Ethiopia: Sino-Ethiopia’s Economic Ties Exemplary

Ethiopia and China continued enjoying a flourishing historical bilateral relations that goes back to 1970, which now is hitting a raised prominent partnership bar. As Ethiopia seeks to replicate the experience of Asian countries like that of Taiwan, Malaysia, or China to attract foreign direct investment (FDI) in order to accelerate the development of its manufacturing capacities, a win-win bilateral cooperation with such countries has high significance.

On the other hand, China has been working to export its development model, and to promote connectivity between Asia and the African continent. In this context, the Chinese government identified Special Economic Zones (SEZ) projects in 19 countries – including one in Ethiopia located in Dukem some 30 kilometers southeast of Addis Ababa.

China by far has become the leading foreign direct investor in Ethiopia. In addition to the Eastern Industrial Zone (EIZ) in Dukem and their dominant presence in the Hawasa Industrial Park (HIP) in Hawassa, Chinese investors are engaged in privately-run Chinese firms and are also extremely active in all kinds of infrastructure development.

As Chinese investments in Ethiopia are concentrated in infrastructure and in the manufacturing sector, they have been playing a transformative role and give rise to a “win-win” outcome.

Meles Alem, Ethiopian Foreign Minister Spokesperson, told The Ethiopian Herald that a number of infrastructural projects in the areas of road construction, spinning factory, irrigation development, housing, garment, fertilizer factories, textile industry, technical and vocational education, railway links, sugar factories and electric power generation are supported by Chinese funds.

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Meles further said that as a result of intensified bilateral relations between China and Ethiopia over the last two decades, the trade exchange between the two countries is now growing with a rate of 22.2 percent per year.

China has certainly played a useful role in Ethiopia by setting up industrial zones, financing infrastructure, and encouraging Chinese firms to move some manufacturing production to Africa. In doing so, it is contributing a great deal to the industrialization process.

Up on the recent visit of Prime Minister Hailemariam Desalegn to China, Ethiopia has become a member of Asia Infrastructure Investment Bank (AIIB), which ensures an alternative funding source for Ethiopia pursuant to its infrastructural development projects. The bank was established in 2012 by China and other Asian countries.

According to Meles, it was possible to persuade Chinese mega companies to tune their investments to Ethiopia through face to face forums channeled for 17 Anchor Investors in Shandong, Fujian, Hunan, and Sichuan states of China.

Rather than manufacturing investments, Chinese investments in infrastructure may have proven to be more instrumental in transforming the country. The construction of new dams, for instance, has been instrumental in guaranteeing a stable supply of power and helping the country to realize its plan of becoming a major electricity exporter.

“In addition to those already in Ethiopia, last month Prime Minister Hailemariam sat down with officials from 17 big Chinese companies requesting their investment in Ethiopia,” said Meles.

The prime minister who attended and spoke at the Belt and Road Forum for International Cooperation held from May 14-15 of this year in Beijing, visited several Chinese provinces and signed a 250-million-dollar loan agreement for an industrial park. The premier also formally signed Ethiopia’s membership to the Asian Infrastructure Investment Bank (AIIB), making the Horn of Africa nation the 77th member.

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Meles also said, “Chinese investors in Ethiopia have dispensed in a total of 624 projects with a total investment of nearly four billion US dollars, securing employment opportunities for 57,555 permanent and 53,669 temporary employees.”

Partnerships between the two countries is also strong in the field of development cooperation, according to the Spokesperson. This is highly beefed-up due to the ever growing Chinese economy, allowing the nation to increase in its capacity in providing loans. Accordingly, beyond the provision of aid, China is now capable of providing concessional and non-concessional loans which Ethiopia is also taking advantage of, Meles said.

It was recently reported that Chinese companies have invested around four billion USD during the last two decades in Ethiopia, employing 111,000 Ethiopians on permanent and temporary basis. Currently, China is Ethiopia’s largest trading partner and the trade relation reaching 6.37 billion USD in 2015, while growing at an average 22.2 percent annually for the last several years.

The prospects look rather good, provided that other accompanying measures are put in place so as to improve the overall business environment, and importantly, to enhance the local labor force’s employing capacity.

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