Kenya and Ethiopia cement cross-border trade relations

By Macharia Kamau

Kenya and Ethiopia are working on a framework that enhances trade and cross-border investments following a meeting between political leaders from the two countries.

A meeting at State House, Nairobi, attended by President Kibaki, Pime Minsiter Raila Odinga, and Ethiopian Prime Minster Meles Zenawi agreed to set up a bilateral trade agreement.

Zenawi was in the country for the ground-breaking of the Sh2 trillion Lamu Port-Southern Sudan-Ethiopia Transport (Lappset) Corridor Project that took place Friday morning.

Prime Minister Raila Odinga will spearhead the process of coming up with the Special Status Agreement to fast track the deal.

The announcement on the creation of the bilateral framework was made when Odinga hosted Zenawi Friday evening in Nairobi at a Kenya-Ethiopia business forum.

Odinga said the special status agreement would play part in increasing intra-African trade that has over the years failed to pick up due to inadequate infrastructure connecting the continent.

"There is a huge potential that exists between the two countries that we have not exploited. The demographics are in our favour but we have not taken advantage to increase trading amongst ourselves," Odinga said.

"Trade today is usually between African countries and other countries of the world. There is little intra-African trade, which accounts for about 10 per cent of trade by African countries.

This is not the case elsewhere as for instance intra-European trade accounts for about 60 per cent of trade by European countries." Odinga urged the two countries to focus on value addition than selling raw materials.

Zenawi said Ethiopia’s liberalised economy - including manufacturing and agriculture was good for investment though the government controls some sectors for growth for indigenous businesses.

"We have created an enabling environment to help private firms set up sectors like in manufacturing, agriculture and tourism but there are restrictions in areas like retail trade where we create space for Ethiopian youths to earn some money and learn business," he said.

Quoting South Korean model, Zenawi said the state and the private sector have a symbiotic relationship that aid trade. "The state does what the private sector cannot do to create an enabling environment. This is meant to supplement and not limit the private sector."

Zenawi cited Ethiopia’s longstanding internal conflict as setback to trade with Kenya and her neighbours. "We have had conflict for many years and this has made it almost impossible to trade without neighbours. But we have been mending our ways in the recent years and our economy has grown at over 11 per cent," he said.

He said Ethiopia was undertaking major infrastructure projects including construction of railways, power transmission lines and roads that will link Addis Ababa to the neighbouring countries of Djibouti, Sudan and now South Sudan.

At the forum, the Kenya Association of Manufacturers (Kam) expressed concerned over the protectionist policy and highly regulated nature of Ethiopian economy, noting they have hindered Kenyan firms from venturing in to into the country.

Jaswinder Bedi chairman Kam said Kenya could be the largest investor to Ethiopia as the case in Tanzania and Uganda if the Government liberakised the economy.

Other than Lappset, Kenya and Ethiopia will trade in electricity and a highway linking Addis Ababa to Nairobi as part of the Trans-African highway.

Kenya had planned to buy 500 megatts of power from Ethiopia once the country starts generating more power from its dams.