[LINK] "Ethiopia Charts a Chinese Course"

[rfmcdonald]

Ed McKenna's Inter Press Service article highlights the Chinese-style trajectory of Ethiopia in the past decade, a combination of an authoritarian political system with relatively competent governance and an export-oriented economy. As the professor interview notes, Ethiopia is still a very poor country, even by African standards. If sustained, though, Ethiopia's economic growth could eventually produce significant results, as we've in fact seen already with China. Much depends on succession.

The death of Ethiopia’s leader of 21 years has raised fears of instability in one of Africa’s fastest-growing non-oil producing nations, which could potentially slow investment activity.

Former Prime Minister Meles Zenawi, who passed away in August, saw foreign direct investment (FDI) as key to his development plan for Ethiopia. This attitude helped shift Ethiopia’s economy from being wholly reliant on the export of agricultural commodities to, for example, utilising abundant labour and cheap power to begin developing a manufacturing industry.

“Without Meles, Ethiopia will struggle to control unrest (ethnic/religious) that could easily spill across regional borders,” a recent International Crisis Group report said.

According to the National Bank of Ethiopia, FDI in this country climbed from 150 million dollars in 2005 to 1.1 billion dollars in 2010. To bring in scarce foreign exchange, Meles channeled investment to export-oriented sectors like floriculture, horticulture, textiles, and leather.

Ethiopia’s foreign earnings increased 15 percent last year to 3.2 billion dollars, according to the Ministry for Trade. The government aims to double exports as a share of output by 2015, with a much bigger contribution coming from minerals and manufactured goods.

Dr Getachew Begashaw, professor of economics at Harper College in the U.S. city of Chicago, questions to what extent foreign investment is translating into jobs and improved quality of life for Ethiopians.

“Ethiopia has the lowest per capita GDP (only 351 dollars) in Africa; it is one of the last four countries in Africa. Similarly, it stands at the bottom of all countries reviewed for the human development and prosperity indices (171 out of 178 for HDI and 108 out of 110 for prosperity),” he told IPS.

By citing China as his model for governance, Meles may have mistakenly presumed that investors were only interested in receiving a good return on finance, according to Getachew, who believes that if the government’s repressive approach continues it could deter companies in the future.

“The political climate in the country is not conducive for investments; the degree of human rights abuses in the country dampens the sense of economic security; the lack of a free, secure, and safe political environment will discourage bold economic initiatives. The current uncertainties following (Mr. Meles´s) death could slow investment decisions,” Getachew said.

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According to a recent International Monetary Fund report, Chinese firms are attracted by cheap labour, large plots of land and a growing market of 94 million people.

Chinese factories like shoe manufacturer Huajian are now relocating production facilities to Ethiopia to escape rising costs at home. The company was also drawn by one of the largest livestock industries in Africa.

The firm may generate four billion dollars in exports a year, according to a recent Bloomberg report that cites the company’s vice president. Chinese businesses have invested 900 million dollars in the country, Ethiopia’s Investment Agency reports.

Foreign firms are also eyeing up services. This year the number one hotel group in Europe, the Carlson Rezidor Hotel Group, expanded its upscale Radisson Blu brand into Ethiopia. The company says it sees this country as its vanguard in east Africa.

Also this year, Schulze Global Investments, a U.S. firm, announced a 100 million dollar Ethiopia fund, the first private-equity scheme focused exclusively on this Horn of Africa country. The fund will invest in sectors from agribusiness and cement to health care and natural resources.