*5.3. Structural Break Analysis*

Production and processing of horticultural crops, vegetables, and fruits have been placed by the Government of Ethiopia on the list of high priority areas, and various incentives have been provided for investors. A package of incentives under regulation No. 84/2003 was developed for both foreign and domestic investors engaged in new enterprises and expansions. This includes a 100 percent exemption from import customs duty and other tax levied on imports on investment capital goods and construction materials necessary for the establishment of a new enterprise. In addition, the Ethiopia Horticulture Producers and Exporters Association (EHPEA) was established in 2002 to facilitate private sector horticultural exports. It represents the horticulture sector in the country, as well as internationally, and it also organizes trade fairs. The Ethiopian Development Bank (EDB), the key institution financing the expansion of the sector, provides loans with a grace period and at relatively low interest rates. Furthermore, to boost the horticultural sector further, the Ethiopian Horticulture Development Agency was established on 6 June 2008, as an autonomous Federal Government Agency under the Ministry of Agriculture [36].

The cumulative effect of these policy measures were tested to check whether it had brought any significant structural break in the performance of the horticultural sub-sector. In this regard, the Zivot-Andrew test of structural break analysis was applied to the series to examine the structural break in horticultural export performance (Figure 6). The results of the test presented in Table 4 showed that there was a structural break in the year 2005. The test statistic for 2005 (−5.21) was at a minimum level in the graph. This test statistic was less than the 5% critical value. Therefore, it can be concluded that the structural break that occurred in the year 2005 was a significant structural break. Thus, this confirms that developments that had occurred before and after 2005 had resulted in the structural break in 2005, with regards to the performance of the horticultural sub-sector.

**Figure 6.** Zivot-Andrew breakpoints test results.


**Table 4.** Zivot-Andrews Unit Root Test results.

\* Probability values are calculated from a standard *t*-distribution and do not take into account the breakpoint selection process.
