The busy traffic of economic diplomacy to Ethiopia


The busy traffic of economic diplomacy to Ethiopia

By Bereket Gebru 1-26-15

The tremendous economic development strides Ethiopia has taken over the last decade have increasingly cleansed the country’s image in the international system. Instead of the gloomy perceptions of the international community towards the country in relation with recurring drought, Ethiopia has increasingly become a symbol of African renaissance.

The country is nowadays regarded as a favorable investment destination drawing in large Foreign Direct Investment. Various companies from around the world have increasingly invested more in the country. These moves have helped speed up the development of the country.

In the international system, economic development helps build up the negotiation capacity of states. By pronouncing the rewards and threats a nation can exert during negotiation, economic development helps improve a country’s diplomatic capabilities. As the achievement of economic development during this period of globalization demands strong economic and political relations with major world powers, these strong relations would also be brought to the negotiating table as assets.

Accordingly, Ethiopia’s diplomatic power has increased significantly through the years of its double digit economic growth. This can be corroborated by the large number of foreign ministers and heads of states and governments of economic powerhouses paying a visit to the country. The US Foreign Secretary, John Kerry, and the Foreign Minister of the Russian Federation, Sergey Lavrov, are two of the numerous high ranking foreign officials who visited Ethiopia this year.

In stark contrast to the conditions a couple of decades ago when Ethiopian government officials would have limited access to the most powerful people in the world, they regularly consul with such individuals these days. Ethiopian delegations are often chosen to share their experiences in universalizing health and education along with reducing poverty, child mortality and other issues that the country has excelled at in international forums.

Recent reports also state that Addis Ababa, the Ethiopian capital, has become the third largest seat of the United Nations in the world next only to New York and Genève. According to Fortune Newspaper, an Ethiopian weekly, Addis Ababa also boasts the fourth largest presence of diplomatic corps, following New York, Washington DC and Brussels. It further states that Addis Ababa hosts close to 25 UN agencies, with their army of employees bordering on 3,000. These facts are clear indications of the immense increase in the diplomatic stature of the country in recent years.

Accordingly, the Foreign Affairs and National Security Policy and Strategy document of the country states that the goal of the country’s foreign and security policy is to ensure international conditions that are conducive to achieving development and democratic objectives. It further states that the country needs extensive market opportunities, investment and technical support to bring about development and realize it in the framework of globalization. It also acknowledges the country’s yet unresolved need for grant and loans to finance development endeavors. It also recognizes the need for technical and financial support to build and strengthen institutions of democratic governance. It then clearly states that the approach is mainly economic diplomacy.

The increased diplomatic capacity of the country geared further forward by the development of the country has positively influenced the efficacy of its economic diplomacy. Accordingly, in addition to the Foreign Ministers of the US and Russia, this week saw visits by the Japanese Prime Minister Shinzo Abe and Turkish President Tayyip Erdogan.

Shinzo Abe’s visit

Let’s first look into the visit by the Japanese Prime Minister Shinzo Abe as his was the first of the two. Abe visited Ethiopia on January 13 and 14, 2014. During his two-day visit, the premier met and held fruitful talks with Ethiopian government and AU officials. The Ethiopian Ministry of Foreign Affairs stated that Shinzo Abe’s visit was a very successful one. The Ministry stated that the PM held very productive talks with Ethiopian officials.

Various news reports state that PM Abe also pledged to fulfill all the commitments that his country made at the fifth Tokyo International Conference on International Development (TICAD), which took place last June. PM Abe also pledged to provide a total of more than 17 million US dollars to support refugees in Ethiopia, Ethiopian returnees from Saudi Arabia and South Sudan. Other reports also stated that the PM was expected to commit some 10 billion yen (about 93.4 million US dollars) for the construction of a geothermal power plant in Ethiopia but the information has not been verified.  

