Kenya Ponders Future Of Economic Ties Ethiopia

Meles Zenawi
Meles Zenawi Ethiopia’s late Prime Minister

Policy and business leaders are confident that the death of Meles Zenawi, Ethiopia’s two decade long leader, will not derail any of the economic deals Kenya had signed with its northern neighbor.

Those privy to bilateral and multi lateral pacts affecting Kenya said the fallen influential regional leader was categorical that economic agreements are underpinned in binding frameworks after a rigorous and consultative process.

Known for his “protectionist” economic policies with most investments directed by the state, the late Ethiopian premier was comfortable going to bilateral rather than multilateral negotiating tables.

He drew largely from East Asia’s economic models, especially South Korea and Taiwan. Such models promote strong state involvement in encouraging and directing investment, while at the same time inculcating values of hardwork among their population.

Those models have proved successful in the so called Asia’s Tiger economies, and Zenawi was a strong crusader of those policies, backing them as the perfect route to accelerate Africa’s economic growth. He had attracted praise for steering economic development and growth in his country.

Since 2004, Ethiopia has been one of the world’s fastest growing non-oil producing economies growing as much as 12 percent at some point, with an average of 8 percent growth annually.

The country, whose population has grown to an estimated 84.3 million in 2012 from 31.7 million in 1971, was ranked at position 174 by UN’s development programme’s index of 2011 out of 187 countries surveyed in life expectancy, education and living standards.

The ex-guerrilla leader who succumbed to an undisclosed illness has over the recent past been keen on selective bilateral deals, especially on infrastructure and trade development.

He however preferred using his trusted technocrats, but kept a tight grip on the unfolding negotiations, adequately being briefed on each new development. Three months before he reportedly disappeared from public limelight in June, he was in Kenya to launch Africa’s most ambitious infrastructure project, the $24.5 billion Lamu- South Sudan Ethiopia transport and economic corridor (LAPSSET) and uncharacteristically warm up to the domestic private sector.

Local investors, long starved of investments in Ethiopia, were given reprieve during his visit when he sanctioned the two governments to work on a special bilateral status to promote a bilateral economic integration.

“We are following models in Asia and especially South Korea that has succeeded in doing better what the private sector failed to do,” Zenawi told business leaders during a dinner in Nairobi after jointly commissioning the LAPSET project.

“The intention is not to limit or to restrict private sector investment but to supplement them.”

Domestic private sector investors who dominate foreign direct investments in Uganda and Tanzania had petitioned Ethiopia to embrace COMESA’s free trade Area treaty by liberalising some of the sectors she maintains a tight grip on.

The late leader made it clear he was ready to open up to Kenya’s “dynamic private sector” under a bilateral agreement and not through the COMESA framework.

The private sector through the chair of the Kenya Association of manufacturers Jaswinder Bedi had petitioned him to consider liberalising investment in wholesale trade, financial services, transport and foreign exchange sectors.

“We can’t integrate the whole continent at once, we should start with regional integration first and Ethiopia Kenya pact is a bridge to this,” was the late premier’s response during a dinner also attended by Kenya’s Prime Minister Raila Odinga.

However he publicly told them to forget a share of Ethiopia’s banking, insurance, retail trade and SME sectors in short and medium terms.

“Controlling financial services is necessary to adequately fund infrastructure. Sooner or later we may allow foreign banks, but it is not yet in our pipeline.  The reason why for example land is state owned in Ethiopia is because we want manufacturers to access it at low lease rates,” he further said.

China, Turkey and India remain the top foreign direct infrastructure sources for Ethiopia. But the late premier was keen on Kenya’s private sector to help build capacity in his country especially in the manufacturing sector.

Restrictive policies on the transport sector have always forced local manufacturers to offload their goods at Kenya’s Moyale border into Ethiopian trucks leading to increased consumer costs.

Patrick Obath, the chair of the Kenya Private Sector Alliance (KEPSA) said the Kenya’s negotiating team cordinated from the office of the prime minister finalized its draft memorandum of understanding over two months ago.

The memorandum containing the way forward on promoting investments into Ethiopia was then forwaded but Kenya is yet to receive feedback.

KEPSA is however optimistic that the death of the prime minister will not interfere with ongoing negotiations. “He was categorical that Ethiopia was not going to open up fully until she builds enough capacity to effectively compete with any foreign investor,” said the KEPSA boss.

But his strong conviction into a possible tie with Kenya was in his unwavering support of the LAPSET project, arguing that developing efficient infrastructure was a launchpad to promoting economic integration.

Silvester Kasuku, the infrastructure secretary and head of the multifaceted project’s coordinating committee allayed any delay fears in its implementation following the change of guard in Ethiopia.

Kasuku reiterated the lengthy deliberations that led to a binding bilateral agreement were government to government. “There was nothing personal that would derail the project in the absence of Zenawi. Leaders can change but once policies and instruments of bilateral policies are clear and signed using appropriate framework then the project cannot be threatened,” he assured