costs are high making their exports expensive and uncompetitive
(Radelet and Sachs, 1998; Matthee, Grater and Krugell, 2007), and reducing foreign
earnings from exports (UNCTAD, 2003; Matthee, Grater and Krugell, 2007). The
analysis of African trade flow shows that their relative volume is low due to poor
infrastructure (Limão and Venables, 2001). Therefore, improvements in transportation
services and other infrastructure can lead to improvements in export performance
(Fugazza, 2004; Clarke, 2005; Francois and Manchin, 2006; Edwards and Odendaal,
2008).
It has been shown that infrastructure affects trade via altering transport costs
(Limão and Venables, 2001; Edwards and Odendaal, 2008). In this context, Edwards and
Odendaal (2008) argue that infrastructure directly affects transport costs by determining
the type of transport used (for example, the type and quality of roads determines the
maximum size of trucks) and delivery time for the goods. Bougheas, Demetriades and
Morgenroth (1999) have analyzed the effects of infrastructure on trade through its
influence on transport costs and found a positive relationship between the quality of
infrastructure and the volume of trade. Fugazza (2004) also finds that the internal
transport infrastructure has a significant and positive impact in raising exports.
24
International Faculty and Students Multi-Research Consortium
4
(IFSMRC)
COMPARATIVE ANALYSIS AND RESULTS
4.1 Introduction
In this chapter the main problems of the research are analyzed in line with existing
theory. Many variables were listed as determinants of export that could affect Ethiopia’s
export performance. Comparison was done between Ethiopia and the two countries,
Vietnam and Republic of South Korea. The analysis was based on extended time
interval to harmonize the prevailing situation of three countries’ export status, including
the period where Ethiopia used to be the larger exporter than those 2 countries. It is
attempted to see relevant facts about factors which helped Korea and Vietnam in the
past. These include various policy mechanisms in export sector in 1960s to 1980s in
Korea and since 1980s to present in Vietnam. The reason for differentiating the time
scope for case of Korea in contrast to Ethiopia and Vietnam is that the current case for
Korea is highly advanced through the use of high tech exports since mid-1980s. South
Korea and Vietnam cases are seen in this paper just for policy lesson and to get idea
about why Ethiopia is lagging behind, where it used to be larger exporter than both, i.e.,
compared to Korea in 1960s and Vietnam in 1981.
4.2 Export diversification
This paper uses the Herfindahl Index (HI) as the measure of export diversification.
The HI lies between 0 and 1. Lower values of the index represent more diversification.
The Herfindahl index simply computes the sum of squared shares of the variable in
question, in this case export shares, or where si is the share of total exports attributed to
the country’s exports. According to (Haussmann, Hwang and Rodrik (2006), the HI
indicates that there are two factors that can lead to a lower HI: an increase in the number
of products or a more even distribution of the shares of the products. Economies with
highly diversified export baskets are likely to have Herfindahl indices below 0.05,
followed by a slightly less diversified range of 0.05-0.1. Between 0.1 and 0.4 is another
25
International Faculty and Students Multi-Research Consortium
(IFSMRC)
range of much more specialized export baskets. And above 0.4 is highly specialized; this
paper use COMTRADE (export) data. All the export data are at the SITC- 3 digit level.
Mathematically the HI
is represented as:
HERFINDHL INDEX
}
In this paper, three countries’ exports have been measured using the model. RoK
from 1962 to 2009. Vietnam and Ethiopian case have been only from 1995 to 2009 due
to data limitation. While measuring these indices exports of all products on SITC-3 base
were used.
As seen in table 5 and figure 6, Ethiopian export sector share at present is in good
progress. This could easily be seen the HI that significantly improved from
approximately 0.45 in 1995 to 0.14 in 2009. But the bottom line is that the level of
reduction of HI and export increment is not that much proportional. This finding helped
to understand significant diversification effort is made but the way it was made is
horizontal focusing on primary commodity expansion.
Still the first three leading
exportable products dominate to date. Moreover, the reduction of Ethiopia‘s HI from
1995 to 2009 is still attributed to the top three products which means the diversification
effect is not significant when it is seen on the basis of all export sectors so far.
Conversely, the level of diversification in South Korea since 1962 was high except 1970
which was relatively more specialized because of dominance of three products such as
veneers, plywood boards and other wood, worked, nes, clothing except fur clothing and
manufactured articles, nes having share of 11%, 25.5% &12.5% respectively of total
exports in the mentioned year. Since 1975 Korea’s export have been the most diversified
and having HI index share of less than 0.05. Vietnam is considered as developing country
and more of traditional products exporter. However, its export was interestingly among
the slightly less diversified which is almost less than 0.1, even in 2009 its HI was 0.04.
26
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Figure: 6 HI indices of total export from 1962-2009.
Source: UNCOMTRADE SITC -3.
Table 5: Comparative HI indices progress.
Year
KOREA
Ethiopia
Vietnam
1962
0.086
NA
NA
1965
0.056
NA
NA
1970
0.104
NA
NA
1975
0.069
NA
NA
1980
0.023
NA
NA
1985
0.043
NA
NA
1990
0.026
NA
NA
1995
0.041
0.45
NA
1997
0.039
0.42
0.06
2000
0.044
0.32
0.089
2005
0.046
0.19
0.076
2009
0.05
0.14
0.041
Source: UNCOMTRADE, SITC-3.
27
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Ethiopia’s export is dominated by coffee exports among all exports as shown in
figure 7. The dominance of coffee export may not be bad, but when we observe the HI
indices of Ethiopia’s export at product level and aggregate level coffee is the determining
factors. This implies that coffee is not only leading the share of the Ethiopia’s export but
also concentrates all the country’s export. However, the bottom line is that the value of
the export of coffee in Ethiopia never reach 1 billion USD compared to that of Vietnams
export having only 3 percent of total export share accounting approximately 1.billion
USD. But in contrast Ethiopia’s coffee share toll about 23 percent out of total export
share with a value of USD 370 million (see figure 7 and 8).
