The Chinese investors who have placed their fingerprints on the railways, roads , manufacturing , and the Turkish and Indian investors in textiles and the coming of European and American businesspeople to work in industry is a good witness to show that much has been done to attract foreign investors to Ethiopia. Obtaining land, electricity and fast service are challenging areas for investors. The current State Minister for Business and Diaspora Affairs in the Ministry of Foreign Affairs Dr. Aklilu Hailemichael says more investment will come from abroad if work is done to increase exports. His biography on the Ministry of Foreign Affair’s website shows that he started his career in the agricultural sciences and completed his PhD degree in Technology and Agrarian Development in the Department of Social Sciences at the Wageningen University and Research Centre of the Netherlands in 2007. He worked as a lecturer and researcher in the College of Agriculture and Natural Resources in Mekelle University. Apart from teaching and research, he also contributed to institutional building and development as a Vice-President of Aksum University for several years and as vice college dean at Mekelle University. He is an adjunct associate professor in the College of Development Studies of Addis Ababa University.
Capital’s Reporter Tesfaye Getnet sat down with Dr. Aklilu to learn more about the government’s plan to improve Ethiopia’s business relationship with the rest of the world. Excerpts;
Capital: How would you describe Ethiopian foreign direct investment?
Dr. Aklilu: In our ministry we have sector called economic diplomacy. This sector is part of the general diplomacy and is focused on promoting, protecting and realizing our national interest in terms of our country’s economic gain. In our policy the core point is development. The trait for national existence is poverty. So to promote our development in a fight against poverty we built a relationship with state and non-state actors. Our foreign policy serves our domestic policy and the main target is to reduce poverty and to sustain development. We strongly believe that we have a good FDI policy and because of this we have been increasing our exports and our country is one of the top destinations in terms of attracting FDI.
Capital: Even though the government has been working to attract foreign investors there are challenges when it comes to getting land, electricity and licenses. How you are working to overcome these challenges?
Dr. Aklilu: We have an institution like the Ethiopian Investment Commission which is established to provide services the investors need. You can look at the industrial parks which have shelter, water, roads, power, banks and customs offices and this is the real testimony to how we are working to ease the burden of investors. Outside of the industrials parks, regional investment bureaus are working to provide better services for investors as quickly as possible.
Capital: Foreign investors want to do business in telecom which is monopolized by the government and banks which are only allowed only for local people and the state. Why has the government closed these sectors to foreign investors?
Dr. Aklilu: Ethiopia has set a priority where foreign investors can come and operate in here. The top priority is manufacturing. This is the area where we lack capital and the area that is very important to facilitate our development. Ethiopia has the vision to have a large manufacturing economy by 2025. In manufacturing we give are giving priority to textiles, garments, leather, agro- processing, pharmaceuticals, construction materials and other related areas. Foreign investors are expected to invest in these areas and to fill needs which can generate employment and transfer technology. For their areas like banks and telecom sectors we believe that we can do these by ourselves so they need protection.
Capital: Economists argue that if the government allows foreign investors in banks and telecommunication, competition will increase which ultimately will increase efficiency and bring more job opportunities. What are your thoughts about this?
Dr. Aklilu: Only local banks operate in Ethiopia but competition is increasing. When we think we lack capital and technology we will consider allowing foreign investors in this area.
Capital: The protests in the last two years have damaged the property of some foreign and local companies. Some fear that this may hinder future foreign investments coming into Ethiopia. What is your opinion on this point?
Dr. Aklilu: We have been growing by double digits over the last 15 years. We have built positive images consistently in the case of our agriculture products, investing in infrastructure, education, health and so on. The development we have made has caused people to the ask government for speedy results like roads, electricity and jobs. Sometimes the demand created complaints and problems of governance which led to unrest in some areas. We are starting on the long journey of development and you may face accidents while you are moving but the problems that we face will not reverse our way to becoming a prosperous country. The violence did not stop our development. If you look at the last year’s report we registered a 23 percent increase in terms of FDI. Companies came from India, the USA, Europe, China and others. Our investors know that we cannot fail in continuing the development. They know that we have institutions that have internal systems to identify problems and created dialogues with the public when problems occur. I believe that we will address the challenges and keep the momentum to have the development that we are working on now.
Capital: Last year’s exports did not meet the USD four billion expectations. What should be done to increase the exports and minimize the trade deficit?
