Ethiopia’s proud population, stabilising governance, improved infrastructure and a steady economic growth rate has led some observers to suggest the East African state may be the next to experience an economic miracle of Chinese proportions. This assessment is not entirely surprising. China has been investing heavily in Ethiopia for years, as well as assisting in the formation of its very own Special Economic Zones (SEZs), an aspect of state planning that was pivotal in China’s alacritous economic transformation decades ago.
The city of Shenzhen stands testament to the rampant success that was Deng Xiaoping’s Reform and Opening policies. Shenzhen was elected as the first SEZ by Deng himself and prior to 1978 boasted a modest population of 30,000 inhabitants. Today, Shenzhen’s population has ballooned to over 11 million, with the city raking in over US$345bn worth of GDP in the past year; a number that is roughly equivalent to the national GDP of Colombia.
States from all over the African continent have shown interest in accessing Chinese investment and development techniques for their own use. China has been more than happy to play the role of facilitator. The recent Forum on China-Africa Cooperation (FOCAC) demonstrated just how significant the relationship is to African nations. Nearly every one of the 55 heads of state made the journey to Beijing to hear President Xi Jinping lay out his plan for US$60bn worth of development in the region. This funding will be funnelled through China’s audacious Belt and Road Initiative (BRI), which includes vast amounts of planned infrastructure projects across the continent, many already underway.
The nature of this investment has been subject to a range of public criticism, with suggestions that Chinese loans have been moulded to lure these lesser developed states into intractable financial positions, in what has become known as dept-trap diplomacy. These fears are substantiated by the recent acquisition of the Sri Lankan Hambantota port to the China Harbour Engineering Company, which over ten years ago provided the government with military support during their civil war.
However, in Africa, if this debt is properly managed, it could prove to be a rare opportunity for a region often overlooked in trade relations. Ethiopia has emerged as one of the biggest recipients of Chinese investment over recent years. The Chinese Communist Party has labelled Ethiopia a ‘model nation’ for its investment strategy overseas.
China has demonstrated this confidence in the establishment of its very own SEZ, known as the Eastern Industrial Zone. Much like the SEZs established in the South of China since the late 70s, the Eastern Zone was formed with the dream of fast-tracking industrialisation and transforming the economy. Additional infrastructure such as the Addis Ababa-Djibouti Railway – which connects Ethiopia’s landlocked capital to the coastal nation of Djibouti – is undeniably valuable, as it allows access to a crucial export location.
Yet there remain significant differences between China’s reform initiatives of the late 70s and Ethiopia of today that continue to impede true economic transformation. Backed by centuries of imperial rule, the Chinese Communist Party (CCP) has tight control over its population. This vice-like grip makes landmark reform such as occurred in 1978 a swift procedure, where the Chinese have little choice but to acquiesce to the demands of the party.
Much like the CCP, the People’s Revolutionary Democratic Front (PRDF) in Ethiopia faces little competition from opposing political parties. Yet the dimensions of their power are vastly different. When the PRDF sought to expand its industrial sector into the surrounding villages outside of the capital, the decision was met with immense public outcry, resulting in mass protests which forced the government to declare a state of emergency. This event demonstrated how significantly the PRDF and CCP had miscalculated their reach of power, and also suggested that despite the perceived benefits of Chinese money on Ethiopian soil, the path to transformation was not so clear-cut.
Further, the mere fact that the Ethiopian economy has been steadily rising for some years is often used as a blanket statement that hinders proper consideration for the spectrum of forces at play. For significant economic improvement to remain stable, Ethiopia is going to have to transform its agriculture-driven economy. Recent reports indicate that despite Chinese attempts to drive the economy toward an export-driven model, agriculture still accounts for roughly 40 per cent of GDP, and employs 85 per cent of the nation’s workers. Attempts to facilitate this transformation have already been scrutinised for poor implementation of compensation plans, or resettlement plots for those forced into industrial work.
As demonstrated in the most recent FOCAC meeting, heightened Chinese investment in Africa is going to be a reality for years to come. Ethiopia is but one prominent example from a plethora of opportunistic states looking to cash in on this sudden bout of Chinese generosity. It remains to be seen whether China’s SEZs will develop into a long form of debt-trap diplomacy. Yet, it is in the here and now that we can see some early cracks starting to show.
Oliver Martin Lees is the China Fellow for Young Australians in International Affairs.