Trade, TNC’s and AID

• Ethiopia's global connections


  How Ethiopia's international trade influences development
• Ethiopia has seen one of the fastest GNI growth rates in the world with figures around 10% since 2010

  
• The Sub-Saharan Africa region only accounts for a tiny proportion (3%) of global economic wealth creation
• Composition of Ethiopia's economy

  • Primary Industry (Agriculture) - 40% of GNI
  • Secondary Industry (Manufacturing) - 18% of GNI
  • Tertiary Industry (Services) - 42% of GNI

  
• Ethiopia's over reliance on agriculture makes the economy extremely vulnerable to rapid fluctuations in global prices for raw materials (primary goods)
• Ethiopia is vulnerable to extreme weather events such as droughts which affect farming and can therefore damage exports and employment
• Ethiopia's agricultural potential

  • Huge availability of uncultivated (unfarmed) arable land which could add a further 25% of its GNI growth
  • Requires investment in irrigation to grow domestic food production and international food exports
• Increasing prices for raw materials (commodities/primary goods)

  Increases Ethiopia's GNI

  
• Foreign Direct Investment (FDI) was 20% of GNI but it has now shot up to 40% of GNI
• Ethiopia's trade policy


  • Not a member of the World Trade Organisation (WTO) which is a deliberate part of its government's Growth and Transformation Plan
  • Welcomes specific industries which it thinks will benefit the country such as leather, textiles, coffee and light manufacturing
  • Closed to other industries such as banking and telecoms

  
• Not being a WTO member means that countries can slap import tariffs onto Ethiopian goods, making them more expensive on the world market
• Ethiopia is part of China's long-term trade and investment initiative called One Belt One Road
• Benefits of TNC investment using cheap labour

  • Gets more young semi-skilled people into official 'formal' employment
  • Cuts extreme poverty as more people will be in work earning a regular income
  • Increased tax revenues for the government as it easier to tax official 'formal' employment than it is to tax informal 'cash in hand' employment
• Problems of over reliance on TNC investment

  • Foreign Direct Investment (FDI)/foreign money is 'footloose' and can easily switch from one country to another and could therefore quickly disappear
  • Light manufacturing boosts GNI but since the products are of low value they don't generate a significantly huge boost to GNI
  • Robotics and Artificial Intelligence (AI) can easily replace cheap labour
• The Ethiopian government receives huge amounts of international aid worth $3.5 to $4 billion dollars annually
• In 2014 these aid flows were worth 9% of government incomes

  
• In 2014 11% of international aid has been given for humanitarian reasons such as famine relief and emergency food aid, mosquito bed nets, HIV AIDS medication
• The main reason Ethiopia has received so much international aid is also given for due to its geopolitical importance
• Remittances are significant and are worth just over 1% of GNI with an increasing trend
• There are over 2 million Ethiopians living outside the country, who fled from the conflicts and droughts of the last 30 years