An Ethiopian Journal

"Until lions have their historians, tales of the hunt shall always glorify the hunters"

ETHIOPIA: ON A PATH TO GROWTH?

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UN Special – N# 665 – September 2007
http://www.unspecial.org/UNS665/t52.html

NEW ECONOMY TAKES SEVERAL STEPS FORWARD
By David Winch

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. 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.

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Written by Tseday

September 8, 2008 at 4:56 pm

Posted in Ethiopia

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2 Responses

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  1. Nice writing. You are on my RSS reader now so I can read more from you down the road.

    Allen Taylor

    Allen Taylor

    September 8, 2008 at 5:00 pm

  2. well written analysis, we ethiopians have began to see the light at the end of the tunnel, ethiopia will change beyound recognition. I went To Addis Ababa after ten years and I was amazed to see all the posetive changes. Ethiopia needs people who see the glass half full, lets all be optimist and work together to see a developed democratic Ethiopia. Good Luck To Ethiopia and Ethiopians

    habeshaman

    November 23, 2008 at 11:02 am


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