Economic diplomacy has become a cornerstone in Ethiopia’s Foreign Policy and the country’s embassies and consulate generals in the Gulf are working to exploit the region’s enormous potential for trade and investment.
Ethiopia’s participation in various festivals, including the annual Riyadh Travel Fair and Gulf Food Exhibition, were aimed at seeking markets for the country’s agricultural exports and promoting the country’s wider investment opportunities among potential stakeholders.
The Gulf countries (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) have shown growing interest to do business with Ethiopia. Dubai Chamber of Commerce and Industry, for instance, opened its first African Branch Office in Addis Ababa in 2013.
Ethiopia’s agricultural export to Gulf Countries
Understanding the objective reality of the Gulf countries is important to utilize the region’s trade opportunities and obtain market for exports.
Most of the Gulf countries are reliant on food imports due to unfavorable climatic conditions and low water supply. Ethiopia’s largest economic partner in the region and third biggest export destination, Saudi Arabia, imports around 80 percent of its food requirements from foreign countries and has set plan to stop producing wheat and other agricultural items in the near future.
The same is true for the other countries, including UAE, Kuwait and Qatar, which focus on importing large quantities of food items such as wheat, barley, corn, beets and soybeans. Ethiopia, therefore, needs to prioritize trading agricultural products with Gulf countries by capitalizing on its huge potential and geographic proximity.
The revenue obtained from agricultural exports to the region hit 306 million US dollars in 2015 from 184 million in 2013. Export volume has also shown a double digit annual average growth during the first Growth and Transformation Plan period.
Despite this, there is a huge imbalance between Ethiopia’s potential for agricultural exports and its actual engagement with Gulf countries. Too much dependence on few exportable agricultural items coupled with issues in export quality and quantity are widely considered to be factors contributing to this.
In this respect, diversifying exportable items and improving quality and quantity are necessary tasks that could narrow the gap in the country’s potential for agricultural export and the actual performance.
Economic analyst at the Embassy of the United Arab Emirates to Ethiopia, Dr. Fikru Deksisa, stated that identifying the Gulf countries’ demand and keeping the quality of exports are the tools to bridge the gap between the potential and performance.
He said: ” The trade imbalance is not a result of low interest of the Gulf countries for our agricultural exports; rather it emanates from our weakness to meet the quality standards. If we provide them with exports at the desired quality level and appealing package, they have no reason to go far away to buy agricultural products.”
Apart from its geographic proximity, Ethiopia’s abundant livestock resource enables it to provide fresh meat to Gulf countries and overturn the current dominance of Brazil and other countries far away from the region.
Hence, in addition to efforts to increase meat exports during the Islamic fasting season, attention should be given to building certified abattoirs and improving quality of slaughtered cattle and availability of transport to win the competition.
Ethiopia has indeed executed significant tasks to increase its competitiveness in the Gulf meat market in terms of building laboratories and chilled storages as well as increasing loading docks, expanding transport as well as certifying abattoirs.
The various trade missions and discussions held with Gulf countries are also believed to have played a big role in bolstering trade with the region. Dr. Fikru in this regard, hailed the outcome of the trade mission UAE held in Ethiopia in 2014 to create opportunity for business persons from the two countries.
These kinds of forums are helpful to identify the interest of Gulf companies and aware about the potential of the country. The deliberations will also help to narrow the current trade gap and find new markets for Ethiopian products.
Diversification of Hydrocarbon Economies
Most of the Gulf countries have abundant petroleum resources that enable them to be among world’s economic powers with huge potential for foreign direct investment (FDI).
The fall in global oil prices has; however, caused significant revenue shortfalls in many energy exporting nations and there is a growing demand among them to reduce the dependence on oil revenue. The Gulf States are also aiming at lessening their dependency on the oil industry.
While Saudi Arabia is implementing a restructuring plan known as Vision 2030 that reduces its reliance on oil and transform the economy to become the top investing in the world, UAE is working to become commercial and tourism hub of the Middle East.
