Beyond the Diplomacy: The Need to Enhance Ethio-US Business, Investment Relations

United States Secretary of State John Kerry was in Addis Ababa earlier this month. During his visit, he met with high-ranking officials including Prime Minister Hailemariam Desalegn and his counterpart Tedros Adhanom to discuss a number of issues, including Ethiopia’s role as peacemaker in a number of conflicts on the continent, fighting terrorism in the Horn of Africa, and on the effects of U.S. aid that the country receives yearly. The visit marks Secretary Kerry’s second time in Ethiopia within a year, suggesting that ties between the two countries are stronger than ever. Yet, as EBR’s Editor-in-Chief Berihun Mekonnen reports, even though Ethiopia has proven a reliable and strategic ally of the U.S in Africa, when it comes to economic and business ties, the two countries have a weak partnership. The Ethiopian government hopes to strengthen these ties and there are signs that change is coming.

The United States Secretary of State John Kerry recently visited Ethiopia -- the second such visit within a year. During his visit, he met with Prime Minister Hailemariam Desalegn and Foreign Affairs Minister Tedros Adhanom (PhD) and discussed a variety of issues, including the conflicts in South Sudan and other African countries as well as touching upon the issues of democracy and human rights, development, economic cooperation, business and investments. 

Historically, the relationship between Ethiopia and the United States has generally been considered good, with the exception of the 1970s and 1980s, when the Dergue regime was in power in Ethiopia. The socialist orientation of the military junta put the interest of the United Sates aside. This caused the United States to reduce Ethiopia’s diplomatic status down from the “Most Favored Nation” ranking it had held under the imperial regime.

When the EPRDF rose to power in 1991, the relationship between the two states began to mend and made significant strides forward.  Currently, diplomatic relations between the two countries is at its peak, particularly on matters of regional security (in particular, fighting terrorism) and peace-building initiatives. Ethiopia, with its increased role as peacemaker in the troubled Horn of Africa region, will continue to be a strategic ally of Unites States. 

As a result, Ethiopia is now the largest recipient of American development assistance in sub-Saharan Africa, receiving, on average, close to USD800 million annually over the past few years. This development assistance is used to support the country’s endeavours in health, capacity building, education and other economic developments. Though some military training funds are provided to Ethiopia, they are explicitly limited to nonlethal assistance, training, and peacekeeping support, according to State Department sources. 

Support in the health sector is particularly strong, with the United States contributing aid to providing antiretroviral drugs for people living with HIV/AIDS and protection against mother-to-child transmission. Secretary Kerry has applauded these efforts in Ethiopia. He visited the Gandhi Hospital in Addis Ababa, where services to protect against mother-to-child transmission of HIV/AIDS are provided, and stated his appreciation of these kinds of efforts.

Despite the strategic partnership in security and cooperation in the health sector, the relations between the two countries in business and investment doesn’t enjoy a similarly beneficial relationship. 

Foreign Direct Investment (FDI) from America is miniscule compared with that of Ethiopia’s major business and investment partners such as Turkey, India, China or even neighbouring Sudan. While Turkey, China and India are the three biggest sources of FDI in Ethiopia -- with an investment capital of ETB72.5 billion, 51.3 billion, and 32.6 billion, respectively -- the US lags behind in 7th place, investing only 17.7 billion birr. This is out of the total 447 billion birr registered as FDI in Ethiopia from January 1999 to February 2014, according to data from the Ethiopian Investment Agency. That figure, according to economic analysts, is diminutive considering the relationship between the two countries and America’s investment potential as the richest country in the world.

Ambassador Dina Mufti, spokesperson for the Ministry of Foreign Affairs, says that Ethiopia and the U.S. have a relationship that both governments cherish deeply, “but the business and investment linkage hasn’t reached the level we desire.”  Yet, this link isn’t just weak with the U.S.:  Ethiopia’s business and investment relations with the West in general haven’t been strong and the government is working to change that, the spokesman added. 

The recent visit of the Japanese Prime Minister Shinzō Abe, who was accompanied by the country’s top business moguls and Finnish Prime Minister Jyrki Katainen, was aimed at changing this situation, according to Ambassador Dina. Frank-Walter Steinmeier, Germany’s Federal Foreign Minister, also made a trip to Ethiopia in March. The Minister came with a large number of the country’s business community to explore areas of investment in Ethiopia. All this is an attempt to strengthen Ethiopia’s economic, business and investment ties with the West, the Ambassador said.

