Homecoming Struggles to Secure Economic Role
Current and past administrations have tried to tap into the potential of Ethiopians living abroad. As much as there always has been the understanding that the diaspora can play a greater role in the Ethiopian economy, politics has always taken over the way in which government looks at this vast community.
The Ethiopian diaspora—vocal in their criticism of local politics—has long been regarded as a threat to government. Hence, they have been alienated from social, political, and economic activities of their home country. For the most part, the nation has not been able to tap into the opportunities of economic potential which the community possesses.
The recent mobilization of the diaspora in the diplomatic arena gives an insight into their economic potential. If mobilized upon the appropriate strategy, they can play a greater role beyond remittance and direct financial support to be investors and champions of investment, writes EBR’s Bamlak Fekadu.
One cannot say Ethiopia has had a great 2021; rather, it has been to the contrary. The military confrontation between the federal government and the Tigray People’s Liberation Front (TPLF) and, to a lesser extent, the Oromo Liberation Army (OLA)—both labeled as terrorist organizations—have made most of the headlines which concern Ethiopia. At one point, global mainstream media and the US Embassy in Addis Ababa were nagging foreigners to leave Ethiopia as they claimed it safe no more.
In what seemed to be an attempt to counter the public relations damage caused by some media and other entities, Prime Minister Abiy Ahmed (PhD) called out on one million diaspora to a homecoming challenge on December 2, 2021. Even though numbers are yet to be confirmed, Ethiopians living abroad responded to the Premier’s calls in significant numbers. Since their arrival in Addis and consequent travels around the nation, diaspora members have engaged in a series of activities of social, political, and economic significance.
One such engagement happened in mid-January at the five-star Skylight Hotel, subsidiary of the Star Alliance member Ethiopian Airlines. Dubbed Invest Ethiopia, the event was put together by the Ethiopian and Addis Ababa investment commissions. The hotel’s lobby was filled with green-badged ushers welcoming and assisting their fellow countrymen and women from abroad. The organizers hoped the event would serve as a platform to present investment opportunities and discuss challenges of investing in Ethiopia as it stands currently.
Lelise Neme, Commissioner of the Ethiopian Investment Commission (EIC), was present alongside ministers and state ministers of health, transport and logistics, trade and regional integration, and agriculture. Also present were officials of the Industrial Park Development Corporation (IPDC). The ruling Prosperity Party (PP) presented its priority investment areas—agriculture, health, manufacturing, and transport and logistics, among others. Ministers and sectoral leaders were seen contesting to grab the spotlight for their respective sectors.
Lia Tadesse (PhD), Minister of Health, laid out the challenges in her sector which could be alleviated with more investment. Pharmaceuticals, tertiary health centers, primary hospitals, medical research centers, innovation and technology in medicine, and human resource development are still haunting the sector, according to Lia. The Minister was more vocal in soliciting not just investment, but also direct support as her sector is one that has fallen victim to destructive militaristic rampage in northern Ethiopia.
Lia did not leave the event empty-handed as good news came from Birhane Mewa, former Secretary of the Ethiopian Chamber of Commerce and Sectoral Association (ECCSA), who heeded the homecoming call and was part of the event. Birhane, along with other diaspora and Ethiopians based at home, is planning to set up a pharmaceutical plant and looks to bring in industry heavyweights to realize the plan.
“Thus far, we have projected USD20 million,” he told EBR. The group is closing in on securing a joint venture license with a pharmaceutical giant which Birhane was not willing to disclose. “The plant will contain three production lines producing capsules, tablets, and syrups,” he added. “The plan is to produce up to a billion pieces of medicine per annum.”
The forum, attended by some 800 people, also looked to pass the assignment of promoting Ethiopia as an investment destination to the diaspora community around the world. EIC, which announced investments worth USD1.07 billion in this fiscal year’s first four months despite all the challenges, is looking to translate the homecoming into more foreign direct investment (FDI).
As interesting and well-attended as the forum was, investing in Ethiopia is full of challenges—now more than ever. Issues in logistics, skilled manpower, foreign exchange, and security afflict investment activity. Logistical hurdles that have been challenging exporters, including FDIs in the 13 Industrial parks, were well-noticed by participants.
