The Ethiopian government has signed agreements with Chinese ecommerce giant Alibaba to become its second Electronic World Trade Platform (eWTP) hub – a private sector initiative to facilitate cross border ecommerce. It sounds like a win-win. But is it?
Electronic World Trade Platform (eWTP) describes itself as a private sector-led initiative for public-private cooperation to incubate eTrade rules and foster a more effective and efficient policy and business environment for cross border electronic trade.
The scheme, which was set up by Alibaba founder Jack Ma in 2016 is to allow large multinational businesses and SMEs – to participate in cross-border commerce. Rwanda signed up to the scheme in September 2019, while Malaysia, Belgium and China are also participants. Alibaba expects that trade between the hubs will increase as the number of eWTP hubs increases.
Alibaba and Ethiopia see the eWTP as a key step in developing a digital economy in Ethiopia. In Ethiopia’s case it is trying to become a manufacturing powerhouse in East Africa – as a quick trip southeast out of Addis Ababa will lay testament to: the road to Bishoftu has countless new Chinese factories set to assemble vehicles and manufacture plastics, electronics, glass etc. The road also crosses under the new 759 km long railway linking Addis Ababa with the port at Djibouti handling almost all Ethiopia’s imports and exports. Chinese built, of course.
For Alibaba, which accounts for 80% of commerce revenues in China and has built an ecosystem of payment platform, online marketplace, cloud computing platform, logistics provider, social media platform, African markets offer almost virgin territory for online sales – regardless of where the goods originate. Facing strong competition in the broader online sector from Tencent and Baidu, Alibaba is looking to new markets as an engine of growth.
In June 2019 the Chinese city of Yiwu, reputedly the world’s largest wholesale market, became China’s second eWTP hub. Yiwu’s interest in eWTP is to open up export markets further for its manufactured goods. Here perhaps we get a sense of the future. Alibaba, acting like an arm of the Chinese government, is laying the ground for the flow of even more Chinese products into Africa.
Many consumers will welcome cheaper products. But small retailers across Africa are incredibly wary of the power of foreign retailers to destroy revenues in the traditional trade and outcompete on price. Furthermore, not least in Ethiopia, governments don’t want to add to the trade deficit and see precious hard currency exit the country: they want to increase domestic manufacturing, especially for commodity and low tech goods. And preferably they want to add the value in-country and see a knowledge transfer to improve skill levels among the workforce. Exactly what has happened in China through the past 3 decades.
Those conflicting goals have every opportunity to conflict with one another. And we expect they will. The question, just as it is for China’s belt and road initiatives in Africa, is whether the net benefits are worth the long term cost. And if they don’t, what kind of leverage do governments have against the powerhouse Chinese government?
