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

117 comments

  • WalterApelm

    droga generica de viagra
    viagra sale singapore
    how do i order viagra online
    viagra cheap fast shipping
    viagra prices at boots

    WalterApelm Saturday, 30 September 2017 22:52 Comment Link
  • StevenLab

    viagra for sale in ireland
    can buy viagra yahoo
    hard sell the evolution of a viagra salesman scritto da jamie reidy
    order viagra online safe
    online viagra real

    StevenLab Saturday, 30 September 2017 20:48 Comment Link
  • Davidquoca

    viagra online bestellen strafbar
    cheap viagra bangkok
    viagra france online
    order viagra men
    viagra versus generic viagra

    Davidquoca Saturday, 30 September 2017 08:51 Comment Link
  • TyrellLep

    levitra cialis viagra price comparison
    can you buy viagra walgreens
    ordering generic viagra in canada
    where can i buy viagra from
    can you buy viagra tescos

    TyrellLep Friday, 29 September 2017 13:22 Comment Link
  • TyrellLep

    where to buy liquid viagra
    viagra online discount
    cialis 20mg x viagra 50mg
    buy viagra at walmart
    donde comprar viagra generico

    TyrellLep Friday, 29 September 2017 10:13 Comment Link
  • JamesHep

    generico do viagra como usar
    viagra sale glasgow
    safe website to buy generic viagra
    cuanto sale viagra en argentina
    viagra generico doctor simi

    JamesHep Thursday, 28 September 2017 02:28 Comment Link
  • JamesHep

    buy viagra in europa
    viagra sale pakistan
    sildenafil online canada
    order viagra without rx
    can you take levitra and viagra together

    JamesHep Wednesday, 27 September 2017 23:28 Comment Link
  • Arthurdiz

    discount code viagra
    order brand name viagra online
    generic viagra me.uk
    order cheap viagra online uk
    generic sildenafil citrate uk

    Arthurdiz Wednesday, 27 September 2017 21:22 Comment Link
  • Arthurdiz

    para que serve sildenafil 50 mg
    viagra generic
    generic viagra safe or not
    viagra buy over counter
    street value of viagra 100mg

    Arthurdiz Wednesday, 27 September 2017 18:24 Comment Link
  • Isidrodem

    cobra 120 mg. sildenafil
    can you buy viagra over the counter
    tabletki viagra sprzedam
    viagra sale liverpool
    discount viagra or cialis

    Isidrodem Wednesday, 27 September 2017 10:09 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

Tweets


ሰበር ዜና ብሄራዊ ባንክ ከነገ ጀምሮ የብር ምንዛሪ ተመንን በ15% እንዲገሽብ ውሳኔ አስተላለፈ፡፡ በተጨማሪም የገንዘብ ማስቀመጫ ወለድን ከ5% ወደ 7% ከፍ እንዲል ውሳኔ... https://t.co/fab8ZVRMVa

Breaking News National Bank of Ethiopia will depreciate the exchange rate of birr against a basket of foreign... https://t.co/1JPgVHEv1E
Follow EBR News on Twitter

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