Taking a new look at Ethiopia

The nation has been steadily advancing and now seeks additional Chinese resources and expertise to reach a promising industrial future

Many people may think of Ethiopia as a proud and ancient land that saw its share of troubles in the 20th century.

But a delegation from the country, including the prime minister, arrived early this month in China to invite investors to what they described as a changing land with a rapidly growing economy and a stable political system that is ready to fulfill a new destiny.

"Ethiopia is moving from an agrarian economy to an industrial economy. And we need you, the Chinese investors, in cooperation with our domestic investors, to bring about this industrialization and urbanization as quickly as possible," says Ethiopian Prime Minister Hailemariam Desalegn.

The prime minister, accompanied by trade and investment officials, spoke during the China-Ethiopia Production Capacity Cooperation conference in Beijing, held after events marking the 70th anniversary of the end of World War II.

Ethiopia is a country that is pulling itself up by its bootstraps, much as China did decades ago, they told delegates.

"Ethiopia has one of the world's fastest growing economies. It is currently the fourth-largest economy in (sub-Saharan) Africa, on track to be third by 2017," says Sisay Gemechu, CEO of Ethiopia Industrial Parks Development Corp.

The prime minister says Ethiopia is glad to be a involved with China's transfer of part of its industrial capacity to Africa, and that the country would like to learn from China's experience to improve its economic mix.

"We know that we are still a developing country and we have a long way to go in improving the investment environment of the country. But my government is doing everything we can to create a conducive environment to facilitate investment in production capacity," Desalegn says.

"So we have opted for working with China, because political and diplomatic relations between our two countries are excellent and the two governments are working in tandem to bring about mutually beneficial cooperation between our two countries.

"In this regard, the last visit of Premier Li Keqiang to Ethiopia has brought up a new dimension of the relationship that has deepened and broadened since his visit. Both countries have an understanding of how to bring about robust investment in sectors like manufacturing and urbanization.

"Our agriculture still needs to be modernized and we want Chinese investors to come and invest. We have potential in the mining, oil and gas sector," he says.

"I think the most important thing is that I am here amongst you to show that we are committed. We want you to relocate your companies to us because we have the comparative advantage of low labor costs. You need to come to Ethiopia, because you have the technology, the managerial capacity, and we have the labor and we have the facilities. But of course, we understand that we need to improve our infrastructure. Thanks to Chinese investors, we are improving our infrastructure facilities. Electricity power, energy generation, railways, light manufacturing," Desalegn says.

Fitsum Arega, director-general of Ethiopian Investment Commission, says the country's potential is borne out by the numbers: "Its nominal GDP hit $55 billion, and per capita GDP hit $632. The real GDP growth rate was 10.3 percent.

"The growth is broad based. Ethiopia is not only growing, but it is transforming, lifting society out of poverty and illiteracy. Ethiopia is determined to become a carbon-neutral, middle-income manufacturing hub by 2025, which means that there are many opportunities in this nation.

"There is political and macroeconomic stability. We have fast growth, good governance and attractive investment law, the commitment of the government to support foreign direct investment, integrated air and sea transport and logistics infrastructure."

Ethiopia averaged 10 percent GDP growth for the past 11 years, including 10.3 percent last year, official figures show. According to figures released by the Ethiopian government, the nation has witnessed significant FDI increase in the recent years.

Last year, 18.5 percent of all jobs generated by FDI in Africa were in Ethiopia, the Addis Ababa government says. FDI in Ethiopia amounts to about $1.5 billion.

"The top investor in Ethiopia is China, followed by Turkey, India, Saudi Arabia, the Netherlands, and the United Kingdom," he says.

"Over the next 10 years, Ethiopia aims to create 2 million manufacturing jobs to develop the manufacturing sector by fourfold. There will be massive investments in infrastructure in industries including electricity, roads, rail and telecom," Fitsum Arega says.

Gemechu listed some of Ethiopia's competitive advantages: "First, strong leadership and governance; second, large and untapped economy; third, demographic advantage; fourth, infrastructure; fifth, manufacturing hub of Africa; sixth, huge untapped resources; seventh, agriculture including livestock.

"Ethiopia has one the lowest manufacturing labor costs, $0.41 a hour. We also have a goal of training up to 1 million professional workers every year. The nation has 35 public universities with over 400,000 students, 70 percent of whom are in engineering, technology and natural sciences."

The nation also has more than 20 million square meters of factory buildings, he says.

"The development of industrial zones is critical. Currently there are three industrial parks under construction and seven are planned for constructed within the next five years," he says.

About 400 Chinese companies attended the conference, and some of them expressed a willingness to invest in the nation.

Gao Lei, general manager of CGC Overseas Construction Co Ethiopia Ltd, says that Ethiopia has a good investment environment. Several international organizations such as the United Nations Economic Commission for Africa, the World Bank and International Monetary Fund have set up their regional headquarters there. CGC Overseas Construction Co is a Chinese construction firm that ranks among the 100 largest contractors in international projects.

"The political conditions here are also very stable, which provides a very favorable investment environment for companies. What's more, the Chinese government provides strong financial support for Chinese companies to invest in the nation. The two nations enjoy good relations, which makes it a desirable investment destination," says Gao.

The company entered Ethiopia in 2003, and now it has about 600 employees locally, with an investment of 200 million yuan ($31.3 million). It is building highways, some projects for treating polluted water and also industrial parks.

On the day of the conference, the company signed a contract to build three hydropower projects in Ethiopia. Once finished, the projects will provide 10,000 megawatts of electricity, all with Chinese technology, and they are to be integrated into the Ethiopian national electricity network by 2025, says Gao.

"The Ethiopian government has a goal to generate about 12,000 megawatts of power by 2017, which also provides many opportunities for us to develop our business there," says Gao.

Recent years have witnessed increasingly close cooperation between China and Ethiopia, and by the end of 2014, trade between the two nations had hit $3.4 billion. China has become the largest trade partner and foreign investor in Ethiopia. Also, China's National Development Bank has issued loans of $1.4 billion in Ethiopia, supporting construction of local projects such as those of Ethiopia Telecommunications Corp.

Gao says Ethiopia still has some problems to overcome.

"We face some challenges in government operating efficiency, taxation, and opening up to foreign investment in more sectors, yet since the government keeps loosening investment policies, improving the environment, and enhancing the management of investment services to encourage foreign interests, the situation is getting better, " says Gao.

huhaiyan@chinadaily.com.cn

(China Daily Africa Weekly 09/11/2015 page19)