Ethiopia‘s Optimistic, But Challenging Path Forward

Lawrence K Freeman

August 3, 2018

On June 28, thousands upon thousands of smiling Ethiopians poured into the Washington DC convention center to listen to their new Prime Minister, Abiy Ahmed. They began gathering in the morning hours before the noon starting time of the event. Standing for hours, on a line that snaked around the convention center, with the last of the crowd finally entering the hall at 3pm. I was fortunate to witness this joyous occasion. The entire ground floor hall of the convention center was filled, as far as the eye could see, by the Ethiopian community that came to celebrate the new leadership of their nation.

Only three days earlier on July 26, in Addis Ababa, Simegnew Bekele, the chief engineer of the Grand Ethiopian Renaissance Dam-GERD, was found murdered in his car. His assassination was followed by a large funeral at Meskel Square where he was mourned by tens of thousands.  His body was taken to Holy Trinity Church where he was honored by being buried alongside Emperor Haile Selassie, and Prime Minister Meles Zenawi.

The juxtaposition of these events, an ocean apart, foretell the challenging course ahead for Ethiopia. A future brimming with optimism, but fraught with danger. There is more than symbolism involved.

Progress Under Attack

Engineer Bekele, in the minds of Ethiopians, embodied a true patriotic spirit, who led their nation forward. He will be remembered for his lasting commitment to develop Ethiopia into growing sovereign economy in the Horn of Africa. Before overseeing the construction of the GERD in 2011, he worked on the Gibe I and II dams. The completed Gibe III hydro-electric project generating 1,872 megawatts, has doubled Ethiopia’s power supply. When the construction of the GERD- 6,450 megawatts-is finished, Ethiopia will be the second largest producer of electricity in Sub-Sahara Africa behind South Africa. The multi billion-dollar GERD, is being built with help of China, but financed by Ethiopia. The GERD is on the Blue Nile close to the border of Sudan and will be the biggest dam in Africa at 1.8 kilometers wide and 155 meters high.

Ethiopia’s ambitions to create a modern-advanced economy and lift its 100 million people out of poverty is evident in its commitment to also expand its rail and road infrastructure. The operational Addis-Ababa to Djibouti electrified train (the first of its kind in Sub-Saharan Africa) will transport manufactured goods from Ethiopia’s industrial parks, to the port of Djibouti for export. Their Growth Transformation Plan II (2014-2019) emphasizes Ethiopia’s intention to expand its manufacturing sector by 25%.

It is Ethiopia’s unwavering devotion to progress to “eliminate poverty, not manage it” that is the real target of Simegnew Bekel’s assassination. 

(Artist drawing of completed GERD, whose completion will allow Ethiopia to become an energy exporter)                       

Abiy’s Life Threatened

In a mere four months since assuming office in April of this year, the 42-year-old Prime Minster has created a fervor in the population, causing waves of unbridled excitement, not seen since the overthrow of the bloody Derg regime in 1991 by the Ethiopian People’s Revolutionary Democratic Front led by Meles Zinawi.  In what is being called a revolution, Prime Minister Abiy has released thousands of political prisoners, reached out to all ethnic regions of the nation, and unexpectedly ended the state of war with Eritrea in a ceremony held in the Eritrean capital Asmara on July 8. By taking this giant step to normalize relations with its neighbor Eritrea after a generation of armed hostility, Prime Minster Abiy has now become a living symbol for peace and security in the Horn of Africa.

Let us not forget that a month before coming to the United States, Prime Minister Abiy escaped an assassination attempt when a grenade was thrown at a rally where he addressed millions of his fellow citizens.  Although he was not harmed, over one hundred were wounded and two died from this attack on June 23, in Addis Ababa’s famous Meskel Square.

Steeped in the ideas of Meles Zenawi, Ethiopia, unique among African nations, has demonstrated an understanding of principles fundamental to economic growth. To wit: the necessity for the state to direct public credit into vital categories of infrastructure necessity for the economic security of a nation (dirigisme). The government not only has the right, but the obligation to intervene into the economy to foster “pro-growth” polices that benefit the general welfare of its people. Ethiopia’s relative success in this effort has produced enemies internally, regionally, and internationally, who oppose any progress towards achieving economic stability in the Horn of Africa. Economic independence by Africa nations challenges the dominance of financial predators, who still view Africa as a pawn on their “geo-political” chessboard.

Author with Ethiopians inside DC Convention Center

Ethiopia Should Stay the Course

For many years there has been enormous pressure by the international financial community including the IMF to force Ethiopia to “liberalize” its economy by; decentralizing its economy, reducing regulations, allowing foreign investment in state-owned enterprises, and deregulating its banking system. Thus far Ethiopia has resisted, but under increasing duress, there are reports that some in the leadership of Ethiopia may be ready to open the floodgates to intrusions by international financiers, who are not interested in the welfare of the citizens.

