Ethiopia striving to be preferable destination of Chinese investment
Fekadu Wubete
Last week the biggest Chinese chronicler, Xinhua, stated that building on decade-long double-digit growth, catalyzed by enormous government spending on infrastructure, the size of the Ethiopian economy has reached well over 69.2 billion USD, far better than same GDP that stood at 61.6 billion USD in 2015, according to projections of the International Monetary Fund (IMF) made for 2016.
According to Xinhua, China is leading the way in foreign investment trend in the East African country. Investment is an important contributing factor behind Ethiopia’s fast economic growth, complementary to the government’s huge investment.
Tourism has been witnessed paying a lot to the economic growth of the country. Cognizant of its remarkable benefit, Ethiopia is resolutely working to develop and diversify tourism destinations, widen market shares, help the sector generate as much revenue as possible and contribute its own to the economic transformation and poverty alleviation endeavor of the country.
Lately, some13 Chinese investors had expresse dinterested to invest in Ethiopia, particularly in the development of tourist destinations and construction of infrastructures related to accommodation. The Chinese investors are enthusiastic about engaging in construction of facilities in various tourist destinations. This endeavor would make Ethiopia among the predominant destinations of Chinese tourists; to entertain many thousands of them in the near future.
The constructions of infrastructures are aimed to make Ethiopia tourist attraction hub and preferable destination to all tourists from around the world, including the Chinese. The construction of facilities (including hotels, airports, souvenir shops and emporiums) is estimated to cost as much as 250 million USD; it will help foster various sectors of the economy including the construction sector, service provision and job creation.
This year alone, Ethiopia has attracted investment companies with projects worth 14.5 billion Birr. And Chinese companies are taking the lead in terms of capital and number of manufacturing companies, followed by India and Turkey. Likewise, in the past six months, over 120 investment projects have went in to operation, of whom 45 are Chinese firms with an aggregated capital of over four billion USD.
Ethio-China ties and economic cooperation has reached at an enviable level; volume of trade increasing with time. The relation includes multi-lateral aspects of trade, construction, education and training and people to people relation and cultural exchange.
Until now tourism has become the most important part of the national economy. The sector has been scaling up at an annual average of about 10 percent over the past decade as Ethiopia has been attracting increasing amount of Foreign Direct Investment (FDI). It is estimated that tourism is contributing about 4.5 percent of the gross domestic product (GDP), or close to three billion USD. The contribution of the tourism sector is as tremendous as employing 1.5 million citizens and enabling lots of families to earn their living from it.
Nation believes Chinese tourists would be the foremost visitors rushing to tourist destinations in Ethiopia soon. Secret in public, these days, influx of Chinese tourists to various tourism destinations of the country has increased (following the economic boom of China and significant increment in the income of its citizens.
The effort to broadly involve Chinese investors in the development of tourism, manufacturing and agro-processing sector is part of the endeavor of government to obtain reliable development stake holder, create thousands of jobs as quickly as possible and expedite accelerated transformation in the economy; witnessing the commitment of the country to let no stone unturned to help develop the economy (particularly, helping tourism and manufacturing sectors generate tremendous revenue to realize poverty alleviation effort of the country).
China has been keen on investing in Ethiopia and involving in genuine cooperation since the introduction of free market and liberalization of the economy in 1992. The new economic chapter has opened up the country to foreign investment and other business activities in unparalleled manner. Following the profound change, China becomes the first to come to East Africa and involve in the free market economy of Ethiopia that enables China to engage in tremendous investment activities.
Furthermore, Addis Ababa being the seat of many international organizations and embassies and becoming hub of international diplomacy has roused the interest of China to go in to deeper relation with Ethiopia. Besides, Ethiopia’s huge number of population, its potential for immense market opportunities and access to regional markets like Common Market for Eastern and Southern Africa (COMESA) has all increased the interest of China to strengthen relation with Ethiopia.
