Question

Why is Ethiopia considered a “loser” in globalization? What are some positive and negative affects of globalization to Ethiopia’s society? Explain in detail.

Answer 1

Ethiopia, among the Sub-Saharan nations has liberalized its economic policies the most. The tariffs have been progressively reduced and non-tariff barriers have been eliminated on a large range of commodities. The country encouraged the private sector's role through removal of investment restrictions (such as investment capital ceiling and licensing). Various other policy reforms also enhanced the globalisation with the abolition of market control mechanisms such as compulsory quota delivery and pan-territorial fixed prices by farmers to public trading enterprises; promoting financial sector (such as insurance and banks) for private participation; privatisation of small, and medium-size state-run enterprises; and relaxing of controls on exchange rate. However in spite of the liberalizing the global policies, Ethiopia is still a loser and among the marginalized low-income developing nations in the in globalization. The exports of Ethiopia remain basically primary commodities, wherein the coffee alone contributed more than 50 percent of total international exchange earnings. Since the falling trend of primary commodities (especially coffee) in the global markets, the terms of trade for the country is declining. Because Ethiopia have not diversified its exports thus failed to accelerate its economic development.

The advantages of globalisation to Ethiopia includes is market opportunity. It allowed the country to export its agricultural products such as coffee, horticulture, cereals, tea, to international markets. Furthermore the importation of technology transfer, medication, skills, knowledge, and agricultural inputs such as fertilizer, modern education, and tourism helped in the nation's growth. The disadvantages are that foreign banks are not allowed to participate in Ethiopia’s financial sector directly. The legal structure is still in development and the business rules are also not developed fully; and causes problems in paying for imported and exported goods.