Time for Ethiopia

2 years ago . 6 min read
Ardian Wibisono
Author of forbes indonesia
Time for Ethiopia
Admasu Tsegaye, Ethiopia’s ambassador for Indonesia, Singapore and Malaysia.

For decades, Ethiopia used to be synonymous with famine, drought and hunger. But in the past ten years the country has been addressing those problems and has emerged as one of the fastest growing countries in the world. It is already the fastest growing in Africa as it aims to be a middle-class country by 2025. According to the United Nations, in the period of 2004 to 2017 the country’s economy grew by an average of 10.5%, with real GDP growing from $10.5 billion to $81 billion in the same period albeit GDP per capita of the country of 107 million is still below $800. As a comparison, Indonesia’s GDP per capita was $3,846 last year.

The main drivers of this strong growth are public investment and private consumption on the demand side and value-added products in agriculture, services and the construction sector on the supply side as the country ambitiously builds its infrastructure. But the country is also aiming to grow its service and industrial sectors. Since 2009 the service sector has surpassed agriculture in terms of contribution to GDP. Currently, the service sector contributes 39.3% of the GDP while agriculture accounts for 36.3% with the rest from industry. The Ethiopian government has been trying to attract more and more foreign investment to the country. So far, China has taken the lead, pouring over $13 billion between 2006 and 2015 although many say the rally is now cooling off.

In mid-2016, Ethiopia opened its embassy in Jakarta and appointed Admasu Tsegaye as the country’s ambassador for Indonesia, Singapore and Malaysia mainly to attract investment from the region and grow bilateral trade.

In Indonesia, the embassy has been proactively seeking potential partnerships, holding meetings with government officials and arranging visits of Indonesian companies and businessmen to Ethiopia.

“Our mission here is to inform Southeast Asian investors about investment opportunities and incentives. It will be a win-win situation as we have natural resources but are still underdeveloped. So, we need expertise and equipment. Many companies from China are investing in Ethiopia because they are already familiar with my country. But investment is also coming from India, Turkey and Europe,” says Admasu at his office in Jakarta.

Admasu says Ethiopia is currently directing foreign investment to labor-intensive, light manufacturing sectors. Some of the potential sectors highlighted by the ambassador are agro-processing industry, textiles, pharmaceuticals, construction materials, and tourism. In the agro sector, Admasu says Ethiopia is well-known for its coffee and for being the largest livestock producer in the continent. Meanwhile, Head of Indonesian Textiles Association (API) Ade Sudrajat acknowledges that Ethiopia has emerged as a new and big player in the textile industry. “It has become a new competitor for Indonesian textiles beside Vietnam and Bangladesh,” he says.

“We offer incentives to investors. Firstly, labor is very cheap, as well as electricity at $0.03 per kWh. There are also industrial parks that can be leased at a low price with a period of up to 80 years. We also give tax incentives for imports and exports that varies for each sector,” Admasu says.

The Ethiopian government understands that infrastructure is key. Thus, the country has been ambitiously building industrial parks, giant dams for electricity, networks of railways, roads, and improving its airport. This year Ethiopia’s new 750 kilometers railway worth $3 billion began commercial operations, making it Africa’s first fully electrified cross-border railway. It links the landlocked country to the sea in ways that lower transportation costs for imports and exports.

In June, agreements were signed for the construction of nine new road projects covering 749 kilometers across the country, which adds to the 7,910 kms of asphalt roads that have been constructed over the last three years. Early this year the country also completed its $345 million airport expansion project that will increase its annual passenger handling capacity from 7 million to 22 million passengers.

By building these entire transportation network Ethiopia is also aiming to be the hub for Africa as it prepares to benefit from the implementation of the Continental Free Trade Area (CTFA). The main objectives of the CFTA are to create a single continental market for goods and services, with free movement of people and investments, thus paving the way for accelerating the establishment of the Customs Union. The agreement will bring together 54 African countries with a combined population of more than one billion people and a combined gross domestic product of more than $3.4 trillion.

“The first is people-to-people relationship. There should be trust between the people. So now we have begun air connectivity, our Ethiopian Airlines already started flying to Jakarta three times a week. This will help the process. With the Indonesian chamber of commerce and industry, Kadin, we try to establish a council comprising businessmen of the two countries and to organize business trips for Indonesian investors to go to Ethiopia to meet their counterparts and vice versa,” says Admasu.

According to the Indonesian Embassy in Ethiopia, economic relations between the two countries have been “dynamic”, with the trade volume reaching $351.75 million (2016), down from 2015’s figures of $423.99 million. The decline was attributed to a drop in Indonesia's exports to Ethiopia and the hard currency issues in Ethiopia.

Many Indonesian products such as garment and textile products, paper/paper products, chemicals, soap and detergent, glassware, furniture, plastic products, pharmaceuticals, medical equipment, and food (instant noodles) are well-known in the Ethiopian market because of their good quality and reasonable prices, according to the Embassy. On the other hand, Indonesia imports cotton, leather, spices, and coffee from Ethiopia.

Indonesian instant noodle company PT Indofood opened its factory in Ethiopia in the middle of 2015, while leading garment producer PT Ungaran Sari Garments has started production since early 2017. Meanwhile, PT Sinar Antjol, producer of B-29 soap and detergents, started production in early 2018.

Admasu also says that investors should not be worried about armed conflicts in the country. In July, Ethiopia and its neighbour Eritrea signed a declaration that put an end to the state of war between the two countries. The truce ended the 1998-2000 border conflict and tension between the two neighbors.

“So as the economy is growing, the government is wisely taking advantage of the situation. Everybody is benefitting from the growth,” Admasu says.

Land of Origin

Human civilization has deep roots in Ethiopia. It is believed that modern human beings first set foot in the region over 3.2 million years ago before expanding to the Middle East and other regions. Some of the oldest skeletal evidence for anatomically modern humans has been found in Ethiopia, with Lucy being the most popular. Lucy is a fossil of several hundred pieces of bones of a female Australopithecus afarensis found in the Village of Hadar in 1974.

With that deep roots in civilization, there are eight world cultural heritage sites listed by the Unesco. This makes Ethiopia a country with the most world heritage sites. The more famous sites are Rock-Hewn Churches Lalibela that was constructed in the 12th century as a ‘New Jerusalem’ after Muslims halted Christian pilgrimages to the Holy Land, and the Aksum obelisk built two millennias ago by the kingdom of Queen Sheeba.

Written By
Ardian Wibisono
Author of forbes indonesia