Ethiopia is one of the world’s poorest states, with an annual per capita GDP of just $707. Yet Addis Ababa is awash with billboards for Chinese construction firms, and China’s presence is palpable all over the country. Is “neocolonial” China “out for oil” yet again?
In Ethiopia, that explanation just doesn’t add up: the country has virtually no oil, gas, or other precious minerals.
Fortunately, while the media and politicians seem stuck on uninformed accusations of neocolonialism, some Western investors are starting to make the most of China’s growing presence. In Ethiopia’s Hawassa Industrial Park, the crown jewel of its industrial policy, the largest jobs provider is PVH – the U.S. owner of major global brands such as Calvin Klein, Tommy Hilfiger, and Speedo. Eco-friendly Hawassa was built by a Chinese company, the state-owned China Civil Engineering Corporation (CCECC), in just nine months. And, of course, PVH and other global investors could not run their businesses – and create thousands of coveted manufacturing jobs – without the railways, roads, and power stations that China is constructing all over Ethiopia.
There are also encouraging signs at the local level that, instead of pointing fingers at each other, China and the West can work together to deliver development aid. While the majority of Chinese funds go to hard infrastructure, traditional Western donors prefer social “soft” sectors. This makes them complements, not rivals. Ethiopia is eager for roads and railways, but it also needs a better-trained, healthier workforce. Take Ethiopia’s new railway academy, designed to educate a fresh, local generation of engineers and workers: China is funding and building the school’s physical infrastructure, while the World Bank and European institutions are helping with curriculum development and business planning.
Turning “Made in China” to “Made in “Ethiopia”
History shows that (without massive oil reserves) industrialization – working up from cheap, lightly manufactured products to technically sophisticated products – is the only way to develop quickly. Factories offer an escape from unproductive and grueling subsistence farming into modern jobs with regular wages. Japan, South Korea, and later China all owe their economic success to this model, and Ethiopia’s government hopes to turn “made in China” to “made in Ethiopia.”
But industrialization needs more than cheap labor (which Ethiopia has in abundance) and the good governance that Western donors strive to instill. Investors desperately need roads, electricity, water, and the internet. With traditional Western partners either unwilling or unable to fund these at scale, and low tax revenues due to the country’s poverty, how else can the Ethiopian government build the basic infrastructure that we take for granted in the developed world? Without Chinese help, Western money for training and other “soft” sectors is sinking money into a black hole, and Ethiopia risks being “too poor to develop” – condemned to survive on subsistence agriculture and international handouts.
Ethiopian officials stress that they take the lead in dealing with China. They lament that Western aid (although well-intentioned) is frankly “not enough.” Ethiopia, which has ambitious plans to escape poverty and become a middle-income country by 2025, does not have time to waste.
What’s in it for Beijing?
But is China a trustworthy partner? Beijing claims its aims are “win-win” rather than “neocolonial,” but what is China’s “win”? Like the United States after World War II, China seems to realize that providing global public goods is in its own interests. In Ethiopia, an important African hub for the Belt and Road Initiative (BRI), China secures important diplomatic gains and lucrative business opportunities.
Beijing’s visible, tangible projects boost its soft power. The buzzing Eastern Industrial Zone on the outskirts of Addis Ababa, with young managers chatting energetically into their iPhones, huge red banners extolling the virtues of hard work, and nearby restaurants serving nongjiacai (rustic, home-style Chinese food), feels like a typical Chinese industrial park. Addis Ababa’s Chinese-built commuter rail system, throngs of taxis made locally by Chinese firms, and noodle bars at Addis’ airport – where middle-class Ethiopians and Chinese chat in Mandarin – all contribute to a sense that China holds the key to success.
And, of course, Ethiopia’s techno-autocratic ruling party appreciates Beijing’s hands-off approach to human rights, which they see as an unwelcome distraction from the pressing business of development. Ethiopian leaders are vocal cheerleaders – former Prime Minister Meles Zenawi pronounced China’s “amazing re-emergence” as “one of the reasons for the beginning of the African renaissance.”
Chinese business interests are also at play. Official loans are tied to the use of Chinese contractors, creating lucrative revenue streams. Fresh from “building China” over the past 40 years, Chinese state-owned enterprises (SOEs) are experts in cheap, fast infrastructure. They’re also eager for new opportunities as domestic growth slows. For example, the multi-billion dollar Addis-Djibouti railway was built by the state-owned China Railway Group and China Civil Engineering Construction Corporation, who later won a multiyear contract to operate the new line.
Why Engagement Not Estrangement is the Key
So is this really “win-win” for everyone? On the one hand, the commercial rates of many Chinese loans make debt sustainability a huge concern. To pay back what it owes, and eventually stand on its own feet, Ethiopia is in serious need of more tax revenue. So, if it fails to grow as quickly as hoped, Western warnings of a mountain of unsustainable debt may prove right. Ethiopia could end up like 1980s Latin America, where countries spiraled into crisis when they could no longer pay their foreign debts.
But, while there’s some dispute over the numbers (IMF estimates are slightly lower than the official figures), Ethiopia’s economy is widely agreed to have been growing at around 10 percent for the past decade – a phenomenal achievement. Given the extraordinarily low starting base, it’s unlikely to slow down soon. Businesses in Ethiopia’s industrial zones cite the continually improving infrastructure as one of the country’s main draws, and both Chinese and international firms plan to expand in future. For Ethiopia’s booming young population, this means yet more coveted industrial jobs.
Ethiopia’s success shows what’s possible when a capable, development-minded government brings together Chinese support, Western aid, and investment-promoting policies that entice local and international businesses. Much of this is down to the skillful and pragmatic planning of the Ethiopian government. UN officials and company bosses alike point to Ethiopia as the African industrial policy leader. If Ethiopia’s strategy works, by 2025 it will be a middle-income country, no longer dependent on handouts.
How much more might be achieved if Beijing and the West proactively worked together across the whole African continent? Much of the media and political discourse seems unable to accept that China’s role is equaling – or even surpassing – that of the West. But bottom-up collaboration by businesses is already blossoming in Ethiopia, and there are promising signs that wider collaboration among development aid practitioners is nascent. The OECD and China have already established a development aid “study group.” At the moment, its scope is limited to knowledge sharing, but could offer a pathway to more institutionalized practical coordination in future. The next, critical, step is for top-level leadership to recognize the untapped potential for cooperation: China is here to stay, and Western and African countries alike should make the most of it.
Pippa Morgan is a Ph.D. candidate in international relations at Fudan University, researching Chinese aid and investment in Africa. She is assistant editor of the Chinese Political Science Review and the Fudan Journal of the Humanities and Social Sciences, and has previously written on Sino-African relations for Sixth Tone and China Economic Review. Before starting her PhD, Pippa worked in energy policy at the UK Department of Energy and Climate Change.