Ethiopia, a poor country that suffered from a wrecked economy twenty-five years ago, has emerged as a leader on the Sub-Saharan continent. Ethiopia’s commitment to expanding its physical infrastructure has served the nation well, though it still faces serious impediments. Providing meaningful employment for the 500,000-young people, who are seeking to join the work force each year will remain a significant challenge. However, Ethiopia should not permit itself to be coerced into deviating from its thus far successful economic policy.

BRICS, China, and Ethiopia Promote Industrialization

BRICS ministers adopt new industrial action plan

The industry ministers from Brazil, Russia, India, China and South Africa (BRICS) adopted a new action plan to deepen industrial cooperation among the five nations, Trade and Industry Minister Rob Davies said in a statement on Sunday. Davies and his counterparts from the BRICS grouping attended a meeting in Hangzhou, China where industrial and manufacturing matters were discussed and which culminated in the adoption of a seven-point action plan. “The action plan states that the world economy is still in a period of profound adjustment after the international financial crisis,” Davies said.

 “Industrial sectors, the manufacturing sector and the service sectors related to it in particular, have become key factors in sustaining mid- and long-term economic development.” At the meeting, the ministers acknowledged that the new industrial revolution of digitisation among other things will change traditional production flows and business models that will give rise to new industrial forms.

The following seven points have been identified as key in the action plan:

       strengthen industrial capacity cooperation 

       strengthen the coordination and match-making in the field of industrial policies

       promote the cooperation in the development of new industrial infrastructure

       expand cooperation in technological development and innovation

       deepen cooperation in the field of small and medium enterprises (SMMEs)

       strengthen cooperation in standard area

       facilitate all-round cooperation with the United Nations Industrial Development Organization (UNIDO)

He emphasized that industrial development strategies and investment cooperation have to grapple with the potential threats in particular in the context of high unemployment.  Davies said the industrial development cooperation between the Brics countries can be used as a springboard to foster growth and development and create work opportunities. BRICS countries will focus on using their respective rich natural and human resources and broad domestic markets to broaden industrial capacity and policies, while working together in developing new industrial infrastructure and technology.

Chinese investment leads way as Ethiopia opens to outside

As Ethiopia, the most populous nation in East Africa, is spreading its economic relations across the globe, investment from the world’s most populous nation China is playing a prominent role. Ethiopia, with a population of some 100 million, is a country on the move with rail, air and road infrastructure projects and an ambitious industrialization plan.

Ethiopia keenly needs investment from industrial giants like China to give its burgeoning population, which is estimated to grow by 2 million annually, ample employment opportunities. According to the Ethiopian Investment Commission (EIC), there have been 279 Chinese companies with more than 571-million-U.S.-dollars worth of investment, creating more than 28,300 jobs in Ethiopia between January 2012 and January 2017.

Huajian Industrial Holding Company Limited, a Chinese company that has a long-term investment plan in Ethiopia, is operating two plants in the country. Yin Xinjun, Vice General Manager at Ethiopia Division of Huajian Industrial Holding Company Limited, says Huajian’s decision to have its first plant in Ethiopia stems from the country’s firm desire for industrialization. In fact, a personal call for more investment by late Ethiopian Prime Minister Meles Zenawi during an August 2011 visit to China is what motivated initially Huajian to invest in Ethiopia, says Yin. According to Yin, Huajian’s investment in its first African plant had overcome several challenges, including logistical ones. Huajian initially had to transport its goods through an overcrowded highway from the plant in landlocked Ethiopia to Djibouti port. The problem has been partially solved with the construction of the 85-km Addis Ababa-Adama Expressway funded partly by the Export-Import Bank of China (China EXIM bank) and built by China Communications Construction Company (CCCC). The 500-million-dollar expressway was inaugurated in May, 2014.

Huajian also had to face intermittent power and water outages. The Ethiopian government later solved this problem through a special water and power line for the Eastern Industry Zone where Huajian’s first plant is located. Overcoming these challenges, Huajian currently employs more than 4,000 Ethiopians with a plan to increase employment to 50,000 people by 2022. Having established a plant in the Dukem industrial zone, 37 km south of Addis Ababa, Huajian is currently building a massive 138-hectare international light industry city in Addis Ababa. With the completion of the light industry city, Huajian foresees increasing its export revenue from 30 million dollars in 2016 to 4 billion dollars by 2022

However Western critics warn Ethiopia of being trapped in a neo-colonial relationship and some Ethiopians wonder if the Ethiopia-China relationship comes at the expense of other countries. Gedion Jalata, Program Manager of Africa China Dialogue Platform at Oxfam International, says both views miss the mutual beneficial and sovereignty respecting aspect of the bilateral relations. Jalata points out that Ethiopia is one of the beneficiaries of the China-proposed Belt and Road Initiative.

While Ethiopia is attracting massive Chinese investment in infrastructure projects, the Ethiopian government has set its sight in particular on Chinese involvement in industry parks. Ahmed Shide, Ethiopia’s Minister of Transport, says the country plans to utilize Chinese built infrastructure to boost its industrial exports. Shide is especially keen on the 4.2-billion-dollar Chinese built and financed 756 km Ethiopia-Djibouti electrified rail line to boost its industrial exports.