Promoting Agricultural Value Chains:
In the OIC Member Countries
30
Technology and Innovation observed a new dynamism in the Dutch economy triggered by the
policy, as many parties have entered into dialogues and research agendas have been
coordinated within a sector.
2.2.2 Value chain promotion: The rapid growth of Ethiopia’s cut flower
export industry
Over the past decade, Ethiopia has been among the world’s fastest growing economies and one
of its most striking success stories is its cut flower industry. From a handful of farms in the late
1990s, Ethiopia grew into the second largest flower exporter on the African continent after
Kenya and the fourth largest non-EU country to offer flowers on the world market (EFE, 2015).
It all began when European growers started relocating their flower production towards
developing countries with favourable climatic conditions and low labour costs in the 1990s.
While countries like Kenya, Zimbabwe, Ecuador and Colombia soon managed to established
themselves as important production sites, the Ethiopian government was initially unaware of
the market opportunities offered by flower production. The few private floriculture companies
that existed struggled with significant obstacles, particularly related to land, input supply,
logistics and finance (Melese & Helmsing, 2010). In 2002, they formed the Ethiopian
Horticulture Producers and Exporters Association (EHPEA) and successfully lobbied for
government support to further develop the sector. Together with EHPEA the government
developed a five year action plan to have 1000ha under production by the end of 2007. To
meet this target, the government made state-owned land available at affordable prices,
especially near the airport, and offered air transport coordination. It also revised the country’s
investment code to create incentives for domestic and foreign investors, including duty-free
imports of capital goods and raw materials, easy access to bank loans, and exemption from
income tax for different periods of time, depending on the overall investment package.
As a result of these and other incentives, such as the abundance of low-cost labour, good
climatic conditions and cheap transportation, Ethiopia’s cut flower industry soon took off.
Flower exports rose from US$ 660,000 in 2001 to US$ 178.3 million in 2010/11 (Abiye, 2014)
and are projected to reach US$ 550 million by the end of 2016 (EFE 2015). Flowers are even
expected to overtake coffee as the leading export commodity.
To a large extent, the rapid growth of the floriculture sector is due to heightened levels of
direct foreign investment. While initially most flower farms and exporters were domestic
owned firms, the incentives by the government attracted investors from other African
countries and Europe, particularly from the Netherlands. The number of flower farms
operating grew from 10 in 2004 to currently over 84, of which 70 are either foreign-owned or
joint ventures with Ethiopian participation (Abiye, 2014).
More than 70 percent of Ethiopia’s floriculture produce is exported to the Netherlands (Abiye,
2014). The majority of flowers are still sold through the Dutch flower auctions but an
increasing amount is sold through direct contracts with supermarkets and fixed channels
(Gebreeyesus & Sonobe, 2012). Inherent in this trend is also the increased importance of
standards governing horticultural trade, such as GlobalGAP or the Milieu Project Sierteeld
(MPS) label. Already early on the Ethiopian industry recognised the importance of such
standards and, supported by the Ethiopia-Netherlands Horticulture Partnership, developed a
Code of Conduct aligned to international requirements.