Abiy’s prospective reforms and persistent challenges

The political transition under Abiy did not immediately alleviate the long-standing economic pressures that the EPRDF struggled to balance. In particular, access to hard currency to finance imports has remained a challenge. However, Abiy has made a series of moves that have important economic implications, especially related to the role of foreign investment in key sectors (telecommunications, finance, agro-processing) and to the government’s efforts to boost the private sector. He has courted investment by the Ethiopian diaspora and has also cultivated stronger relations with the rich Arab states of the Gulf, specifically encouraging their investment in Ethiopia.

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Abiy’s administration announced intentions to relax restrictions on investment in key sectors. Full details of the new policies have not yet been developed, and there is stiff resistance to full-scale liberalization within the Ethiopian development community. But what is known so far suggests an important role for foreign investors in several areas.

Telecommunications have long been a key target for foreign investors, and interest is likely to be strong. Previous governments have justified the continued state monopoly on telecommunications as an important source of revenue for the state’s ambitious development spending.23 However, at least a minority share (49 per cent) in the state-owned Ethio telecom appears set for privatization, and two additional players are expected to enter the market for licence to operate.24 In order to improve the overall business environment, Abiy’s focus seems to be on improving telecommunications service quality and lowering costs.

Abiy has courted investment by the Ethiopian diaspora and cultivated stronger relations with the rich Arab states of the Gulf

Boosting sugar and electricity exports has been a key pillar of the GTP agenda and remains important. Privatization of sugar processing factories is expected under Abiy’s reform agenda, although the precise shape of this process has not yet been revealed. Abiy’s administration targeted the leadership of the state-owned Metals and Engineering Corporation (METEC) and criticized its performance under the previous administration.25 Shortly after Abiy took office, METEC’s contracts to build key components of the GERD were revoked. While some smaller dams, mainly for irrigation purposes, have been inaugurated, METEC was well behind schedule on the GERD, holding up important potential sources of export earnings. Although work has resumed in earnest, GERD’s new timeline remains uncertain. METEC’s contracts to build sugar processing plants in southern and eastern Ethiopia were also revoked and may now be tendered to foreign investors.

There appear to be shifts underway in the Ethiopian private sector landscape, including the emergence of new key players

Through remittances and, to a limited extent, through investment, Ethiopia’s large diaspora population has long played a key economic role in the country. Shortly after taking office, Abiy visited Ethiopians in the diaspora in the United States and Europe and encouraged them to support Ethiopia’s development. In part, this is being encouraged through the Ethiopia Diaspora Trust Fund, a new foreign investment vehicle, with a target of $300–400 million per year. Potentially more significant would be measures under consideration to relax restrictions on investment and property ownership by the diaspora. Under Ethiopian law dual citizenship has not been possible, and many in the diaspora are reluctant to give up citizenship in their host countries. This has limited their ability to invest in businesses or property back in Ethiopia.

Abiy has also courted investment in the tourism and real estate sectors, which are historically key sectors for Gulf investment in Africa. The UAE committed $3 billion in investment and support to Ethiopia, including a $1 billion deposit with the National Bank of Ethiopia to help improve access to hard currency. A controversial $2 billion Emirati luxury property development was announced in 2018 around the site of the old La Gare railway station in central Addis Ababa.26 Such a project fits with an aesthetic focus by Abiy. Much of his reform has been of style rather than substance, focusing on beautification in Addis Ababa and updating the furnishings in the prime minister’s office to make it look more modern.27

Another important factor in the outlook for foreign investment, and the development of Ethiopia’s private sector, will be the role of the Mohammed International Development Research and Organization Companies (MIDROC) group. Founded by Mohamed al-Amoudi, MIDROC has been a pillar of Ethiopia’s economy since the 1990s and is active across many sectors, including tourism, mining, agriculture and logistics (many key for Ethiopia’s export agenda). Al-Amoudi’s companies are estimated to have taken on more than half the monetary value of former state enterprises privatized under the EPRDF since 1991.28 As such, the group was well networked into the TPLF-led EPRDF and its economic vision. Although born in Ethiopia, Al-Amoudi is a Saudi national and, as such, his businesses are considered part of the Saudi investment profile in Ethiopia.29

Al-Amoudi’s relationship with both the Abiy administration and the Saudi Government are in doubt, which potentially carries important implications for MIDROC’s continued role in the Ethiopian economy. Al-Amoudi was caught up in Saudi Arabian Crown Prince Mohamed bin Salman’s purge of opponents in 2017 (couched as an ‘anti-corruption operation’) and was eventually released from detention in early 2019.30 It is not clear to what extent his personal wealth (previously estimated at around $10 billion) may have been affected. Under Abiy’s administration, MIDROC lost control of two significant parcels of land in Addis Ababa that were been appropriated for the modernization and beautification plan.31 MIDROC appeared in 2019 to be ramping up activity in Ethiopia again. However, there appear to be shifts underway in the Ethiopian private sector landscape, including the emergence of new key players, potentially at the expense of Al-Amoudi or the party-affiliated businesses associated with the EPRDF (especially the TPLF’s Endowment Fund for the Rehabilitation of Tigray, or EFFORT, group).32

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