ETHIOPIA: ON THE PATH TO BECOME THE NEXT CHINA?
Ethiopia has since shrugged off the tag of being Africa’s no-hoppers to become a wealthy economy and compelling economic experts and observers to imagine it is on the path to become “Africa’s next China”.
this is not far-fetched, considering that the government’s current focus is on ambitious broadminded and marketfriendly reforms. Though the economy was hard hit by civil wars and famines of the 1970s and 1980s respectively, the government has made it its top priority to embark on economic reforms such as privatisation of state enterprises and rationalisation of government regulation. The process which is on-going has been widely lauded at home and abroad and vital FDIs have continued to flow due to the reforms. The country has a mixed and transition economy with a massive public sector, while the majority of the businesses that are in government hands are being transformed into pri
vate enterprises towards a market economy. Despite this, state-owned companies dominate the banking, telecommunications and transportation sectors. Economic analysts say that for the foreseeable future, government is expected to keep under its control some sectors regarded as strategic such as telecommunications, financial and insurance services, air and land transportation services, and retail.
With a population of over 100 million (2016 figures), this places it only next to Nigeria, making it a leading country .regarding its human inhabitation. The Horn of Africa giant is one of the fastest-growing economies in the world, with youth below the age of 18 presently projected at about 50% of its total current population.
Some Key Sectors Contributing to Economic Rise
Agriculture is arguably Ethiopia’s commercial mainstay with 2015 projections putting the sector's contribution to the economy at about 81 percent of exports and the labour force. This makes the sector largely responsible for economic activities such as marketing, processing and agricultural exports. Coffee production tops the list of a number of major foreign currency earning crops, including beans, oilseeds, cereals, potatoes, sugarcane and vegetables.
In 2017, shipments to global destinations were reportedly dominated by coffee, tea, spices (US$963 million) and representing 33.6% of overall exports, followed by vegetables and oil seeds. Coffee Arabica, indigenous to the southwestern Ethiopian highlands and a most highly regarded species, has since ancient times been part and parcel of the Ethiopian way of life, evidenced by the country’s introduction of the coffee plant into the Arab world circa 5th – 8th century. As more production areas grow to complement the coffee industry of which the country has some of the best in varieties and growing conditions in the world, and more trade opportunities in the crop are opened up, Ethiopia could surprise many by claiming an unrivaled place as a top pan-African economic powerhouse.
In the transport industry, its air transport industry is emerging as a force to be reckoned with on both the African and world stages, earning the state huge foreign currency revenues through the increasing tourist numbers. Notable has been flag carrier Ethiopian Airlines, also known as “Ethiopian” that has continued to take air connectivity to the next level, performing resoundingly to surpass other competitors in the continental air passenger and cargo game, such that it has now become the largest and most profitable in Africa. It continues to advance its capacity and capabilities in a manner never before seen in Africa and in comparison to other leading airlines on the continent.
Ethiopian’s growth is impressive, with services to over a hundred destinations spanning the globe and increasing yearly. It also continues to win every major accolade available in African aviation excellence almost annu
With a population of over 100 million (2016 figures), this places it only next to Nigeria, making it a leading country regarding its human inhabitation. The Horn of Africa giant is one of the fastestgrowing economies in the world, with youth below the age of 18 presently projected at about 50% of its total current population.
ally, with the latest one held in November 2018 when it reportedly was crowned Best Airline in Africa, for the 7th consecutive year, in recognition of its exceptional financial performance. The award was handed over to the airline’s management at the 50th high profile African Airline Association Annual General Assembly in Rabat, Morocco. A vibrant and robust air transport industry bears a strong influence to any nation wishing to experience unprecedented economic growth, and in this regard Ethiopian is on the right path, more pronounced by its sound management surprising many as a fast growing, profitable and sustainable airline. Complementing the air industry has been the forward-thinking planning and execution of infrastructure such as in rail. Ethiopia has in recent years opened more trade routes by land with regional and international destinations. From 2005, Ethiopia expanded international trade through the ports of Djibouti, connected to Addis Ababa by the Addis Ababa-Djibouti Railway backed by some minimal use of Port Sudan in Sudan. The Chinese-built Ethiopia-Djibouti Railway, will see it begin to move goods from the beginning of 2019.
