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Report: American Investors Third Largest Group in Ethiopia

By AMI Newswire Staff

As Chinese interest in Africa’s fastest growing large economy wanes, American investors may be poised to play a larger role.

The United States already enjoys a small but healthy trade surplus with Ethiopia – in 2017 it exported $877.2 million worth of goods to the country while imports were valued at just $291.5 million.

Those figures and American investment in the country could grow after the government announced ambitious privatization plans earlier this year.

“Ethio Telecom, Ethiopian Airlines, Ethiopian Power, and the Maritime Transport and Logistics Corporation are intended to be sold to local and foreign investors,” said Sara Demsis, an analyst with the market research firm Asoko Insight. “The intent to privatize is a solid step forward but we have seen to date with regards to investor sentiment in Ethiopia is a concern about the ability to repatriate funds invested.“

U.S. trade with Ethiopia is taking on new geopolitical significance following reports earlier this year that Sinosure, an export and credit insurance company owned by the Chinese government, stopped extending support to Chinese investments in Ethiopia. China has invested more than $13 billion in country since the turn of millennium on everything from a massive dam project on the Blue Nile to roads. China has often used loans and investments to foreign countries as a method of enhancing its economic and diplomatic footprint around the world.

While China remains Ethiopia’s largest trading partner, the United States is now third, also trailing India.

Asoko Research reports  that  China was involved in 19.4% of all projects funded by foreign direct investments (FDI) in Ethiopia during the period studied. This was followed by India (8.8%) and The United States is third with (8.1%).

“ U.S’s main target is manufacturing holding 28% of all investments between the year 1992-2017,” Demsis said.

That manufacturing appears to be aimed at the Ethiopian domestic market rather than for export to the United States.

During much of the Cold War, Ethiopia was ruled by Africa’s most brutal communist dictatorship. The People’s Democratic Republic of Ethiopia was defeated by insurgents in 1991 paving the way for a new era in foreign investment. Using government data, Asoko Insight uncovered foreign direct investments (FDI)in 5,890 projects in the country between 1992-2017.

Ethiopian Prime Minister Abiy Ahmed conducted a two-day state visit to the U.S. from July 28-29 has sought to attract more foreign investment in the country. In June, Abiy forged a historic peace agreement with Eritrea when his government agreed to abide by an international agreement over disputed territory. Direct flights between the two countries have resumed, and Ethiopia hopes to conduct much of its maritime trade through Eritrea. Ethiopia which is the world’s largest landlocked country has also announced plans to launch a navy though where that force will be based remains unclear.

Ethiopia, despite being Africa’s second largest country by population, has lagged behind South Africa and Nigeria in nominal GDP terms.

As the country grows, and liberalizes its economic system, it is likely to see an increase in its demand for U.S. goods. According to Department of Commerce data from 2015 (the most recent available), trade with Ethiopia supports 8,000 U.S. jobs.

You can take a closer look at the data compiled by Asoko Insight below:

FDI Investment Asoko Ethiopia