Wednesday, January 18, 2023
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BusinessGov’t to overhaul logistics sector

Gov’t to overhaul logistics sector

As part of the ongoing economic reform program, the Ethiopian government is working to overhaul the national logistics sector, it was learnt.

The government is planning to cut the import-export transit time by half. A worksheet plan issued by the Office of the Prime Minister recently indicates that high cost of logistics is undermining the country’s overall trade competitiveness. The document cited limited participation of the private sector in the logistics sector as one of the shortfalls in the sector. It stated that lack of modern systems and inefficient customs clearance procedures are some of the key challenges.

“The bureaucratic and backward logistics system in Ethiopian is a dragging force in the export,” a coffee exporter told The Reporter. “It is a good news that the government is planning to overhaul the sector. But we need the government to start acting now,” he said.      

The Ministry of Revenues is planning to launch a customs single windows service. The administration of Prime Minister Abiy Ahmed (PhD), whose focus is on economic liberalization, expressed commitment to enhance the participation of the private sector in the entire logistics supply chain. There is also an initiative taken by the administration to diversify the country’s port access.

The expected outcome of the logistics turnaround strategy is to reduce the import-export transit time by half by 2020. “Reduce the number of documents required for import and export by half, reduce the average duel time of imported goods to two days in dry ports and increase general cargo carried by multi-modal transport system coverage to 90 percent,” the document stated.

With regards to the export and revenue mobilization, the government revealed that the total export of goods and services does not exceed 10 percent of the GDP. The worksheet plan stated that the export performance of the country is alarmingly declining. In the Second Growth and Transformation Plan, the export target for 2018 was eight billion dollars but the government managed to secure only 2.9 billion dollars.

Narrow tax base, unfair tax system, high tax compliance cost and low tax collection are the critical challenges in revenue mobilization. The government is planning to rationalize and improve tax incentives to increase and diversify exports. The Ministry of Revenues expressed a firm commitment to implement a system that would enable it to control contraband trade.

The document stated that the Ministry of Finance and the Ministry of Revenues would review all tax break and incentive schemes and revise as needed. The government plans to increase value added exports in selected agricultural products.

The government has set a target to increase share of exports to GDP to 15 percent and share of mining and manufacturing to total exports to 35 percent.

Ethiopia has applied for World Trade Organization (WTO) membership and has been working on the long tedious procedures. The government now plans to finalize WTO accession and Continental Free Trade Area (CFTA) by 2020.

The Ministry of Revenues is working to increase share of tax revenue to 15 percent of GDP and implement new system of VAT and excise tax.

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