1. The Role of ICTs in Facilitating Trade and Economic Growth in Ethiopia Assefa Admassie
2. Presentation Outline Introduction
Trade and ICT Landscape
Legal and Regulatory Framework
Private Sector Readiness for E-Business.
Conclusions and Recommendations.
3. Introduction….Cont’d Advances in ICTs have dramatically changed the World economy over the last few decades:
Advances in the Information Technology
(Computers usage for Storage, Processing & Retrieval)
Advances in the Communication Technologies
(Telecom & Computer Networks, Broadcasting, & the Internet)
Access to information and knowledge via ICT:
Makes business more competitive and Productive
Empower people with knowledge
Speed up and reduce the costs of production and transactions
Open new opportunities, perspective, but also new challenges.
4. 1. Introduction….Cont’d ICT use could also facilitate:
more transparent and accountable governance, delivery of public services, and
Improved quality and reach of health, education and other basic services.
ICTS enables other sectors to develop new functions and services.
It is now taking a central stage with e-government, e-commerce, e-learning and other internet-enabled activities.
5. 1. Introduction…cont’d Knowledge has replaced traditional inputs for growth
Demand for ICT products and services generate new job opportunities (tele centers)
In general, Significant spillover effects on economic growth:
1% ? stock of infrastructure?1% ? GDP (WB 1994)
Poverty also ? (the case of Grameen Bank village phone system)
Those who can best receive, process, adopt and innovate information are the winners!
6. 1. Introduction…cont’d ICT offers many promises and opportunities in trade transactions:
Trade transaction is a complex process
Involves Many documents and Many players
A trade transaction involves different actors.
Raw material and component supplier
Government authorities- export promotion/approval
Local transport and warehousing companies
Port and harbor authorities
Shippers (sea, air, road, rail, …)
Bank and insurance companies
7. 1. Introduction…cont’d Each has own set of paper forms and interactions with other organizations.
Trade occurs in physical space and moving goods requires time.
Time is, thus, an important Trade Barrier
Trade logistics costs are as important as tariffs
Each day saved is equivalent to 0.5% tariff
7% of the value of world trade is cost of administration of trade logistics (UNCTAD)
8. 1. Introduction…cont’d ICT is an important tool for facilitating trade transactions:
Trade facilitation imply:
Facilitating market access
By lowering technical barriers
Lowering transaction costs through
Improved trade logistics
Enhanced information flows.
Reduced transport costs
Transparent and harmonized regulations
Improved ports facilities and procedures
Efficient and transparent customs procedures
Simplified trade document processing and clearance processes
9. 1. Introduction…cont’d ICT should be viewed as a cost-effective tool to enable all sectors to realize their objectives better than through traditional means.
Given the profound promises and impacts of ICT on national economies countries need to embed ICT into their overall development strategies.
Hence, the awareness of policy makers is critical for ICT to enable development.
However, very little is known about the extent of ICT applications in trade and other sectors in Ethiopia.
10. 1.1. Motivation and Objective Objectives of the study
The main aim of this study has been to assess the use of ICTs in facilitating trade and the private sector’s readiness to use ICTs.
Methodology (several methods):
Systematic analysis and review of policy documents
Review ICT and trade statistics
Primary survey data
11. 2.1. General Overview of the Ethiopian Economy Ethiopia:
Is Among the poorest countries on Earth (PCI of $160)
Is primarily rain-fed low productive Agrarian economy
>15% children cannot celebrate their 5th birth day
47% of children are malnourished
871 per 100,000 MMR
48 million people do not have access to clean water
Only 17% have access to electricity
Average Ethiopian lives only 43 (F) yrs or 42 (M) yrs
12. 2.1. General Overview of the Ethiopian Economy
13. 2.1. General Overview of the Ethiopian Economy
14. 2.2. Trade Landscape: Several reforms and promotions in the trade sector
Contribution of export trade has been growing at about 7.4% - 1995/96 to 2005/06.
2009 is the target accession date to WTO
Ethiopia is also a member of COMESA
23 African countries (300 million pop.)
Member of NEPAD
Economic Partnership Arrangement (EPA)
15. 2.3. The Structure of Export (in million of USD)
18. 2.6. Overview of the ICT Landscape
19. 2.6. Overview of the ICT Landscape
20. 2.6. Overview of the ICT Landscape
21. 2.6. Overview of the ICT Landscape
22. -3- Assessment of the Policy Domain
23. 3.1. Policy Assessment Gov’t plays a vital role in the creation of enabling environment in the use of ICT for trade
Policy can enable or enhance adoption of ICT or act as a barrier and suppress the e-Economy.
Hence, the contribution of e-Commerce and e-Biz to growth ultimately depends on policy environment
24. 3.1. Policy Assessment …. Cont Main Strategies and Policies reviewed:
Rural and Agricultural Dev’t Policy
Customs Procedures & Regulations
Foreign Exchange Directives
Standardization & Quality Control
Draft ICT Policy.
