The role of Government in promoting export: Comparative case study of Ethiopia, South Korea and Vietnam

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 trade deficit, because the return from exports is far less than the expense needed for imports. This export and import unbalance leads to the unstable export and ineffective macroeconomic management because the country lacks foreign currency, and eventually, Ethiopia is forced to look for additional source of finance to cost of its imports. The lack of Ethiopias own financial source has led the country to accumulate a significantly-sized external debt. This paper tries to find answers to the following questions: 1) why Ethiopias export has remained so weak in the past decades 2) how Korea and Vietnam has succeeded in boosting export, 3) what the link between private sector and government regarding financial credit is, and 4) how much FDI is important in export growth as well as what can be done to improve the nations export performance. This paper adopts the Herfindahl index, trend analysis, and SWOT analysis to compare and contrast the three countries. The analysis revealed that the Ethiopian economy remains highly dependent upon coffee production. From 1995 to 2010, coffee accounted for an average of about 44 percent of the country's total value of exports. Both the FDI inflow and the role of private sector in exports is much too low compared to South Korea and Vietnam. To find solutions to these problems, this paper suggests that Ethiopia promote export by encouraging FDI, by providing more incentives, introducing EPZ, and encouraging a wider role for the domestic private sector by supporting them using financial instruments.