Misuse of import privileges hurting local manufacturers


In the Ethiopian year 2007 a law was passed to make it easier to import food and traditional clothing around the border regions. It allowed people living in those areas to import the items tax free and without foreign currency. The rational is that infrastructure issues make it more difficult to obtain these items from the capital city. This type of trading should involve small transactions among people living along the border. However, at the moment, single transactions of over 200,000 cartons are coming across the border. The imports are massive and the products are coming all the way to the center of the country and competing with local manufacturers who pay the requried taxes.
This is seriously affecting and discouraging local manufacturers as they pay tax unlike the people who import these products under this directive. This gives them an unfair advantage and is not what the sprit of the law intended.
Article 6.2 of the directive clearly indicates that people who misuse this rule to import products to the center of the country will be prosecuted. This is not only driving local manufacturers out of business but also discouraging all their efforts toward import substitution, which would save foreign currency for the country.
Among the categories that are tremendously affected by this directive is the pasta manufacturing industry. Ethiopia’s policy clearly supports the agro-processing industry. However, this directive is going to be a major bottleneck in the development of the sector unless something is done immediately to curb this problem.