25. 3.1. Policy Assessment …. Cont Development Strategies:
ADLI Has not made any concrete reference to the use of ICTs either in the production or distribution of goods and services.
SDPRP recognizes ICT as one of the capacity building programs.
PASDEP acknowledges that ICT is central to growth and poverty reduction.
26. 3.1. Policy Assessment …. Cont Sectoral Policies:
The Agric. and Rural Dev’t policy:
Recognizes the need for expanding telecom services up to kebele level.
The policy, however, makes no systematic reference as to how the development and application of ICT in the sector could be achieved.
The Trade Policy:
The Ethiopian Trade Point was established with objectives of:
Receiving, collecting, compiling and disseminating trade information,
Sending, receiving and distributing electronic trading opportunities,
Promoting domestic products at int’l market, Etc.
27. 3.1. Policy Assessment …. Cont Nevertheless, an up-to-date and interactive web-based database and information dissemination system does not still exist.
The Industrial Dev’t Policy:
articulates the importance of rigorous effort on the dev’t of ICT
It underscores the role of ICT for:
Proper income , expenditure and property registration for the tax system, etc.
28. 3.1. Policy Assessment …. Cont The Investment policy
Ethiopia has poor record in attracting FDI
Many licensed projects have not been implemented
One reason could be the underdeveloped ICT infrastructure
Requirements for an investment permit:
In person or photocopy of his power of attorney
Photocopy of memorandum and Article of Association
Photocopy of identity cards
All are paper-based
29. 3.1. Policy Assessment …. Cont No provision of ICT in processing investment licensing using
The Foreign Exchange Regime:
A number of financial liberalization measures have been undertaken since 1991.
payments for imports and export, can be made by:
Letter of Credit (LC)
Cash Against Documents (CAD)
Advance Payment (AP)
All are paper based documents!
30. 3.1. Policy Assessment …. Cont The Forex directives have no room for:
Electronic payment system for cross-border transactions
Electronic processing of imports and exports
Electronic application forms and
Banking is still done in the conventional way; “explicit consent”
Transaction security (e-transactions and e-payment) Privacy and safety are not yet in place.
31. 3.1. Policy Assessment …. Cont The Customs Procedures:
ECuA has made significant progress!
Customs automation (Automated System for Customs Data – ASYCUDA++)
Several branch offices have been networked.
Simplified declaration process using Direct Trade Input (DTI)
About 32 agents are remotely connected.
32. 3.1. Policy Assessment …. Cont The National ICT Development Policy:
A national ICT Policy was drafted.
EICTDA was established in 2003;
ICT Capacity Building program was launched in 2003.
The policy Acknowledges:
That ICT is an important tool for Ethiopia to enhance its development.
The need to develop of ICT as a sector or industry
physical and telecommunications infrastructure is underdeveloped.
33. 3.1. Policy Assessment …. Cont The Strategic Focus of the ICT policy:
Physical and ICT infrastructure;
Human resource development;
ICT industry and private sector development and e-commerce
The legal and regulatory environment;
34. 3.1. Policy Assessment …. Cont Policy strength:
The ICT policy has excellent intentions;
The intention to develop globally competitive private sector;
The introduction of tax incentives to create an attractive environment for ICT enterprise development;
Recognizing ICT infrastructure development as a critical factor for social and economic development;
Outlining the Goals and the strategic focus areas. Etc.
35. 3.1. Policy Assessment …. Cont Policy Gaps:
Fails to initially recognize the existence of a very weak private sector (including ICTs),
Too Many strategic focus areas:
Emphasis should be given to the most important issues.
Piecemeal approach in initiating infrastructure & public service projects (SCHOOL NET, WEREDA NET & TELECOM SERVICES EXPANSION);
Prolonged time taken to officially approve the ICT policy
THE LEGAL AND REGULATORY FRAMEWORK
37. 4.1. THE LEGAL AND REGULATORY FRAMEWORK Introduction:
The rapid development in the ICTs sector has brought about new challenges.
Regulators and policy makers are looking at creating responsive and dynamic legal and regulatory framework.
Generally there is a need for:
a Legal & regulatory framework which is aimed at facilitating instead of Strictly regulating e-commerce activities.
38. 4.1.THE LEGAL AND REGULATORY FRAMEWORK Some relevant Regulatory institutions have been established.
Ethiopian ICTs Development Agency (EICTDA);
Ethiopian Broadcasting Agency (EBA);
Ethiopian Telecommunication Agency;
Ethiopian Science & Technology Commission;
The National Bank of Ethiopia, etc.
39. 4.1. THE LEGAL AND REGULATORY FRAMEWORK Common challenges:
Limited institutional, managerial and technical capacity;
Fragmented effort to regulate ICT sector;
Low protection capacity of consumers in a digital environment such as the Internet.
There should be an institutional arrangement that ensures the development & maintenance of various legislation & institutions that could serve well in an electronic environment.
