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Rising donors: Can China and Brazil help Ethiopia achieve its development ambitions?

April 2014

Alemu, D. 2014. Rising donors: Can China and Brazil help Ethiopia achieve its development ambitions? GREAT Insights, Volume 3, Issue 4. April 2014.

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The rising powers are growing sources of development finance for developing countries. The Ethiopian state has been actively engaging with Brazil and China to complement Western donor support and realise its agriculture and rural development vision. 

Ethiopia is a poor country, highly reliant on external donor aid. In 2010 aid received was equivalent to 11% of its Gross National Income. (1) Yet Ethiopia is a country with ambitions, particularly in the agricultural field that accounted for a significant 41.1% of GDP in the fiscal year 2010/11. (2) And with economic growth rates being some of the highest in the world in the last few years, peaking at 11.4% in 2010/11 (3), such ambitions are beginning to be realised, with agriculture pivotal to the story. (4)

The now late Prime Minister, Meles Zenawi, was at the centre of this vision, being deeply committed to a development revolution in the country. While dependent on donors, Ethiopia is not just a passive recipient. Prime Minister Meles in particular was highly adept at presenting Ethiopia’s case, but also at providing a framework for investment and aid that was on Ethiopia’s terms. An East Asian developmental state vision, modelled on Korea and Japan, (5) has been promulgated which combines tight state control with the encouragement of investment. (6)

In this context, the importance of South-South cooperation has been growing through increased official engagement of the Ethiopian government with governments and private sector actors in the South. These engagements are modelled around the sharing of experience in public governance, technical cooperation, and the attraction of private and public investments. 

The floriculture sector has grown from US$2 million worth of exports to US$170 million. between 2003 and 2010, involving 85 companies, three- quarters of which are foreign.

Promoting collaboration with Brazil and China

Different organs within the Ethiopian Ministry of Finance and Economic Development (MoFED) and the Ministry of Foreign Affairs (MoFA) play an important role in promoting the collaboration with Brazil and China. The emphasis given to such collaboration is so strong that an independent office dealing only with China, which is called the Ethio-China Development Co-operation Office was instituted within MoFED. This is in addition to the International Financial Co-operation Directorate and the Bilateral Cooperation Directorate that also play key roles in promoting collaboration. The official justification for this emphasis is related to the public belief that the relationship with China has provided, and is expected to provide, the country with economic development. China provides soft and interest-free loans as well as grants for development projects without any conditions. As a balance to the many strings attached to Western development aid, heightened especially since the contested elections of 2005, China’s contribution is an important part of the overall portfolio.

Additionally, the Economy and Business Directorate of MoFA, in collaboration with Ethiopian Missions in Brazil and China and the Ethiopian Investment Agency, promote collaboration mainly in terms of identifying sources of Foreign Direct Investment. This involves the selection of appropriate investors, analysing data on assistance, loans and technical cooperation agreements, providing information on government priorities and identifying partners to finance priority areas as appropriate, and investigating development assistance experience and trends of bilateral and multilateral foreign assistance. Similarly, the Americas Affairs and the Asia and Oceania Affairs Directorates of the MoFA are also involved in promoting priority areas for political and economic cooperation with Brazil and China by conducting studies in areas of trade, investment, development cooperation, and technical assistance.

This very active approach to trade and investment promotion certainly pays off. The floriculture sector, for example, has grown from US$2 million worth of exports to US$170 million between 2003 and 2010, involving 85 companies, three-quarters of which are foreign. Ethiopia is now the second largest exporter of cut roses in Africa, and the sixth largest in the world. (7) Land has been offered, concessions on export arrangements guaranteed, and afast-track investment approach encouraged through the establishment of the Ethiopian Horticulture Agency, all with direct facilitation by the state, and often with directed political oversight from the Prime Minster himself. (8) And in the field of agricultural investment in general, the rising powers – including China and Brazil – are expected to play a major role.

Engaging with Brazil and China

Engagements between Ethiopia and Brazil and China are occurring on three broad fronts: experience sharing and benchmarking of public organisations, as part of public sector reform; technical cooperation in a range of areas; and private investment in agriculture. Existing cases discussed below, show how ‘state agency’ influences external relations to realise a ‘developmental state’ vision through such cooperation arrangements.

Experience sharing in public governance

Experience sharing is promoted in the form of benchmarking best practices of public governance from countries in the South through experience sharing tours of higher officials, and invitations of experts from the South. Ethiopia has been keen to learn from countries that have achieved major economic growth through ‘developmental state’ approach (or variants of), with the political leadership being unconvinced by the neoliberal economic reform edicts of the West (although of course paying due abeyance to them at key points). Ethiopian public institutions have been benchmarking a number of countries in the South, mainly China, India, Thailand and Brazil. Benchmarking is based on the assumption that these countries have witnessed fast economic growth; have more or less similar administration, such as a federal state system (India, Brazil, etc.); and, through the engagement, there would be a possibility of accessing their markets through trade agreements, facilitated through ties established between state officials of the respective countries.

