The Promises, Progress of Economic Diplomacy in Ethiopia

Globalisation has created a highly interconnected world. The increased flow of trade, investment and people, sustained by rapid transport and communication, is one of the features of the globalised world – one that provides immense potential for economic growth and development. However, countries should be competitive to tap the maximum benefit that globalisation brings forth.That’s why governments engage in economic diplomacy: to promote themselves as favourable destinations for trade, investment and tourism. This form of diplomacy has become a central activity of foreign affairs for an increasing number of countries.
Ethiopia is no exception. Its foreign policy aims to employ economic diplomacy to reduce poverty and achieve inclusive and sustainable economic growth. This approach recognises that abject poverty is the primary national security concern that puts the survival of the country in danger. It underscores that foreign relations should contribute to the fight against poverty and the promotion of speedy economic development. To that end, Ethiopian diplomacy focuses on promoting trade and investment, tourism opportunities and soliciting external development finance.
This method of foreign affairs has increased in significance with the rapid, ongoing process of globalisation. It promotes global trade, investment, tourism and technology. These increase the importance attached to economic diplomacy, which integrates commercial interests into diplomacy. As a result, most diplomatic work in recent years is related to econmic development. It involves external trade, foreign investment, tourism, technology, official development assistance and technical cooperation. In a broader sense, it encompasses the promotion of goods and services abroad by diplomatic representatives from foreign ministries and other government agencies.
The principal actors in economic diplomacy include high-level government officials such as presidents, prime ministers, ministers, ambassadors, diplomats and consular officers. Currently, as the issues in globalised diplomatic world are becoming complex, it is not uncommon to see government officials outside the Ministry of Foreign Affairs engaging in commercial diplomatic activities.
The main activities of economic diplomacy comprise gathering relevant and first-hand information; facilitating communication and networking, recruiting potential exporters, investors and tourists; the resolution of trade disputes support for business delegations; and coordination of actors. For diplomats from developing countries, the mobilisation of development finance in the form of grant and soft loans and soliciting technical cooperation as well as facilitating technology transfer are additional aspects of their diplomatic work.
To effectively undertake these responsibilities, governments must provide the necessary training for their diplomats and restructure their institutions that engage in commercial diplomacy. This, however, is the main challenge governments continue to face in their endeavours to conduct successful commercial diplomacy.
Its objective is to encourage economic growth by promoting foreign trade, attracting investment and tourism, enhancing development financing and technology transfer. The main and direct beneficiaries could be public and private companies. However, as long as economic diplomacy operates within the framework of the national development policy, the successes of the national enterprises could be reflected in job creation and tax increases, which benefit the public at large. Effective economic diplomacy contributes to peace and alliance among countries by fostering economic integration.
Virtually every country is pursuing this form of diplomacy. Vietnam is one of the most successful countries in employing economy-driven diplomacy to advance its domestic development agenda. It has developed a clear policy and strategies to attract foreign direct investment (FDI), promote trade and tourism as well as obtain external development assistance. It has been training its diplomatic personnel with the support of United Nations Development Programme.
As a result, the southeast Asian nation has registered laudable results. According to the World Economic Forum (WEF), Vietnam attracted more than USD22 billion in FDI in 2013. The WEF also notes that, as of 2014, the country had a total of more than 16,000 active FDIs that amount to roughly USD238 billion. In addition to this, the Vietnam Investment Review reports that the country “drew in USD2.8 billion of newly-registered and newly-added FDI” in the first two months of 2016 alone, a 35Pct increase from the same period the previous year.
Vietnam is not only a favourable destination for FDI – it has also become a source. It has invested around USD1.1 billion in Africa. It has also been expanding and diversifying export, reaching USD160 billion in 2015. Vietnam is also a very active actor in global and regional trade negotiations, economic diplomacy includes participating in rule-making negotiations. It joined the World Trade Organisation in 2007 and is part of the Trans Pacifice Trade Agreement, a mega trade deal that includes the United States and Japan, among others.
For Ethiopia, one could argue that the guiding principle of the current foreign policy illustrates a fundamental paradigm shift from previous policies, as it places emphasis on domestic situations. For decades, our foreign relations were consumed by external threats. However, in order to bolster economic diplomacy efforts, an inward-looking approach is of the utmost importance. It asserts that poverty and underdevelopment and poor governance are the existential threats to the state.
Domestic diplomacy is, therefore, the central priority of Ethiopian foreign policy. Diplomacy should contribute to economic growth by bringing increased flow of trade, investment, tourism and development finance as well as technical assistance.