In addition, numerous mechanisms have been devised and commissions were formulated to speed up multi-lateral relation between the two countries. Hence, economic relation between Ethiopia and China is being facilitated by Joint Ethio-China Commission (JECC), Sino-Ethiopian Agreement for Mutual Promotion and Protocol concluded in 1988, Sino-Ethiopia Agreement for trade, economic and technical cooperation signed in 1996 and Forum on China Africa Cooperation (FOCAC).
Mainly, the launching of the Forum on China Africa Cooperation (FOCAC) in 2000 with subsequent ministerial meetings has provided the framework for China-Africa political and economic relations (in which Ethiopia is predominant actor). The forum enabled to heighten the multi-lateral relation of the Ethiopia and China(though, some politicians argue that similarity of China’s credentials with that of third world, particularly African countries, has helped China to share broader sense of ideological relation. Besides, China’s foreign policy declaration founded on non-interference has helped to strengthen the bond of the two countries).
To further strengthen the ties of the two countries, Ethiopia has called for more Chinese investors in countless sectors following the conclusion of a three days’ visit by the Chinese delegation meant to Promoting South-South Cooperation (PSSC) earlier. Following their visit, Ethiopia has briefed the delegation that several investment windows are open to foreign investors. Particularly, Ethiopia has clarified potential investors about its untapped investment potential in the areas of tourism, agriculture, agro-processing, manufacturing and construction, among others.
Currently, the volume of trade between Ethiopia and China has reached unparalleled level. As part of exchange, Ethiopia is exporting agricultural produce like oil seeds, hides and skins, leather products and minerals, while China exports machinery, mechanical appliances, electrical equipment and parts, vehicles, textile and plastic products, among others.
Indubitably, China is the leading investor country in Ethiopia. Notably, road and rail way construction, electric power generation and telecommunication are among the sectors Chinese companies have prioritized to engage in Ethiopia. A case in point, construction of Addis Ababa City light rail way and Ethio -Djibouti rail way projects have become a concrete instances for the deepening of relation between the two countries.
The projects, particularly the Ethio-Djibouti, are anticipated to contribute their own to regional integration and economic development through facilitation of surface transport and opening of the east African corridor to other same regions of Africa. Notably, the construction of Hawassa Industrial Park (HIP) by Chinese contractors has also showcased unshakable development cooperation between Ethiopia and China, proudly evidencing the ever-growing relation of the two countries.
So far, the Ethio-Chinese relation has been going on the right track. The investment projects being undertaken by Chinese investors in Ethiopia have become beacon of strong relation. In this regard, in addition to the available incentive packages, the government is committed to offer further assistance to Chinese investors and enhance development of the country through mass flow of investment. In doing so, the government has opted to selectively woo capable and high-profile investors with feasible projects that can create thousands of jobs, increase quality of export produce and foreign currency earning.
Taking in to account instrumentality of investment in job creation and lifting millions of citizens out of abject poverty, the Second Growth and Transformation Plan (GTP-2) has given emphasis to investment, especially increasing flow of FDI in to Ethiopia. In this regard, Ethiopia is interested to reinvigorate its multi-lateral relation with China and enhance the amount of Chinese investment in Ethiopia.
Nation believes the investment sectors (including the tourism and manufacturing) are at their fledgling stage and it needs significant leverage of stakeholders to enable it fully swing at a desirable level. In this regard, to realize change in the sector, it has become a must for the country to strengthen cooperation between various stakeholders engaged in the sector (foreign and domestic partners) and the government as well.
Ethiopia is striving to the top of its capacity to realize robust investment and manufacturing sector and enable it to take off and become most preferred destination of Chinese tourists and investment. Hence, it is striving to devise ingenious mechanism to help facilitate smooth flow of investment, attract more FDI, improve quality of manufacturing produce and penetrate in to the niche of world market (and overcome stiff competition induced by globalization).
Ethiopia has girt its loin to go a long way to improve investment and manufacturing sector and build industry-led economy and export-oriented industry. To this end, nation will continue enhancing its multi-lateral relation with countries like China that have big potential investors. In addition, nation is industriously working to generate disciplined and trained work force, innovate technologies and adopt best practices, provide financial and technical assistance and prod the investment and tourism sector further.