It provides relief for Ethiopian khat farmers through export rule changes
Somalia is poised to begin formally exporting fish and fruit products to neighboring Ethiopia following the signing of a bilateral trade agreement last week.
The trade deal is aimed at curbing smuggling which had led Somalia to halt livestock exports previously. It also has provisions for trade in services and selected goods like the stimulant plant khat between the nations.
The signing ceremony in Mogadishu was co-chaired by Ethiopia’s Deputy Prime Minister and Foreign Minister Demeke Mekonnen and Somalia’s Deputy Prime Minister Salah Ahmed Jama, following a Senior Officials meeting between September 5-6, 2023.
A joint Ministerial Commission meeting between Ethiopia and Somalia was held in Mogadishu where the two countries put pen to paper on a Memorandum of Understanding (MoU) to strengthen bilateral trade ties.
Speaking to The Reporter about the agreement, Gebremeskel Chala, Ethiopia’s Minister of Trade and Regional Integration, said the deal aims to promote mutual benefits in the trade sector between the two nations.
“In order to increase production and marketing exchange, the government will play its role so that private business investors are active participants in order to eliminate illegal transactions,” he stated.
The Minister noted that unofficial trade between Somalia and Ethiopia was previously higher due to rampant smuggling. However, he assured that the new MoU provides a legal framework to formally facilitate trade in goods like livestock, cattle and other agricultural products from Ethiopia in return for Somali exports such as fish and fruits.
According to Gebremeskel, Ethiopian authorities provide assistance to private sector stakeholders to navigate bureaucratic hurdles and ensure a streamlined process for cross-border business activities, especially regarding the export of khat.
Khat occupies the top position among Ethiopia’s export items to Somalia, generating over a quarter of a billion annually when accounting for shipments also sent to Somaliland – a de facto independent region that is legally part of Somalia.
Kenyan khat merchants have had more success than their Ethiopian counterparts, as per Gebremeskel, due to advantages such as lower remittance costs, a bigger merchant network, and superior access to banking services.
In response, the Somali government aims to level the playing field for local khat exporters by extending the maximum delivery time to Somalia by 10 days and allowing shipments in larger volumes.
“The government was aware of this transaction and the two countries agreed on the relevant political decision at the government level. Senior Trade Officials reviewed the details technically and reached consensus,” he explained.