Figure 8 explains the dominance of petroleum in Vietnam’s total export and its
diversification progress through time by show casing how petroleum’s share affected its
diversification aspects. It also explains that of Ethiopian coffee export share and the
progress of its diversification. Through comparison of both countries case we understand
that though petroleum is still the leading export in Vietnam, its impact on diversification
is offset by other export items. However in Ethiopia as coffee export increases, the
diversification value decreases leading to increased specialization just because of weakly
competitive supply of other product items weakness in proportion to volume of coffee
export.
28
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Figure 7: Share of dominant export and its HI in Vietnam & Ethiopia.
Source: UNCOMTRADE SITC-3.
Figure 8: Share of dominant export items and total Hi indices of Vietnam &Ethiopia.
Source: UNCOMTRADE SITC-3.
29
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Figure 8 Presented above shows how the dominant export product affected overall
level of diversification. No matter how the single product leads overall export,
diversification depends on the comparative value of the dominant export item and the
number of other export baskets and their value. In the figure Vietnamese’s export is still
lead by petroleum however it has no negative impact or volatility on the overall
diversification level, conversely the Ethiopia’s coffee export has significant negative
impacts on the overall diversification levels of export.
The progress of export can also be explained by the number of export baskets and
their value. Please see Table 6, 7, & 8 for Ethiopia, Vietnam, and RoK respectively.
Table 6: Ethiopia’s top export basket in % during 1995 to 2010.Error! Not a valid link.
Source: UNCOMTRADE 2010 SITC-3.
.
Table 7: Vietnamese top export basket in (%) during 1997 -2009.
Export items
1997
2000
2005
2009
PETROLEUM OILS, CRUDE
15.5
24.2
22.7
10.8
FOOT WEAR
10.5
10.2
9.5
7.3
others
74
65.6
67.8
81.9
Total
100
100
100
100
Table 8: Korea’s export basket in %during1962-2000 5 years intervals.
Export items
1962 1965
1970 1975
1980 1985 1990 1995
2000
Rice
15.8
x
x
x
x
x
x
x
Fish, fresh & simply
preserved
x
11.
14.3
8
x
x
x
x
x
x
x
non-ferrous base metals
14.2
x
x
x
x
x
x
x
x
Veneers, plywood boards
x
10.
11
x
x
x
x
x
x
Ores & concentrates of
30
International Faculty and Students Multi-Research Consortium
& other wood, worked,nes
(IFSMRC)
3
Clothing except fur
clothing
2.00
x
25.5
22.2
x
x
x
x
x
Manufactured articles, nes
x
x
12.5
x
x
x
x
x
x
Margarine and shortening
x
x
x
x
22.2
x
x
x
x
x
x
x
x
x
16.6
x
x
x
x
x
x
x
x
x
x
x
14.3
,ETC.
x
x
x
x
x
x
x
15.5
x
others
53.7
77.9
51
77.8
77.8
83.4
x
x
x
Total
100
100
100
100
100
100
0
15.5
14.3
Non-alcoholic beverages,
nes
FIXED
VEG.FAT,OILS,OTHER
TRANSISTORS,VALVES
Source: UNCOMTRADE 2010, SITC -3.
Note: “x” represents cases where export share less than 10% during the given year
As presented on figure 6 and table 5 above export diversification indices show too
much difference among three countries. The table and the figure lack some consistency in
time. For South Korea the data included from 1962 to 2009, whereas for Ethiopia and
Vietnam the cases of interest were observed from 1990s to 2009Therefore, no data on
product by product basis prior to the 1990s. However, this does not have negative impact
on the analysis because the trends indicate that there had not been grounds for going back
for concentration.
Korea’s export was diversified at its early stage of the development beginning
from 1962 with its HI indices of less than 0.1 except for the year 1970 a maximum value
of 0.104.
This was due to the high share of garments except those for fur and
manufacturing articles, net in export basket. Apart from this the nation’s export basket
has been highly diversified and always been less than 0.05 since 1980s.
31
International Faculty and Students Multi-Research Consortium
(IFSMRC)
In the case of Vietnam also the export basket was too diversified and almost less
than 0.1 HI indices. It was even less than 0.05 since late 2005, though petroleum is the
leading export commodity of the country.
Ethiopia’s export basket is still under the range of 0.1 and 0.4 a value ranging from
much more specialized to highly specialized export basket. The HI indices were 0.45 in
the year 1995 but in the year 2009 it became 0.14, encouraging but still requires much
more improvement. This would be revealed looking at mix of commodity on figures 7
and 8, which take the share from Coffee.
When Korea started its economic development specially the change in trade policy
from inward to out ward industrialization in 1962, the country had almost good status in
terms of trained manpower and supported by government policy that gave first priority to
‘”Growth number one”. Lack of natural resources could have influenced the nation to be
concentrated in specific exportable products like Ethiopia had coffee as primary products.
But the nation’s good leadership with a catching up effects of North Korea in 1960s and
Japan later on complemented by Government commitment to finance export sector in
general and the private sector in particular and the active role of private sector helped to
great extent. However, the same scenario was observed in Vietnam like having relatively
good level of educated man power Vietnam also had plenty of primary resources like
coffee and petroleum. Despite the facts of Korean and Vietnamese situation, Ethiopian
case is not strong in every aspect including literacy rate, as well as natural resources like
mineral and petroleum that could have been easily exploited. Though the country has
potential of all these resources, it has been only focusing on primary agricultural products
of volatile prices in international market. Ethiopia’s export basket is concentrated in very
few primary products like coffee and oil seeds and on gold, Very limited light industry
products such as leather, hides and skin and very recently on flower. Therefore, even
when the share of coffee decreases, the diversification level by itself is very insignificant
going back to single dominant products like for instance oil seed as presented on table 6.
