(Addis Ababa) 08 Feb 2020<\/strong> <\/span>\u2014 The great power struggle between Washington and Beijing takes an unexpected turn in Ethiopia.<\/p>\n

For the past four years, Welibuw Buzenehe watched as China built a new national sports stadium in the heart of the Ethiopian capital.<\/p>\n

Located deep in Addis Ababa\u2019s commercial center, the soon-to-be-finished structure towers some 130 feet above the ground, and will have a capacity of 62,000 people.<\/p>\n

\u201cChina is building this city from the ground up,\u201d said Welibuw, a local food seller in the area around the stadium. \u201cWithout China, not much would happen around here.\u201d<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n

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The roughly $160 million construction project is one of many highly visible, Beijing-backed mega-projects \u2014 from hydropower dams to skyscrapers \u2014 that have helped make China Ethiopia\u2019s largest trading partner.<\/p>\n
But recently, efforts by Ethiopia\u2019s firebrand prime minister, Abiy Ahmed, to modernize the economy, privatize state-owned companies and reduce the country\u2019s debt burden are shifting the power dynamics in the country.<\/p>\n
Abiy, analysts say, is positioning the country to leverage competition between the West and China to attract even greater investment \u2014 and reduce the country\u2019s dependence on Beijing.<\/p>\n
In December, Ethiopia received a $9 billion injection of financial aid from Western donors, the International Monetary Fund and the World Bank. The influx of cash could upend 15 years of Chinese dominance and spark unprecedented interest from Europe and America, investors, economists and political analysts say.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n
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\u201cThe granting of this money sees the West countering China in a very tangible way, in one of the more politically and economically important and consequential countries in Africa,\u201d said Zemedeneh Negatu, an Ethiopian-American investor and global chairman of the Fairfax Africa Fund.<\/p>\n
\u201cWestern governments, led by the U.S., appear to like what Prime Minister Abiy is trying to achieve and they want to help him move forward with his reforms.\u201d<\/p>\n
For Europe and America, Ethiopia \u2014 one of Africa\u2019s fastest growing economies and the continent\u2019s second most populous country after Nigeria \u2014 has become too big of a prize to ignore.<\/p>\n
The IMF\u2019s disbursement was the first time in over a decade the Fund lent money to Ethiopia. The amount \u2014 $2.9 billion \u2014 also represents one of the highest levels of financial assistance that can be provided under the organization\u2019s lending rules.<\/p>\n
Observers chalk up the body\u2019s decision to approve the cash to the leadership of Ethiopia\u2019s prime minister, who \u2014 despite criticism that he has not done enough to quell deadly fighting between Ethiopia’s ethnic groups \u2014\u00a0is seeking to embark the country on a new path.<\/p>\n
A core part of Abiy\u2019s agenda is an effort to overhaul the country\u2019s economic model of heavy state investment, which economists widely agree has run out of steam.<\/p>\n
As part of that push, the prime minister has surrounded himself with a tightly knit group of young, liberal-minded technocrats with international experience to raise private capital and privatize key sectors such as the telecommunications market.<\/p>\n
\u201cA key objective of the government\u2019s economic reform agenda is to sustain Ethiopia\u2019s growth by tackling emerging fiscal and current account deficits,\u201d said Mamo Mihretu, Ethiopia\u2019s chief trade negotiator and a senior adviser to the prime minister.<\/p>\n
Abiy\u2019s efforts haven\u2019t gone unnoticed. In October, he won the Nobel Peace Prize<\/a> for his efforts to end Ethiopia\u2019s long-running war with Eritrea and to bring greater political and economic freedoms to a country that had suffered for decades under oppressive regimes.<\/p>\n
The award appears to have gone a long way toward burnishing his image on the world stage. Despite hundreds dying in ethnic clashes and anti-government protests demanding more autonomy from the state since he came to power in April 2018, Abiy has become the poster child of a modern Africa full of economic potential.<\/p>\n
The reforms are creating \u201copportunities for Western businesses to invest in Ethiopia,\u201d even as they are altering Ethiopia\u2019s relationship with China, said Abdulmena Mohammed Hamza, an economist specializing in banking at the Edinburgh Business School.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n
