general » Can Ethiopia become the economic hub of Africa?

Can Ethiopia become the economic hub of Africa?

Addis AbabaPhoto by kaleab on Unsplash

 

Ethiopia Economy: Ethiopia has been one of the fastest-growing countries in the world, with a double-digit growth rate over the past one and half-decade. The country’s GDP  increased by 10.25% in 2017, mainly as a result of the huge state investment in infrastructure, agriculture, education, and the services sectors in a state model that permitted no political opposition[1]. The country’s positive economic progress is reflected in the improved living standard, a huge reduction in the poverty rate (down 33%), improved employment opportunities, and relative peace.

However, the political dominance of the Trigrai Peoples Revolutionary Front (TPLF) makes the political environment tense and has pushed opposition party leaders and intellectuals away. As a result, many live in exile abroad. Strong protests by the young, mainly the Oromo ethnic group (The Qeerroo), have forced the ruling party to undertake massive internal party change, which brought Abiy Ahmed to the fore, as prime minister in April 2019 after elected the leader of the ruling party.

Ethiopia Under Abiy Ahmed

It has been less than two years since the 2019 Nobel Peace Prize winner, Abiy Ahmed assumed the highest power of the country. The grand protests against the previous ruling system of Ethiopian People Revolutionary Democratic Front (EPRDF) not only forced the previous Prime Minister Hailemariam Desalegn to leave power but also obliged the party to bring dynamic leaders like Abiy to the front.

He did not waste any time in reshaping the fragile political and economic environment of the country. In the first six months of his time in office, Abiy let exiled opposition leaders move to their homelands and pushed away the old guards of the previous system from office as well as releasing political prisoners and journalists ended the dispute. He was recognized by the Nobel committee, for bringing the Ethio-Eretria war to an end and working towards stabilizing the Horn of Africa countries.

The decision to fully privatize huge state-owned enterprises like sugar plants, railway, and industrial parks as well as partial privatization of Ethio-Telecom, Ethiopian Airlines, Ethiopian Electric Power Corporation, and Ethiopian shipping & logistics services enterprises showed his major ambition to revolutionize the economy too.

 

In changing the relationship

Over the last decade, Ethiopia has become increasingly dependent on Chinese aid and investment. Chinese has a hand in most mega-projects in the country either fully or partially. Chinese loans also account for nearly half of Ethiopian external debt. However, Abiy’s effort to modernize the economy is shifting the power dynamics and positioning the country to leverage the investment competition from the west and China.

In December 2019, the country secured a maximum loan of US-$9 billion from Western donors, the International Monetary Fund and the World Bank. There is clear interest from western investors, and companies from the US and Europe are preparing to make multi-billion investments. Given the potential, Ethiopia is a too big prize to ignore for the west.

 

“There could be no better country than Ethiopia for my first visit outside the EU. Ethiopia has given hope to an entire continent.”

Ursula von der Leyen, President of the European Commission, on her visit to the African Union and Addis Abeba.

 

Is Ethiopia sliding back?

Even though Abiy has tried, there are unkept promises. Recently he has been criticized for not doing enough to bring an end to the bloody ethnic conflict. Recently, many, especially the elites from different ethnic groups, believe expected changes have not been realized, and the Prime Minister cannot fulfill his promises. There is also criticism of his political ideology of “Medemer,” which can be thought of as an emotional concept to foster unity among Ethiopians. Many believe that it is not a fit for the existential political problems of the country. The ideological and political interest difference among the ethnic groups in the country makes the political environment fragile. Abiy, himself rather than trying to solve the problem, became part of it, and now there are signs of regression.

 

What does he need to succeed?

Everyone wants Abiy to succeed. However, he needs to solve complex and long-standing problems in the country: harmonizing the political environment, creating trust among ethnic groups, securing peace and security, solving the unemployment problem, and above all, keeping the rule of law. One key measure of his success will be the general election on the 29th of August 2020. The competition will not be easy for his newly formed Prosperity Party (PP).