Even then coffee remains dominant export basket in the country’s export mix. The
32
International Faculty and Students Multi-Research Consortium
(IFSMRC)
drawback is not its highest share, but it’s being sole diverter of export mix direction even
in the diversification index. In the Vietnamese export mix eventhough petroleum is the
leading export mix its share is small and other export commodities mix is higher. The
Koreans export mix also had not shown any such big share by single commodity right
from the very beginning of development except in 1965 and 1970s.
In general , export diversification is basically affected by conventional factors such
as human capital explained by level of literacy, infrastructure, institution which could
encourage the role of private sector in the economy, as well as good policy that gave
incentive for boosting Korea’s export.
4.3 FDI and export growth
As seen in the literature review section FDI has both positive and negative effects on
export growth, but both having same effects on economic growth. However, this paper’s
main objective is how to capitalize on or increase export growth eventually. Under this
scenario, the FDI inflow was analyzed in all the three country cases and its impacts on
export growth are shown. Eventhough FDI inflow prevails in three country cases, its
impact on export expansion is not similar and the amounts of inflow are also difference
from time to time. Figure 8 shows FDI inflow in million USD to each of these countries
during 1970 to 2009.In addition, the share of export generated from FDI is also
considered as determining factor for the comparative analysis between Ethiopia and
Vietnam as presented on figure 10.
Figure: 9 FDI inflows since 1970-2009.
33
International Faculty and Students Multi-Research Consortium
Source: UNCTAD data base.
Figure 10: Vietnamese export from 1995-2008 by ownership.
34
(IFSMRC)
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Source: UNCTAD data base.
In the growing and interdependent world, the role of FDI is crucial for a country’s
economic growth in general and export expansion in specific. The main issue is to
determine how FDI can work for the country’s export expansion as well as to know the
main preconditions to attract FDI. The conventional advantages that a country has, and
the motive of the incoming FDI to the country, could be the main factors that either boost
the country’s export or even take the advantages of domestic economy leading to
decreasing export.
On the basis of the above factors, the flow of FDI in Ethiopia is the least among
the sub Saharan Africa and also the least compared to Korea and Vietnam. The main
problem of the FDI in Ethiopia was explained as the policy in the past regimes. However
these policy issues were dramatically changed and the reform has been introduced in
Ethiopia since 1992 though some of the sectors are reserved for domestic firms and the
government. As shown on figure 9, even after the reform the nation’s FDI inflow is too
small. This problem is explained by both domestic situation and the motive of firms.
According to the domestic law, there are some sectors which are not permitted for the
35
International Faculty and Students Multi-Research Consortium
(IFSMRC)
foreign firms. These include subsectors such as telecommunication, energy transmission,
financial institutions and banks as well as Aviation service. On the contrary, foreign
firms highly demanded to invest in those protected areas with the expectation of getting
profit free of risk than if they invested on export items. Because the later are
characterized by insufficient infrastructure and high transportation cost due to the
nation’s landlockdness. Since 1992 FDI is small in number but all have invested mainly
in the areas including tourism, services and domestic market oriented business. During
2009/10 only 8% of FDI inflows went to export sector such as cutting flower business.17
In the case of Vietnam as shown in figure 10 large influx of FDI has been observed
since 1970 especially after the reforms. The nation is not only benefited from FDI inflow
but enjoyed export expansion due to foreign owned firms. Vietnam was a country
surrounded by big and emerging countries as well as endowed with natural resources like
coffee and petroleum. Also the economy was facilitated by relatively better educated and
cheap labor force, infrastructure and had strong market integration with the rest of the
world.
Korea’s export growth was not supported by FDI as seen from various literatures.
The nation enjoyed increasing FDI inflow since 1980 though boosted its export in
increasing trends since 1964 (see figure 9). The economic development history of Korea
revealed that it allowed FDI at the early stage but was reversed in late 1960s to protect
the domestic industry. That time, the nation’s export was boosted by domestic industry
rather than FDI. However, the reason for the increase in the inflow of FDI in to the
country since 1980s was market liberalization.
See 17 No data on exports generated from foreign firms in Ethiopia were available before 2009.
36
International Faculty and Students Multi-Research Consortium
(IFSMRC)
4.4 Participation of private sector and export growth
It is believed that the role of domestic private sector in the economy is very
significant.
Reviews by the international financial institutions and many scholars
indicate that larger saving can be achieved from less consumption and it can affect
investments negatively. No longer could this argument work in developing country as we
know in depth that saving in developing country is just for buying some luxury products
like gold, jewelry and home furniture especially in sub Saharan Africa and other least
developed countries in the world.
The comparative study of the three countries’ case in Figure 11 and 12 indicate that
the rate of 5 year average saving in all the three countries. The average trends of
improvements are seen whether they are proportional with export or not. Whereas figures
13 and 14 deal with the 5 year average credit provided by domestic financial institutions
to the private sector and the rate of improvements in the sector respectively. The finding
of the comparison is presented below.
Figure: 11:- 5 year average saving %of GDP.
Source: world Bank development indicator.
37
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Figure 12: Trends of 5year average savings rates %of GDP in three country case.
Source : World Bank development indicator.
Figure: 13:- 5 year average credit provided to the private sector %of
GDP.
Source: world Bank development indicator.
38
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Figure: 14:-Trends of 5 year average credits provided to the private
sector.
Source : World Bank development indicators.
The role of private sector in the economy is vital for export growth. The chance for
private sector to enjoy in the economy is explained by level of financial support by the
government at the early stage of development. As attempted to address the role of the
government in the review literature, free market is the best policy for export growth.
However, this principle works in well-organized environment that does not lead to failure
of market and related industries.
Otherwise, the history of free market shows that it
could not work well as expected and this has been claimed by pro liberalist.
