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Ethiopia’s relationship with one of the fastest emerging economies in the World, India, may be centuries old traversing through mutually beneficiary educational, business and even ideological paths. But it’s only over the last decade that the relationship, especially the business ties between the two countries, has been expanding rapidly. Capital’s Elias Gebreselassie sat down with R.V. Kanoria, Chairman & Managing Director of the Kanoria Chemicals and Industries Limited, who is also the President of the Federation of Indian Chamber of Commerce and Industry (FICCI), the largest and oldest chamber in India, for an interview during a recent visit to Ethiopia, accompanied by a high-powered Indian business delegation.
Capital: What would you say was the rationale behind your visit to Ethiopia at this time?
R.V. Kanoria: Our visit to Ethiopia has many facets. For me, personally, my company Kanoria Chemicals is investing USD 30 million in a textile project here. We plan to export textiles worth USD 30 million annually, and I liked the country so much I felt that we should bring more Indian businesses to Ethiopia to participate in its growth.
Capital: During your stay in Ethiopia, what were the areas of discussions you held with government and private officials?
Kanoria: The best meeting we had was with the Prime Minister of Ethiopia, Hailemariam Desalegn; he spent more than one hour with us. He is very keen that India should increase its investments in Ethiopia and wants to elevate India to the status of “most favored nation,” because there are old, cultural and historical links between India and Ethiopia. As an example, many Indian teachers have come to Ethiopia and taught a lot of Ethiopians at all levels of the educational spectrum; therefore, I think, there is an emotional bond or interconnection between India and Ethiopia. The PM has indicated that we should increase our investment to USD 10 billion in the next three years.
Capital: You also met with representatives of the private sector, both from Indian businesses who invested in Ethiopia and Ethiopian businesses operating here. What was your impression of what you saw here, regarding the investment climate and potential?
Kanoria: The investment climate in Ethiopia is very good, the policies are excellent and also every person I have met who is a decision maker, like all the ministers, including the Prime Minister, are good people, who are very interested in the development of Ethiopia. Security and stability in Ethiopia is very good, which isn’t so in some African countries where I can’t go out at night because of security concerns. Comparatively, there’s very little corruption in Ethiopia because of effective laws, and everybody follows the law which makes for a very good climate for investment. There are no bars on repatriating profit, which also makes things very easy overall. Presently, Ethiopia’s economy, which is growing at 11.4 percent annually, allows for a wonderful place to invest in; with cheap power, very friendly and gentle people who are willing to learn and develop the necessary skills.
Capital: I’m sure there are some challenges you or your company has faced in Ethiopia. What are they and how do you think they should be solved?
Kanoria: There definitely are some challenges you face. The first one is, we think that in Ethiopia the cost of transportation is very high and the availability of transportation is limited. We believe the government needs to look in to this and allow for competitive undertakings and improving logistics. Second, because Ethiopia lacks sufficient foreign currency, the financing of projects is not easy as we have to get the required money for investment from abroad. Finally, the third challenge, which I think the government is slowly resolving, is the time it takes to do business, to get clearance is easy. Once small things like obtaining import permits, export permits etc., which require too much time are expedited, things will be much easier. The PM has assured us that he is creating a “one-window clearance system” where every clearance will be provided from one place, thereby forgoing the necessity of going to the various ministries for these required documents. We are of the opinion that the government of Ethiopia is actually addressing and solving all these issues and much more.
Capital: What sectors do the business people in the delegation who came with you represent?
Kanoria: We’ve got new people who want to be involved in the hotel sector, in sanitation, in tile production and in the construction industry. We’ve also have people who are interested in the paper industry. I’m interested in the chemical business, because my company deals with chemicals too. We have also members of the delegation who are into tractor manufacturing for agricultural equipment, integrated communications and IT solutions for the health sector and the agricultural sector, which Ethiopia requires. Therefore, I can definitely say our delegation represents and encompasses quite diverse areas.
Capital: Who is interested in the hotel and IT sector? Could you brief us a little bit about the investors who are engaged in these sectors?
