Will Economic Partnerships have the Capacity to Strengthen Ethiopia’s Local Economies’ Resilience?

We attempted to analyze the chances for Ethiopian participation in a variety of global and regional economic integration activities by describing a couple of initiatives in brief with the aim of provoking thoughts.

China’s Belt and Road Initiative and Ethiopia

The Belt and Road Initiative (BRI), presented around the world as China’s distinct vision for reinventing its global connections, was announced by Chinese President Xi Jinping in 2013 and fully launched in 2014. It intends to invest in the approximately 70 countries that have so far signed up for the program.

Ethiopia is viewed as the face of China’s Belt and Road Initiative, with 16 billion in investments between 2000 and 2020 and now housing 400 Chinese manufacturing and construction projects. Manufacturing employs two-thirds of all Chinese businesses in Ethiopia.

Quick Facts about BRI:

• One Belt, One Road (OBOR) has been inscribed into state and governing party constitutions as a strategic priority for China to achieve Great Power status by the mid-twentieth century.
• BRI spans three continents and affects 60% of the world’s population, accounting for 30% of global GDP and 75% of global energy reserves.
• Around $900 billion in infrastructure projects are being implemented by 50 Chinese state-owned enterprises around the world.
• According to a study supported by the United Nations Economic Commission for Africa, East Africa’s exports might increase by up to $192 million per year if BRI projects are used profitably.
• The initiative identifies five major priorities: policy collaboration, infrastructure connectivity, unrestricted trade, financial integration, and people connectivity.
• The BRI is linked to a substantial investment program in the construction of ports, highways, railways, airports, power plants, and telecommunications networks.

Ethiopia’s industrial policy, the policy orientations of the Forum on China-Africa Cooperation, and China’s Belt and Road Initiative infrastructure development strategy have characterized China-Ethiopia economic cooperation throughout the previous decade.

China is building and operating railroad routes, roads, airports, and industries in major parts of Africa. Dams have been built with Chinese assistance in various countries, including Zambia, Ethiopia, and Ghana.

Through infrastructure projects such as the Addis Ababa-Djibouti Standard Gauge Railway, China’s projected Belt and Road Initiative (BRI) is gaining traction throughout Africa. The 752-kilometer transnational railway built by China, which opened in October 2016, is a showpiece project of China-Africa cooperation under the BRI, connecting Ethiopia, Djibouti, and China together for a common purpose.

According to official figures, Africa’s first fully electrified transboundary railway earned 86.1 million US dollars in 2021, up 37.4 percent from the previous year, with 449 passenger and 1,469 freight trains running along the route and commodities such as cooking oil, small cars, and fruits and vegetables transported.

According to the Foreign Policy article titled “What China Wants in Ethiopia?” China has donated $1.2 billion in financing toward the development of the GERD. Furthermore, a huge port with 32 berths is being constructed, together with a neighboring industrial complex and infrastructure, as well as new traffic pathways to South Sudan and Ethiopia.

The African Continental Free Trade Agreement and Ethiopia

The African Continental Free Trade Agreement (AfCFTA), which went into effect on January 1, 2022, for all members of the African Union except Eritrea, could give Ethiopia a competitive advantage when it comes to the challenge of penetrating international markets if used in conjunction with a well-thought-out strategy.

AfCFTA links 1.3 billion people in 55 countries with a total GDP of $3.4 trillion and requires countries to eliminate tariffs on 90% of items, providing free access to commodities, goods, and services across the continent. However, such money necessitates coordinated economic policies and financial services.

Ethiopia’s current economic growth problems, as well as efforts to generate enough foreign currency, may benefit from active engagement in international trade and well-coordinated economic strategies. Furthermore, if Ethiopia directs its resources toward BRI and AfCFTA in order to meet its economic growth targets, the economic impact will be enormous.

Source:

1. https://www.beltroad-initiative.com/info/
2. https://en.wikipedia.org/wiki/Belt_and_Road_Initiative
3. https://www.ebrd.com/what-we-do/belt-and-road/overview.html
4. https://english.news.cn/africa/20220304/1cfe1dcce9bd42c4a53a8e32f70ef40e/c.html