Investors request government support to resist the effect of Ethiopian termination from the African Growth and Opportunity Act (AGOA). Due to the conflict erupted last year between the federal government and the Tigray People’s Liberation Front (TPLF) on November 2, 2021, the U.S. President Joe Biden moved to suspend Ethiopia from the AGOA.
Temesgen Tilahun, Deputy Commissioner of the Ethiopian Investment Commission told Capital, following the commission’s discussion with investors, some investors have disclosed that they are working to find alternative market options while some investors have stated that they are planning to cut off their production until a better time comes and have asked the government to support them, in that accord.
As the commissioner elaborated, EIC is carefully inspecting the operation of investors and having encouraging discussions on the problems investors face. Moreover, the commission is preparing a strategy which includes different stakeholders to support investors.
Rearranging tax and tariffs, expanding duty free schemes, giving loan relief, minimizing transport subsidy and also minimizing shade leasing cost are some strategies to be used, the deputy commissioner indicates.
Since Ethiopia is not a WTO Member State, the country’s standard tariff schedule for access to the US market has far higher tariffs than would be the case under normal tariff relations (NTR). A loss of AGOA removes preferential access to 6,500 tariff lines.
Ethiopian officials had warned the suspension could take away 1 million jobs, disproportionately hurting poor women who are the majority of garment workers.
Temesgen explained that one of the efforts that the government is working on is to change the decision of the US government and also going forward, perhaps finding alternative market and increasing the product is the mainstream market which will be impactful for the future.
In a statement issued by the Ministry of Foreign Affairs, “removing the preferential agreement will affect the livelihoods of more than 200,000 low income families, mostly; women who have got nothing to do with the conflict, it will also considerably impair the lives of one million people who are engaged in the supply chain ecosystem.”
The ministry expected a balanced view on the situation from the international community and asked the US government to reverse its decision that may only embolden the terrorist group while endangering the aspirations of Ethiopians to extricate themselves out of poverty.
Ethiopia is one of three African countries alongside coup hit Guinea and Mali which will lose access to the scheme from January 1st.
AGOA brings Ethiopia about $100m in “hard cash” annually and directly generates employment for about 100,000 people, Ethiopia exported 237 million dollar duty-free to the U.S. last year, U.S. Commerce Department data said.
Almost half of Ethiopia’s 524 million dollar in exports to the US in 2020 utilized AGOA preferences – mainly for apparel and footwear, two sectors reliant on AGOA preferences with most of the exporters found in Industrial parks.
From the total 24 Industrial Parks developed in the country, 22 are now in operation and the country has managed to attract more than 250 domestic and foreign investors which till August 2021 created employment opportunities for 86,837 unskilled laborers and more than twenty thousand posts for skilled labor and graduates, excluding the three Industrial Parks in Tigray region which have ceased operations for the last one year.
According to the IPDC inclusive of the ones in the Industrial Park context, currently more than 65 textiles and apparel, and 67 major leather products, and gloves manufacturing industries employ over 200,000 direct jobs of which 80 percent of them are women and youth and generate about 230 million dollars per annum.