Concrete measures desired to increase trade with Ethiopia

Ethiopia is Africa’s oldest independent country and the second largest in terms of population.

It served as a symbol of African independence throughout the colonial period, and was a founder member of the United Nations and the African base for many international organisations. Ethiopia is located in the horn of Africa with a total area of 1,104,300 square kilometres. THE BLUE MOON Editor Amit Mittal spoke to Ambassador Asfaw Dingamo of Ethiopia in New Delhi. Some excerpts :

Bilateral trade with India stood at USD 1.2 billion in 2014 which showed a tendency to increase. Why is that still India is next to China in terms of imports into Ethiopia ?

India and Ethiopia relations go back to about 2,000 years of recorded history. Trade between the two countries flourished during the ancient Axumite Empire (1st century AD), which is seen to be origin of modern Ethiopia.

Both India and Ethiopia have emerged as the two fastest growing developing countries in the world. In recent years, bilateral trade between the two countries increased significantly since the Bilateral Investment Promotion and Protection Agreement was signed in 2007. 

With recent agreements and actions, trade volume between the two countries has increased from a meagre $74 million in 2000 to $1.22 billion in 2015. Annual Export from Ethiopia to India increased from $8.3 million in 2000 to $64.9 million in 2015. On the other hand, India’s annual export to Ethiopia increased from $65.8 million in 2000 to $1.1 billion in 2015.

Although the trade relation between India and Ethiopia increased from time to time, trade balance remained highly in favour of India.

To increase the trade to the most possible level both countries would need to take concrete measures to maximize the opportunity. 

Are you satisfied with the pace o f Indian investment in Ethiopia?

The pace of Indian   investment in Ethiopia increased significantly. India is the 3rd in terms of number of projects and Capital next to China and Turkey.  There are roughly 632 Indian firms which have invested over USD 5 billion and have been active in sectors such as agriculture, floriculture, ICT, mining, cotton and textiles, plastics, and health care. In addition, Indian investment in Ethiopia has created thousands of jobs, temporary and permanent boosting export and industrialization in Ethiopia.

Which are the sectors still open for investment and there are no investors for that?

All areas of investment are open for foreign investors other than the following :

Areas reserved exclusively for the government:

-Postal services with the exception of courier services

-Transmission and supply of electrical energy through the integrated national grid system and

-Passenger air transport services using aircraft with seating capacity of more than 50 passengers

Areas reserved for Ethiopian nationals:

-Banking, insurance and micro credit and saving services

-Travel and shipping agency services

-Broadcasting services and

-Air transport services using aircraft with a seating capacity of up to 50 passengers

 Areas reserved for domestic investors:

-Retail trade and brokerage

-Wholesale trade (excluding supply of petroleum and its by-products as well as wholesale by foreign investors of their products locally produced)

-Import trade (excluding LPG, bitumen and up on the approval from the Council of Ministers, material inputs for export products)

-Export trade of raw coffee, chat, oil seeds, pulses, hides and skins bought from the market and live sheep, goats and cattle not raised or fattened by the investor

-Construction companies excluding those designated as grade 1

-Tanning of hides and skins up to crust level

-Hotels(excluding star-designated hotels), motels, pensions, tea rooms, coffee shops, bars, night clubs and restaurants excluding international and specialized restaurants

-Travel agency, trade auxiliary and ticket selling services

-Car-hire and taxi-cabs transport services

-Commercial road transport and inland water transport services

-Bakery products and pastries for the domestic market

-Grinding mills

-Barber shops, beauty salons, and provision of smith workshops and tailoring services except by garment factories

-Building maintenance and repair and maintenance of vehicles

-Saw milling and timber making

-Customs clearance services

-Museums, theatres and cinema hall operations

-Printing industries 

What is the state of lines of credit of over USD 1 billion ; are they being timely disbursed? 

Ethiopia has utilized Indian Lines of Credit (LOCs) arrangements for its essential development priorities. So far there are two important projects covered by Indian LOCs. The first one is a concessional line of credit of US $ 65 million was approved in January 2006.  The credit was given to support the rural electrification program. 

According to Ethiopia’s Growth and Transformation Plan, the financing request to the GOI for the sugar projects was done since 2006. Accordingly, $ 640 million in concessional lines of credit for financing the development of the sugar industry was submitted and approved by India in February 2006. 

The total cost of the project was indicated to be US $ 1.35 billion.  The project involves setting up a green field project at Tendaho with an annual sugar production of 600,000 tons. In addition, expansion of the existing Finchaa Sugar Factory to take its annual production up to 270,000 tons and expansion of the existing Wonji-Shoa factory to increase its production up to 300,000 tons. 

The Agreement for the release of first tranche of loan of US$ 122 million was signed between EXIM Bank of India and Ministry of Finance of Ethiopia at New Delhi on 4 October 2007.

The second tranche of a Line of Credit (LOC) of US$ 166.23 million in January 2009, the third tranche $213 million LOC in December 2010, the fourth and the last tranche $91 million credit commitment were released in March 2011.

The impact of this development assistance is huge. The project will change Ethiopia from being an importer of sugar to a major exporter. In addition to that the country will become self-sufficient in sugar, it will earn up to $376 million annually in revenue from sugar exports. Furthermore, it will enable to produce the country 2,000 mw of electricity generation from sugar and 300 tons of ethanol.

The annual foreign exchange outflows, vast employment opportunities, improvement on local access to water, educational and health infrastructure created as a result of from the projects will assist the country tremendously.

Between 2004 and 2013, India has extended LOCs worth over US$ 1 billion to Ethiopia,

Indian financial assistance other than bilateral arrangement is the one India has earmarked 300 million USD to finance regional integration projects through railway connecting the city of Asaita and the port of Tadjourah in neighboring Djibouti.  Recently the Government of Ethiopia has decided to shift this fund to another regional power project of connecting Ethiopia with South Sudan and Djibouti electrical transmission lines.

Is the LOC disbursal satisfactory or are there hitches?

Despite some lags related to the implementation of some projects related to the Indian LoC, the disbursement has gone satisfactory.