Ethiopia, a landlocked African nation that was once marred by violence, hunger and poverty has astonished the world with its aggressive economic growth. Pouring billions into investment in the sectors of hydropower, infrastructure, telecommunication and agriculture, the country has not only been successful in achieving double digit economic growth but also has turned to be an example of political will for development. The country has turned into an attractive investment destination for foreign investors. Asfaw Dingamo Kame, Ambassador Extraordinary and Plenipotentiary of the Federal Democratic Republic of Ethiopia in India, Bangladesh, Sri Lanka and Thailand believes that there are many similarities between Nepal and Ethiopia for sharing and learning from each other. Ashok Thapa from Business 360° talked with Ambassador Kam about the success of Ethiopia, its economy and several other issues.
Ethiopia of late has been named one of the fastest growing economies. How has this been possible?
For last 12-13 years, our economy has become one of the fastest growing economies. This has been done because of many factors. We have brought a new constitution to eradicate the roots of conflict which was inequality. Since then we have started to make political transformation. What we did was to identify our enemies. The number one enemy was poverty and we used all our efforts to fight poverty. To do that, we put in very attractive policies and strategies of development. When we started these polices, we knew we were short of capital so we identified available capital which is land. We also identified the other biggest resource which was human capital. 85 percent of our population was employed in agriculture. So we put in rural development strategies and polices. The government helped to maximise the growth of agriculture. It provided technical assistance to farmers. It also supplied improved seeds, fertilisers and there was technical assistance in the mode of cultivation; many development agents were trained in agriculture. We started to develop agriculture to feed our population rather than to be dependent on external assistance. So this was one area and through its improvement resources and assets were created. The farmers began to earn more and they became investors.
The other area was infrastructure. We put in place the infrastructure development plans and policies. Among that, the rural road construction development policies were highly emphasised to make rural road networks connecting the capital and the regional states. Also Ethiopia has neighbours and to expand our market to our neighbours, we put best efforts in road infrastructure construction. The other one was telecommunication network. We expanded our network enormously. Ethiopia was one of the backward countries in this sector and now we have became one of the leaders in the whole of Africa.
We also focused on hydropower development as the government was convinced that energy was the lifeline of our economy. We put in place electricity development plans and polices. We started with the available resources. Ethiopia has many rivers which are flowing from the mountains and we made water resource management plans. Many master plans have been made and from that we have been able to develop a number of hydropower projects. We had less than 300 MW when we started harnessing our hydropower potential which now has become more than 4,200 MW. In coming 1-2 years, we will put into operation one of the biggest dams in Africa which can produce 6,000MW hydropower. Apart from that, we also came up with industrial development plan. As I have told you know we have rural development in agriculture. We are now gradually shifting from agrarian economy to industrial economy. By year 2025, we will be a middle income country. To do that the industrial policies and strategies have been put in place. And in this strategy, higher emphasis has been laid on manufacturing. In this way, with the utmost of few areas and sector, we have been able to accelerate our economic growth.
Which economic model did the government of Ethiopia pursue to make this transformation happen?
The country was exercising the Marxist model. The Marxist model was ineffective and the government was toppled. Then we had to adopt a market based economy. But this market economy in a country like Ethiopia could not function unless you go for mixed model. We studied many other models and opted for Taiwanese and Korean model of economy which is a developmental state. The model of developmental state combines the private and government sector. In the area where private sector is not effective and incapable to work, the government will intervene and public enterprises are established. In the area where the private sector is strong, the government leaves the ground entirely for private players. We also chose mixed model which is public private partnership (PPP). This is also now getting a big boost. Joint ventures are also coming in some areas and it has given us a upward surge in the economy. Coupled with good policy, good implementation capacity, less corruption and many reforms in management and administration we have a positive path.
How supportive has the private sector been in the transformation of the economy?
The private sector has been enormously supportive. The sector is coming forward with massive investment plans because the country has put in place very effective investment policies and foreign direct investment is flowing. Countries like China, India, Turkey, America and others from Africa are flocking into Ethiopia and investing in many areas including agriculture, textiles, pharmaceutical industries and others. The transformation could not have happened had there been no support from the private sector.
How important is politics for the growth of the economy?
One of the prerequisites for any country to develop socially and economically is political stability. Peace and security is very important. Unless you have peace in the country, unless you have security and political stability in the country, development is simply a dream not realised. To realise your dream, political stability is very important. Bringing all actors together is very important. All the actors should understand the national vision for development and stability should be created. I would say political situation is the first determinant for the success or failure of the country.
Despite Ethiopia’s economic growth, income disparity and poverty are still pervalent. How is the government addressing this?
When we place those plans in implementation more than a decade ago, over 50 percent of our population was below the poverty line. With just 13 years of double digit growth, we have been able to reduce the population massively and today only 22 percent of the population fall under the poverty line. So you can see what effort the government has put in place. When income is considered, one of the income sources in our country is land. Land in our constitution has been defined as the property of the whole Ethiopia population and the government. This is very important because land is not a private property in Ethiopia. From this point of view, land is available for those who want to work on it. The other point is Ethiopians are free to have employment on equal basis. So I would not agree when one claims there is income disparity in Ethiopia.
Ethiopia has been successful with FDI. What attracts foreign investors?
There have to be a number of criteria for any country to receive FDI. One of the criteria is a conducive environment. We have created that environment by putting in place very sound investment policies and strategies, and the law as the legal framework is very important. Secondly comes political stability. Foreign investors refrain from investing in any country that has liquid situation. Another critical aspect is infrastructure. We have set up almost all necessary infrastructures like road networks, energy and telecommunication. We have ensured all these aspects. Additionally, we have one of the best airlines in Africa and it is 18th among international carriers. We are connecting more than 95 destinations of the world. It is the gateway to Africa. We also have cheap land and have offered tax holiday between 2-15 years depending upon the investment scale. So investors are flocking to Ethiopia.
Nepal and Ethiopia do not share many economic collaborations. Your thoughts…
First of all, Ethiopia and Nepal have many similarities. Ethiopia like Nepal was non-colonised. Both countries have many mountains. Both of us share agricultural economy and pastoral community. A host of ethnic groups and federal system are yet other similarities while both the countries are land locked. From this point of view we can learn a lot from each other. Trade and business ties are very important. I feel people to people relationship is also very critical. The attraction of tourists in both countries should be replicated. I think we will learn a lot from each other and cooperate together to maximise benefits. This is what we are going to do.