NEW ECONOMY TAKES SEVERAL STEPS FORWARD
ETHIOPIA: ON A PATH TO GROWTH?
Things are looking up... a bit. During the turbulent times of military rule in the 1970s and 1980s, bad news from Ethiopia was endemic. Its economy fell about as low as it could go. For many observers and the world media, the country sometimes looked beyond redemption.
Now finally there is some movement – starting
with the much more open political environment
of the 2000s. Since the return to
civilian rule in 1991, there has been a steady
opening of markets, lowered barriers to investment,
and renewed confidence, as shown
in return of some Ethiopian expatriates.
The World Bank reports that “real non-agriculture
GDP increased by a solid 6.4 per cent
per year... during 1993-2003, with rapid expansion
of the services and industrial sectors”
of Ethiopia.
This trend has continued. While some statistics
are imprecise, most analysts accept that
Ethiopia’s economy has jumped ahead in recent
years, with growth between 8 and 10 per
cent a year. The capital city Addis Ababa, already
far ahead of rest of country in most areas,
boasts a highly visible construction boom,
with new highways, commercial and government
buildings springing up. This boom includes a new $150 million headquarters for
the African Union financed largely by China.
New export industries have emerged, especially
for horticultural flowers and food.
Tourism is still hobbled by the lack of hotels
and infrastructure in some regions, but plans
are being hatched to “re-brand” the country to
attract more cultural tourists to Ethiopia’s millennial
sites and monuments.
Still, the basic indicators of Ethiopia’s economy
are low, in no way above African sub-Saharan
development levels. Even in the 1990s,
following the overthrow of the military, GDP
per capita in Ethiopia shrank by 43 per cent,
from $188 down to $84 per capita. Today in
Addis there is severe unemployment among
young people. And instability, never good
for the economy, continues to bubble up
with border disputes and regional strife.
Problems remain
The national economy of Ethiopia is largely
based on subsistence agriculture, which accounts
for half of gross domestic product,
making up 60 per cent of exports, and 80
per cent of total employment. Parts of the
north and east of the country are subject to recurrent
food problems, and various international
programmes try to establish a “floor” or
“safety net” to avoid any recurrence of past
shortages.
Coffee exports remain crucial to the Ethiopian
economy, providing about 65 per cent of its
foreign exchange earnings. More than 15 million
people (25 per cent of the population)
derive their livelihood from the coffee sector,
and it contributes 10 per cent of Ethiopia’s
GDP. Its biggest coffee customers are Germany,
Japan, Saudi Arabia, the United States,
France and Belgium. Other top exports continue
to be live animals, hides, gold, seeds and
oilseeds, and the narcotic khat (or qat).
Visible progress
While much of its economy remains deeply
traditional, Ethiopia also enjoys the “leapfrog”
effect of new technologies, for example in
telecommunications, which makes some old
hardware and infrastructure unnecessary, i.e.
telephone poles and cables (see text “Wiring
Ethiopia”). Wireless technology couldn’t arrive
at a better time!
There is a thriving new horticulture industry,
visible in massive greenhouses stretching over
dozens of hectares. These exports fuel rapidly
expanding cargo operations, shipping freshcut
flowers to Holland, vegetables including
green beans to Germany, and passion fruit to
the Gulf countries. Started with Dutch and Israeli
expertise, other investors have moved in
and greenhouse installations have expanded
in the ideal climate and altitude of the
Ethiopian plains.
A wave of expatriates returning home, always
a good sign for a country on the rebound, is
very visible in Ethiopia. Wars, famine and
political repression prompted thousands to
flee in the 1980s. The large communities of
Ethiopian Americans, particularly in Washington,
Dallas and Chicago, prompted the International
Organization for Migration to note
that there were probably “more Ethiopian
doctors in Chicago” than in Ethiopia itself.
While some technicians, entrepreneurs and
professionals are returning to live permanently,
many others are now supporting their
country with remittances or charitable gifts.
Perhaps symbolically, a new hospital in Addis
Ababa is being built largely with the financial
support of expatriates.
The lack of basic infrastructure – water and
sanitation, irrigation, paved national highways, telecommunications – has been a mark of
Ethiopia’s underdevelopment. But there is a
new determination of national authorities,
prompted in part by the UN’s Millennium Development
Goals, to progressively provide
the entire country, for example, with water and
sanitation, from less than half the population
supplied to 100 per cent supply in seven years.
There are also plans to rapidly expand the
telecommunications network to smaller centres
and villages across the country.
Foreign assistance
While the Organization for Economic Cooperation
and Development (OECD) notes that
“Ethiopia’s successful economic policies had
made it a favourite of donors”, national missions
in Addis gave UN Special widely differing assessments
of the country’s progress.
The UNS team visited several national missions
in Addis, focusing on the economic assistance
and cooperation programmes of the United
States, Egypt, Israel, Canada and Switzerland
(see “Des progrès... mais aussi des reculs?”).
USAID is involved in several projects in
Ethiopia, including on economic policy, livestock,
agriculture and food security projects.
The agency also supports small farmers to become
exporters through improved irrigation
systems and higher-quality products. Often
small-scale producers link to an international
buyer, but do not meet the production demands
due to lack of technology, skilled labour
and or transportation. USAID helps cooperatives
overcome these obstacles.
USAID is working in to improve hide skin and
leather products. Short-term loans, which do
not require collateral, are provided to industry
associations. In the area of coffee, USAID is
also supporting Ethiopia’s international competitiveness.
Bilateral Trade
The deputy head of mission of Egypt, Maher El-Adawy, emphasized the wide cooperation on
water issues, as Ethiopia is the source of the
Blue Nile, and also the centre of many African
development agencies. Bilateral trade between
Egypt and Ethiopia reached close to $82 million
in 2006, an amount that more than doubled
in the last four years. Egypt exports cement,
medicines, building and petroleum
products while at the same time importing
seeds (sesame), agricultural and meat products.
The ambassador of Israel, Yaacov Amitai, emphasized
the historical ties and the “immediate
affinity” between the two countries, as
the Old Testament shaped their respective
historical and religious consciousness. Technical
programmes focused on specific areas,
such as dry-climate agriculture and water
management, honey-making and camel husbandry,
and health care, areas in which Israel
had distinct expertise. Individual investors
also come from Israel to invest in, for example,
horticulture projects, and as a result there
are now several flights weekly between Tel
Aviv and Addis.
Without empty boosterism, then, one can
safely say there is real economic movement in
Ethiopia. To some, this may sound like the
blues singer’s ironic lament, “I’ve been down
so long, this looks like up to me”. But if its current
progress continues, the country may start
singing a different tune entirely.
David Winch (dwinch@unog.ch) is an editor at UN Geneva
