Ethiopia and the People’s Republic of China (PRC) have enjoyed long and historic ties based on their common values. Both are very aware of their ancient civilization and their long histories, though diplomatic relations were only established in 1970.
Since then China has proved itself a real and dependable friend in many areas. It has played a significant role in helping the fight against poverty, and the economic relations between the two countries bears witness to the level and strength of cooperation. With the establishment of the Forum on China-Africa Cooperation (FOCAC) in 2000 the relationship was transformed into a new strategic partnership.
Ethiopia, strongly supportive of the objectives of the Forum, hosted and co-chaired the second Ministerial meeting of the Forum in 2003. Trade relations have shown significant progress following the Government of China’s allocation of quota and tariff free rights to African countries.
As a result, Ethiopian exports to China, mainly agricultural produce, have risen substantially. Since 1991, Ethiopia has been following the model of a democratic developmental state economy and has been going through a dynamic political and socio-economic transformation for the past two decades.
The relationship between the two countries has been further strengthened and characterized by close and comprehensive consultation and cooperation for a win-win socio-economic development not only through strong government-to-government relations but also through party-to-party ties and people-to-people contacts. Besides the excellent bilateral relations the two countries have collaborated in the international arena to promote global peace, harmony, responses to climate change, and other areas of common concern.
The frequent exchanges of visits of top officials have contributed a lot to the excellent multifaceted relations. Recent exchanges of visits include President Dr. Mulatu Teshome visiting China in July 2014 and Prime Minister Hailemariam Dessalegn in June 2013; Deputy Prime Minister Demeke Mekonen in May 2013 and November 2014. China’s Prime Minister Li Keqiang visited Ethiopia in May 2014; Vice Premier Madam Liu Yandong in November 2013 and Foreign Minister Wang Yi in January 2014. It underlines the great interest both countries have shown in further strengthening their relationship.
China and Ethiopia signed a Trade Cooperation Agreement in 1996 in order to strengthen their trade relationship and the amount of trade has steadily progressed. The total trade turnover (expressed in terms of value of the two countries reached nearly 2.7 billion USD in 2013 rising from 353 million USD in 2004.
The volume of trade in recent years has increased by an average 16.7 per cent annually, though the balance remains firmly in favor of China at the moment. The main exports of Ethiopia to China are oil seeds, sesame, leather and leather products, natural gums and mining products. Given current trends and fast economic growth of Ethiopia, Ethiopia expects the trade balance to improve in the next few years.
Ethiopia and China signed an Investment Protection and Promotion Agreement in 1998 and the Government of China has also demonstrated its policy of encouraging Chinese investors to invest substantially in African Countries through its “GO Global” policy.
During the FOCAC Summit held in Beijing in 2006, the Chinese government also announced the establishment of a China-Africa Development Fund and pledged to commit US$5 billion to encourage Chinese investors to invest in Africa. The Fund was established in June 2007, and a branch office was opened in Addis Ababa in April 2010 to facilitate the activities of Chinese companies in Ethiopia as well as in Eastern Africa.
The level of Chinese investment has now reached unprecedented levels in Ethiopia and Africa. In Ethiopia there is also great potential to further increase investment, particularly in the manufacturing sector. The Huajian Shoe Factory which was established two years ago, employing more than 4000 Ethiopians, is one such a good example, and it has substantial plans for expansion. The total capital of Chinese companies registered in Ethiopia between 1992 and 2014 is calculated at 2.76 billion USD. Much of this is in the manufacturing sector, and is investment in line with the Government’s development priority areas.
In order to encourage further Chinese investment in Ethiopia, a “Framework Agreement on Strengthening Cooperation in Industrial Transformation” was signed by the Ministry of Finance and Economic Development of Ethiopia and the National Development and Reform Commission of China earlier this year.
The Agreement creates a platform for attracting investors from China and to implement the Agreement, a Joint Steering Committee has been established. It held its first meetings in Guangzhou, August 5-6. The Agreement is expected to encourage Chinese investors in priority development areas.
In addition to financial cooperation agreements, technical cooperation agreements have also been signed in the fields of education, health, agriculture, science and technology, culture and other areas. The Chinese government has offered technical support in human resource development through scholarships and long- and short-term training, sharing its development experience.
Other developments have included significant support for Technical and Vocational Education Training (TVET); sending doctors and supplies of medical equipment and medicines as well as building facilities like the Tirunesh-Beijing Hospital. The Government has also dispatched volunteers to assist in many areas including computer and networking, agriculture and pasture development.
The Government of Ethiopia and China signed a Technical and Development Cooperation Agreement in 2002. Since then the Chinese Government has committed more than 10 billion USD in terms of commercial and interest free loans and grants.
