(DTIS) Update, Volume 1 – Main report - Enhanced Integrated ...

CHAPTER 3 – Export diversificationThe 2004 DTIS called for priority technical assistance to expand and diversify Burundi’s exports.The DTIS indicated that Burundi’s goods export diversification will have to be driven by a combinationof quality improvements of its traditional products (such as coffee and tea) and a gradual expansion ofnon-traditional exports (such as such mining, agro-processing, and fishing products). However, up todate Burundi has made only limited progress with the diversification of its exports – the narrow exportbase has not changed significantly in the last 8 years, making the country vulnerable to external shocksand dependent on foreign financing. Moreover, Burundi’s main export – coffee - faces severe challenges,and, except for tourism, services have so far been neglected as a source of export diversification.What factors explain Burundi’s lack of export diversification? What are the concrete measuresthat Burundi needs to start expanding the breadth of its exports? To provide answers to thesequestions, this chapter analyses Burundi’s export performance during the last decade, identifies the mainchallenges that limit Burundi’s export performance in two sectors (coffee and horticulture) and presentsconcrete recommendations to address those challenges. The analysis is based on a review of recentstudies, as well as new case studies and field visits. Export diversification can take several forms, two ofwhich are emphasized through the sectoral case studies in this chapter: (i) the quality improvements oftraditional exports; and (ii) the gradual expansion of non-traditional exports. In addition, services as asource for export diversification - through improving services inputs to improve Burundi’scompetitiveness and facilitate goods exports diversification, and through the export of services such astourism - are analyzed in Chapters 6 and 7 respectively.1. Burundi’s poor export performance during the last decadeAs indicated in Chapter 1, Burundi’s very narrow export base has not changed notably over thelast decade. Burundi’s goods export basket has been relatively stable in the 2000s, despite efforts todiversify. Export earnings remain highly dependent on primary products, predominantly coffee and tea,which together represented almost 70% of total exports in 2008 /2010. Other traditional exports (e.g.hides and skins, cotton, sugar) add some degree of diversity - the share of these products increased from2.5% to 5.6% of total exports between 2001/03 and 2008/10 59 . Moreover, the almost total absence ofnew higher-value exports in the last decade is striking. Cut flowers emerged as a promising export in2001, but they never surpassed half a million dollar per year and collapsed in 2008, as they weresupplied to only one buyer who cancelled orders in response to low demand during the global crisis(World Bank 2011b). Overall, Burundi’s export performance is still characterized by a high productconcentration and a strong dependence on coffee (Chapter 1).The recent increase in Burundi’s export values is to a large extent caused by price mechanisms,particularly the strong increase of the international price for coffee (figure 3.1). The picture is muchmore mixed in real terms: between 2008 and 2010 exports in constant prices averaged USD 36 millionper year, which puts them below the average for 2001-2003 (USD 45.2 millions). The export figures arehighly dependent on the quantity of coffee that Burundi manages to produce and export. For example,the large drop in exports in 2008 corresponds to a decrease in the quantity of coffee exported from 21.4to 15 thousand tons 60 . So far, the very favorable evolution of coffee and, to a lesser extent, tea prices(registering compound annual growth rate between 2001 and 2010 of 13.6% and 6%, respectively) 61 has59 Cf. World Bank (2011b) for a more detailed presentation of these products.60 Source: International Coffee Organization (ICO)61 Sources: ICO (historical price for Burundi’s coffee category); World Bank DEC Prospects Groups (Mombasa teaauction)55 / 153