Lately, the Ethiopian Investment Commission (EIC) and the Ethiopian Revenue and Customs Authority (ERCA) organized a half day joint workshop to discuss on the quality and efficiency of Ethiopia’s trade regulatory system ranging against with the basic parameters of the World Bank’s Doing Business Report 2016.
In fact, the World Bank report measures the regulations that enhance business activity and those that constrain it. The study presents a detailed analysis of costs, requirements and procedures in all 10 methodology indicators such as Starting a Business; Dealing with Construction Permit; Getting Electricity; Registering Property; Getting Credit; Protecting Minority Investors; Paying taxes; Trading across boarders; Enforcing contracts; Resolving insolvency 1 across 189 countries.
It has become an indispensable means for private sector development, and also to propel regulatory reforms in developing countries. As it has been released for public, countries are ranked from 1 to 189 by ease of doing business focusing on regulations relevant to the life cycle of businesses.
According to the report, Ethiopia ranks 146th out of 189 globally and 20th among 48 Sub Saharan African countries. Based on the 10 indicators used for measuring the countries’ Doing Business suitability, Ethiopia ranks particularly below par in the area of starting a business (176th), getting credit (167th), trading across borders (166th), and protecting minority investors (166th).
In this regard, Senior Analyst with EIC Saron Lakew opposed that the World Bank’s Doing Business contest does not directly measures the macroeconomic conditions or the underlying strength of institutions, quality of infrastructure services, and the economy’s proximity to large markets. As she noted, the status of training and skills of the labour force, transparency of public procurement, prevalence of bribery and corruption, security of property from theft and looting were not considered for competition.
Commissioner Fitsum Arega also said that though the efficient service delivery expected from EIC and ERCA needs more improvement, there has been a significant change to make the nation an enviable place of doing business. Recognizing the fact that trade can promote faster growth and development and higher income per capital in an economy, the Ethiopian government showed its commitment to improve the country’s trade system from time to time.
Fitsum ascertained that EIC has been engaged in preparing conducive investment climate for the private sector to improve the country’s ranking on ‘Ease of Doing Business.’ Consequently, the Commission has been working closely with various stakeholders to achieve the industrialization goals through providing a favourable investment and business climate that could compete with regional and international businesses.
Approaching the solution, Saron explained that the government has also planned to place Ethiopia in a better rank than its current 104th position in Logistics Performance Index (LPI). Currently, logistics cost is 30 per cent of GDP and the goal is to reduce to less than 22 per cent by 2020. In addition, port dwell time will be reduced from 40 days to 3 days.
With regard to the New Customs Proclamation, ERCA Deputy Director General Moges Balcha explained that the newly customs legislation mainly focused on facilitating goods to licensed traders at the port using easy customs procedures. Thus, close to 99 per cent of the goods are treated under the green channel.
Moreover, Moges noted that Ethiopia is working towards establishing an Electronic Single Window for international trade. The authority has planned to use One Stop Border Post which is under construction – Ethio-Kenya (Moyale Border Post), and Ethio-Djibouti (Dawale Post for Rail Transport).
ERCA Customs Programme Development Directorate Director Goim Tibra on his part said that the New Customs Proclamation No. 859/2014 has been reformed under the Revised Kyoto Convention (RKC), and focused on facilitating goods at the port than controlling licensed traders.
Thus, the new customs procedures allowed authorized traders to take out their goods from port with the minimum information, Pre-arrival clearance of goods, Post-Clearance Audit, use of commercial records to self-assess duty and tax, and differed payment privileges. Full fledged customs clearance service including reconciliation of incentive schemes, Goim noted.
According to him, documents to export included bill of lading, certificate of origin, commercial invoice, customs export declaration, customs transit declaration, export bank permit, export license, and others. Similarly, agency agreement, tax identification (TIN) certificate, VAT certificate, import declaration, import license, and insurance certificate are some of the documents required to import goods, and should be enclosed with.
In short, trade facilitation can have an enormous effect on trade competitiveness. The more costly and time-consuming it is to export or import, the more difficult it is for local companies especially those in landlocked economies to reach international markets.
Likewise, Doing Business should capture other aspects of the business environment, such as security, market size, macroeconomic stability and the prevalence of bribery and corruption.
In sum, Doing Business was designed with two main types of users in mind: policy makers and researchers. It is a tool that governments can use to design sound business regulatory policies. Nevertheless, the Doing Business data are limited in scope and should be complemented with other sources of information. It is also an important source of information for researchers. It enables the competition helpful for the role of business regulation in economic development.
Though there has been a significant improvements in the service delivery in EIC and ERCA, it is important to communicate these improvements, and create accountability on the part of the relevant stakeholders. Because, Doing Business rankings can be improved only if improvements are well communicated. As the saying goes: “Justice must not only be done, but must also be seen to be done,” citizens can benefit from the result of the competition only if they are aware of the improvements.