“The main reason for our failure to compete globally is administrative barriers,” said a diaspora member from Washington DC who claimed to have worked in the logistics sector for two decades. The ruling party’s government has displayed efforts in liberalizing the sector but the changes are not big enough to resolve the immense challenges, according to the participant.
“The diaspora could take the lion’s share in the process of upgrading the standard and quality of transport services which requires ETB69.5 billion,” said Dagmawit Moges, Minister of Transport and Logistics, while also attempting convince attendees to not get frustrated and lose patience with policies, as amendments are underway.
This is not the first time, of course, for the Ethiopian government to try and tap into the potential of the community. Ethiopians based abroad have been called out for investment several times during the Ethiopian People’s Revolutionary Democratic Front’s (EPRDF) regime that ruled the country for close to three decades. That administration, which supplanted the communist Derg in 1991, had a mixed record in its relations with Ethiopians living elsewhere.
However, unlike the Derg, the EPRDF welcomed members of the diaspora, with the Ethiopian Origin ID Card, a case in point. Issuance of that card now costs USD200 from its previous USD50. The late Prime Minister Meles Zenawi handed roses to welcome diaspora members who came to their motherland to celebrate the start of Ethiopia’s second millennium. They were also exempted from visa restrictions and fees. Meles invited and encouraged them to invest. The regime even granted 500 square meters of land for free to incentivize diaspora investment.
No matter the good gesture, the climate was not free enough to boost morale for the diaspora to engage further in Ethiopia’s economy. According to the 2011 Index of Economic Freedom prepared by the Heritage Foundation and Wall Street, Ethiopia’s economic freedom was one of the lowest in the world ranking 144th out of 166—even below the sub-Sahara African average in many of the major indicators. The report affirmed that, “the business and investment regime are burdensome and opaque.”
The report concluded the EPRDF regime’s regulatory framework of businesses is too corrupt and beyond repair to attract any meaningful and genuine investment. This is due to the poor quality and inefficiency of government services and weak rule of law alongside illogically high requirement of investment capital.
However, the economy has shown some progress since. Few in the diaspora began to respond with increased investment, particularly in the real estate and construction sectors. Even then, exorbitant tariffs in some protected industries dominated by party affiliates, import taxes and restrictions, restrictive foreign exchange controls, non-transparent government procurement, cumbersome customs clearance, and inadequate judicial infrastructure threw investing diasporas in the wrestling ring empty-handed.
It was with this ungainly history in which the platform at Skylight Hotel looked to advertise to and convince diaspora members. However still, no matter how encouraging the forum was, corruption and serious lack of knowledge are still challenges spanning decades and are still present. Protection of properties and investments was top of the concerns these potential investors had.
Participants Nardos and Ruth were cautiously optimistic. They traveled from Italy and welcomed the government’s attention towards inviting and catering to the diaspora to engage in different sectors of investment. As much as they are skeptical—mainly due to public officials who do not operate before taking bribes—the two partners are well-appetized to invest in agro-processing. The inhibitive politics, however, pushes the two young women to the verge of throwing it all away.
“Yes, it is difficult to think of investment in a country where people’s farms are burned down only because they belong to a certain ethnic group,” they told EBR referring to damages inflicted by protestors and violent groups in the last few years which ruined farms ranging from smallholdings to large coffee estates.
“I can say that the judicial system is at its infancy regarding handling investment disputes,” Daniel Fekadu, Legal Expert on business law, told EBR. “You can only find less than a handful of investment cases even at the higher court levels, and most of them are related to land and jurisdiction matters, and not compensation or settlement for destruction. There are almost no investment property rights issues in our courts.”
Most investment disputes are worth millions or billions, making it difficult to entertain them in Ethiopian courts where the executive branch of government has unbalanced power relative to the judiciary. Democratic concepts like checks and balances are impossible in some cases. In addition, the line that separates the ruling party from the government has been extremely blurry, making it impossible to win cases against the government. Daniel argues there is no legal scheme for compensation of damage and protection of property.
Daniel Dirar, 42, from Stuttgart, Germany, admires the commissions’ intentions through the Invest Ethiopia forum. He is optimistic that the current ruling party looks towards easing frustrations for the Ethiopian diaspora with a potent to invest.