In this paper the role of private sector can be explained by financial facility for the
firms in the country, specifically by the amount of domestic credit provided to the private
sectors as percentage of GDP. Eventhough credit provided to the private sector is directly
related with firms and industry, there are indirect effects of the nation’s contribution to
the GDP through saving every year.
Figures 11 and 12 show that the average saving rate on five year bases in the three
countries is quiet different. In Ethiopia, average saving rate never exceeded 20% as seen
in figure 10. However, the saving rate of Vietnam and Korea exceeded 30% of the GDP.
This indicates that the saving capacity of Ethiopia is still weak.
39
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Moreover, trends of saving rate are falling for Ethiopia significantly in comparison
to Korea and Vietnam (see figure 12. But for Korea the decrease in the rate is natural
because the country has approached the stage of economic maturity.
Korea was the most successful country in resource mobilization at its early
development, especially from 1960s to 1980s. Vietnam is still enjoying larger saving rate
and again the trends of saving is also much better than Korea and Ethiopia. This stage of
development could have also been observed in the Ethiopian case.
The direct effects of private role in export sector can further be explained by the
amount of credit provided by the domestic banks to the private sector. Average credits
provided to the domestic private sector as share of GDP and the changing trends of credit
respectively were shown based on five years average (see figures 13 & 14). In Korea and
Vietnam, the average credit given to the private sector is increasing in absolute terms and
it was higher than 100% and 92% respectively of GDP in 2009. However, in Ethiopia
this share is below 50% in the same period. Moreover, the trend of the change is
disappointing as seen in figure 14. In Ethiopian it is decreasing though increasing in
absolute terms which are unusual at this stage. However for Vietnam the trend is
encouraging because in the year 2000-2004 it has increased by 97% and in the year 2005
-2009 it has further increased by 107%.
40
International Faculty and Students Multi-Research Consortium
4.5
(IFSMRC)
Domestic infrastructure and export growth
Domestic infrastructure is vital for a country’s economic growth. Improved level
of infrastructure is an incentive to engage in export sector investment by foreign as well
as domestic private firms. As the seen in the review the quality of domestic transport
infrastructure has important role in decreasing transportation cost to the international
market. In addition, communication and power are also important in motivating FDI to
invest in a country’s industry.
The trends of road quality in terms of % of paved road in the country; electric
power production (KWH); telephone lines per (100) person; air transport –freight
(million ton-km) of the three countries are presented in figures 15, 16, 17, &18.
Figure 15: Roads, paved (% of total roads).
Source: World Bank development indicator.
The quality of roads in Ethiopia lags behind both Korea and Vietnam. Without
standard quality road transport, export cannot be increased because; the transportation
cost will be very high. This scenario is too challenging for Ethiopia since it is landlocked
Vietnam compared to Ethiopia has comparative advantage of sea access to integrate with
the rest of the world. In addition to road transport infrastructure air transport is very
41
International Faculty and Students Multi-Research Consortium
(IFSMRC)
important this day since it serves to transport value added manufactured and horticulture
products such as flower. Regarding this, Ethiopian Airline is among the three leading air
ways in the African continent. It has contributed significant incentive for firms to engage
in horticulture investment. (Please see Figure 16).
Figure 16: Air transport, freight (million ton-km).
Source: World Bank development indicator.
Power is the most fundamental requirements since the world shifted its
merchandize trade from primary export to the manufactured export. Every investment
whether domestic or FDI require energy sufficiency as prerequisite. Result of
comparisons among the three country cases shows that in the energy sector Ethiopia are
still lagging behind, though the country is investing in increasing trend in electricity
production. However, the current situation is encouraging for further investment
attraction if energy capacity in the country’s action in provision of power continues.
Overall, energy is the necessary condition for FDI to come and invest it further can also
determine the sector in which to invest based on their energy requirements.
42
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Figure 17: Electricity production (kWh).
Source: World Bank development indicator.
At last but not the least telecommunication is also vital in the dynamic global
environment. Both exporters and importers need communication to fix contract, to get
information. Without efficient and sufficient communication network it is impossible to
handle international trade in the contrary to the 17th century situation. The trends of
telephone lines per 100 people in Ethiopia are among the lowest in the world and it
remained constant. This is one of the problems of investment in the country which need
government’s emphasis.
Figure 18: Telephone lines (per 100 people).
Source: World Bank development indicator.
43
International Faculty and Students Multi-Research Consortium
(IFSMRC)
In general, in the infrastructure sector all the indicators seen in the above figures
are not that much satisfactory except the Air Transport. All the infrastructures have direct
impact on export growth and this could easily be proved by the role of the efficiency of
the Ethiopian airline which has given incentives for FDI and private sector to invest in
horticulture like cut flower as of 2009.
4.6 Export promotion tools and export growth in Ethiopia
Ethiopia has used some of export promotion mechanisms to avert export sector
problem, among those the focus of this study are listed as follows;
The Ethiopian currency Devaluated by more than 140 percent in terms of US dollar, the
tariff regime was continuously revised and was reduced on a stage basis from a
maximum of 230 percent to50 percent currently 35%, the import and export licensing
system were simplified, a duty draw back scheme was introduced, State exporting
enterprises were provided a managerial autonomy but deprived of a monopoly power, the
Ethiopian Export Promotion Agency established, Exemption of capital requirement for
foreign investors which export more than 75 percent of their outputs; The entire above
mentioned are applied in Ethiopia since late 1990s but challenged by weaker bureaucracy
and inefficiency of public sector.
