Bridging Infrastructural Gaps to Draw Investment
Bereket Gebru
Ethiopia is one of the African countries spearheading African Renaissance. The double digit growth that it has registered over the past dozen years has pushed the country steps forward towards realizing its target of becoming a middle income country by 2025. The country that was used synonymously with poverty has now become the symbol of change, hope and rapid growth.
This rapid growth has drawn considerable foreign investment into the country. Ethiopia is one of the biggest destinations of foreign direct investment in Africa. A vibrant economy, long periods of political stability, tremendous incentive packages, a large market with people of rising income, strategic location to other major markets and cheap labor are among the drawing factors for a large influx of foreign investment.
On the other hand, the problem of infrastructure (energy, roads, etc.) is considered the most notable push factor. The Ethiopian government has been working to bridge the huge infrastructural gap in the country for a long time. These infrastructural achievements, in addition to alleviating the problems of local residents, help draw foreign investment.
The House of People’s Representatives and the House of Federation officially kicked off their duties on October 8, 2017 with a joint session addressed by President Mulatu Teshome. The President touched up on many issues looking back on the performance of sectors in the previous fiscal year and indicating the areas of focus in these sectors this year. Let’s look into the President’s report on infrastructural undertaking in 2016/17 and the priority areas for 2017/18.
The President stated that bridging infrastructural gaps and enhancing the quality of services are among the factors that determine the competitiveness of the economy. Cognizant of this fact, the President went on to say, the government has been striving to fill up the infrastructural gaps. Roads connecting 75% of rural kebeles among themselves and with main roads were built in 2016/17. Ensuring the accessibility of rural roads plays a major role in rural transformation. The sustained building and maintenance of the roads could hasten the transportation of agricultural products to the market while simultaneously speeding up the delivery of inputs and services to farmers and pastoralists. The goal for this year is to raise the level of accessibility of rural roads to 85% and have all the kebeles covered in the next two years.
There was a 97% success rate in reinforcing and upgrading main roads, and building and upgrading connecting roads in 2016/17. Following the low implementation of 8% of roads, the previous contracts have been terminated with proceedings underway to award the construction to other contractors. However, road projects are generally progressing according to plan. In addition to finalizing ongoing projects and launching new ones, the focus for 2017/18 is to complete the ongoing research on classifying federal and state roads and venture into the implementation phase. Accordingly, there will be a non-overlapping division of labor between federal and state administrations.
As railway construction demands a large lump of finance, sustaining the construction of the ongoing projects and the full commissioning of the recently completed Addis Ababa-Djibouti line is going to be the primary plan for this year. New railway projects will not be launched this year because of failure to secure funds.
The most important infrastructure in transforming the economic structure is the supply of electric energy. Accordingly, operating Gibe-3 power generation project at full capacity, hastening the construction of the GERD (currently at 60%), completing the construction of the Genale-3 dam to begin power generation and speeding up works on koisha dam, Melka Sedi thermal power generation project, Aluto geothermal power generation project, Repi biomass power generation project and Aisha wind power generation project to proceed with their construction according to plan is the focus for this year.
In addition to power generation activities carried out by the government, the focus will be on inviting the private sector to participate in power generation with those on their marks set to begin operation in the near future. Towards that end, a Private-Public-Partnership (PPP) bill is expected to be ratified by the House of People’s Representatives in the recent future.
In addition to power generation activities carried out by the government, the focus will be on inviting the private sector to participate in power generation with those on their marks set to begin operation in the near future. Towards that end, a Private-Public-Partnership (PPP) bill is expected to be ratified by the House of People’s Representatives in the recent future.
Ongoing efforts to back manufacturing and trade activities, teaching-learning service and governmental service delivery with information communication technology will be strengthened. Activities already underway to enhance the participation of private investors in software development and manufacturing industry will be strengthened and their scopes broadened as they are bearing fruit. Moreover, activities underway to organize public communication centers in all rural kebeles to satisfy demands for information and the internet have covered 12% of kebeles while there are plans to soar that figure up to 40% this year.
Accordingly, the share of the agricultural sector of the whole economy has gone down steadily to reach 36.3%, while that of the industry reached 25.6% and the rest 39.3% is attributed to the service sector. A booklet entitled “4th Ethiopia Economic Update: Overcoming constraints in the Manufacturing Sector” by the World Bank Group stated that in 2013/14 the three sector shares in GDP were: 40.2 percent (agriculture), 45.5 percent (services), and 14.3 percent (industry). The figures thus indicate that the share of the industrial sector has increased considerably over the three years while that of the agricultural and service sectors has shrunk. From the figures above, we can say that the goals of industrialization are progressing well.
The landscape of the Ethiopian economy is changing fast with the industry, assuming increasingly bigger pieces of the pie while that of agriculture and the service sector diminish. That is a good testament to the spread of the roots of industrialization in the country. With more growth projected over the coming years, it would be wise for foreign investors to invest in Ethiopia.