Live in the Future to Foster Regional Integration With Ethiopia in the Horn of Africa

WATCH Interview with OBN Horn of Africa, January 10, 2024

January 16, 2024

Let us work to make the Horn of Africa and East Africa a model of regional economic integration. This process has already begun, with the Grand Ethiopian Renaissance Dam exporting electricity to Sudan, Kenya, and Djibouti. Ethiopia having long term port access to major shipping routes through the Gulf of Eden and the Red Sea, will expand Ethiopia’s economy and has the potential to develop the regional economy of East Africa. There are three primary conceptual obstacles that people have in understanding how to develop this region, which I discuss above in the video interview with OBN, and below in the written interview with ENA.

One, the majority of people do not understand the physical scientific principles to economic development, having been miseducated by our schools and society.

Two, the legacy of colonialism has perverted the thinking process of many Africans, leading to fixed prejudices that prevent one from seeing what is possible.

Three, most people live in the past, or at best in the present. I try to live in the future, where my mind can see the fruitful potential of that which we humans can create but does not yet exist.

Ethiopia-Somaliland MoU Model for Economic Development of Africa: American Analyst

Interview with Ethiopian News Agency, January 2, 2024

Addis Ababa, January 4/2024(ENA)- The current MoU signed by Ethiopia and Somaliland could become a model for economic development of the continent, Political-economic analyst for Africa Lawrence Freeman said.

In an exclusive interview with ENA, the analyst said that the Memorandum of Understanding signed on Monday could be a “useful example for the rest of the African continent.”

Moreover, the MoU for Partnership and Cooperation inked by Prime Minister Abiy Ahmed and President Muse Bihi Abdi includes wide scopes of cooperation in social, economic, political, and military fields.

It is also intended to serve as a framework for the multisectoral partnership between the two sides, and shall pave the way to realize the aspiration of Ethiopia to secure access to the sea and diversify its access to seaports.

In this respect, Freeman believes the agreement is a breakthrough that could accelerate regional and global trade.

“If you look at it optimistically, the situation in the Horn of Africa could actually become a model for economic development and in the whole African continent. Now, this is what we’re looking for, regional integration, economic-regional linkage into international trade among nations, instead of exporting everything outside the nation. So this could be a useful example for the rest of the continent.”

However, there are political forces within the Horn of Africa and around the world who would like to continue destabilizing the region, the American analyst noted.

He particularly pointed out that there are manipulators and political forces screaming war constantly.

When the prime minister talked about the port in October 2023, dozens of articles were published predicting war. But, there was no indication of war, he stated.

According to Freeman, the historic MoU was signed in a peaceful manner and has the potential to bring other countries to cooperate with Ethiopia in this geopolitically strategic part of the world.

He advised specifically Somalis to refrain from inflammatory statements and resolve the issue calmly.

Given the conflict between Somalia and Somaliland for many years, Somaliland has been conducting its affairs differently in the spheres of currency, economy, governance and others.

The MoU “can offer economic growth to actually both nations because if Somaliland is growing, Somalia is growing too…. Statements like ‘we’re not going to give one inch of our territory’ is the kind of talking that is not helpful. We’re going to have to move forward. We can’t stay the way we are. We need to have a resolution between those two between Somalia and Somaliland.”

Beyond that the problems in the Horn of Africa are very complicated and emanate from a whole bunch of leftover problems from the days of colonialism, he noted.

There is a lot of antagonism and complications that come from colonial history.

“As for the amount of anger and hatred that I see from people against one country versus another, we’re not going to give up. We’re not going to let them know that you’re stuck in the mind of the old colonists picture. My message to people is to move forward,” the analyst underscored.

For Freeman those people who are screaming about war are either fools or they’re being manipulated by other forces in the wrong way.

In general, the American analyst stated that the MoU is very important for Ethiopia to realize the advancement of import-export trade and allow the nation to have greater access to the rest of the world.

Ethiopia also being the largest economy and population, the area can make perfect sense to build a naval capacity it once had when it accessed the Red Sea, he added.

More importantly, Ethiopia is also now going to play a major role as the country has become a new member of the BRICS, the leading institution of the global South, with a new paradigm for development of emerging nations.

That gives Ethiopia a great deal of an opportunity to begin to deal with all the political-economic frailties and create a new level of regional cooperation in the region.

Read my earlier posts:

Ethiopia Access to Seaports Benefits All People of East Africa

Economic Development Can Bring Peace to the Horn of Africa

Lawrence Freeman is a Political-Economic Analyst for Africa, who has been involved in economic development policies for Africa for over 30 years. He is a teacher, writer, public speaker, and consultant on Africa. Mr. Freeman strongly believes that economic development is an essential human right. He is also the creator of the blog:  lawrencefreemanafricaandtheworld.com

Ethiopia Access to Seaports Benefits All People of East Africa

Potential Ports for Expanded Ethiopian Trade

November 4, 2023

In his new article, Ethiopia needs a reliable seaport and a navy, Ken Opalo provide a great deal of useful information on the necessity for Ethiopia to have access to a sea port to continue its progress towards of industrializing its economy. It is imperative for all the nations in the Horn and East Africa to understand, it is in their self interest for Ethiopia, East Africa’s largest and fastest growing economy, to have access to a reliable port. A prosperous Ethiopia benefits the African continent.