Figure 19: SWOT matrix for Ethiopia current status and Government policy
Strength
Weakness
Continuous reduction of
Export concentration in few traditional
coffee export share
products
Export oriented growth
Low FDI
strategy ( with promotion
Weak private sector participation in the
policies)
economy
Growing Air transport
Low level of credit disbursement
Prior investment on
Poor infrastructure
44
International Faculty and Students Multi-Research Consortium
(IFSMRC)
infrastructure
Opportunity Taking
FDI
Market
advantage
of Horizontal diversification at this level
opened market opportunity will be good option
- (AGOA, COMESA,EBA)
Establishing export processing and
access
Encouraging private sector industrial zone would be good to tackle
(AGOA,
in
EBA)
support through financial Export financing and market search by
export
sector
and infrastructure problem
instruments
government will boost export
Increase export
diversification should be in
both even distribution and
export baskets as well
Threats
Increasing transport
Improving infrastructure
Land
corridor
Expanding dry port and multi modal
lockedness;
Creating economic
transport system
Developed
diplomacy as well as
In the long run focusing on heavy
country
increasing export basket
industrialization and highly value added
policy on
and standard
products
agricultural
Taking advantage of
products;
volume rather than price at
The volatility
the current level.
of primary
product price
45
International Faculty and Students Multi-Research Consortium
(IFSMRC)
As it is already presented on the SWOT matrix, specific factors are
identified which could affect Ethiopia’s export leading to instable economic
growth. Among those basic factors, high concentrations of exports on few
primary products, weak infrastructure & the low share of private sector in the
export sector of the economy are bold. This has happened due to policy problems
that facilitate access to domestic and international market which is related with
geographic bottlenecks. Domestically, though the nation allowed private sector to
engage in the economy, it was without sufficient facilitation of finance and
consistent political support at different stages of political hierarchy. Other policy
issues are restriction of sectors like telecommunication, distribution of electric
power and financial service from domestic private sector and foreign firms’
involvement. However both domestic and foreign firms most of the time
demanded to invest their business in domestic oriented business and restricted
sectors for private involvement. Because they want to minimize risks due to weak
infrastructure which is explained by poor road, communication, energy facilities
and low level of skilled labor that is essential for the real sector business specially
manufacturing. All these cumulative effects contributed for poor growth in
comparisons with the two countries used for benchmarking. The current global
market situation opened access through mechanism like AGOA provided by
USA, EBA provided by EU and furthermore COMESA inside the continent
Africa. Maximizing the use of these opportunities could be achieved through
improvement of the areas of the weakness.
This could include actions like
increasing multi transport corridor, providing financial support and political
support for domestic private sector, linking both input and output producers in
46
International Faculty and Students Multi-Research Consortium
(IFSMRC)
effective manner and boosting economic and social infrastructure. The
government should improve its institution both in quality as well as policy arena
in order to allow firms to engage in every business at least in joint venture; and
improving public sector is also vital.
47
International Faculty and Students Multi-Research Consortium
5
(IFSMRC)
CONCLUSION AND POLICY IMPLICATION
The Ethiopian economy remains highly dependent upon coffee production, with 25
percent of the population deriving its livelihood from the coffee sector. Indeed, from
1995 to 2010, coffee accounted for an average of about 44 percent of the country's total
value of exports. Gold, leather products, and oilseeds constitute some of the country's
other important exports. Ethiopia mostly exports agricultural products and imports higher
valued capital goods. The country runs a severe balance of trade deficit, because the
return from exports is by far less than the expense needed for the imports. This forced
Ethiopia to look for additional finance to cover the cost of its imports. Lack of own
financial source has led the country to the development of a significantly sized external
debt.
In the comparative case study of Ethiopian, south Korean & Vietnamese export
performance from 1960s to 2009, the following main issues are identified that hampered
Ethiopia‘s export. The main findings are that;
Exports are concentrated on few traditional exports specially dominated by coffee export.
Lack of competitiveness is described by the low share of private sector in the export
sector economy.
The country lacks good financial sector and the capital formation is
insufficient. This is caused by low share of the saving in the entire GDP of the country
and eventually led to the low credit access to the private sector. As few traditional export
baskets are generated from government and the household sector, the share of export
became tiny fraction of the GDP.
FDI is supposed to be complementary for the nation’s export growth; however FDI
inflow in Ethiopia is a little, even though the country has reformed all the trade and FDI
policy to encourage inflow of FDI. This is so because of insufficient infrastructure and
financial market as well as some restricted sectors left only for state to run the business.
Though there was some inflow of FDI, its contribution to the export sector is not more
48
International Faculty and Students Multi-Research Consortium
(IFSMRC)
than 8%. Even this share is generated from cut flower which was run by domestic
private sector.
The country has enacted policy for FDI as well as private business, with restricting
some of the sectors as state owned that private sector and foreign firms are badly
demanding to invest in. Eventhough the country tried to implement the policy that
encouraged free market economy, still the nation’s export does not exceed 12% of the
GDP.
Policy implication and recommendations for the state consideration to avert all or
the major problems are presented here. These policy ideas are believed to complement
and feel gaps in the already existing policy initiatives.
As advocated a lot by economists and as analyzed in this paper, when country’s
export is concentrated in few export baskets there is no longer prospects for export
growth, this is proved by Ethiopia’s export sector performance in the past decades. The
nation’s export was concentrated on few baskets and there were no significant growth in
the country’s export. Therefore, the nation should diversify its export basket by
promoting both private sector and foreign firms in light industry, and traditional sector
that would help the nation’s export to improve.
Free market policy alone does not make any sense without fulfilling necessary
condition to maximize involvement of privates sector. As the analysis result revealed,
private sector exists but few and only tied with domestic business oriented. Most of them
do so just in fear of challenges from weak infrastructure, financial constraint, and poor
access to ports. Therefore, the nation should encourage domestic private investors to
involve in the export market by providing export financing, and administrative support,
with necessary incentives like discretionary currency devaluation rather than uniform
devaluation. Expanding multi modal transport system and dry port is also an advantage.