-5- Private Sector Readiness in Using ICTs in Trade (SMMEs)
41. 5.1. Introduction SMMEs:
Ensure efficient utilization of resources
Instant to respond to new opportunities
Create employment opportunities
Breeding ground for entrepreneurs in LDCs
Expand the tax base.
42. 5.1. Introduction ICTs can benefit SMMEs in many ways:
Increase efficiency of internal biz operation – inventory management, accounting and budget
Expand client base – e-Marketing
Facilitate capacity building – e-Learning/Training
Facilitate government services – business registration and filing of taxes.
BUT SMMEs need to have affordable access to:
Physical Infrastructure, and
Information & Communication facilities
43. 5.2. Background to the SMMEs Study With the aim of understanding the level and usage of ICTs by SMMEs in Ethiopia a small survey was organized.
Coverage of the survey: Addis Ababa
Sampling frame: list of registered and currently operational SMMEs
A two-stage stratified sampling - according to their area of operation and level of paid-up capital
Four areas of operation:
Customs and clearance
Export and import
Foreign trade auxiliary (import only is excluded)
44. 5.2.Background to the SMMEs Study
45. 5.2.Background to the SMMEs Study 40 SMMEs were selected for the study.
Missing contact address
Mismatch between registered and actual address
46. 5.3.Year of establishment and Location
47. 5.4.Enterprise and Owners profile Majority of the firm managers are male(93%)
80% have either college diploma or degree
48% are sole proprietorship, 43% partnership
The majority (65%) are engaged in retail and whole sale trade
More than 50% employ on the average less than five workers.
48. 5.5.ICT Penetration and Utilization What type of ICTs do they use?
Fixed line, mobile, fax, PBX, PCs, LANs, Website, internet.
49. 5.5.ICT Penetration …cont’d
50. 5.5.ICT Penetration …cont’d E-mail services are the most important use of internet.
About 45% stated that they have received sales orders via the internet.
About 45% of the firms have made orders via the internet to purchase goods and services.
Main reasons for using the internet for trade transactions:
51. 5.6. Availability of Online Gov’t Information and Electronic Forms Less than 40 percent indicated the availability of some Government Information online.
More than one-third indicated that some gov’t information and some electronic forms are available on the internet.
BUT, Most firms indicated that there is no legal and regulatory provision that authorizes the establishment of online cross border business!
52. 5.7. Constraints on the Use of ICTs by SMMEs Some of the factors constraining SMMEs’ participation in E-trade:
Absence of legal framework for electronic commerce
Inefficient utilization of ICTs within SMMEs;
Paper based export and exchange regulations;
Absence of a critical mass of robust ICT private sector to develop & Support ICTs in SMMEs
Inadequate ICT skilled workforce;
Insufficient information network & security safeguards;
Lack of sufficient support for trade facilitation & information provision;
Customers not ready to use Internet purchases.
Conclusions and Recommendations
54. 6.1. Conclusions Evidence shows that developing a national ICT strategy is vital to a country’s economic development.
The main goal of this project has been to assess the use of ICTs in facilitating trade and thereby identify the gaps in policy and regulatory frameworks to promote e-trade.
The result shows that:
Like many other countries, Ethiopia has not been able to fully benefit from developing the ICTs industry as a sector and using ICTs as an enabler.
55. 6.1.Conclusions Some positive Developments:
ICT is considered as a cross-cutting edge in the strategy documents (SDPRP, PASDEP).
Concrete efforts are observed on the expansion of ICTs infrastructure
Although, still more efforts are needed, Custom’s reform and modernization are encouraging.
The draft ICT policy has clear guiding principles for the implementation process.
The result of the SMMEs survey shows that:
some firms have started to be engaged in online trading
great interest to use ICTs in trade practices
56. 6.1. Conclusions Policy Gaps:
Sectoral policies did not clearly articulate the role gov’t can play to facilitate the use of ICTs.
Very little attention has been given to the role of the private sector’s participation in ICTs development
The current Foreign exchange directives have serious bottlenecks for the development of e-commerce
The absence of an appropriate legal and regulatory framework is one of the main constraints for the expansion of online trade.
Major Problems facing SMMEs:
absence of legal and regulatory framework
poor ICT related infrastructure
high cost of the technology
57. 6.2. Recommendations Efforts to create enabling policies, institutions, infrastructures, and skills, and to devise national strategies that promote adoption of ICTs must be scaled up.
Mainstream ICTs in all sectors of the economy.
Ensure ICT friendly legal and regulatory environment:
The use of electronic document
Legal recognition of electronic signature
Electronic document transaction recognition; (signature, payment)
E-trade compatible Export and Exchange regulations;
Liberalization of the telecom sector is long overdue.
58. 6.2. Recommendations Providing incentives for ICT development :
private sector capacity building programs,
trade facilitation centers
substantial investment in human capital development
Encouraging SMMEs to use ICTs by:
Improving the business processes
Simplifying registration and other legal processes
Providing business & ICT skills education at all levels
Improving the costs to access ICT infrastructure, the internet, Personal computers, etc.