Ethiopia’s foreign policy aims to transform both the institutional setting of the Ministry of Foreign Affairs and the role of ambassadors and diplomats to achieve its objectives of commercial diplomacy. “It is of utmost priority for the Ministry of Foreign Affairs and other government agencies to develop their staff, their organisational structure and procedures so that they [become] effective in carrying out … successful economic diplomacy,” according to the Ethiopian Foreign Affairs and National Security Policy and Strategy. Ambassadors and diplomats are expected to be development officers and sales persons. The policy deems that as the Foreign Ministry is no longer in exclusive control of foreign affairs, mechanism of coordination with other government agencies must be created.
To that effect, the Ethiopian Foreign Ministry is undergoing institutional transformation. The Ministry conducted studies to identify the challenges to properly and effectively carry out its duties as expected in the foreign policy document. A lack of attitude and skill to engage in commercial diplomacy, fragmented and scattered activities without having both internal and external coordination and the absence of an organisational structure to deal with commercial affairs are the main obstacles the Ministry is facing.
To address these predicaments, studies identify a new set of activities and processes to promote export, attract investment and tourism, as well as solicit external development finance and technical assistance. A new mandate to engage in economic diplomacy; strategic plans that prioritise economic diplomacy; and a new organisational structure that creates a new economic and business diplomacy department, both at head office and missions abroad were created as a result of the institutional transformation.
The prioritisation of resources, both human and financial, to activities of economic diplomacy demonstrates this paradigm shift. The establishment of the National Coordination Forum for Economic and Business Diplomacy has enhanced coordination between the Ministry and other agencies involved in functions of commercial diplomacy, as well as in addressing bottlenecks facing the export, investment and tourism sectors. Provision of training for ambassadors and diplomats is also a step in the right direction in the preparation of skilled human power.
If we observe FDI, according to the 2015 World Investment Report, Ethiopia registered robust gains with an increase of 26Pct to USD1.2 billion. This makes Ethiopia one of the top FDI destinations in Africa. Commercial diplomacy has contributed to this progress by, inter alia, disseminating promotional materials and sample products, participating in international forums and exhibitions, facilitating business visits, and assisting in the operationialisation of projects. The FDI flow originates both from emerging nations like China, India, Saudi Arabia and Turkey and more esatblished economies, such as the United States, Italy, and the United Kingdom, indicating diversification in the sector.
Ethiopia, though currently registering rapid economic growth, is still one of the least developed countries. That’s why puitting foreign policy at the centre of poverty reduction is important. In a globalised world, where competition governs how business and development are conducted, attracting and retaining investment, increasing exports and the flow of tourism and foreign aid as well as technical assistance require a highly efficient and competent institutional capacity not only from the Foreign Ministry but also from other government offices.
The Ministry of Foreign Affairs should continue its institutional transformation to enhance the impact of economic diplomacy. The communication and leadership skills of its diplomats should be further enhanced through continuous, tailor-made training programmes. Currently, the Ministry recruits its diplomats from universities and other government offices. It sould also recruit from the private sector to include a business perspective in its commercial activities. Providing up-to-date information to potential foreign investers regarding the investment climate in the country, the incentives and market opportunities should be further improved. More should be done to increase the speedy flow of information.
The National Coordination Forum for Economic and Business Diplomacy should work continuously to address the main challenges of Ethiopian commercial diplomacy, particularly poor service delivery and inadequate provision of land and utilities such as electricity and water. The Ministry’s existing collaboration with associations from the private sector as the principal beneficiaries of commercial diplomacy,should be strengthened to listen to their demands and concerns and be able to serve them better.
The most important aspect of economic diplomacy is a favourable business environment that can attract investment and tourists as well as national capability to engage in the global market. This requires building national capacity to produce sufficient goods and service, in terms of quality and quality, to penetrate the global value chain. An attractive investment climate that balances incentives with regulations aligned with national development priorities, and a tourism sector that is commercialised enough to benefit its immediate communities and the national economy are also crucial.
This calls for enhancing national competitiveness in every aspect; and improving service delivery in the public and private sectors. It also means creating a more favourable domestic situation and predictabe policy and legal framework attract, retain and nurture investment. These contribute to the effectiveness of economic diplomacy.


4th Year • April 16 2016 – May 15 2016 • No. 38

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