Ethiopia Rises, But Challenges Remain

Ethiopia Rises, But Challenges Remain
Ethiopia has invested heavily in infrastructure and development

AFRICANGLOBE – For a very long time, Ethiopia and famine had almost been household words. People in all parts of the world still remember the heartbreaking pictures of emaciated and undernourished children, men and women of this ancient land called Ethiopia. This story is just 40 years old.

The old scene where the famine in Ethiopia morphed as one of our global scary memories is now fast fading. Today, Ethiopia appears to challenge the pecking order, as the country now craves for a top flight on board the “Africa Rising” narrative.

Gauging current trends of development in economic growth, political power, diplomatic upper hand and military might of countries across Africa, a study published recently by the Institute of Security Studies (ISS) described Ethiopia as the third largest continental power in determining Africa’s economic and political destiny, only next to South Africa and Nigeria. ISS, an independent research organisation based in South Africa, analysed county-specific trends on a wide spectrum of performances along socio-economic and political domains, including human security issues, terrorism concerns and post-conflict issues.

Many would wonder what exactly put the wind in the sails of such progress that Ethiopia, rising from the ashes, is now calling shots far and wide. One would wonder even more, why Ethiopia’s robust posture in regional and international scene has come off over only the last decade. In much of this time, Ethiopia enjoyed a double digit economic growth rate, making it the largest economy in Eastern Africa.

Ethiopia’s sterling performance as an emerging giant in the African continent is hugely ascribed to a number of factors, such as the relative political stability, the praiseworthy inclusive economic growth – guided by sound policies and strategies, the huge and vibrant opportunities for trade and investment, the ongoing massive regional economic integration with its neighbours and its excellent records in the promotion of regional peace and stability.

Primarily, in a region where many of its neighbours are being racked on a treadmill of political instability, internal socio-economic tensions, raging war and violence, and soaring concerns of terrorism, Ethiopia, in relative terms, is enjoying sustained political stability for over 20 years now. Much of the country’s stability is flourishing as an offshoot of the federalist structure of governance, which Ethiopia took on over a couple of decades.

Substantial achievements have been gained at forging accommodations of diversity in exercising rights across languages, cultures, religions and sexes. In addition, the inclusive political system of governance greased the surfaces for decentralised platforms, where power devolution reigned, thereby making the peoples of Ethiopia the sole owners of the political power and the decision-making process.

Ethiopia’s towering performance as one of the most influential countries in Africa hails from the praiseworthy inclusive economic growth that the country embarked on for years. Ethiopia is one such country where significant human development gains have been recorded in recent years.

A United Nations Human Development Report in 2013 indicated that “Ethiopian human development is down to massive investments to pro-poor projects and to sound economic policies that the government has been committed to for so long.” In the same year, over 70pc of the government’s budget allocation went for human development schemes, like health facilities, education, social protection, agriculture and infrastructural packages, all intended to lifting millions out of poverty.

In association, Guang Zhe Chen, World Bank country director for Ethiopia, recently said over 2.5 million people in Ethiopia have been lifted out of poverty thanks to the strong and inclusive economic growth in the country. In consequence, the country’s poverty rate showed a cutback from 38.7pc to 26pc between 2004/05 and 2013/14.

The World Bank also lauded the government’s development policies, which, in practical terms, managed to advance with an account of broad-based economic growth and significant reduction in poverty. This is partly evidenced in the thriving of a new class of successful business and professional women in Ethiopia, unlike the traditional roles of Ethiopian women as second rate in the country’s economy.

For some countries, economic growth is viewed as a primary development policy goal, and that efforts of poverty reduction befall merely out of such growth. That is why some countries fall flat in terms of translating development into poverty reduction despite robust economic growth.

Ethiopia, nonetheless, chose a different course. The Ethiopian government has it that the task of poverty reduction remains a prime objective of its development policy, whilst mindful of the fact that economic growth is the principal, but not the only means to this objective.

Several robust reasons are offered to explain why Ethiopia has gone over relatively big at courting considerable trade and investment in-flows. Today, Ethiopia is on the frontline as one of the most favored destinations of trade and investment on a global scale.

Addis Abeba, Ethiopia’s capital is now the third diplomatic hub in the world, with the highest concentration of Embassies next to New York and Geneva. Ethiopia, home for 90 million people, making it the second most populous country in the continent, is marked with the lowest cost of living and the cheapest labour force, thus attracting investment and increased economic activity.

With 70pc of the population below the age of 30, 95pc of its children in schools, and with the highest life expectancy, 63, in Africa, the country is placed at the receiving end of further demographic advantages for trade and investment.

Ethiopia also offers quick market access to 3.5 billion people who are located in a radius of eight hours of flight from the capital. Another comparative advantage that the country sits on is the fact that Ethiopia is among the top regional manufacturing hubs of Africa, with the world’s cheapest electricity prices.

The country also has a steadily improving surface transportation infrastructure, with the largest cargo shipment to almost fifty countries.

Today, Ethiopia owns the biggest and most profitable airline in Africa, and the biggest merchant ship operator in the continent. Even more, Ethiopia is now first in Africa in coffee exports, and 10th in the world; as well as the second largest cut flower exporter in the continent, next to Kenya.

The country also offers a generous assortment of export incentives and support schemes, which include the export credit guarantee scheme, duty free import of capital goods, tax holidays, investment credit support, and many others. Ethiopia’s standing as one of the attractive destinations for investors and companies is further fueled by half a dozen schemes for unilateral export market access.

These arrangements on preferential export access to the markets in Europe and the United States are duty free and largely quota-free. The African Growth Opportunity Act (AGOA), Everything But Arms (EBA,) Sanitary and Phytosanitary Standards (SPS) are just some of these schemes.

As part of the African Union’s grand design on forging inter-African infrastructural integration, Ethiopia is now being a catalyst for economic and political integration in the sub-region.

Accordingly, Ethiopia is currently collaborating with its neighbours, in various regional interconnection projects, such as an increase in the road networks along with the 2,400kms long railway project it launched in a bid to link up producers and consumers of the East African region.

Part Two