Without a question, Ethiopia’s economic change might be aided by China’s Belt and Road Initiative (BRI), which aims to expand infrastructure, encourage investment, and create jobs. China and Ethiopia are collaborating on building industrial parks, a green economy, and infrastructure as part of the BRI.
All of these large-scale initiatives are yielding outstanding results and assisting Ethiopia in becoming one of the fastest-growing economies in Africa. The Ethiopian government encourages more and more Chinese businesses to invest and conduct business there, which is encouraging for the BRI‘s future growth, utility, and strategic significance in this nation. It’s interesting that Ethiopia has a plan called Vision 2030, which has been termed a beacon of wealth for Africa.
Ethiopia’s Vision 2030:
It’s interesting that Ethiopia has a plan called Vision 2030, which has been termed a beacon of wealth for Africa. It created a ten-year development plan with six strategic pillars, including ensuring high-quality growth, boosting productivity and competitiveness, undergoing institutional change, ensuring private sector leadership in the economy, ensuring equitable participation of women and children, and developing a climate-resilient green economy.
In addition, it establishes a number of short-, medium-, and long-term objectives, primarily macroeconomic structural reforms in the areas of technology, natural resources, human capital, physical capital, and untapped growth potential.
The key areas for future development are in agriculture, manufacturing, and mining. Enabling sectors include the service sector, tourism, energy, transportation, sustainable finance, innovation, and technology. The strategy aims to promote balanced and competitive growth at the local, regional, and national levels.
A homegrown economic reform agenda has also been launched and put into action with the aim of preserving macro-financial stability and rebalancing and sustaining economic growth, in which BRI would play a significant role due to its rigorous engagement with its government and other state and departmental organs.
The ambitious Ethiopian 2030 plan seeks to elevate the country to middle-income status and achieve a per capita income of $2,220 by that year.
China-Ethiopia Diplomatic ties:
Furthermore, since the two nations’ diplomatic ties were formed more than 50 years ago, they have continuously cooperated and advanced together. China encourages Ethiopia to pursue a development path that is appropriate for its own unique national circumstances.
The two leaders have maintained frequent communication in recent years, setting the direction for the growth of China-Ethiopia relations in light of the new situation.
In addition to encouraging more Chinese businesses to make investments in Ethiopia and take part in the country’s rehabilitation, China is prepared to strengthen and broaden bilateral cooperation in a number of areas.
The two nations have penned around 60 agreements and memorandums of understanding (MoUs) since the 1970s, covering topics like commerce, investment, taxation, transit, and defense as well as economic and scientific collaboration. A Memorandum of Understanding (MoU) on cooperation within the 21st Century Maritime Silk Road Initiative and the Silk Road Economic Belt was signed in 2018 by the two nations.
Ethiopia has a significant economic relationship with China. It is the second-largest buyer of Ethiopian commodities and the main supplier of those imports; in 2018, almost 24% of Ethiopia’s total imports came from China.
The majority of Ethiopia’s undiversified exports to China are agricultural goods, primarily oil seeds. Contrarily, Ethiopian imports from China are diverse and include goods from all industries, mostly clothing and textiles (including raw materials for the textile industry), but also machinery, plastic items, iron, and steel.
China’s FDI in African Continent especially in Ethiopia:
Ethiopia is the fifth-largest recipient of Chinese foreign direct investment (FDI) stock on the African continent, behind South Africa, the Democratic Republic of the Congo, Angola, and Zambia.
Chinese FDI stocks in Ethiopia increased more than 500-fold from less than $5 million to over $2.5 billion between 2003 and 2019.
Ethiopia is Africa’s second most populous state, with over 110 million people, and one of the world’s fastest-growing economies over the last decade. As domestic policies have shifted the focus from agriculture-led to manufacturing-led growth, GDP growth has been accompanied by structural transformation, with non-traditional sectors of economy.
Most of the population is employed in relatively low value-added sectors, and the four most productive sectors of the economy (transport, construction, mining and utilities) employ around 5% of the population.
Ethiopia has worked to improve exports during the last 20 years. Ethiopian Airlines commercial Group, which has developed into a global leading firm with a varied commercial portfolio, has been the driving force behind growth in exports of logistics and transportation services.
Between 2000 and 2017, exports increased by a factor of six, with exports of services accounting for the majority of the growth. The nation now contains 14 industrial parks that are at least partially functioning, and others are being built.
Others were founded by private investors, while some are government-built through the Industrial Park Development Corporation (IPDC).
The third phase has concentrated on directing foreign investment into specialist industrial parks, enabling international businesses eager to forge relationships with domestic counterparts so that the BRI can continue to change its economy and industry.
Ethiopia and China have extensive economic and political ties, and Ethiopia has received substantial investments from both major and small Chinese businesses as well as loans from the Chinese government, commercial and policy banks, and state-owned enterprises.
To sum up, China is growing its influence in the Horn of Africa along one of the busiest maritime commerce routes in the world. Chinese businesses have made significant investments in Ethiopia’s infrastructure and industrial parks, and they have also enlarged the Port of Djibouti to include a number of commercial specialty ports designed to provide sea access to Ethiopian-produced goods and minerals. Additionally, China just established its first overseas naval station in Djibouti.
Hopefully, the BRI will further boost the comprehensive Ethiopia-China ties. Ethiopia’s inclusion in the BRI is a natural progression of the growing ties between the two countries ever since they established diplomatic ties almost five decades ago.
Ethiopia has already profited from its involvement in the BRI with the successful commissioning of the 756 km Ethiopia-Djibouti electrified railway, which connects the capital of the landlocked Ethiopia to the port of Djibouti on the Red Sea. The railway was built and funded by China. It is yet another component and illustration of the solid relationship that has resulted from this effort.
The Ethiopian government will be doing going forward is focusing on creating a conducive environment, looking at the barriers to investment and trade that may have been a challenge to initiate and materialize the connectivity element of the BRI. It aspires to attracting more Chinese investments in Agro-processing and tourism.
This Article is written by Dr Mehmood Ul Hassan Khan
Executive Director: The Center for South & International Studies (CSAIS) Islamabad
Regional Expert: China, CPEC & BRI