The Effects Of Export Incentive Schemes On National Export Earnings Of Ethiopia

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In the past twenty-plus years, Ethiopia has been striving to promote the development of the export sector. The country has introduced various incentive schemes to encourage investors who are engaged in export activities. Nevertheless, the country's export performance remains low when compared to Sub-Saharan African countries, having one of the least Export to GDP ratios. This study analyzed the effects of fiscal and financial export incentive schemes on the nation export performance of Ethiopia by using annual time series data from 1995 to 2020. The study adopted the Autoregressive Distributed Lag model to investigate the short-run and long-run relationship between custom duty exemption and export credit on export performance. In addition, a qualitative approach, interview with high-level experts, was carried out to have an in-depth understanding of the quantitative findings. The bound test of the study revealed that there is a long-run relationship between export credit and export volume. Keeping other things constant, a 1% increase in export credit results in a 0.63% increase in export volume. This result can indicate that export credits have positive effects on export performance both in the short and long run. On the other hand, while fiscal incentive (custom duty exemption) has a significant and positive relationship with export volume in the short run, in the long run, it becomes statistically insignificant. The absence of a long-run relationship between custom duty exemption and export performance might imply incentives provided in the form of customs duty exemption are more assisting the first years of the business. The error correction term estimated in the research using the ADRL model was found to be negative and significant as predicted. Based on the findings of the study suggested the introduction of additional financial initiatives to improve credit, interest rate policies. On the other hand, it recommended reform measures such as revising the national input-output coefficient system and streaming the outdated accounting systems to improve the long-term impact of custom duty exemptions.

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The Effects Of Export Incentive Schemes On National Export Earnings Of Ethiopia

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