“Besides the investment offers and list of sectors, the government should clear incompetent and inefficient government bureaucracy, and mustered restrictions,” Daniel said. “There can be no legitimate investment opportunity and free economic activity in the absence of good governance and democracy.”
As for the attendees, there was a clear understanding that the diaspora could contribute more to sustainable and equitable growth and development to their country of origin. Directly involving in the economy as investors, mobilizing human resource and technology for already existing investments, and serving as promoters of the nation as a destination of investment have been laid out as plans that can be achieved with encouraging bureaucratic support.
Last fiscal year, the diaspora committed investments with a total capital of ETB37.8 billion, of which 84 projects with an aggregate capital of ETB3.9 billion became operational, providing 13,000 jobs. Of course, the role of remittance in Ethiopia’s economy has always been immense.
During the two months of the homecoming challenge, the Ethiopian Diaspora Agency (EDA) announced 490 members of diaspora have begun investment activities. In all, ETB22.1 billion, or around USD440.2 million, was outlaid through daily expenditures, air tickets, immigration fees, and others by close to 120,000 visiting diaspora.
It is to be recalled that recent annual exports through the African Growth and Opportunity Act (AGOA) were around USD200 million, which was dwarfed by two months of activities of the diaspora. Of course, almost 200,000 jobs have been lost which are much harder to recover.
According to the UN Department of Economic and Social Affairs’ estimation, there are 1.3 million Ethiopian migrants across the globe. Annually, Ethiopia receives USD5 to 6 billion mostly from its diaspora in the US, Europe, and the Middle East. Private individual transfers, including remittances, are the single most important category of foreign exchange for Ethiopia, covering 35Pct of imports. The nation’s total imports exceed USD17 billion and is three times the value of its exports.
Remittances have considerably surged over the past two decades, increasing from USD233 million in 2002/03 to USD5.6 billion at the end of 2018/19. However, remittance inflow of the last fiscal year did decrease by 36Pct to USD3.6 billion, contributing 5Pct to the GDP.
When looking at 25 African countries which have large diaspora populations, remittances are the primary source of national income. In this regard, Nigeria ranks top and is followed by Ghana and Kenya.
According to findings of the Continental Migration Report 2021 produced by the Economic Commission for Africa (ECA) in partnership with the African Union Commission (AUC), remittances to African countries are expected to decrease by 5.4Pct from USD44 billion in 2020 to a projected total of USD41 billion in 2021, due to the effects of the Covid-19 pandemic.
An open call for the diaspora’s involvement beyond remittance was made official at the end of 2018 after the Prime Minister called the community out on a one-dollar-a-day challenge. A strategized approach was followed by establishing the Diaspora Trust Fund (DTF), which has mobilized USD8.5 million thus far, though short of the original plan of USD30 million a month. At the end of January, DTF announced a USD3 million project to construct four schools in the states of Amhara and Afar.
A report of the Ethiopian Diaspora Agency recently stated that Ethiopians in the diaspora have donated close to ETB400 million in just a few months to support the internally displaced people due to the ongoing war and in support of the Ethiopian National Defense Force. The diaspora have also made contributions via newly developed technology-enabled platforms.
The government of Ethiopia has been urging its diaspora to use the formal banking system to send remittances home and abandon the black market even though the rate there is more attractive. Hoping to capitalize on the homecoming spirit, private banks have utilized exhibitions and a series of financial packages looking to attract the diaspora’s interest to engage further in the local economy.
The historic diplomatic mobilization must serve as a wakeup call and signal ways of involving the diaspora community further in the economy. The current administration must learn from its predecessors in resolving bureaucratic bottlenecks that have discouraged the diaspora from actively engaging in economic activities that benefit themselves and the country at large. A comprehensive strategy is vital to tap into the economic potential of the community. Protection against destruction of properties and avoiding discouraging political encounters are the least this strategy should entail.
“The diaspora are not foreigners, they don’t leave you whenever there is a diplomatic standoff with the West,” Birhane argues on how the diaspora can be a sustainable partner to Ethiopia’s economy. EBR
10th Year • Feb 2022 • No. 104
Munir Shemsu