US development assistance to EthiopiaThe Ethiopian government is hopeful that the mix of FDI sources will soon change by attracting more investors from the West. Huge American companies like General Electric are coming to Ethiopia, a hopeful sign for the new direction of business and investment ventures. 

Another hopeful sign of future economic ties between the U.S. and Ethiopia is the African Growth and Opportunity Act (AGOA), which provides trade preferences for quota- and duty-free entry of certain goods into the United States. Yet, according to Solomon Mebre (PhD), professor of international relations at Addis Ababa University, this might not be as fruitful as the government may wish: “Ethiopia couldn’t utilize fully this opportunity because of capacity limitations.” Since the economic capacity of Ethiopia is inadequate, it limits the capacity to do business with countries like the United States, which has a vast and sophisticated economy, he adds.

Trade relations between Ethiopia and the United States are also weak in comparison to other countries. Ethiopia is currently one of the lowest-ranked trading partners of the United States, holding the 101st position out of countries worldwide. The lack of a robust trading partnership is evident from the Ethiopian side as well.  The United States is not at the top list of countries Ethiopia trades with; it stands 7th among destinations for Ethiopia’s export, while conflict-ridden Somalia came in first, accompanied by China, Germany, Netherlands and Saudi Arabia, which rounded out the top five. 

In 2013, the trade transactions between the two countries amounted to USD872 million. While goods exported to the US -- such as coffee, Niger seeds, footwear,  and knit apparels-- amounted to USD194 million, Ethiopia’s imports from the US -- including aircrafts, machineries, wheat, optic and medical instruments -- cost the country USD678 million, amounting in a trade deficit of USD485 million to Ethiopia.

Despite the unbalanced trade relationship, Ethiopia is benefiting from institutions in which the United States has a big stake, like the World Bank (WB) and the International Monetary Fund (IMF). Since the influence of the United States in these financial institutions is immense, Ethiopia has been benefiting from substantial loans and grants they offer. “Of course, our good relations with the US has helped us a lot in securing loans and grants from international financial institutions like the IMF and WB and other multilateral negotiations,” says Ambassador Dina. 

The support and partnerships between the two nations, however, is not without its tension points. America has repeatedly criticized Ethiopia for its lack of press freedom and human rights violations, among other things. During a press conference, Secretary Kerry said that he had concerns about Ethiopia’s recent detainment of six bloggers and three journalists during a meeting with high-ranking officials.

Ethiopia and United Stated trade relationHowever, since the two countries’ relations are largely diplomatic, things that happen within the countries don’t affect their relationships, says Professor Solomon. “America’s primary concern is its interests, which are largely security issues in the Horn of Africa,” he notes,  “other things are secondary.” Ethiopia’s role in stabilizing the crises-ridden Horn of Africa and being a partner to the U.S.’s “War on Terror” have made the country one of its key allies in the post-Cold War era. 

Experts note that the increasing importance of Ethiopia as a key ally to the United States may evolve into economic cooperation, especially in the private sector. During his visit, Secretary Kerry said that the United States will support Ethiopia’s endeavor for economic development.

Secretary Kerry also met with the foreign ministers of Ethiopia, Kenya and Uganda to discuss the challenges of getting South Sudan’s warring sides to halt their months of deadly fighting. He told the press that too many nations are at risk of descending into broad-based violence. “It is clear that the unspeakable violence in the Central African Republic, the deliberate killing of civilians on both sides in South Sudan… underscore the urgency of the work that we have to do together,” the Secretary added. Political or diplomatic relations between nations are usually accompanied by development assistance and support. Ethiopia seems to be getting its fair share in this regard. Development aid may help a country fix some challenges and deficits in the near future, but are ultimately difficult to sustain without stronger economic relations. Despite its century-long relationship and the current strategic partnerships, Ethiopia should take advantage of the business and investment opportunities America can offer. 

In his concluding remarks after Ethiopia and the U.S. signed the first Treaty of Commerce, which meant to strengthen the friendly relations between the two countries on December 27, 1903, in Addis Ababa, Emperor Menelik II said that “this little ceremony marks the beginning in our relations which will have some place in history.”  Over a century later, that day seems to echo in the historic ties the two countries have forged to date. And yet, there is still a long way to go before the promise of the Treaty of Commerce – to build stronger ties diplomatically and economically – is fully realized.