The financial market and institution are under developed in Ethiopia just like most
of the developing countries. Practically there is no access for privates sector to access
49
International Faculty and Students Multi-Research Consortium
(IFSMRC)
sufficient loan for the investment. Hence, the government should provide adequate and
subsidized credit facility for the private sector focusing on export industry. This will
most likely magnify the role of the private sector in the economy. For this the
government should have sufficient capital. However, as analyzed in this paper the share
of saving in the GDP is the lowest in the world, therefore the government should
mobilize the domestic resources by increasing saving.
Export competitiveness is also determined by who shares in the economy. As the
literature review and data analysis indicate, FDI is one of the important instruments that
could increase country’s linkage with the rest of the world by enabling rich export basket
for a nation. As compared to the Vietnam and South Korea, Ethiopia’s FDI inflow share
is the lowest and most of them are engaged in domestic oriented sector. Therefore the
nation should encourage FDI by introducing EPZ to tackle both infrastructure problems
and to catch up the export basket.
In general, Ethiopia should promote export through encouraging FDI, by setting
multi-incentive and introducing EPZ. The country should encourage domestic private
sector through provision of financial instruments such as export financing, discretionary
devaluation and others. Moreover, the country should mobilize its financial resources by
all mechanisms from the household sector and should inject those resources to the export
sector.
50
International Faculty and Students Multi-Research Consortium
(IFSMRC)
REFERENCES
Books and Journals
Abay Asfaw and Zewdu Belete (1999), "Export Earnings Instability and Export Structure:
The Case of Ethiopia", Proceedings of the Ethiopian Economic Association
Annual Conference on the Ethiopian Economy, pp. 243-265.
ADB (1997) Emerging Asia: changes and challenges. Manila: Asian Development Bank
Akinlo A.E. (2004), "Foreign direct investment and growth in Nigeria: An empirical
investigation", Journal of Policy Modeling 26, pp. 627-639.
Alemayehu Geda (1999), "Profile of Ethiopia’s Export Performance’", Proceedings of
the Ethiopian Economic Association Annual Conference on the Ethiopian
Economy, pp. 271-282
Alemayehu Geda (2006), Openness, Inequality and Poverty in Africa, DESA Working
Paper No. 25.
Alemayehu Seyoum and Tadele Ferede (2004). The Structure of the Ethiopian Economy
- A SAM-based Characterization. Paper prepared as a background paper for the Ethiopia
Country Economic Memorandum: World Bank, "Ethiopia-A Strategy to Balance
and Stimulate Growth", A Country Economic Memorandum, Report No. 29383ET, Green Cover, the World Bank (January 2005).
Amdissa Teshome (2007), The Compatibility of Trade Policy with Domestic Policy
Interventions in Ethiopia
Amsden, A.H. (1989), Asia’s next giant: South Korea and late industrialization, Oxford
University Press, Oxford, UK.
Bacchetta, Marc (2007), Releasing Export Constraints: The Role of Governments, AERC
Research Project on Export Supply Response Capacity Constraints in Africa,
Paper No. ESWP_01.
51
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Bae, Jin-Young, “Incentive Structure and Its Changes in the Korean Industrial Policy
Regimes from 1962-1997”, Journal of the Korean Economy, Vol. 2, No. 2, Fall
2001: 297-331.
Baldwin, R. E. (1979). “Determinants of Trade and Foreign Investment: Further
Evidence”, Review of Economics and Statistics, 61: 40-48.
Balassa, B. (1971) The structure of protection in developing countries, Baltimore: the
johns Hopkins university press
Balassa, B. (1981) The newly industrializing developing countries after the oil crisis
Weltwirtschaftlisches Archie 117:1
Balassa, Bela, et. al., (1982) Development Strategies in Semi-industrial Economies,
Johns Hopkins University Press.
Balassa, B. (1985) Out ward orientation the world bank July. Discussion paper NO.NRD
148)
Bhagwati, J, (1978), Anatomy and consequence of exchange rate control regimes.
Cambridge, mass, Ballinger publishing company
for national bureau of
economic research
Bhagwati, J, (1987), Out ward orientation: Trade issues. In v. corbo, M. Goldstein and M.
khan (ed). Washington, DC, international Monetary Fund and the World Bank
Bhagwati, J, (1988), Export-promoting trade strategy: Issues and Evidences. The World
Bank research observer
Biggs, Tyler (2007), Assessing Export Supply Constraints: Methodology, Data, and
Measurement, AERC Research Project on Export Supply Response Capacity
Constraints in Africa, Paper No. ESWP_02
Block, Walter, Resource Misallocations, Externalities, and Environmentalism in the U.S.
and Canada, Proceedings of the 24th Pacific Northwest Regional Economic
Conference, 1990, pp. 91-94
Bougheas, S, Demetriades, P and Morgenroth, E. (1999), "Infrastructure, transport costs
and trade", Journal of International Economics 47, pp. 169-189.
52
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Brainard S.L., (1997), An empirical assessment of the proximity concentration tradeoff
between multinational sales and trade, American Economic Review 87 (4), 520544.
Chaudhry, Shahid A, and N, Hamid (1988) Pakistan. In Asian development bank (ed)
Foreign Trade barriers and Export growth. Manila Asian development bank
Choi, H. (1984), The Economic History of Korea, Seoul, Bakyongsa Co.
Collier, P. (2007), The Bottom Billion: Why the poorest countries are failing and what
can be done about it: oxford university press
Dal Hyun Kim (2010), Development experience of the Korean economy: The Role of
Government in management of economic development in Korea, Graduate
school of pan pacific international studies, Kyung-Hee University; Kyung Hee
university press
De Gregorio, J. (1992), "Economic growth in Latin America", Journal of Development
Economics 39, pp. 58-84.
De Mello, L.R. (1997) "Foreign Direct Investment in developing countries and growth: A
Selective Survey", Journal of Development Studies 34(1), pp. 1-34.