Kanoria: The business person who has shown tremendous interest in the hotel sector is a gentleman by the name of Manutra. He is exploring the possibility of putting up a five star hotel in Addis Ababa. From the Integrated Communications Technology (ICT) sector there is a company based in the southern Indian state of Andhra Pradesh, and they’ve done a lot of work in the field. The company is called crane solutions and I think they are excellent at providing IT solutions and will be great to work with in Ethiopia. I’m told that they are interested in investing up to USD 70 million for creating these solutions.
Capital: Returning back to your investments, what does Kanoria do in Ethiopia?
Kanoria: My business will contribute directly to the employment in the garment sector. It will help in creating new business opportunities around the plant where Ethiopian companies and smaller entrepreneurs involved in the garment industry will use our fabric for making trousers and jeans and other apparel. So our company will directly employ about 500 people and indirectly will create somewhere in the region of 10,000 jobs. It will be mostly for export, where our plans are to export fabrics worth about USD 30 million annually. We are in the process of leasing land around the town of Bishoftu (Debre Zeit); and as soon as we acquire it we expect to complete the construction of our plant somewhere around the end of this year.
Capital: As you already stated, Ethiopia and India have a long history, particularly in the education sector. As investors, apart from investing your capital, what’s your role going to be in knowledge transfer and expertise?
Kanoria: Actually, the ICT sector, which I mentioned earlier, is about knowledge sharing. Any technology and investment which comes into the country has a knowledge sharing component attached to it. This time around, we don’t have anyone in our delegation directly involved in the education sector, as it is a business delegation, but certainly there’s a tremendous opportunity to have a relationship in skills’ and capacity building. Next time, there will be people from our side who will be coming here that are directly involved in those relevant sectors.
Capital: What will be the Federation of the Indian Chamber of Commerce and Industry’s (FICCI) interaction with Ethiopia, in particular, and Africa in general?
Kanoria: FICCI would open an office in Africa because it has a separate Africa desk and it’s also the Secretariat for the India-Africa CEO forum. The CEO forum has been formed under the African Union Commission (AUC), so it consists of all 54 countries.
Capital: What would you say is the current state of Indian investments in Ethiopia and Africa and the Indian government’s role in promoting it?
Kanoria: The Indian government has created lines of credit through the Export-Import (EXIM) bank. If I’m not mistaken, it is USD 1 billion for Africa; hence, the Indian government is supporting Indian investments by providing finance at a lower rate of interest, especially for Africa. But the initiative of investing in Africa is largely taken by the private sector. The Indian government does participate in the development of some infrastructure projects in Africa, like railways. I think in Ethiopia the Indian government has also supported development in the northern region, particularly around the town of Kombolcha, so it’s proactive in many African countries and in particular in Ethiopia.
Capital: As you’ve already mentioned, there is legal framework through which business ties are planned and encouraged between Ethiopia and India. Could you tell me about the current legal framework and agreements between the two countries that would allow smooth trade relations?
Kanoria: FICCI has an agreement with the Ethiopian Chamber of Commerce and Sectoral Association (ECCSA) which is to promote business, and within that legal framework there are two issues which are pending. One is the creation of a bilateral investment promotion and protection treaty and the second is the ratification of the double taxation treaty, so I would urge both the Indian government and the Ethiopian government to expedite the improvement of current legal frameworks which will help the growth of investment.
Capital: As an investor, personally, do you have any additional ideas and suggestions to make Ethiopia a more inviting place for investors?
Kanoria: Personally, I think it’s very important that Ethiopia also works within the COMESA agreement or treaty as is the case with the African Growth and Opportunity Act (AGOA). Ethiopia needs to create a base for Indian investors who are willing to make Ethiopia the foundation for their ventures into the African market.
Capital: In your opinion, what sectors do you think are of special significance to Ethiopia?
Kanoria: I believe Ethiopia has lots of opportunities in all sectors, but to my way of thinking, the agriculture sector and related industries is of special significance. Ethiopia is one of the few countries which is still producing organic crops and is endowed with good soil; therefore, Ethiopian agricultural productivity is excellent. I think one very big opportunity which India needs to look at is the food processing industry which has direct linkage with the agricultural sector as well as the sugar industry.
Capital: Any last comments?
Kanoria: My assessment is that the relationship between Ethiopia and India will grow tremendously and there will be a lot of investment in Ethiopia in the near future. I also personally think that the Ethiopian PM’s plans for Indian investments worth USD 10 billion will be a reality and that the ties between the two countries will continue to become very strong.