Importing from emerging economies and Smart Contracts

Importing from an emerging economy is exciting but needs to be done with enough research and good knowledge of the market. Both exporters and importers have to trust each other and maintain a strong working relationship for business to continue.

As well as its benefits, there are many challenges that come with doing international trade and the right technology can minimise problems in a supply chain. Smart contracts are a good way to speed up transactions and make them secure, especially when recorded on a blockchain.

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As somebody with a strong interest in Africa it is interesting to see how exports to Europe have tripled over the last few decades. A number of initiatives are in place to improve the flow of goods between both continents, one of which is called EBA.

It stands for Everything but Arms initiative and allows for duty / quota free imports to encourage economic growth in emerging economies. It is also a big incentive for people to import from these places as costs are considerably lower than buying from a developed continent such as Europe or North America.

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Smart contracts are perfect for dealing with customers and business associates in a different country because they are immutable and distributed. In a recent investigation by shipping company Maersk, they discovered 200 documents were needed for a simple shipment of flowers from Kenya to the Netherlands. Manual paper based processes like this are still common and information is locked away in organisational silos.

Today 90% of goods in global trade are carried by the shipping industry but supply chains are slowed down by complex point to point communications. A distributed ledger platform uses smart contracts on a blockchain and is accessible to everybody in the production line, including the end-consumer in some cases. This creates trust, efficiency and better user experience.

Ethiopia is the fastest growing economy in Africa and has many import opportunities available. The services sector is at an all time high and there are 12 industrial parks either under construction or fully operational. Their leather products and textiles are being sold throughout the world with positive endorsements from Tescos, Primark and H&M.

The Ethiopian Investment Commission, Ethiopian Leather Industries Association and Addis Ababa Chamber of Commerce oversee the country’s textile industry. Manufacturers can also be contacted directly to discuss products available and shipping. Once this has been arranged, finding the right technology for importing goods is critical – especially when a company is dealing with people they have never met.

Input Output Hong Kong is a technology firm focused on providing financial services to three billion unbanked people in the world. They are a blockchain company with global reach and have a presence in Ethiopia, where they have been working with Ethiopian government for last one year after they signed a memorandum of understanding (MoU) with the government. Both parties are working to tackle some of the ongoing issues in Ethiopia using innovative technologies and smart contracts.

IOHK trained and graduated Ethiopian students in Haskall, a programming language used to build the Cardano blockchain. The grudates are now working for IOHK in Addis Abeba.

Finance in emerging economies can be a problem when paying for services remotely. Sending money abroad is costly and one of the main challenges importers and exporters face. Exchange rates change on a daily basis and although relatively low compared to the rest of Africa, corruption still exists. Cash payments account for majority of the transactions in this market so importers need good communication with trusted partners to ensure no funds are lost.

Companies must