Technical cooperation

Technical cooperation in the form of bilateral agreements is an approach followed by both China and Brazil in support of the agricultural development efforts in Ethiopia. The technical cooperation between Ethiopia and Brazil is yet to be cemented and developed, although an all-round agreement of cooperation between the two countries was signed in April 2012 during the official visit of the Brazilian Foreign Minister. The areas considered in the agreement were education, agricultural research, social security, construction and investment – particularly in renewable energy resource management. A number of other areas of collaboration with EMBRAPA have also been identified, including genetic resources and biotechnology research, germplasm exchange, semi-arid tropical agricultural research related with irrigation and dryland agriculture, and small-scale farm mechanisation. Ethiopia is also looking to learn from Brazil’s biofuel sector and an agreement between the two countries centred on the promotion of renewable energy resource management – especially biofuels – has been signed.

Meanwhile, the technical cooperation with China has resulted in two concrete agricultural development related agreements, i.e. the agreement to construct an Ethiopia- China Agricultural Technology Demonstration Centre in Ethiopia and the agreement for a provision of Chinese instructors on agricultural technical vocational education and training (ATVET) to Ethiopia.

Private investment

The Ethiopian government is also promoting investment possibilities in the country. There are high expectations of Brazilian investment in the sugar industry, linked to the promotion of biofuel. Similarly, Chinese investments are growing in a number of sectors, including agriculture.

The total number of registered investments by China since 2008 is 32, of which 18 are in the area of vegetable farming; four are in edible oil production and processing (including a major investment in palm oil plantation with about 33 thousand hectares of land), three companies are licensed in sugar cane production and processing, and three have received permits to operate in pig farming and processing. The other permits are approved for poultry farming (two), mushroom farming (one), and a rubber plantation (one), with about 30,000 hectares. (9) Similar findings were reported by Bräutigam and Tang that Chinese farming investment is far smaller, at present, than generally believed, though Chinese engagement in agriculture and rural development in Ethiopia is longstanding.

Currently there are only two registered investments from Brazilian companies, Tamar Farm PLC, which has invested in the farming of fruits, grain, sweet pepper and corn, and BDFC Ethiopia Industry PLC involved with coffee and sugar cane farming and processing. The expectation is that biofuel and sugarcane investments will increase substantially in the coming years.

In conclusion, the Ethiopian state has been heavily involved in facilitating engagement with China and Brazil, as well as other ‘rising powers’, as a complement to Western donor support. This has been through experience sharing in public governance, technical cooperation, and attraction of private investments. With a vision of a ‘developmental state’, Ethiopia has been highly successful in mobilising, channelling and focusing external aid and investment towards developmental ends, avoiding the trap of the aid ‘resource curse’, and associated economic and political distortion and corruption, which so many aid dependent countries have fallen foul of. Exerting a strong form of ‘African agency’ (10) is Ethiopia’s hallmark, and so far it seems to be delivering success, at least in terms of aggregate economic growth.

Ethiopia is now the second largest exporter of cut roses in Africa, and the sixth largest in the world.

This article stems from the work being done by the China and Brazil in African Agriculture (CBAA) research theme of the Future Agricultures Consortium (www.future-agricultures.org). The CBAA project is funded by the Economic and Social Research Council (ESRC). 

Dawit Alemu is Coordinator of Agricultural Economics, Research Extension and Farmers Linkage at the Ethiopian Institute of Agricultural Research (EIAR). He is also a Senior Research Officer for the Ethiopia Strategy Support Program (ESSP) at the International Food Policy Research Institute (IFPRI). 

Footnotes

  1. Global Humanitarian Assistance. Ethiopia Key Figures, accessed 8/03/2013: http://www.globalhumanitarianassistance. org/countryprofile/ethiopia
  2. National Bank of Ethiopia. 2011. Annual Report of the National Bank of Ethiopia – 2010/11 Fiscal Year. National Bank of Ethiopia. Addis Ababa, Ethiopia. 116p.
  3. World Bank Data. African Development Indicators: Ethiopia. Accessed 08/03/13: http://databank.worldbank.org/data/views/ reports/tableview.aspx
  4. Geiger, M. and G. Chorching. 2012. Ethiopia economic update: overcoming inflation, raising competitiveness. Washington DC: World Bank.
  5. See article by E. Fourie in this issue of GREAT insights.
  6. Mkandawire, T. 2001. Thinking about developmental states in Africa. Camb. J. Econ. (2001) 25 (3): 289-314.
  7. Kelsall, T. 2013. Business, Politics and the State in Africa. Challenging the Orthodoxies on Growth and Transformation. Zed Press: London.
  8. Gebreyesus, M. and M. Lizuka. 2010. Experimentation and coordination as industrial policy: examples from Ethiopia and Chile. UN-WIDER: Helsinki and Altenberg,T. 2010. Industrial policy in Ethiopia. Discussion paper 2/2010. German Development Institute: Bonn.
  9. Bräutigam, D. and X. Tang. 2012. An Overview of Chinese Agricultural and Rural Engagement in Ethiopia. IFPRI Discussion Paper 01185. Development Strategy and Governance Division, International Food Policy Research Institute.
  10. Brown, W. 2012. A Question of Agency: Africa in international politics, Third World Quarterly, 33:10, 1889-1908.

References

• Alemu, D. and Scoones, I. 2013. Negotiating New Relationships: How the Ethiopian State is Involving China and Brazil in Agriculture and Rural Development. IDS Bulletin, 44: 91–100. doi: 10.1111/1759-5436.12045: http://opendocs.ids.ac.uk/ opendocs/handle/123456789/2609 

This article was published in GREAT Insights Volume 3, Issue 4 (April 2014).

 

Economic Transformation and TradeAgricultureBrazilChina

External authors

Dawit Alemu