A heated discussion was conducted on November 2 between three government agencies and members of the business community regarding the recently enacted revised Export
Trade Duty Free Incentive Scheme establishing proclamation slated to become operational next Saturday, November 10, replacing the old one which had existed for about a decade.
The main aim of this legislation is to make duty free tax products which could come from local or foreign sources to be used in the process of export trading as well as intending it to make the export trade more efficient and successful.It will help in facilitating in the interlinking of local-based raw materials and products process, so as to create a new and modern regimen to encourage traders and companies to boost their exports.
The three Government bodies who participated in the discussion were the Ministry of Finance and Economic Development (MoFED), the Ministry of Industry (MoI) and the Ethiopian Revenues and Customs Authority (ERCA).
The visibly unsatisfied members of the business community said the measures outlined in the proclamation were half-hearted and not enough;they also complained that they didn’t receive adequate notice to discuss the new legislation.
Fasil Tadesse, President of Ethiopian Textile and Manufacturing Association (ETGAMA) said his company and association is competing in the textile sector with established industries in Asian countries like Sri Lanka, Vietnam, Bangladesh and China and, in the shoe production sector, with countries like Italy and China. He said, this being the case, the sector needs a strong legal framework to support it.
“We used to be terrified, especially with regards to export delivery by ERCA, now it’s MoI’s turn,” said Fasil, adding that the low percent threshold of wastage being at seven percent of raw materials in the production process, was too meagre.
Another participant who said she is involved in the production of garment in the fashion industry said the threshold of wastage was also too low as her line of work requires perfection and as such, at each of the stages of production leading to the final stage where the finished product is realized, there is a need to get rid of unnecessary materials at the various stages.
Ahmed Nur, advisor to the State minister of Industry, asked how many of the audience have read a copy of the proclamation and stressed that the threshold for wastage of raw materials is not static and could be upgraded if and when it becomes necessary.
However MoI was not the only agency singled out for criticism, with ERCA receiving its fair share, with one member of the business community engaged in the leather sector questioning the competence of the authority to handle complex tasks.
He particularly asked how ERCA would handle situations in the leather sector where there is multiple product transition processes and where an exporting company needs the supply of raw materials and goods from industries engaged in the leather sector. He also raised the situation of a leather company which focuses on selling to the local market and how it can benefit from the proclamation as part of an import substitution strategy.
Yet another participant who came from D.H. Geda Industrial Business Group addressed his questions the customs authority and MoI querying on how some imported items can be very technical in the usage of a particular industry and whether there are professionals competent enough to evaluate their use.
He went further, asking if there is a verification mechanism in case a particular raw material or product is used for Research and Development Program with an aim of boosting the domestic industry and exports to exempt it from tax duties.
Desta Lambebo, an expert at MoFED, said the proclamation is intended to solve a range of problems related to the export sector and that there are directives with detailed procedures answering some of the questions raised from the aforementioned participants.
Girma Galelcha, Director at MoI, said the complaint about the low threshold of wastage of raw materials allowed in production process was a requirement that was not out of the ordinary from previous such legislations or either from other countries experiences and that it will help in the product interlink in sectors such as the leather industry.
He also said regarding incentives to local companies that sell their products are not covered under this particular proclamation rather in another legislation but that a company touting its products as being an import-substitution type have to fulfil criteria such as it being not less inferior to a similar foreign product and also not substantially expensive compared to its foreign counterparts.
Assurances and explanations from government officials however seem not to be able to soothe the assembled members of the business community who were seen leaving the meeting in droves, apparently unsatisfied with the officials.
One seemingly bitter participant who came from Anbessa Shoe Share Company said he is seeing his business, which was on the edge of a cliff previously, being driven downhill by the government’s action which he said is being caused by a lack of good will and capacity to implement legislations.
He further said the government bureaucracy, in every sense, is creating havoc in his work, because of the unreliablesupply in human resources, raw materials for industries as well as unsettled textile and leather industry and doubts the new proclamation is different in substance to the previous legislation it replaced in the name of efficiency and export promotion.
Tewodros Taye, Attorney General at ERCA, refuted this assertion saying that the proclamation has given many rights and privileges to businesses previously not afforded one and that punitivemeasures has to be proportionate to the incentives given.
“Every country has its own laws and ideologies” Tewodros said, adding that a person who stole 200 birr can receive punishment similar to another person who stole 200 million birr, because the criminal act was the same.
Ahmed, however, reassured the disgruntled businesspeople that the Ministry of Industry plans to hold monthly meetings regarding this new proclamation and its implementation, while offering the possibility that the directive passed with the aim of implementing the legislation can be tweaked in case it needs be.
He also asserted that one of the ways businesspeople can reduce bureaucracy they encounter is to make their business transactions computerized and as such ERCA should help them in this endeavour.
Ahmed told Capital on the sidelines of the meeting that the new proclamation as well as its implementation directive, when being drafted, had passed through the process of consultation, especially with the various business community members from the Trade, manufacturing and agricultura- based sectors to avoid past problems and incorporatethe experiences of other countries.