During his talks with PM Hailemariam Dessalegn, PM Abe expressed his desire to support Ethiopia’s development efforts through Industrial Policy Dialogue. Accordingly, the 15th Round of the Policy Dialogue on Industrial Development was held in Addis Ababa from 12 to 17 January, 2015 as a follow up to the Prime Minister’s visit. Professor Kenichi Ohno and Professor Izumi Ohno, from the National Graduate Institute for Policy Studies (GRIPS), have led the Dialogue since June 2009. Under the Policy Dialogue, the two professors have held talks with the late Prime Minister Meles Zenawi eight times, and with Prime Minister Hailemariam six times, including the just concluded one.

The Policy Dialogue has been conducted as a technical assistance project by the Japan International Cooperation Agency (JICA), and thus, has been closely coordinated with the “Kaizen” initiative that the Ethiopian Government is implementing across the country with the assistance of Japan. This platform is credited for the creation of the ‘Champion Products approach’, which is a tool for promoting trade and increasing exports.

At the high level Forum held on 14 January, participants such as Newaye Kiristos Gebreab, Economic Advisor to the Prime Minister,. Ahmed Abtew, Minister of Industry, Tolesa Shagi, Minister of Mine, Tadesse Haile, State Minister, Minister of Industry, Genachew Adem, Deputy Commissioner, National Planning Commission, and other relevant high officials from economic development related ministries, commissions, and institutions of Ethiopia exchanged views on two major themes: the positioning of productivity and competitiveness in the next GTP and the direction of industrial development, and the development of industrial parks and inviting Japanese companies into Ethiopia.

Regarding the first major theme, a cross-cutting whole picture related to the improvement of product quality, productivity, competitiveness, in particular, the relationship with “Kaizen”, which is a key element to improving productivity and competitiveness in the manufacturing sector, as well as target setting and priority setting in the industry sector, and industrial policy and the role of FDI were intensively discussed by both sides.

On the second major theme, the Japanese provided explanation on the experiences and examples in Asia where the development of industrial zones for Japanese companies already took place, the development of infrastructure and related laws which are critical for inviting Japanese companies and their decision criteria. Both sides have exchanged views on various issues such as one-stop service and other preferred environments by Japanese companies for industrial zone development and marketing strategy.

Tayyip Erdogan

Another one of the heads of state and government who visit Ethiopia this week is the Turkish President Tayyip Erdogan. Turkey's President Recep Tayyip Erdogan arrived in Addis Ababa on January 21, 2015 on the first stage of an official visit to countries in the Horn of Africa. President Erdogan is accompanied by his wife and daughter, Emine and Summeye Erdogan, as well as ministers including Deputy Prime Minister Numan Kurtuand, a delegation of officials and businessmen. The President was received by Ethiopian Prime Minister Hailemariam Desalegn and Osman Riza Yavuzalp, the Turkish ambassador in Ethiopia.

On January 22, President Erdogan held meetings with President Dr. Mulatu Teshome and Prime Minister Hailemariam Desalegn as well as other officials. President Mulatu was Ethiopia’s former ambassador to Ankara. Ewnetu Belata, State Minister of the Government Communications Affairs Office said "President Erdogan is most welcome in Ethiopia at this time when the partnership between the two countries has reached a record high." He said "Turkey leads the pack of industrialized countries in terms of foreign direct investment in Ethiopia, with more than 350 Turkish companies operating in Ethiopia to date and they have created jobs to more than 50,000 Ethiopians," as well as providing for technology and knowledge transfer.

According to the Turkish Ambassador to Ethiopia, Osman Riza Yavuzalp, Turkish investment in Ethiopia stands at US$3 billion. President Erdogan’s three-day visit to the Horn of Africa, which will include a visit to Djibouti where he will hold talks with President Ismail Omar Guelleh, is part of Turkey’s efforts to strengthen trade, economic and investment ties in the region. According to Turkish government data, the volume of trade between Ethiopia and Turkey reached US$422 million in 2013, and in the first 11 months of 2014 it was US$360 million, seven percent down on the previous period in 2013.