In 2015, the first light rail in Africa was opened in the capital city of Addis Ababa and in 2017 services were to commence on the electric Addis Ababa – Djibouti railway. It should be noted that the Ethiopian railway network has been rapidly expanding, pronounced by two other electric railways under construction, specifically the Awash - Woldiya and Woldiya and Mekelle lines, all adding to the country’s ever impressive achievements and the focus to outperform the rest of the continent in the long term.
Furthermore, Ethiopia’s estimated 113,066
In 2017, shipments to global destinations were reportedly dominated by coffee, tea, spices (US$963 million) and representing 33.6% of overall exports, followed by vegetables and oil seeds.
kilometres (as of 2016) of all-weather roads, has enabled the country to rapidly grow internal commercial trade activities. This answers the paucity of transportation infrastructure that is Africa’s major downside. For the world to see are many more positive developments that have been happening in Ethiopia, thereby contributing to the country’s gradually expanding economic activities and centred on scaling up regional business opportunities.
The country recently celebrated its first direct commercial airline service (four flights per week) by private carrier Ethiopia National Airways linking the capital cities of Addis Ababa in Ethiopia and Mogadishu in Somalia in 41 years.
Earlier in July 2018, Ethiopian Airlines had launched its first flights between Ethiopia and another of its neighbour, Eritrea in two decades and which followed softening of relations between the two countries earlier marked by the historical meeting between their Presidents.
The two air services have been hailed as signs of better economic prospects between Ethiopia and the t wo countries that are among several neighbours, specially looking at the fact that Ethiopia had for some time been involved in long running, deep rooted political conflicts (1998 – 2000 Eritrean-Ethiopian war) and protracted cold wars, with its two neighbours.
This is clear and laudable evidence that Ethiopia is engaging its neighbours towards building long-term business-focused relations, important in intensifying its commercial opportunities and building a strong base from which to launch to further regions in Africa and abroad. Quite a lot of promise to its economic growth is being seen, spurred by foreign direct investment from overseas conglomerates, mainly from China, as already stated above.
It has been proven that a country’s success in establishing sustainable trading relationships with its neighbours usually bodes well for various economic activities, opportunities and job creation, there is every reason to see Ethiopia experiencing much growth earlier than anticipated, specially looking at the seeming potential to be derived from trade with its immediate neighbours and many around the continent and overseas.
This comes on top of ever-increasing strong foreign investment inflows as well as the business boom from locals and a burgeoning Diaspora community whose foreign currency remittances have for some time been the backbone of its national wealth.
Data from way back show that in 2002, more than 156, 000 tourists entered the country, many of them Ethiopians visiting from abroad, spending more than US$77 million. Six years later, the number of tourists increased to 330 000. One could bet on current figures being far higher than this, considering that in 2015, Ethiopia was ranked the “World’s Best Tourist Destination” by the European Council on Tourism and Trade. Tourism has huge potential to continue to influence the economic expansion of Ethiopia, like it does to other nations globally, with the creation of critical job opportunities and thereby quelling restlessness as well reducing despondency for thousands of learned youths coming out of tertiary institutions. The country also now boasts top class hydroelectric power facilities, enabling it to circumvent endless growth bottlenecks and providing much needed energy to further spur on industrial growth.
Furthermore, if the government succeeds to regulate and document the multi-million dollar and wide-spread cross border trade in livestock (cattle, camels, sheep, and goats) by pastoralists to neighbouring countries like Somalia, Kenya and Djibouti, there is a likelihood of further boosting Ethiopian national wealth through tax revenue as well as foreign currency earnings.
