The Exim Bank of South Korea has concluded an agreement with the Ministry of Finance and Economic Development (MoFED)in order to support Ethiopian agriculture, infrastructure and manufacturing investment sector.
Sufian Ahmed, minister of MoFED, signed the agreement with Kim Sung Hwan, South Korea’s minister of Foreign Affairs and Trade.
Since its establishment in 1976 at Seoul, South Korea, the Export and Import Bank of Korea has served as an official credit agency that offers export credit and support to Korean enterprises, which carry out business activities overseas.
The Exim Bank of Korea mainly provides export loans, trade finance, and overseas investment credit and operates as an economic development cooperation programme.
It has already started financing in the agricultural, infrastructure, and advanced technology of the investment sector in African countries. In 2010, for example, the bank provided loans amounting to 35 million dollars to Mozambique. In 2010, South Korea had pledged to raise its aid to Africa by nearly one billion dollars.
The Korean government is now looking at potential areas for large investment opportunities in Ethiopia with the conclusion of the contract between the bank and MoFED.
The signing ceremony was held on Friday, July 8, 2011, at the Jubilee Palace, on Menilik II Avenue, in the presence of the South Korean President, Lee Myung-bak, and Prime Minister Meles Zenawi.
In addition, an agreement on scientific and technological cooperation has been concluded between the two governments, including two other economic cooperation accords.
The move could very well allow South Korea to catch up with India and China, which already have large state banks financing large projects across Ethiopia.
“The Ethiopian government would be happy to get another developmental partner from Asia despite risk of loans with high interest rates which would adversely affect the country in the long term. In addition, the loan goes directly through state enterprises rather than directly through the government budget. This may also cause indirect inflation on the economy,” a local macroeconomist said.
Previously the state owned Exim Bank of India provided 640 million dollars in soft loans at an interest rate of 1.7pc in accordance with the agreement signed by the two governments, which requires that 85pc of the construction work be done by Indian firms.
Lee Myung-bak arrived at Bole International Airport at 3:15 pm on Friday 8, July 2011, with 170 South Korean delegates including 53 South Korean journalists for a three day official visit. Hailemariam Desalegn, deputy prime minister and minister of Foreign Affairs, welcomed the President at the airport.
At a press conference held shortly after the signing ceremony, Meles affirmed that apart from the long lasting cordial relationships of the two countries, the Ethiopian government is working hard to attract more Korean investors to take advantages in investment opportunities in Ethiopia.
“Though they are few, there are some Korean investors already operating in the investment sector. The opportunity is open for them to come here and invest,” Meles emphasised.
“The government is keen to encourage and promote Korean private investment to participate in Ethiopian agricultural, manufacturing, technological and other sectors,” he added.
“We will engage with the Korean business community to get involved in the promising Ethiopian investment opportunity Myung bak said.”
“Besides the Korean Republic is a strong ally of the Ethiopian government’s Growth and Transformation Plan (GTP),” he added.
More than 80 South Korean business delegates accompanied the President in order to hold discussions with the Ethiopian business community during their visit.
“There will be a similar visit in South Korea soon by the Ethiopian counterpart,” Meles promised.
During his stay, the President has visited the Korean War veteran’s memorial in Ethiopia and given a speech at Addis Abeba University. In addition, he met with Korean volunteer workers in Ethiopia. Before coming to Ethiopia, the President had visited the Democratic Republic of Congo and South Africa.
President Myung-bak is the first South Korean President to visit Ethiopia. When war broke out between South Korea and North Korea in the 1950s, Ethiopia had peacekeepers as part of a UN peacekeeping force to aid South Korea repel the invasion by North Korea.
In 2008/09, South Korea provided 56 million Br in grants to Ethiopia which later increased in 2009/10 to 101.6 million Br. However Korea’s support has increased in the current fiscal year. For the first six months, it provided grants amounting to 1.6 billion Br. In 2010, Ethiopia imported a total amount of 91.2 million dollars of items while its exports to South Korea only amounted to 9.7 million dollars.