Jul 1 , 2023

Officials of the Ministry of Trade & Regional Integration (MoTRI) have proposed legislation designed to stimulate cross-border trade with South Sudan and Djibouti, following over a year of economic stagnation in the broader region. As part of the new bill, special licenses will be granted to local traders to enable small-scale transboundary commerce, formalising the exchange between border communities and putting a stop to the escalating contraband trade.

The new bill draws from the bilateral protocol for cross-border trade with Djibouti, inked eight years ago, followed by a similar agreement with South Sudan two years later. These agreements were employed as key references in authoring the proposed legislation. However, the protocol has seen delayed implementation due to the ravages of the Covid-19 pandemic and ongoing political instability in South Sudan.

Federal trade officials point out that contraband trade has burgeoned under the guise of local community trading activities exploiting the porous border. Ethiopia, which shares a 375km border with Djibouti and an 847km border with South Sudan, is targeted for regulation in the wake of increasing illicit trade practices.

Communities are primarily engaged in pastoral farming, accustomed to bartering livestock, dairy products, sorghum, maise, and fruits. These communities have witnessed a substantial shift in their economic landscape due to the prohibition of cross-border trade.

Regional authorities in Afar and Somali states independently issued yearly permits.

The directive sanctions the import of up to 20 commodities like edible oil, sugar, and rice, equivalent to 1,000 dollars at current exchange rates, through the Djibouti border. From South Sudan, goods are restricted to an inflow capped at 20,000 Br, with 18 inbound and 15 outbound items of agricultural produce, including equipment. The frequency of trips for traders from both countries is limited to twice a month.

Seven Weredas in Afar Regional State, less than 100Km from the Djibouti border, had issued permits for 820 traders after the bilateral protocol was signed in 2015.

Despite these rules, Tages Mulgeta, head of international and regional integration at the Ministry, says that no firm decision has been made on the number of licenses to be issued. The Ministry is closely examining the potential influence of this decision on the facilitation of illicit foreign exchange transactions.

"Due to the customs office lacking a separate system to register these transactions, traders operating near the borders rarely interact with financial institutions or move significant shipments," said Tages.

This situation, Tages acknowledges, obscures the true extent of the trade volume.

Customs authorities reported that they had seized goods worth over 10 billion Br in the past year intercepted by 99 branch offices, suggesting a high level of illicit activities. Officials have identified that previous permits issued by regional states were exploited by exporters, fueling the growth of contraband trade.

Abdu Ali, the head of inspection & monitoring at Afar Regional State Trade Bureau, echoed this sentiment.

"Exporters used permits to transport unauthorised goods," said Ali. "The permits were initially designed to support small-scale traders in border towns, allowing them to source goods from neighbouring countries for their communities."

However, the Ministry's initiative has not been met without criticism.

Abdu urged a revision of the price caps included in the proposed legislation, asserting that they fail to reflect current market prices.

The draft legislation is scheduled for review and public debate in the coming week, with economists questioning its practical applicability, partly due to the administrative burdens it introduces.

A distinguished economist, Atlaw Alemu (PhD) anticipates that the legislation could exacerbate contraband trade in border areas.

"The rise in contraband trade is driven by bureaucratic red tape, unreasonable duties, and widespread bribery," Alemu said.

He urged reducing duties for communities around the borders, encouraging legitimate trade through official channels.

The legislation has sparked hope among the pastoralist communities devastated by the trade prohibition imposed a year ago. They are struggling with severe drought and surging inflation, making essential goods unattainable.

Umer Ali, a trader in Afar Regional State and a father of eight, is one of these pastoralists. He sees the proposed change as a lifeline. With a sizable herd of goats, Umer would cross the border into Djibouti to barter them for essential goods like rice, edible oil, and pasta.

However, concerns remain about the limited amount of permitted cash and items, casting a shadow over the prospects of cross-border trade.

PUBLISHED ON Jul 01,2023 [ VOL 24 , NO 1209]

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