Ethiopia National Quality Infrastructure Development
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1 Ethiopia National Quality Infrastructure Development A lab run by the Ethiopian Conformity Assessment Enterprise. Photograph by Tommy Kim Highlights Firms in developing countries face high costs and logistical difficulties when meeting buyer requirements from abroad. Firm capabilities aside, product testing and international accreditation can be difficult in the absence of a national system, which is referred to national quality infrastructure (NQI). ComPEL is supporting a randomized controlled trial that measures the effects of product testing on firm outcomes, including decisions to export. Two pilot designs are being tested: first involving discounts and fast-track for product testing for manufacturing firms, and second involving the same interventions but across the value chain of a single sector.
2 The government of Ethiopia is emphasizing the growth of light manufacturing sector and increased exports as parts of its development plan. There are already signs of early growth in the sector, with textile firms producing garments for European brands and special economic zones (SEZs) forming. At the same time, however, Ethiopian firms either face high costs in testing their products or lack awareness of the requirements demanded by foreign buyers. For those who already export, many send their products abroad for internationally accredited testing, which is not available domestically. For potential exporters, they are uninformed of both the standards they have to adhere to as well as the operational changes they must make to produce higher quality products. Currently the World Bank is supporting the government of Ethiopia in the development of its National Quality Infrastructure (NQI), which is the institutional framework that establishes and implements a number of interlinked activities among standardization, accreditation, metrology, and conformity assessment (testing, inspection, and certification). The proposed impact evaluation will be conducted in conjunction with the early developments of the NQI institutional capacity, analyzing how NQI and associated services can allow firms to both signal product quality to buyers and to upgrade product quality. Evaluation Design Two impact evaluation designs are proposed with the possibility of both taking place concurrently. The research team will first initiate a pilot survey to fill some of the knowledge gaps that will assist the team in deciding on the feasibility of each design. The survey would focus largely on firm demands of QI services and how much product testing acts as a barrier to their decision to export or improve quality. Evaluation Design 1 Two interventions will be tested: 1. Priority access to internationally recognized QI services in Ethiopia access. Priority access refers to lower prices and faster processing time. 2. Provision of tailored gap analysis in which firms receive advice about mandatory standards and what improvements they can make in order to meet buyer requirements.
3 These interventions will target medium and large scale manufacturing firms that are in priority sectors as identified by the World Bank program: leather and leather products, textiles and garments, and agro-processing. Firms will be identified by analyzing both the manufacturing survey conducted by the Central Statistics Agency and the lists that will be provided by industry institutes under the Ministry of Industry. The estimated sample size is 300 firms, which will be evenly split into three groups: control, priority access to QI services (1), and priority access to QI services and consulting services (1 and 2). Given that the impact evaluation is primarily concerned with the effect of QI services, priority access intervention will be provided to both treatment groups. Evaluation Design 2 The interventions in this Design are similar to those in Design 1, but will be differentiated by the level of the value chain. This portion of research will target firms that are in the honey sector, which was selected for both its large production level and potential developmental impact. Details on the honey sector are described in the policy relevance section below. 1. Cooperatives and processing firms - Export encouragement, which combines the features of priority access to QI services and gap analysis consulting services 2. Collectors and traders provision of equipment and training that enables them to implement basic, essential quality tests for honey in the field 3. Farmers who produce raw honey agricultural extension services Treatment and control groups will be randomized at each level, in total yielding eight groups. The schematic of treatment and control allocation is as follows:
4 The benefit of this design is that the research team will be able to look at the relationship between the processor- and trader- level interventions with agricultural extension by looking at reallocation of demand toward or away from farmers in treated villages if treated processors shift disproportionately toward sourcing from treated villages, that is evidence that the export encouragement induced greater demand for quality which was more readily available from farmers who changed their practices in response to agricultural extension. Policy Relevance Setting up the QI system has been considered an effective tool for development, since a functioning QI helps increase competitiveness in manufacturing and service delivery in a context of rapid growth of global trade and value chains. This, in turn, increases productivity, helps create employment, and encourages investment. However, the majority of previous QI projects, which were financed by the World Bank and other donor agencies, was focused on the upgrading of the legislative framework and institutional capacity and less on the creation of industry demand for QI services. The associated project of this impact evaluation was designed to address gaps in the supply and demand side of the QI services. Also, to the team s knowledge, no concrete impact evaluation has been done with interventions related to QI services. In the second evaluation design proposed, the research focuses on the honey sector due to its economic importance, the relative simplicity of the production process and domestic supply chain, and the reported relevance of quality and accredited quality testing as a current constraint to exporting. Ethiopia is the world s 10th largest honey producer, and the largest in Africa. 1.8 million households in Ethiopia are engaged in apiculture, and for smallholders earnings from beekeeping makes up nearly half of their total cash income. It is particularly important as a source of income for landless households or small landholders, and is a drought-resistant agricultural activity that is important across many regions of Ethiopia and around the world. Stakeholders in the honey sector in Ethiopia report that quality is a major constraint to exporting, and that the lack of accredited domestic testing services make it difficult to export to Europe and other places with mandatory legal standards for honey.
5 Road Map and Materials: Methodology Note Baseline Report Endline Paper Policy Note Researchers Meredith Startz is IES Fellow at Princeton, and will be a Postdoctoral Fellow at SIEPR in before joining the Stanford economics department as an Assistant Professor. Her research focuses on the role of information and moral hazard problems in trade and private enterprise in developing countries. Prior to beginning her PhD, Startz worked at Innovations for Poverty Action, first on microfinance projects in the Philippines and later helping to launch the SME Initiative. She is the recipient of a 2011 NSF Graduate Research Fellowship and a 2013 Sasakawa Young Leaders Fellowship. Aidan Coville is an economist in the Development Impact Evaluation (DIME) team within the World Bank Development Economics Research Group and coordinator of DIME s climate change program. After completing his MSc in Statistics at University College London and MSc in Economics for Development at the University of Oxford, he joined DIME in South Africa, exploring the effects of a large-scale slum upgrading project implemented across the country. Since then his work has focused on understanding and overcoming critical constraints to small business development, and unpacking the determinants of use and resulting impacts of government-led water, sanitation and hygiene programs Partners providing financial support: World Bank Group: Competitiveness Policy Evaluation Lab
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