Some of the Challenges likely to Stand in Ethiopia’s Way to Prosperity
Several factors could potentially derail quick movement towards greater economic achievements and sustainability for Ethiopia. “In my opinion, the centrifugal forces and ethnic conflicts are the treats that tend to slow down the pace of progress”, said Dr Atlaw Alemu, Head: Department of Economics at Addis Ababa University when asked what were the major possible risks to likely slow down Ethiopia’s economic rise. Pessimism arising from perennial tribal violence and the fear of resurgent internal dissident uprisings, in addition to recently promulgated rural land registration requirements has reportedly raised questions among locals, all seeming likely to take long to reduce to insignificant levels or understand its benefits, respectively.
This is despite widely lauded gestures of peace like the reaching out to separatist groups and reforms (among them the overhaul of state companies) by the country’s Prime Minister Dr Abiy Ahmed, who came into office in April 2018. Also, the extensively reported intermittent inter-communal clashes could probably add to the challenges, thereby standing in the way of national unity, upliftment and recovery. The International Displacement Monitoring Centre (Switzerland) has recorded that in 2018 alone, an estimated 1.4 million people have been displaced by violence and bloodshed.
While it seems that ethnic identity, which goes way back in time, may hold much sway against the significance of national unity, even with the evident and encouraging rise in national wealth, Ethiopia’s future looks bright as it appears on spot to be the continent’s wealthiest country in the future.
The government is showing great enthusiasm to move the country towards prosperity since the youthful president has been leading by example, driving the nation with democracy inspired decision-making processes, at a pace and commitment that have surprised critics and won the hearts of many.
Furthermore, in the country’s favour is the massive and ever-growing population numbers that can help boost its envisaged growth plans, if balanced with consistent business plans and implementation. No doubt the people of Ethiopia will see the benefits from economic stability far outweighing the disadvantages. There is widespread visible and tangible evidence showing that the country is becoming a model in the eyes of many at home and abroad.
Expert Views
The above and more have led to a good number of experts believing or suggesting that the country might be on an economic trajectory to soon be comparable to China’s success!
The IMF has acknowledged that Ethiopia's economy has been on an impressive upward trend for some time, describing it as “one of the fastest growing economies in the world, registering over 10 % economic growth from 2004 through to 2009.” Another global institution, the World Bank says that in 2017 Ethiopia’s gross domestic product was US$80.56 billion. Data from the same body is very encouraging: “Ethiopia’s economy experienced strong, broad-based growth averaging 10.3% a year from 2006/7 to 2016/2017, compared to a regional average of 5.4%.” By African standards, this remarkable economic growth has seen the country defying the odds.
Tyler Cowen, George Mason University Professor of Economics recently wrote for Bloomberg that “Ethiopia’s growth rate is expected to be 8.5 percent this year (2018), topping China’s projected 6.5 percent.” Asked whether he shared the calculation by some economists and observers that “Ethiopia will be the next China”, Dr Alemu said: “If “some economists and other observers” are characterising China by the advances made in manufacturing and the achieved high and consecutive growth for the last many years, I wish to share the idea that Ethiopia will follow the same path, combining it with the political freedom that it is experiencing of late. I believe the wish will be a reality if peace prevails, and the new political atmosphere stabilises to allow people to start using their creativity with freedom.”
He suggested that Ethiopia stood a great chance of becoming the next China, citing the strong force of its economy at present such as its possession of a good stock of educated and skilled people inside and outside the country spread all over the world. “If it uses its human resources well, the economy will jump to a new level and trajectory”.
The academic noted that the government of Ethiopia is doing a number of things correctly in terms of governance that governments of other African countries can learn from, including “openness to the public, addressing the human rights issues and the exercise of inclusiveness in terms of gender and opposition parties.”
At the quick and amazing rate at which his country is developing, Dr Alemu’s forecast was that in the next ten to fifteen years' period it will be showing definite signs of success, however, noting that this would likely depend on giving the above conditions the chance to prevail.
No doubt the people of Ethiopia will see the benefits from economic stability far outweighing the disadvantages. There is wide-spread visible and tangible evidence showing that the country is becoming a model in the eyes of many at home and abroad. Ethiopia’s growth rate is expected to be 8.5 percent this year, topping China’s projected 6.5 percent.