Hostname: page-component-8448b6f56d-qsmjn Total loading time: 0 Render date: 2024-04-23T16:07:43.078Z Has data issue: false hasContentIssue false
  • English
  • Français

Endogenisation or enclave formation? The development of the Ethiopian cut flower industry*

Published online by Cambridge University Press:  03 February 2010

Ayelech Tiruwha Melese  and
A.H.J. (Bert) Helmsing
Ayelech Tiruwha Melese*
Affiliation:
Dir Foundation, Nieuwpoortstraat 90-D, 1055RZAmsterdam, The Netherlands
A.H.J. (Bert) Helmsing*
Affiliation:
Institute of Social Studies, P.O. Box 29776, 2502 LTThe Hague, The Netherlands
*
Email: eyeyou94@gmail.com
Email: helmsing@iss.nl
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper examines the evolution of the Ethiopian cut flower industry, illustrating how rapidly a potential comparative advantage can be realised. But the question is to what extent a country benefits from this in the long run, if foreign direct investment is the principal driving force. Will the new industry become an enclave, or will it be accompanied by a process of building local capabilities, a process which we denominate endogenisation? A value chain framework is used to analyse the industry and to develop a number of indicators on the development direction. The cut flower industry in Ethiopia is characterised by a dominant role of Dutch foreign investors, Dutch trade auctions which dominate the export trade, and the Dutch development cooperation which plays an important role in the development of the sector. This raises the question to what extent this triple role of the Dutch contributes to endogenisation or to enclave formation.

We conclude that endogenisation is a two-way process. It depends both on the degree to which FDI has an interest to draw on domestic firms, enter into relationships and share technologies; and on the interest and ability of domestic firms to take up such opportunities, and on the creation of supporting institutions and infrastructures to make this take-up possible. The latter rests largely with government. Endogenisation is taking place to some extent and at a very incipient stage. Dutch FDI has little direct interest to share technologies, but there is joint collective action on non-core activities, notably transport, which constitutes the largest item in the total cost. Dutch cooperative flower auctions are an open and vital trade channel giving Ethiopian flower growers access to international markets. The Ethiopian government has promoted the industry, making available land and low cost finance; and with the assistance of Dutch bilateral cooperation it is creating trade standards and supporting knowledge institutions to train skilled staff. The main challenge is Ethiopian entrepreneurship: many are attracted by the high growth and profitability of the industry and can run a business in Ethiopia, but lack the technical competence to meet growing competition in the industry.

Type
Research Article
Information
The Journal of Modern African Studies , Volume 48 , Issue 1 , March 2010 , pp. 35 - 66
Copyright
Copyright © Cambridge University Press 2010

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

*

The authors would like to acknowledge the useful comments from two anonymous referees and from the editor of JMAS.

