After a successful global bond issue, Ethiopia emerges as a frontier market to watch out for. Its recent road show in India underlined its confidence and ambition to be an economic dynamo
“We promise to give an investment license to a global company within 24 hours.” This bold promise was made at an unusual road show was held across three cities in India earlier in December. The road show was held by a country keen to attract investment from Indian companies. This country is among the top ten fastest growing economies of the world and is on track for achieving millennium development goals in health and education. The country also boasts of being a gateway for a combined market of 400 million consumers.
Roadshows are common in India, but this one was by Ethiopia and highly unusual as African countries have rarely made such promises to Indian companies. The apex chambers of commerce in India have supported several initiatives to bring African markets closer to Indian Inc. But this road show was perhaps the first of its kind driven by a single African country.
What most Indian investors don’t know is that Ethiopia is growing rapidly towards middle income status. It has the ability and ambition of seeking global investment with pride and confidence. Ethiopia floated a global bond to raise more than $1 billion of external capital. The bond issue was oversubscribed two times when it closed in the first week of December. The country is being recognized by global investors as a high growth frontier market. Only 30 years ago, the Band Aid concert had been held to raise aid for the country. Today it stands tall among emerging and frontier economies.
Among all countries that have issued international bonds, Ethiopia is the poorest with the lowest per capital income. But this status may not stay for long. The funds raised will be used for railway, power and agriculture projects. Ethiopian GDP grew at 8.25 per cent this year according to International Monetary Fund. Prime Minister Hailemariam Desalegn says that Ethiopia welcomes global investment not mere aid. Ethiopia needs over $50 billion investment over next five years. Out of this about $15 billion will come in from global investors. Ethiopia received FDI worth almost $1 billion in 2014, maintaining consistent growth in inflows.
India has been present in Ethiopia for years but needs to increase its investment in the country. More than 600 Indian companies operate in Ethiopia but now the country is demanding focused attention from specific segments.
At the road show held in Pune, Bengaluru and Chennai, the Ambassador of Ethiopia to India Genet Zewide led a delegation to brainstorm with potential Indian investors. Though these were closed door meetings without media, I was invited to facilitate the discussions.
The Ethiopian effort was supported by Indian project developer Overseas Infrastructure Alliance that has been in the country for a decade and has set up rural power and agriculture projects. Global business information company Dun & Bradstreet guided Indian investors at the road show and presented a report on sectoral opportunities in Ethiopia.
The response from Indian companies was enthusiastic even though many were bewildered by the promises. In many ways Ethiopia appears to be ahead of India is providing an enabling environment for industry. Apart from giving an investment license in 24 hours, Ethiopian government is almost corruption free and offers single window approvals. A few Indian companies that already operate in Ethiopia proudly proclaimed that it was easier to do deal with government departments in Addis Ababa than in New Delhi. This is borne out by the World Bank’s ease of doing business report where Ethiopia ranks higher than India on some parameters.
There are challenges of logistics and inadequate infrastructure. But these are challenges that Indians can overcome faster than other investors.
India and Ethiopia are only a single flight away. The daily flights from Mumbai and New Delhi ensure that connectivity does not pose a problem as it does for many other countries. There is a historical connect too. As Abyssinians, Ethiopians came to India’s western region as early as 4th century. From being slaves, they grew into much admired and sought after warriors in regional kingdoms. Soon they rose in the ranks to become chieftains and even rulers of principalities in Gujarat and Maharashtra and merging with local communities.
Many decades ago Indian teachers were sent to Ethiopia by the government to teach in schools. Many generations of Ethiopians have grown with deep regard and appreciation for India. “Ethiopia is stable & peaceful, people are welcoming and policies are friendly” Says Ambassador Zewide.
Unlike India and unlike the entire African continent, Ethiopia was never colonized. It remained free of imperial powers. But like India, it nurtures vibrant culture, cuisine and commerce. In these times of globalization, it is natural that these two emerging economies will strengthen their trade and investment links.
[BusinessWorld]