A few Reasons Why Ermias & Alibaba Venture Will Hurt Small Business in Ethiopia

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By- “በቀቀኑ”

Opining(Points) on ኤርሚያስ አመልጋ opening up an Alibaba branch in Ethiopia( A cloud sharing platform to be specific)

1) Whether its just a simple cloud sharing platform or whether it is a bigger one, business wise for Alibaba’s gluttonous model is bound to be successful that it will definitely progress to establishing a warehouse and a full blown online retail market once it gets its break from the government!

2) Was it tried locally before? Indeed it was but as every local business faced with needs of import, the scarcity of “Foreign Exchange” compounded with the long wait and the shortcuts established business ppl take to preced on bank dollar provision, startups were obviously bound to fail. As Ride truimphed with its Uber copy paste, why this local approachs aren’t celebrated and given help remains a big question! Privatization with letting in of big muscle foreign conglomerates equates to serving ur country up for a feast of economic imperialism. Alibaba’s and Amazon’s market damage(discussed below) isn’t a new phenomenon in South East Asia and USA respectively.

3) To quote US treasury Secretary Steve Munchin from his CNBC interview : “I think if you look at Amazon, although there are certain benefits to it, they’ve destroyed the retail industry across the United States so there’s no question they’ve limited competition!”

4) The rhetorical reply from Amazon for the accusation that it is killing of small and medium business had been that by listing them on their platform they offer them more access to customers which has been disproven countless times. An example would be the almost total closure of brick and mortar local industries which couldn’t compete with the large US and Chinese companies. Another one is the dwindling number of book stores with online ebook and paper back shopping becoming a phenomenon, hollywood has mentioned this on Netflix’s “You” Season 1 as a side note remark conversation where Joe Goldberg highlights how bookstores are struggling a lot. Another would be the almost total disappearance of local pharmacies after the enlistment of Walgreen on Amazon and Alibaba.

5) The first and foremost hit of the conglomerates train would be on local startups of delivery services like Beu, Deliver Addis, Admas book Delivery, … etc which would be swept from their feet once a conglomerate establishes.

6) A opening for a conglomerate will widen inevitabily to invite others too as a domino effect. As an example, Who is gonna protect local supermarket standalones or supermarket chains like ሸዋ once the muscular Walmart waltzes in? Even if we hate their exaggerated profit margins, we shall never forget all the jobs they have provided which will be lost. The owner of ሸዋ won’t suffer, yet its out of work former employees will just be cast out to the street. Remember if u say Walmart will employ, well, when its listed on Alibaba it will only employ minimal people as every online development does.

7) “I am a consumer, I don’t care as long as commodities are cheaper!” Once this is established all those startups, delivery services, businesses n the like will create an unemployment crises on an already over burdened system which will obviously make most employed population replaceable which will drive wages down or make them stagnant.

8) “It will be easier for tax collection when they enlist on Alibaba!” Yes it will be. But excessively taxed consumers buying from excessively taxed almost dying small business on a platform reaping billions in profit and paying almost a non existent tax compared to the above while receiving tax exemption over tax exemption. Do u think that’s right ?

9)” They use their power as gatekeeper to reach customers as a way to extract fees and unfair terms on small businesses, yet they will still use and create PR and claim that any regulation of them would hurt small businesses because they are this platform that has enabled all these small businesses to exist,” said Sally Hubbard, director of enforcement strategy at the Open Markets Institute, an anti-monopoly think tank, who focuses on Big Tech.”

10) Once established these small business outside the online platform are sure to die off easily and with the online one being dominated by a single broker with no competition i.e. Alibaba they have no choice except to pay whatever it charges to prolong their lifeline untill they are muscled out by a fellow larger company enlisted on Alibaba who can reprice their commodity and rely on mass selling for profit.

I have many more concerns but this are the main one’s I think should be opined on before opening up our fragile oligarchy dominated economy for a foreign conglomerate!

Addis Insight
Addis Insighthttps://addisinsight-net.addisethiopiarestaurant.com
Addis Insight is Ethiopia’s fastest growing digital news platform, providing consumers with the latest news from Ethiopia and its diaspora. We provide marketers with innovative opportunities to leverage our stories and overall brand with a fiercely curious and highly engaged audience.

3 COMMENTS

  1. I couldn’t make sense of most of the issues raised here. The arguments are made more or less based on Marxist-Leninist theories that are dominantly shared among Ethiopian intellectuals or at best based on very primitive economic theories.
    (1) There is nothing that immune Alibab from foreign exchange shortages and the inefficient, and bureaucratic foreign trade and shipping system; sluggish, poorly standardized, and non-transparent import clearance, protective and unpredictable trade policies …. There is nothing that guarantees Alibaba to easily succeed. I rather argue that it will not succeed.
    (2) It doesn’t matter how big the firm is, it cannot eliminate some key hurdles. Alibaba cannot bring a silver bullet for many of the challenges discussed above.
    (3) Protection of domestic industry and small business is an old argument that is based on shallow and myopic analysis;
    (4) Alibaba will destroy small local firms is not theoretically well-founded and based on partial-equilibrium and short-term analysis. Even if it is theoretically well-founded, it makes little sense in a socialist-oriented economy dominated by shallow, stunted, and missing markets. Some argum(5) A similar short-run, partial-equilibrium, myopic, and unfounded argument. I rather argue that it can create more businesses than it destroys. It can stimulate many economic activities which we cannot foresee or imagine. In fact, no one on earth can know that with certainty.
    (6) Who said Alibaba will hire only foreigners? It is this primitive argument that kept FDIs away. What about the far-reaching external benefits and spillover effects of Alibaba in terms of knowledge, technology transfer, infrastructure, market network, work ethics,…. What about its effects in promoting and stimulating exports?
    ents against competitions may make sense in highly competitive, market-oriented, and developed economies. But it doesn’t make sense to use the same argument in an economy where competition is weak to none.
    (7) Why do undermine consumer gain? Asking consumers to sacrifice for the country’s economic development is a common but non-sense argument. In a society where it cannot conceptualize economic progress outside ‘collective effort and campaign’, such arguments are not surprising; rather they are a natural extension of the fundamental belief about development.
    (8) Mixed and vague argument. Arguing that tax hurts consumers is one thing, it should be elusive to save them is something non-sense. In addition, the tax will not go to Alibaba but to the government. The arguments here are based on nonsense ideas and false assertions.
    (9) The fear of monopoly may give sense. But we cannot avoid it by keeping FDI away. Instead, we can reduce it through more open and freer economic policies. Its welfare and production effects can be minimized through diverse policies.
    (10) The same anti-monopoly argument as the above

  2. ለበቀቀን
    your concern is good, your writing requires many editing.
    example 1. do not say opining for opening
    2. do not say ur for our
    3. do not overestimate
    4. consider the opportunities those conglomerates bring along the market
    5. remember that growth always breaks comfort zones. your ill insured small business should be hatched out of shell. imagine a chicken emerging out of broken egg.

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