Dr. Aklilu: Ethiopia is trying to get more earnings from exports. A number of companies are coming and exporting their products. We have good access to the USA through AGOA without tax and quotas. Our exports go to Europe, Asia and we are working with COMESA to conduct trade in Africa. Our airline is creating a good opportunity to connect us with most of the world. To facilitate our trade we have a bilateral preferential trade agreement with more than 50 countries. That is the market side but we have to work on the supply side. The core sector to strengthen our exports is agriculture. The government is doing a lot to improve agriculture and this why we have many extensions agents in the country. In every kebele there are at least three extension workers who give information to the farmers on improving production, herbicides and on the market side cooperative agents are working to benefit the farmers by improving market access. The agricultural institutes at the federal and regional levels are conducting research to adopt technology on improving seeds which give better yields and resist disease. We are observing apart from their home conception our farmers are commercializing their products but we have to improve our efficiency to attract more investors to do better jobs in exporting coffee, sesame, oilseeds, meat live animals and other agricultural products.
Capital: As we understand from exports, foreign investors are getting more benefit than the local investors in accessing The African Growth and Opportunity Act (AGOA) market. What do you say about this?
Dr. Aklilu: The AGOA market is open to both local and foreign investors but the problem for local investors is capital. As a government we are giving loans to local investors to promote their investment in industry. We are providing loans for 70pct of their projects. In order to have more local investors in AGOA we need to improve agricultural productivity and quality. However some of our farmers and local companies are still benefiting from AGOA.
Capital: Many thousands of jobs have been created in manufacturing but there is high turnover largely because of the small salaries. Should there be a minimum wage?
Dr. Aklilu: I can’t claim that the wage is good enough for the workers. However, I know from the system that the more productivity comes from one company the more benefit will come for the workers. If you look at China labor was very cheap and many western companies were shifting their business to China which ultimately helped China have a per capita income of USD7,000. This has helped Chinese workers get a better salary. In the same way Ethiopia will have better wages for her workers if we increase productivity and exports by attracting more investors.
Capital: Investors frequently complain about the quality of the workers from vocational schools. What should the Ministry of Education do to overcome these challenges?
Dr. Aklilu: I cannot generalize about all of the labor that we have in manufacturing. There are varieties of skills among individuals. The vocational schools and universities are playing a good role in bringing trained workers to the workforce. However there is still work to be done so schools should update themselves in knowing the practical knowledge that the industry needs and in facilitating apprenticeships and training in manufacturing for their students. We can’t deny that the more quality workers we have the more quality and quantity production we will get in the market.
Capital: Does the ongoing misunderstanding between Ethiopia and Egypt on the Great Ethiopia Renaissance Dam affect their trade relationship?
Dr. Aklilu: Discussions on dam are still going on and the construction of the dam still in progress. As a state minster I have received many Egyptian investors that want to work in Ethiopia. This demonstrates that the two countries are working to have a good business relationship. Among our neighbors we have a very good relationship with Sudan, we are connected by roads and we have a plan to connect by rail. We export our products to them and a lot of business is being conducted by the two nations.
Capital: Chinese have the most FDI in Ethiopia and play a big role in development but some fear the Chinese involvement in Ethiopia will create a lot of debt. What are your thoughts?
Dr. Aklilu: We have benefited greatly from their investment. It helps us access international markets, increase productivity, and bring jobs because they often work with local investors through joint ventures. They also help us improve our technology. We work with the Chinese using the same policy as we do for investors from Turkey, Japan, India, the USA, UK, Germany and other European countries. For developing countries it is normal to take on debt but we do this in a way that benefits us and we assess the risks beforehand.
Capital: Turkish investors have a lot of capital in Ethiopia. However recent news reports indicate their products have been rejected in some countries. What do you think about this?
Dr. Aklilu: I don’t think Turkish businesspeople are investing their money abroad to bring low quality products. As far as I know the Turkish are very competitive and their products meet European standards. They are working here in Ethiopia with the same calculation.
Capital: Recently the Djibouti government canceled their contract with DP World to manage a port does this concern Ethiopia?
Dr. Aklilu: No this is an internal affair of Djibouti and Ethiopia will continue to access the port like it did before. I can assure you Djibouti will continue to be the major port service provider for Ethiopia.
Capital: When the Dubai based logistics giant DP World and the government of Ethiopia officially disclosed Ethiopia’s 19 percent stake buyout of the Berbera Port, Somalia said they were not happy with the agreement. They claimed that Somaliland is not a recognized country and the deal breeches international law. Is it right for Ethiopia to work with an unrecognized country?
Dr. Aklilu: Generally Ethiopia has made contracts with Sudan, Djibouti, Somali and Somaliland to obtain port services for its huge populate. We fully respect the internal policies of neighboring countries. We are working to use Berbera Port in a way that will not affect the relationship between Ethiopia and Somalia.