References

REFERENCES

Ammerlaan, F. 2005. ‘Chances for the Ethiopian floriculture: competitive position and markets for the Ethiopian rose production industry’, Master's thesis, University of Amsterdam.Google Scholar
Best, M. 1990. The New Competition: institutions of industrial restructuring. Cambridge: Polity Press.Google Scholar
Centrum Bevordering Importen uit Ontwikkelingslanden (CBI ). 2006. ‘CBI market survey: the cut-flowers and foliage market in the Netherlands’, Rotterdam: CBI.Google Scholar
Dicken, P. 2003. Global Shift: reshaping the global economic map in the 21st century. London: Sage.Google Scholar
Dolan, C. & Humphrey, J.. 2000. ‘Governance and trade in fresh vegetables: the impact of UK supermarkets on the African horticulture industry’, Journal of Development Studies 37, 2: 147–76.CrossRefGoogle Scholar
Elshof, P. 1996. ‘The Dutch flower sector: structure, trends and employment’, ILO working paper 120. Geneva: ILO, available at: http://www.ilo.org/public/english/dialogue/sector/papers/flrsect/flrsect4.htm, accessed 13.11.2007.Google Scholar
Ethiopia National Strategic Team (ENST). 2006. ‘Growing out of poverty: a strategic direction in the agricultural sector of Ethiopia’, paper presented for International Trade Center. Geneva, ITC, available at: http://www.intracen.org/wedf/ef2006/global-debate/Country-Team-Papers/Ethiopia_Paper.pdf, accessed 4.11.2007.Google Scholar
Gereffi, G. 1994. ‘The organization of commodity chains’, in Gereffi, G. & Korzeniewicz, M., eds. Commodity Chains and Global Capitalism. London: Praeger, 92–121.Google Scholar
Gereffi, G., Humphrey, J., Kaplinsky, R. & Sturgeon, T.. 2001. ‘Introduction: globalization, value chains and development’, IDS Bulletin 32, 3: 1–10.CrossRefGoogle Scholar
Gibbon, P. 2001. ‘Upgrading primary production: a global commodity chain approach’, World Development 29, 2: 345–63.CrossRefGoogle Scholar
Global Development Solutions (GDS). 2006. ‘An overview of the integrated value chain analysis of selected strategic sectors in Ethiopia’, power point presented for the government of Ethiopia and the World Bank, Addis Ababa, 23 May.Google Scholar
Görg, H. & Strobl, E.. 2005. ‘Foreign direct investment and local economic development: beyond productivity spillover’, in Moran, T., Graham, E. & Blomström, M., eds. Does Foreign Direct Investment Promote Development? Washington, DC: Institute for International Economics, Center for Global Development, 137–55.Google Scholar
Groupe de Recherche et d'Échanges Technologiques (GRET). 2006. ‘Horticulture in Eastern and Southern Africa (ESA)’, Sustainability impact assessment (SIA) of the EU-ACP economic partnership agreements, Phase 3, available at: www.sia-acp.org/acp/.../20070516-Rapport-SIA-Horticulture.pdf, accessed 29.10.2007.Google Scholar
Helder, J. & de Jager, A.. 2006. ‘Ethiopian-Netherlands Horticulture Partnership’, report on agenda setting mission, 29 May–2 June.Google Scholar
Helmsing, A. H. J. 2001. ‘Externalities, learning and governance: new perspectives on local economic development’, Development and Change 32, 2: 277–308.CrossRefGoogle Scholar
Helmsing, A. H. J. 2005. ‘Local economic development in Africa: new theory and policy practices’, in Egziabher, Tegegne Gebre & Helmsing, A. H. J., eds. 2005. Local Economic Development in Africa: enterprises, communities and local government. Maastricht: Shaker Publishing, 18–60.Google Scholar
Helmsing, A. H. J. 2007. ‘Promotion of local economic development: globalisation of roses and local economic development in Ethiopia’, lecture handout, The Hague: Institute of Social Studies.Google Scholar
Hojman, D. 1983. ‘From Mexican plantations to Chilean mines: the theoretical and empirical relevance of enclave theories in contemporary Latin America’, working paper 3, Centre of Latin American Studies, Liverpool University.Google Scholar
IUCN NL & Both ENDS. 2007. ‘The flower industry in Kenya and Ethiopia’, Trade matters series, available at: www.iucn.nl/sbeos/doc/file.php?nid=4826, accessed 15.11.2007.Google Scholar
Joosten, F. 2007. ‘Development strategy for the export-oriented horticulture in Ethiopia’, Wageningen: Wageningen University and Research Centre.Google Scholar
Kaplinsky, R. 2000. ‘Globalization and unequalisation: what can be learned from global value chain analysis?’, Journal of Development Studies 37, 2: 117–46.CrossRefGoogle Scholar
Kras, J. 2004. ‘Breeders' right’, Floraculture International. Heiloo: Ball publishing, 1–2.Google Scholar
Lall, S. & Narula, R.. 2004. ‘Foreign direct investment and its role in economic development: do we need a new agenda?’, European Journal of Development Research 16, 3: 447–64.CrossRefGoogle Scholar
Ministry of Trade and Industry (MOTI), Government of Ethiopia. 2007. ‘Budget plan for 2007/2008: the export production of floriculture’, Addis Ababa: MOTI (Amharic text).Google Scholar
Mulu Gebreeyesus. 2008. ‘Micro evidence on the development of the cut-flower industry in Ethiopia’, power point presentation to the Initiative for Policy Dialog Task force on Africa, 10–11 July 2008, Addis Ababa: Ethiopian Development Research Institute, available at: http://www0.gsb.columbia.edu/ipd/pub/cut_flower_Mulu.ppt#2, accessed 10.9.2009.Google Scholar
Poh, C. 2006. ‘Transplanted or endogenized? FDI and industrial upgrading in developing countries: case study of Indonesia’, PhD thesis, The Hague: Institute of Social Studies.Google Scholar
Porter, M. E. 1985. Competitive Advantage: creating and sustaining superior performance. New York: The Free Press.Google Scholar
UNCTAD. 2005. Economic Development in Africa: rethinking the role of foreign direct investment. New York & Geneva: United Nations publications, sales no. E.05.II.D.12.Google Scholar
Weisskoff, R. & Wolff, E.. 1977. ‘Linkages and leakages: industrial tracking in an enclave economy’, Economic Development and Cultural Change 25, 4: 607–28.CrossRefGoogle Scholar
Wijnands, J. 2005. Sustainable International Networks in the Flower Industry: bridging empirical findings and theoretical approaches. The Hague: LIE.Google Scholar
World Bank. 2004. ‘Opportunities and challenges for developing high-value agricultural exports in Ethiopia’, report I draft, available at: http://siteresources.worldbank.org/INTETHIOPIA/Resources/PREM/OppandChallengesHighValueExports.pdf, accessed 11.10.2007.Google Scholar

Newsletters and Web sources

EHPEA website, available at: http://www.ehpea.org.et/contactus%201.htm, accessed 9.11.2007.

EIA website, available at: http://www.investethiopia.org/ethiopia/incentives.aspx, accessed 8.9.2007.

EVD website, Programme for cooperation with emerging markets, available at: www.evd.nl/psom, accessed 2.11.2007.

HortiNews. 2007. Newsletter, March 2007.

Middle East Times (MET) website ‘UK supermarket to stock Ethiopian roses’, available at: http://www.metimes.com/storyview.php?StoryID=20060214-074637-3999r, accessed 9.11.2007.

Ministry of Economic Affairs website, The Hague, available at: www.evd.nl.

Royal Netherlands Embassy (RNE). 2004. Trade and Business Newsletter No. 6, Addis Ababa: RNE.

RNE. 2007. Trade and Business Newsletter No. 10, Addis Ababa: RNE.

Sher-Holland website, available at: http://www.sher.nl/en/ethiopie.html, accessed 9.11.2007.

VBA website, available at: http://www.vba.nl/, accessed 8.11.2007.