Excerpts below from Ethiopia needs a reliable seaport and a navy

Ethiopia’s economic case for reliable and cost-effective seaport access is strong. In order to secure its economic future, the country must minimize or completely erase the economic costs associated with being landlocked. Overall, landlocked countries tend to be 20% less developed than they would be if they had access to the sea. This is partially due to cost of trade, with transportation costs being between 50%-262% higher for landlocked countries.Subscribe

Given the significant economic costs associated with being landlocked, it is a no-brainer that for Ethiopia to achieve its ambitious developmentalist agenda — which will necessarily require export-oriented industrialization and improved agricultural productivity — it needs to have more control over trade-related costs and policy (or procure stability on both fronts from its neighbors). According to the Ethiopian government, transportation costs gobble up 16% of the value of international trade (which seems really high). Foreign trade currently amounts to 24% of GDP, and needs to grow by orders of magnitude. With an annual output of US$127b, Ethiopia is already Eastern Africa’s biggest economy (Kenya is second at US$113b) but with lots of low-hanging opportunities for even bigger trade-driven output.

Last year Djibouti cut stay of cargo days from 45 to 8 days. In addition, the port is more expensive relative to neighbors, often lacks storage space, and suffers from untimely availability of empty containers for exports. These factors have are the motivation behind Ethiopia’s aggressive port diversification initiative. As of early last year, Djibouti City’s share of Ethiopian trade cargo had declined from 95% to just under 86%, with the Kenyan border Moyale dry port (0.02%), Somaliland’s Berbera (5%), and Djibouti’s Tadjoura (9.6%) emerging as alternatives. These latter routes, however, lack the infrastructure (roads, petrol stations, service and repair stops, etc) to support bulk haulage logistics.

His careless bluster notwithstanding, Abiy has significant leverage over Djibouti (population 1.1m). Ethiopia is Djibouti’s leading revenue generator, ahead of the naval base leases by China, France, the United States, Saudi Arabia, Italy, and Japan. Ethiopian trade reportedly generates more than US$1b each year for the Djiboutian economy. Rents from foreign military bases estimated to be at least US$120m per year. The service sector accounts for nearly 80% of Djiboutian GDP (US$3.5b in 2022), much of it related to ports and logistics. Ethiopia accounts for upwards of 85% of all cargo passing through Djibouti.

Source: World Bank data

II: The economic case for securing reliable seaport access

As shown below, over the last decade Ethiopia has quintupled its industrial output and is quickly catching up with its regional neighbors. If these trends are to continue and if Ethiopia is to attract both domestic and foreign investments into its manufacturing sector, the state must guarantee investors that they will be able to access global markets at reasonable prices. The same goes for investments in the agricultural sector, which still has a commanding share of exports. Agriculture accounts for nearly 38% of GDP (including 50% of manufacturing production), 80% of employment, and about 90% of forex earnings.

Ethiopia’s planned rail network (see below) reflects the country’s industrialization agenda (the same goes for the overall transport masterplan, including road infrastructure). The proposed lines are all designed to serve specific industrial parks. Currently the main rail network (red) terminates at Djibouti City (Doraleh Multipurpose Port), with a planned alternative route to the opposite side of the Gulf of Tadjoura (in Tadjoura). While the rail network will certainly serve domestic production and distribution of goods once completed, an equally important objective should be to guarantee high-enough international traffic volumes to pay for its construction and ongoing maintenance.

As revealed by the planned railway network below, Ethiopia’s seaport options are largely limited to Djibouti — which is cause for believing that Abiy’s comments, if he really meant them and was not just carelessly thinking out loud that he is the latter day Ras Alula Abanega, were a negotiating tactic vis-a-vis Djibouti. Given its importance for Ethiopia’s maritime trade, is also likely that Djibouti is Addis Ababa’s first choice for the location of the planned naval base.

Ethiopia’s industrial parks are in Jimma, Hawassa, Adama, Dire Dawa, Bole Lemi, Debre Birhan, Semera, Kombolcha, Bahir Dar, and Mekelle. Source: Wikipedia

Read my earlier post: Economic Development Can Bring Peace to the Horn of Africa

Lawrence Freeman is a Political-Economic Analyst for Africa, who has been involved in economic development policies for Africa for over 30 years. He is a teacher, writer, public speaker, and consultant on Africa. Mr. Freeman strongly believes that economic development is an essential human right. He is also the creator of the blog:  lawrencefreemanafricaandtheworld.com