De Mello, L.R. (1999), "Foreign Direct Investment-led Growth: Evidence from time
series and panel data", Oxford Economic Papers 51, Oxford University Press.
Dunning (1977) Determinants of ownership advantages: Otago Management Graduate
Review
Eung-Kyuk Park & Chang Seok Park (2010), Korea from Rags to Riches; The Korea
institute of Public Administration
Ethiopia Export performance review, Ethiopia Revenue and Custom authority, (2010)
Francois, Joseph and Manchin, M. (2006), "Institutional Quality, Infrastructure, and the
Propensity to Export"
Feenstra, R. C. (2002), "Border Effects and the Gravity Equation: Consistent Methods for
Estimation", Scottish Journal of Political Economy 49(5).
53
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Fischer, S. (1993) The role of macroeconomic factors in growth, Journal of Monetary
Economics, 32, pp.485-512.
Fugazza, Marco (2004), Export Performance and Its Determinants: Supply and Demand
Constraints, Policy Issues in International Trade and Commodities Study Series
No. 26.
Hakkala, Katarina and Per Ola Nilsson (1997) ‘Trade Liberalisation under Transition in
Vietnam: A Study on Trade and Specialisation’, Minor Field Study Series No.76,
Department of Economics, University of Lund.
Hausmann, Ricardo, Jason Hwang, and Dani Rodrik, “What You Export Matters,”
Harvard University, April 2006.
Helpman, E. (1984). “A Simple Theory of International Trade with Multinational
Corporations” Journal of Political Economy, 92(3): 451-471. .
Hobday, M. (1994) Export-led technology development in the four dragons: the case of
electronics, Development and Change, 25, pp.333-63.
Hoekman, B. and S. Djankov (1997). “Determinants of Export Structure of Countries in
Central and Eastern Europe”, The World Bank Economic Review, 11(3): 471487.
Imbs, Jean, and Romain Wacziarg, “Stages of Diversification,” American Economic
Review, 93(1), March 2003, 63-86.
J.Weiss (2005) Export Growth and Industrial Policy: Lessons from the East Asian
Miracle experience ,ADB Institution discussion paper.
Joosten, Frank (2007), “Development Strategy for the Export Oriented Horticulture in
Ethiopia”, Wageningen University and Research (WUR), Netherlands.
Khan, Ashfaque H., A. Malik, and L.Hasan (1995) Exports, Growth and Causality: An
Application of cointegration and error correction Modeling, The Pakistan
Development Review
54
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Kim, J. and Lau, L. (1994) The sources of growth of the East Asian newly industrialized
Countries, Journal of the Japanese and International Economies, 8, pp.235-71.
Kim, Jeongryum, From a Least Developed Country to a Developed Country, 2006 (in
Korean).
Kong Dan Oh (2010), Bureaucracy and Think Tanks, Korea from rags to riches, KIPA
Koo, B.Y. (1986), The role of government in Korea’s industrial development, in K.U.
Lee (ed.) Industrial Development Policies and Issues, Seoul: Korea Development
Institute.
Korea Trade Insurance Corporation (K-sure), Export Insurance Magazine, K-sure: Seoul,
January-February 2010 (2010a).
Kravis, I.B. and Robert, E. Lipsey (1982). “The Location of Overseas Production and
Production for Export by US Multinational Firms”, Journal of International
Economics, 12: 201-223.
Krugell W. F. Naudé W. A. &, (2007). "Investigating geography and institutions as
determinants of foreign direct investment in Africa using panel data," Applied
Economics, Taylor and Francis Journals, vol. 39(10), pages 1223-1233
Krueger, Anne O. (1978) Foreign Trade Regime and Economic Development:
Liberalization attempts and consequences, NBER, Bar linger publishing
company, Cambridge Massachusetts.
Krueger, Anne O. (1981) Export Led industrial growth –Reconsidered. In W. Hong and
L.B. Krause (ed) Trade and Growth of the Advanced Developing countries in the
pacific Basin. Seoul: Korea Development Institute
Krueger, Anne O. (1984) Trade policies in Developing countries. In R.W.Jones and
P.B.kenen (ed) Handbook of international Economics1. Amsterdam: north
Holland
Krueger, Anne 0. “Import Substitution Versus Export Promotion.” Finance
and Development 22 (June 1985): 20—23.
55
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Krueger, Anne O. (1994), The political economy of the Rent seeking society. American
economic review
Krueger, Anne O. (1997) Trade policy and Economic Development: how we learn.
American economic Review
Krueger, Anne O. (1997a) Factors affecting export growth and performance. Paper
presented at the commencement work shop on Asian exports: past trends and
future prospects, Manila: Asian Development Bank
Krugman, P. (1994), The myth of Asia's miracle, Foreign Affairs, 73, pp.62-4.
Kumar, N. (1998). “Multinational Enterprises, Regional Economic Integration, and
Export-Platform Production in the Host Countries: An Empirical Analysis for the
US and Japanese Corporations”, Weltwirtschaftlisches Archie, 134: 450-483.
Lall, S. (1978). “Trans nationals, Domestic Enterprises and the Industrial Structure in
Host LDCs: A Survey”, Oxford Economic Papers, 30: 217-248.
Lee, H.K. (1996), The Korean Economy: perspectives for the twenty first century, State
University of New York Press, New York, USA.
Mah, Jai S. and Yunah Song, “The Export Insurance System of Korea: Its Implications
on the Trade Regulations in the Global Trading System”, Journal of World Trade,
Vol. 35, No. 4, August 2001: 603-614.
Mah, Jai S., “Export Promotion and Economic Development of Korea”, Journal of World
Trade, February 2006.
Mah, Jai S., “Government-led Export Promotion in Light of Distributional Fairness in the
Global Trading System”, Journal of Economic Issues, Vol. 45, No. 4, December
2010: 877-894 (forthcoming).