A statement from the Turkish Presidential Palace said Turkey had “increasing economic, trade and investment ties with the countries in the region especially with Ethiopia." It added that President Recep Tayyip Erdogan’s visit aimed to further strengthen and deepen the continued growth of these business ties as well as long-standing relations with Ethiopia and the region. 

Most Turkish investment in Ethiopia is focused on textile and garment manufacturing. Textile products do not yet make the top list of Ethiopian export items. The 2002 data from the Central Statistical Authority shows that the country earned 28.8 million birr from the export of textile, clothing and apparel in 2000/01. The country has come a long way from that as it made 98 million USD (about 1.8 billion birr) in the fiscal year that just ended. This figure, however, still runs short of the one billion USD export earnings planned at the end of the Growth and Transformation Plan (GTP). 

Ethiopia has enjoyed increased attention from various textile and garment factories located all around the world. The biggest milestone in this context was the inauguration of Ayka Addis in April 2010. Built by Turkish investors, Ayka Addis is the biggest textile factory in Ethiopia. The factory has a daily spinning capacity of 20tn and knitting and dyeing capacity of 40tn. It is expected to make up to 100 million USD per year at its optimal operational capacity. Ayka was first established in Istanbul, Turkey, in 1998. It dismantled its plant in Turkey completely in order to move to Ethiopia. Part of the 140 million USD needed to build the factory was provided by the Development Bank of Ethiopia. The factory has provided employment opportunity for 10,000 people. 

After four years of operation in Ethiopia, Ayka Addis has facilitated the relocation of over 50 Turkish textile and garment companies. Accordingly, Capital newspaper reported, Ayka Addis is expected to build an industrial zone of several five-story buildings that  it plans to rent out to the relocating factories. The report further indicates that Ayka Addis is carrying out project preparation and feasibility study. The government, the report further states, is allocating land around Addis Ababa for the construction of the industry zone.  

The project aims to export value added textile products which are considered to be sources of strong export revenue. The relocation of these companies is projected to generate two billion USD in export revenue for the country per annum, surpassing the one billion USD goal set at the end of the last year of the GTP by an astounding 100%. In so doing, the whole package is expected to create more than 60,000 job opportunities.

The manufacturing sector in Ethiopia has expanded very noticeably during the past decade. The World Bank reported a growth rate of 12.3% in the sector as far back as the year 2009. Aggressive efforts to draw investment from both outside and inside have these days pushed investment activities in the sector to an unchartered territory in the history of the country. Recent international studies have further put Ethiopia among the countries poised to become heavy weights of international manufacturing.

With the three decades of economic growth putting the abundant and cheap Chinese labour force into relative expensiveness, the large influx of companies from all over the world to China has, as a result, been affected negatively. A report entitled “The PC16: Identifying China’s Successors” by Stratfor (Strategy Forecasting inc.), an intelligence think-thank, explains “as the process matures, low wages rise — producing simple products for the world market is not as profitable as producing more sophisticated products — and the rate of growth slows down in favor of more predictable profits from more complex goods and services. All nations undergo this process, and China is no exception.”  Stratfor founder and Chairman George Friedman notes that there is a continual flow of companies leaving China, or choosing not to invest in China.

The study further argues that China is too big of a manufacturer to be replaced by a single country. Therefore, the study goes on to denote, a combination of sixteen countries would take over as the global manufacturing hub. It is these countries that the study named PC 16 – Post China 16. Ethiopia has been identified as one of these countries.

The noticeably intense diplomatic engagement Ethiopia has been pursuing has been highly directed towards strengthening its economic development over the coming years. Accordingly, high profile world leaders along with businessmen have increasingly made themselves busy trying to engage with Ethiopia in the area of trade and investment promotion. The highly improved conditions for doing business in the country have made their efforts worthwhile as can be corroborated by the increase in the flow of investment.

Opinions and Views published on this site are those of the authors only! Aigaforum does not necessarily endorse them. � 2002-2019 All rights reserved.