Same is true for Kuwait and Qatar that are taking investment as a means to diversify their hydrocarbon economies.
Ethiopia on the other hand offers wide investment opportunities that are crucial for Gulf countries in order to meet their goals of economic diversification in the agriculture, health care, retail and infrastructure sectors.
As pointed out earlier, due to their limited water supply and the cost of desalination, agriculture has become the Gulf countries’ priority for overseas investment. Governments have set various platforms, including King Abdullah’s Initiative for Saudi Agricultural Investment Abroad and Abu Dhabi Fund for Development, to encourage investors engaged in the sector while eyeing Africa as a primary destination.
Currently, Saudi Arabia and the UAE are two of the top countries investing in Africa’s agriculture and the involvement of Saudi Star Agricultural Development in Ethiopia, Kenana Sugar Company in Sudan and Al Dahra Agriculture in Egypt are the manifestations for the trend.
Meanwhile, Ethiopia’s high soil fertility, the amenability of its climate towards the cultivation of diverse range of crops and the comparative abundance of water supply make it an ideal place for agricultural investment.
The government of Ethiopia has also been hugely investing to improve the country’s infrastructural networks and set policies that create favorable investment climate. The efforts have born fruits by attracting large- scale Gulf companies, including Saudi Star Agricultural Development and the UAE-based Maaza Mango Bottling.
Yet, this is insignificant when compared with Ethiopia’s potential and geographic proximity to the Gulf as well as the desire Gulf countries have shown for agricultural investment.
Member of Saudi Arabia’s Shoora (Council) and economist, Dr. Fahad Bin Mohammed advised Ethiopians to create favorable environment for agricultural investment, saying: ”You should look at what the Arabs really need. For example, if you look at the area they have a lot of money and it is really need agricultural products. You know they have problem in water supply and also the weather. So we can invest more in agricultural products and this is what African countries should focus on and make it easy to the money to flow from Arabs to Africans.”
The road ahead
Most Gulf companies have shown a tendency to engage in Ethiopia’s agriculture sector, followed by hospitality, energy and pharmaceutical industries. In recent years, the country has succeeded in attracting high profile Gulf investment, including Sheikh Mohammed Hussein Ali Al Amoudi’s multi-sector corporate MIDROC and UAE-based companies like Julphar Gulf Pharmaceutical Industry and Al Ghurair Group’s aluminum factory.
Besides, business persons from Saudi Arabia, UAE and Kuwait launched a 7.1 billion birr worth investment projects during the past five years. Despite this, the investment of Gulf companies in Ethiopia is still low.
In its endeavor to make Ethiopia attractive to FDI globally, the government has made various investment policy amendments; and studies were also conducted to find out specific interests of Gulf investors and the reasons for abandoning projects.
In this regard, the construction of industrial parks is believed to play a big role in easing bureaucracy and infrastructural setbacks investors have been encountering in Ethiopia.
The economic analyst at the UAE Embassy, Dr. Fikru agreed on this fact. He stated that industrial parks are the tools to fill the missing link in Ethiopia’s investment opportunities and Gulf companies’ capital by cutting the tedious bureaucratic process.
Dr. Fikru said: ”Industrial parks development is a solution to Gulf investors’ low involvement in Ethiopia’s market. The parks will cut short the ups and downs investors face in the operation phase by providing them with land, sheds and infrastructural facilities.”
Currently, the government has built 12 specialized industrial parks for the agriculture, manufacturing and hospitality sectors across the country. These give momentum for Gulf investment.
Embassies in Gulf States need to play the leading role in promoting Ethiopia’s investment opportunities and hold discussions with investment authorities of the respective countries to encourage potential investors from the region to come and do business in the country.
Signing investment protection and promotion agreements, addressing bureaucratic challenges and improving infrastructure are some of the challenges that Ethiopia has to address in order to lure more investments.
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