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\u201cThere are some that say we are adding more debt to the country’s already high debt. But borrowing from the IMF and the World Bank is like borrowing from one’s mother.”<\/p>\n
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– Abiy Ahmed, Prime Minister of Ethiopia<\/p>\n<\/footer>\n<\/blockquote>\n<\/aside>\n<\/div>\n<\/div>\n<\/section>\n
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Over the course of the last decade, Ethiopia has become increasingly dependent on Chinese investment.<\/p>\n
The Export-Import Bank of China put up $2.9 billion of the $3.4 billion railway project connecting Ethiopia to Djibouti, providing the landlocked country access to ports. Chinese funds were also instrumental in the construction of Ethiopia\u2019s first six-lane highway \u2014 an $800 million project \u2014 the metro system, and several skyscrapers dotting Addis Ababa\u2019s skyline.<\/p>\n
Beijing also accounts for nearly half of Ethiopia\u2019s external debt and has lent at least $13.7 billion to Ethiopia between 2000 and 2018, data compiled by John Hopkins University School of Advanced International Studies shows.<\/p>\n
But finance ministry figures show that Beijing has begun to taper the amount it lends to Ethiopia in recent years \u2014 from $1.47 billion in the 12 months from July 2014 to $630 million in 2017.<\/p>\n
Diplomats and observers of Ethiopia\u2019s economy say that Beijing has grown frustrated after major investments such as the Djibouti railway line failed to generate sufficient revenues.<\/p>\n
China\u2019s partial retreat has thrown into relief Ethiopia\u2019s indebtedness to Beijing. Observers say upending that equation is perhaps the greatest motivation for Ethiopia\u2019s opening up to the West.<\/p>\n
Speaking at a conference in Addis Ababa in December, Abiy went as far as to say the terms of Chinese loans had damaged the Ethiopian economy.<\/p>\n
\u201cThere are some that say we are adding more debt to the country’s already high debt. But borrowing from the IMF and the World Bank is like borrowing from one’s mother,\u201d Abiy said.<\/p>\n
\u201cWhat hurt Ethiopia is borrowing from other companies or some countries. For instance, Ethiopia borrowed to build a railway but was asked to repay the debt before the completion of the construction,\u201d he added, referring to the Chinese-backed railway line to Djibouti.<\/p>\n
European and American companies are hoping to make the most of the moment.<\/p>\n
In December, Abiy received European Commission President Ursula von der Leyen<\/a>, who laid out plans to forge a new relationship with Africa beyond just development aid and strategies to prevent the flow of migrants into Europe.<\/p>\n
The previous month, Adam Boehler, the CEO of America\u2019s International Development Finance Corporation, the investment branch of the U.S. government, said Washington is \u201cprepared to make multibillion-dollar investments in Ethiopia.\u201d<\/p>\n
Such high-profile visits, analysts say, shows that Western economies have finally arrived at the table alongside China, the Gulf States and Russia, which have all been maneuvering for influence in Ethiopia since its economy started to boom about a decade ago. One of the most visible pledges came in 2018 through a $3 billion package of aid and investment from the United Arab Emirates.<\/p>\n
\u201cIt would be a gross simplification to say that Ethiopia will no longer seek Chinese overseas development finance. China and Ethiopia continue to enjoy robust trade and investment relations,\u201d said Mamo, the prime minister\u2019s senior adviser.<\/p>\n
But, he continued, \u201cfinancing from the Word Bank and the IMF has an additional attraction of being concessional, long term and predictable without unduly distressing the public debt burden.\u201d<\/p>\n
Irmgard Erasmus, a senior financial economist at NKC African Economics, a research company, said China had been very flexible with Ethiopia in accommodating Addis Ababa\u2019s hard currency liquidity challenges and restructuring their loans.<\/p>\n
But, he added, \u201cthe Asian giant\u2019s decision to start closing the funding taps came at the same time as some positive developments in the Ethiopian political space, which allowed Ethiopia to pivot to multilaterals as they are more willing to engage.\u201d<\/p>\n
Source: Politico<\/p>\n
Hadalsame Media<\/span><\/strong><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"
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