Investing in a developing economy

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India, the world’s largest Democracy with the second largest population, has had cordial relations with Ethiopia since the time of Indian independence in August 1947, starting with the first Indian Prime Minister Jawaharlal Nehru and the late Ethiopian Emperor Haileselassie I, then  progressively warmer relations fostered through their membership in  the Non-Aligned Movement, which had a policy of  neutrality during the Cold-War era and was set up to protect the interests of Developing Countries.  Today it has  grown to a great extent to include cooperation in a wide array of fields and sectors ranging from trade and education to culture and beyond. Capital’s Elias Gebreselassie   recently paid a trip to the Indian capital,  New Delhi, where he interviewed the Ethiopian Ambassador to India, the Honorable Genet Zewdie about the multi-faceted, enduring accord between the two countries including its challenges and its promises.

Capital: Could you briefly describe  the activities of the Ethiopian Embassy in New Delhi   since you assumed the position of Ambassador?
Genet:
The Ethiopian Embassy in India was established in 1948 and throughout its sixty-plus years   has kept the relationship between the two countries on a friendly footing. At the beginning, relations were developed along   cultural and educational lines, later on extending into the trade sector. Now, we cooperate in all areas and at all levels based on mutual interest. To elaborate, we have established a very good bilateral Government-to-Government relationship on the political front while trade relation with investment promotion is also greatly enhanced.    We are also working together on capacity- building measures in various areas with great support from the Indian government.  One of our major priorities is in finding out the  kind of technologies that could be transferred to Ethiopia so that we can achieve our objective aims in terms of economic development and poverty reduction,  so on so forth.
Capital: What is the scope of the Indian Government’s participation  in financing big projects in Ethiopia?
Genet
: Well, the Indian Government has financed rural electrification projects in the area surrounding the town of Hageremariam for the last six or seven years at a cost of USD 65 million so far;   it  also financed the three Sugar Factories in Ethiopia  which are Fincha, Wonji and  Metehara, in order to  revitalize and rehabilitate them.   Furthermore, a long term loan to the tune of USD 640 million was provided by the Indian Government for the construction of the Tendaho Sugar Factory, which is set to become the biggest sugar development project. Discussions with the Prime Minister of India, Manmohan Singh, has also yielded results regarding the financing of the railway project from Asaita, in the Afar Region, to the Djibouti port of Tadjoura,  with USD 300 million already promised by the PM.  The Ethiopian Government has  requested a further or additional USD 300 million for this project and discussions are ongoing. Therefore, these huge sums were and are being provided by the Indian Government under loans provisioned for least-developed countries, with a low interest rate through the Exim bank of India. Other activities, like  capacity building, are areas in which they support us. To date, 40 scholarships  per year are provided  to Ethiopian nationals, supplemented by small trainings.  There are also specialized trainings extended to,  for example, the Ministry of Trade of Ethiopia, Ethiopian banks etc.  However, by far, the largest financial investments    are not from the Government of India but rather from the private sector through  Foreign Direct Investment (FDI).  Plenty of  investors from India are in Ethiopia right now, involved in various sectors like in leather and leather products, textile, agro-processing, agriculture, mining, steel works, and so on. Yearly, their participation is increasing because of the favorable investment climate and some businesses and businessmen in fact strike out on their own without going through our Embassy here, being invited to invest in Ethiopia by friends and associates.  And that’s the state we have reached, I dare say.
Capital:  Can you quote  figures, in terms of percentage points, the  increase in investors from here that are  flowing to Ethiopia?
Genet: Unfortunately, I don’t have specific figures, but off the cuff, I can tell you that, in  the last four months, between July 2012 and now, four investors have gone to Ethiopia and taken out licenses, and they are in the process of constructing industries. One is engaged in Denim jeans production; one is in cotton, yet another  has gone into sugar production. The fourth one is in the garment Industry. These are separate from the ones that go to Ethiopia on their own.
Capital: Indian investors are currently engaged in commercial farming in Ethiopia. What do you believe they will bring to Ethiopia in terms of the Country’s drive for food self-sufficiency?
Genet:
By the way,  Indian investors, particularly those who have leased land for the past year or so, are into producing varied commercial crops like cotton, palm oil and sugar cane:  these are not staple crops.   We believe we have enough Ethiopian farmers to produce more than enough crops to meet our self-sufficiency goals; we just have to provide them with the awareness and train them in modern farming techniques and the proper utilization of land to reach and surpass our goals.  The aim of leasing land to investors, foreign and domestic, is to obtain foreign currency from the exports they make through taxes, the provision of raw materials, produces and  products to local industries and markets, but above all, they provide employment to the skilled and unskilled workforce. Examples of produces that can be used as raw materials are the Atrophy plant for biofuel, cotton for local textile industries and palm for palm oil production.  Land has also been leased for producing pulses, in particular rice, which is consumed in vast quantities by the  Indian population.   The Indian Government has already put in a request to  import pulses from Ethiopia. Because of this, we have been encouraging Ethiopian farmers to produce pulses in tandem with other crops..
Capital: Do you have the figures for the number of hectares  being cultivated by Indian commercial farmers?
Genet:
What I know of is that, of the leased land given to foreign investors so far, the largest acreage   was given to Indians.  
Capital: There are complaints by some foreign “human rights organizations” and “NGOs” about the forced displacement of indigenous populations along with  environmental concerns. Any comment?
Genet:
I’ve heard of such complaints  before: it has even been said that there is some sort of land grab.  Ethiopia has about 74 million hectares of arable land and I believe about three percent is leased for commercial farming. . These  lands  are situated in the lowlands  with minimal habitation  in regions such as Gambela and Beni-Shangul Gumuz.  Therefore,  the question of evicting people illegally, I believe, doesn’t really apply here. For instance, the figures for the population of Gambela are a well known fact, and actually most of them   live in the highlands of the region.
As to the question of environment, we take great care to avoid deforestation. We can take tea plantations as a case in point. Land is leased for tea plantations precisely because they do not degrade the environment., It is a well known fact that as a poor Country in trying to develop our available resources we will face obstacles and challenges from some quarters. Needless to say, we consider everything carefully before proceeding on a certain path. Therefore, not only the environment but every relevant issue will be addressed.
Capital: How do you perceive complaints raised by some that the lease prices for Indian, Chinese or other investors are too small in commercial farming compared to other countries?
Genet:
When considering  lease prices a number of factors come into play: infrastructure in Ethiopia is practically non-existent; the land is not cleared in some areas particularly in the Gambela region; and in other sparsely inhabited areas, there’s labor shortage, so  investors  face all these  hardships  in  a Country they don’t know.  Other countries  have better infrastructure, railroads  etc  and can afford  to have their  land developed in a  manner that is quite different and much easier than it can be done in Ethiopia.  They can afford to charge higher prices, but we  charge our investors in accordance   with  international market values where infrastructure  development is essential and critical. We should be compared to  countries where the infrastructure is underdeveloped like ours, not to  countries which give  land for free to attract investors.  Investors  bring along  technology, employment and foreign currency, all of which we require. So prices are set by considering all this.

Capital:   Yet another complaint raised, in this case against the Indian Government, is for the  way they do business. One point often put forth is  the amount of time they take  especially  when compared to the Chinese Government, to finance projects in Ethiopia?
Genet:
Well, the policies of India and China are different and it would be absolutely unfair to compare policies: for example the Chinese projects tend to be Government-driven projects in Ethiopia, but in the  case of India the Government finances through the private sector.  So in that way there are different ways of financing..                   
Capital:  You’ve said agricultural products are the main exports of Ethiopia to India. What would you say are the goods and services that are exported from India to Ethiopia?
Genet
: As to the trade relations between the two  Countries, India exports things like steel products, textile products, garment, electronic goods and pharmaceutical products since our manufacturing hasn’t taken off yet to be self-sufficient; therefore, we get many of our products from India and also other countries.
Capital: Are there substantial numbers of Ethiopians living in India, and if so for what reasons?
Genet:
Well, there are a good number of Ethiopian students in India; this is because the Ethiopian Government  sends Ethiopian students  to be trained  here in India, in different sectors such as, in science, Information Technology and what not. Many of our students become  instructors in our new universities back home. There are also Ethiopians that have come through  Government scholarship (Indian); there are also Ethiopians here who’ve come using their own means and are supporting themselves.