Markusen (1983), Substitution in Markusen's Classic Trade and Factor Movement
Complementarity Models
Nayyar, D. (1978). “Transnational Corporations and Manufactured Exports from Poor
Countries”, Economic Journal, 88: 59-84.
56
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Nurkse, R. (1961) Balanced and Unbalanced growth. In G Haberler and R.M. Stern (ed)
Equilibrium Growth in the world Economy, economic Essays by Ranger Nurkse.
Harvard economic studies 118
O’Sullivan, P. J. (1993). “An assessment of Irelands’ Export-Led Growth Strategy via
Foreign Direct Investment, 1960-1980”, Weltwirtschaftlisches Archive, 129:
139-158.
Park, Y.C. (1994), Korea: development and structural change of the financial system, in
H.T.Patrick and Y.C. Park (eds.) The Financial Development of Japan, Korea
and Taiwan: growth, repression, and liberalization, Oxford University Press,
Oxford and New York.
Park, Y.C. and Kim, D.W. (1994), Korea development and structural change of the
banking system, in H.T. Patrick and Y.C. Park (eds.) The Financial Development
of Japan, Korea and Taiwan: growth, repression, and liberalization, Oxford
University Press, Oxford and New York.
Petrohilos, G. A. (1989). “Foreign Direct Investment and the Development Process: The
Case of Greece”, Avebury: Gower Publishing Company Ltd.
Pfaffermayr, M. (1996). “Foreign outward Direct Investment and Exports in Austrian
Manufacturing: Substitutes or Complements?” Weltwirtschaftlisches Archive,
132(2): 501-522.
Prebisch, R. (1959) International Trade and payments in an Area of Coexistence:
commercial policy in the under developed countries. American economic Review
Ranis, G. (1989), The political economy of development policy change: a comparative
study of Taiwan and Korea, Korea Development Institute, Working Paper No.
8916, Seoul, KDI, June
Ricardo Hausmann and Dani Rodrik (2003), ECONOMIC DEVELOPMENT AS SELFDISCOVERY
57
International Faculty and Students Multi-Research Consortium
(IFSMRC)
Rehman, K. (1991). “Firms’ Competitive and National Comparative Advantages as Joint
Determinants of Trade Composition”, Weltwirtschaftlisches Archive, 127(1): 83
-97.
Rhee, J.C. (1994), The State and Industry in South Korea: the limits of the authoritarian
state, Routledge, London and New York
Sharma, K. (2000). “Export Growth in India: Has FDI Played a Role?”
at:http://www.econ.yale.edu/~egcenter/
Shewangizaw Sileshi. (2003), The Role of Diversification in Reducing Impacts of Export
instability on Ethiopian economic Growth: An Empirical investigation. M.A
thesis
Song, B.N. (1990), The rise of the Korean economy, Oxford University Press, Hong
Kong
Tatyana Soubbotina (2004), Beyond Economic Growth: An introduction to sustainable
development (2nd ed), The world bank, Washington, D.C
Todaro, M. P. (1997) “Economic Development” Sixth Edition. New York: Longman.
Togan, S. (1993). “How to Assess the Significance of Export Incentives”: An
Application to Turkey”, Weltwirtschaftlisches Archive, 129 (4): 777-799.
Todaro P, Michael; Smith, Stephen (2006) Economic Development, 9th edition, United
States of America: Pearson Education Limited, Harlow
UNCTAD (2005), "Determinants of Export Performance: Developing Countries in
International Trade", Trade and Development Index 2, pp. 49-79.
UNCTAD (2007), Market Access, Market Entry and Competitiveness, Background note
by the UNCTAD Secretariat, TD/B/COM.1/83.
UNCTAD (2008), Export Competitiveness and Development in LDCs: Policies, Issues
and Priorities for LDCs for Action during and Beyond UNCTAD XII,
UNCTAD/ALDC/2008/1
Vernon, R. (1966) International investment and international trade in the product cycle.
Quarterly Journal of Economics 80, pp. 190-207.
58
International Faculty and Students Multi-Research Consortium
(IFSMRC)
V. Chandra, J, Boccardo and I. Osorio (2007), Export diversification and
Competitiveness in Developing Cou working paper
Wacziarg, Romain & Welch, Karen Horn, 2003. "Trade Liberalization and Growth: New
Evidence," Research Papers 1826, Stanford University, Graduate School of
Business
Weissleder, L. (2009) Foreign Direct Investment in the Agricultural Sector in Ethiopia
in ECOFAIR TRADE DIALOGUE, Discussion Papers.
World Bank (1991) World Development Report, New York: Oxford University Press,
Various Issues.
World Bank (1993), The East Asian Miracle: Economic Growth and Public Policy,
Oxford University Press, London and New York.
Yoo, J. (1990), The industrial policy of the 1970s and the evolution of the manufacturing
sector in Korea, Korea Development Institute Working Paper, No.9017, Seoul:
Korea Development Institute.
Young, A. (1994a), Accumulation, exports and growth in the high performing Asian
economies: a comment, Carnegie-Rochester Conference Series on Public Policy,
No. 40.
Young, A. (1994b), `Lessons from the East Asian NICs: A contrarian view, European
Economic Review, 38, pp.964-73
Websites
http://www.mor.gov.et/
http://www.moi.gov.et/
http://www.google.com/url?sa=D&q=http://www.nbe.gov.et/&usg=AFQjCNFVEYpO1s
mXfhlz7VsCdIWiZdoo7A
http://www.mofed.gov.et
http://www.ethiopia.gov.et/English/MOTI/Pages/PrivacyPolicy.aspx
http://www.ethioinvest.org/
59
International Faculty and Students Multi-Research Consortium
http://www.gso.gov.vn/default_en.aspx?tabid=472&idmid=3
http://www.koreaeximbank.go.kr, 2004
60
(IFSMRC)