The financial support provided by the Chinese Government has enabled Ethiopia to carry out a number of major infrastructure projects including the Addis Ababa-Adama Expressway, the Airport -Meskel Square Road, the Addis Ababa Light Rail project, the Addis Ababa-Djibouti Railway project, Gibe III Hydro Power Plant, Adama Wind Farm Phase I and II, a number of power transmission and substation constructions with upgrading the National Grid system, sugar projects including Kesem and Omo II and III, the upgrading and expansion of Ethio-Telecom and a water supply for Addis Ababa City.
The Government of Ethiopia is also looking for more support for other infrastructure projects such as the Makalle-Haragebeya Railway project and the establishment of Special Economic Zones and industrial parks which are a central element in the plans for the next Growth and Transformation Plan.
The feasibility study for the Makalle-Haragebeya Railway project has been carried out by the independent consulting company (CIECC), and submitted to the Government of China. For development of Special Economic Zones, Ethiopia hired the Chinese Association of Development Zones as consultant. During his visit in May 2014, Prime Minister Li Keqiang promised to support these projects.
Prime Minister Hailemariam Dessalegn, on his visit to China to attend the 70th anniversary of the Chinese People’s victory against Japanese aggression marking the end of World War II, held discussions with Chinese officials on attracting investment to the manufacturing sector, a major priority in the second Growth and Transformation Plan. The Prime Minister held warm and successful talks with Chinese President Xi Jinping and Prime Minister Li Keqiang covering ways to enhance Ethiopia’s manufacturing sector, infrastructure, and poverty reduction endeavors.
He also signed a series of agreements on various aspects of cooperation to help increase Ethiopia’s manufacturing capacity. Both President Xi Jinping and Prime Minister Li Keqiang commended Ethiopia’s commitment to fight poverty and transform the country. They assured the Prime Minister that China would continue to provide strong support to Ethiopia to help it achieve its vision of becoming a middle income country by 2025. Both countries expressed their mutual interest to work together to lift their relationship to a higher level.
Following China’s fast economic transformation of the last 30 years, many labor-intensive first-generation industries are looking for favorable places to relocate. Ethiopia is one of the main targets for Chinese companies because of its strong relationship with China and its relative peace and stability. It also has a government committed to development, macro-economic stability and a conducive investment environment.
During the bilateral talks in China last month, both sides reiterated their intention to vigorously implement the Production Capacity Cooperation Framework Agreement signed in May last year. This largely focuses on enhancing Ethiopia’s manufacturing sector through technical and financial support and experience sharing._ Both President Jinping and Prime Minister Keqiang indicated Ethiopia was well-positioned to benefit from Chinese cooperation in such areas as urban planning, human resource development, capacity building, oil and gas exploration and agricultural modernization.
Prime Minister Hailemariam underlined Ethiopia’s continued interest in attracting investment from China. Ethiopia and China are also committed to expanding areas of cooperation in social sectors, especially in health. Prime Minister Li Keqiang promised, during President Dr. Mulatu Teshome’s visit to China in July 2014, to build a Modern Referral Hospital in Ethiopia. A project proposal for the Ethio-China Tertiary Hospital (with a total cost estimated at 383 million USD) has been prepared by the Ministry of Health and submitted to the Ministry of Commerce of China.
Economic development in Ethiopia has looked to closer economic links between Ethiopia and other countries, like China. The relationship with China has provided Ethiopia and other countries with economic development that they can really own themselves. China’s policies are based on the principles of promoting mutual advantage and a serious commitment to win-win bilateral relations.
China’s readiness to stay away from the concept of conditionality underlines its understanding of Ethiopia’s need to own its own economic development strategy. This is one explanation why relations between China and African countries, including Ethiopia, have become so close and successful, as demonstrated in FOCAC. It also explains why they will continue to expand and be effective.
In 1979 a partial opening-up policy was initiated by President Deng Xiaoping. Since then Chinese leaders have followed their own model of economic development focusing on market-oriented economic development and subsequent reforms. These began with the phasing out of collectivized agriculture, and expanded to the gradual liberalization of the socialist market economy, fiscal decentralization, increased state-owned enterprises, creation of a diversified banking system, development of stock markets, rapid growth of the private sector, and opening-up to foreign trade and investment by establishing Special Economic Zones.
The result was rapid and sustained economic development. The success of China has showed to the world that sovereign countries could choose their own independent model of development in accordance with their own characteristics. Developing countries, especially African countries can draw many lessons from China’s model of economic development, from the experience of Chinese visionary leadership and the disciplined work culture of the Chinese people.
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