2nd Year . June 2014 . No.15


Berihun Mekonnen

EBR Staff Writter

48 comments

  • DerrickFam

    online pharmacy without scripts
    Canadian Online Pharmacies
    canada drug
    Canadian Drugs
    canadian living recipes

    DerrickFam Tuesday, 19 September 2017 01:50 Comment Link
  • DerrickFam

    canadian pharmacy cialis
    Canadian Online Pharmacy
    no 1 canadian pharcharmy online
    Canadian Online Pharmacy
    Trusted Online Pharmacies

    DerrickFam Monday, 18 September 2017 22:30 Comment Link
  • DonnieHause

    buy cialis kuala lumpur
    cialis canada
    buy viagra cialis levitra.php
    cialis online pharmacy
    buy cheap cialis from india

    DonnieHause Monday, 18 September 2017 04:17 Comment Link
  • DonnieHause

    cialis cheap overnight
    buy cialis
    wholesale cialis
    cialis online canada pharmacy
    order cialis online with mastercard

    DonnieHause Monday, 18 September 2017 00:02 Comment Link
  • AshleyRot

    order viagra and cialis
    cialis from canada
    http://ph-u.com/buy-cialis-usa.html
    cialis online pharmacy
    what does cialis pills look like

    AshleyRot Sunday, 17 September 2017 22:03 Comment Link
  • AndrewBot

    ac uk buy cialis
    cialis from canada
    buy cialis cheap generic
    cialis online canada pharmacy
    cheap cialis 40 mg

    AndrewBot Sunday, 17 September 2017 19:19 Comment Link
  • AndrewBot

    buy cialis london
    cialis canada
    cialis online cheap from canada
    cialis from canada
    blood pressure pills and cialis

    AndrewBot Sunday, 17 September 2017 16:26 Comment Link
  • Carlosvog

    buy cialis no rx
    buy viagra online
    buy viagra
    is viagra cheaper than cialis
    cialis buy
    cialis buy
    tratamento tadalafil 5mg

    Carlosvog Friday, 15 September 2017 23:47 Comment Link
  • LouisSeaps

    cheap viagra bulk
    viagra online pharmacy
    buy viagra
    wanna buy viagra
    online cialis
    online cialis
    generic viagra available usa

    LouisSeaps Friday, 15 September 2017 07:57 Comment Link
  • Jasonmeack

    oxycodone withdrawal treatment
    alcohol rehab centers
    ways to help with opiate withdrawals
    alcohol rehab facilities
    treatment for xanax withdrawal

    Jasonmeack Sunday, 10 September 2017 03:53 Comment Link

Leave a comment

Make sure you enter the (*) required information where indicated.Basic HTML code is allowed.

Latest News

Ethiopia to Host the 4th International Coffee Conference

Ethiopia to Host the 4th International Coffee Conference

Ethiopia is set to host the 4th International Coffee Conference from March 6 – 8, 2016 in Addis Ababa at the United Nations Conference Center. Previous conferences were held  in England in 2001, Brazil in 2005 and Guatemala in 2010. Read more

Most Popular

  • 1
  • 2
Prev Next

The White-Box of Ethiopian Agriculture

The agricultural sector remains our Achilles heel, nonetheless, we remain convinced that agricultural-based development remains the only source of hope ...

Read more

For Whoever Has, to Him Shall be Given …

As the Ethiopian government seeks to transform the economy into one that’s rooted in manufacturing, the simplicity for local investors to access finance...

Read more

Commentary

  • 1
  • 2
  • 3
Prev Next

Shooting in the Dark: The Anomalies of Headhunting

The war for ‘heads’ – also known as talent – has been raging for many years and the manner headhunters ‘poach’ people is getting tougher ...

Read more

Understanding Chinese Investment in Ethiopia A Critical Evaluation of the World Bank’s “Chinese FDI in Ethiopia” Survey

The World Bank country office in Ethiopia, apparently in response to the request by the government of Ethiopia, has conducted a survey of...

Read more

Mitigating Growing Income Inequality: What Needs to Be Done

Rising income and wealth inequality in many countries around the world has been a long-term trend for three decades or more. But the atte...

Read more

View Point

  • 1
  • 2
  • 3
Prev Next

Delivering Life Insurance: The Untapped Market in Ethiopia

Modern insurance transaction in Ethiopia was started by an Egyptian Bank in 1905. According to Ethiopian Chamber of Commerce there were 19, 33 and 40 insuran...

Read more

Headache When a Key Personnel leaves a Company in the Financial Sector

The financial sector in Ethiopia has undergone considerable changes in recent decades. The dramatic rise of new market players into the sector has vividly al...

Read more

Women and the World Economy

In many countries, public debate about gender equality focuses mainly on women’s access to top positions and high-powered career opportunities. But the “glas...

Read more