**1. Introduction**

Developing countries are highly dependent on export earnings to satisfy their import requirements and for the development of their economy [1,2]. Consequently, instability of such proceeds will significantly influence output by constraining input and production planning. Furthermore, fluctuations in quantity and price of exports could create a serious problem in balance-of-payments, national income, investment, as well as the overall growth of less developed countries [2]. Susceptibility to this problem is high in SSA (Sub-Saharan African) countries as their international trades are mainly based on exporting primary agricultural commodities, whey they possess comparative advantages due to cheap labor [3].

Similarly, in Ethiopia, the export structure is highly concentrated to a few traditional agricultural commodities, such as coffee, hides, skins, oilseeds, and pulses. Over a long period of time, coffee was the dominant export earning commodity, followed by non-coffee commodities such as hides, skins, oilseeds, pulses, and chat. Over two-thirds of the export earnings were obtained from the export of these few commodities [4]. However, since the mid-1990s, the relative importance of these commodities, particularly coffee, in total export revenue has declined drastically. Coffee's contribution to export earnings declined to 45% in 2003, from a high of 70% in the mid-1990s, due to the high volatility of coffee prices. This would have a detrimental effect on the economic planning and economic development of the country. From this, it can be understood that export earnings instability was one of the chronic economic problems facing Ethiopia. Since the 1970s, many other Less Developed Countries (LDC) have also experienced strong volatility and declines in the international prices of their primary commodities exports [5]. Therefore, high dependence on a few agricultural export commodities added with the high volatility of prices left the countries' export earnings extremely vulnerable.

In countries like Ethiopia, that mainly depend on primary agricultural commodities for their export earnings, vertical diversification through establishing agricultural processing industries which produce value-added quality export products is difficult. However, diversification horizontally into the export of non-traditional high-value agricultural commodities was one of the possible ways to reduce over-reliance on a few low-value traditional products and tackle the problem of export income instability.

Consequently, due to the declining export earnings from traditional exports, horticulture and other non-traditional, high-value, agricultural export expansions represent an important area of potential income growth [5]. In this regard, Ethiopia was considered to have the potential to achieve trade gains in these sub-sectors [6]. This is because Ethiopia has diverse agro-ecological zones that can easily fit the production of different agricultural export commodities, with minimum adjustment to the existing production systems [1,7]. As a result, promoting the production and export of horticultural products (fruits, vegetables, and flowers) has caught the attention of the federal government of Ethiopia. These high-value and labor-intensive cash crops can contribute to the fast and successful diversification of the export base towards non-traditional agricultural commodities to attain export earnings stability.

Production of horticultural products is a new sector in Ethiopia, as the production of these crops has been undertaken for decades. The sector comprises of large state farms supplying fruits and vegetables to the local market and for export [8]. Fruit and vegetable crops with a significant potential for domestic consumption, export markets, and industrial processing are produced in the country [6]. In this regard, the Ethiopian government, sector organizations, and donors have played a great role to identify potential for the further development of the fruits and vegetable sector in Ethiopia, both for the domestic and export market [8].

The export destination of Ethiopia's fruits and vegetables are mostly neighboring countries like Djibouti, Sudan, and Somalia. High-value fresh vegetables were exported to the United Kingdom, the United Arab Emirates, and the Netherlands, which may create an opportunity for the improvement of the fruit and vegetable sectors in the country [6]. According to statistics in Reference [9], in 2004/2005, export income generated from the subsector was 28.55 million USD. In 2015/16, the sector provided employment opportunities for approximately 183,000 persons and generated earnings of about 274.62 million USD, making the sector the fifth largest foreign revenue generator for the country.

Given Ethiopia's endowment of natural resources and other competitive advantages, the export performance was still low despite the existence of blooming prospects for the development of the sub-sector. Consequently, although export diversification through horticultural produce was advocated as an alternative export promotion strategy, the performance of this sector has been generally unsatisfactory. In this regard, knowledge of the determinants of industry's development has paramount importance. However, so far different empirical works [2,3,10–15] have mostly emphasized the export performance of traditional export commodities, with less consideration on examining the factors affecting the export performance of the horticulture sub-sector. Some others had tried to describe [4,16] and analyze the production and marketing aspects [1] of the sector in a limited part of the country. Effective policy intervention to promote the performance of this potential and promising sub-sector needs knowledge of the determinants of the industry's development. Consequently, the objective of this study was to assess factors affecting the export performance of the Ethiopian horticulture sub-sector, which in turn will enable the sector to be competitive in the global horticulture market and stabilize export earnings of the country.
