Capital

Old ties, new impetus

Capital: The last 2 years or so have witnessed a remarkable strengthening of India Ethiopia relations across a diverse range of sectors. Numerous projects have been undertaken and launched here with Indian support. Could you tell us what the notable achievements are so far and of upcoming plans?
Ambassador Gurjit Singh: Thank you. It is always a pleasure to talk to CAPITAL. Yes, I would say the millennial year has been progressive and a busy one for us in Ethiopia. Not only has it been so for Ethiopia, but India also has been busy with Ethiopia.
I think one of the significant things we can see is our effort to bring in more Indian Foreign Direct Investment (FDI) into Ethiopia is succeeding. In April this year, when I spoke at a function, I had quoted figures that Indian investment in Ethiopia stood at about USD 2 bln. But the latest figures that we have obtained from the Ethiopian Investment Agency, show us that Indian investment in Ethiopia up to September 2008, is USD 3.5 bln, which ranks us as the second highest of all foreign investment activity in Ethiopia. This gives me immense satisfaction, because when we worked, up to last year, to provide a very large line of credit to Ethiopia, for developing the sugar industry, our aim was that the approximately USD 700 mln of concessional loan that India offers to Ethiopia should lead to a progression of private sector engagement with Ethiopia. So when you have USD 3.5 bln of private Indian investment, which is about five times the India government loan, it proves our point, which means that the experiment has truly been a resounding success.
In addition, there is the aspect of trade, which I would say is the most modest segment of our economic engagement. I find that the target of USD 500 mln of bilateral trade, set by Ato Girma Birru, Minister of Trade and Industry, when he visited India and met our Minister of Commerce and Industry, Mr. Kamil Nadu, is likely to be achieved by that time, because latest figures, again from the Ethiopian side, show that trade is at almost USD 450 mln. Therefore, overall, I would say that economic engagement is steaming full-speed ahead. There is a surge of Indian investment flowing into Ethiopia. And Ethiopian agencies consider Indian imports to be cost effective and we believe that the initiation of a new economic engagement through the line of credit has borne fruit.
Capital: What are particular interest areas for Indian investors in the Ethiopia of today?
Amb. Singh: Interestingly agriculture remains the focal point of our investment surge with a valuation of about USD 2 bln on 75 projects - 57% of total Indian investment in Ethiopia. Initially, it was a lot of companies coming in for floriculture, but now we have some large companies engaging in large farms multi agricultural cropping and they will conduct a multiplicity of activities: palm and palm oil, sugarcane, cotton, vegetables, pulses a huge variety of things. There are also companies interested in tea development. This transition from floriculture, therefore, which was essentially based on utilizing Ethiopia and tapping its third country partners for export, the new trend is more on contributing to the development of Ethiopian agriculture. For instance, rice growing is about to be undertaken, as well as lentils, pulses etc…, which then can be re-exported into Asia. So this is a new dimension of agriculture that we are witnessing. Besides agriculture, 15% of all Indian investment, that is half a billion US dollars, is in manufacturing, mining and in hotels and restaurants. This area comprises the bulk of our engagement with Ethiopia in terms of private sector investment.
Capital: This is a tremendous achievement, even better than many would have expected. What do you forecast for the near future? What is bubbling in the pipeline… Should we expect new companies to come in?
Amb. Singh: Indeed, I would happily say that the figure of USD 3.5 bln has astonished me as well. Because, I had estimated that we were somewhere between USD 2.5 to 2.7 bln, but in the last 6 months, the surge has displayed a huge spike. And, I think we can easily become number one in FDI in this country because I have seen many business people on visits here, who have looked into janthropha cultivation, yarns production, cotton plantations and a variety of other ventures including, leather processing value adding. Actually, so many new areas will emerge that I am very confident that both the diversity and depth will sharply alter the nature of Indian investment in Ethiopia. The only point of caution is that this FDI surge has been happening only in the last year or so. This means most of the companies are in pre-implementation stages. At this point, I would like to state that it is important that there is the appropriate nurturing and handling of the projects at local level, so that they do not get distracted and go and invest elsewhere, but follow our lead by setting up in Ethiopia.
Success feeds on success and it leads to many more partners, and what we are targeting is seeing how problems and issues of these companies can be better handled, on the ground, so to speak.
Capital: To what do we owe this welcome surge? As you stated, the almost USD 700 mln loan did in fact encourage private Indian companies to come to Ethiopia. What are the special attractions of Ethiopia for Indian investors?
Amb. Singh: I would say there are four reasons: the first, which predates all this is a systemizing – that when India has a large amount of foreign exchange reserves, we allowed our private sector the freedom to invest overseas and removed many of the controls which our Reserve Bank, like your National Bank had. This has allowed many big Indian companies to look overseas. So while these are looking at say Range Rover, Corus, Arcelor, Jaguar, etc. there are many smaller companies that are focusing on their own fields, in which they can do more modest things, but do them abroad.
Secondly, I think there are two significant factors during the last two years in which India has moved specifically aiming at encouraging private sector investment in Ethiopia. This includes the large line of credit. The first is for rural electrification, and the second is for the sugar industry. Both gave a clear signal to the Indian economy that the government of India considers this to be a good economy to deal with. Those signs are clearly sensed by Indian entrepreneurs, who see that where the government is supporting an economy, that is the place to go.
Thirdly is April’s India-Africa Forum Summit and the announcement of the duty free tariff preference scheme, of which, I think, Ethiopia was the second African country to accede to. I think that the hidden message of that trade promotion is that we encourage investors to come here and grow that which will get you duty free tariff preference access to the Indian market. So this will change not only the terms of investment but also the terms of trade, and I think these two incentive schemes are having an impact.
The final factor I would say, would be the ambient conditions created by Ethiopia itself, which is ‘we are positive, we welcome Indians, we are ‘gung-ho, private investors are welcome, we will support you and also ensure that you succeed.’ I think this picture is accepted by Indian entrepreneurs who yet also recognize that Ethiopia runs a closed economy in terms of banking, telecoms, etc… And yet they come despite these difficulties, because they believe the potential is huge. The fact is that Ethiopia is a stable country of 77 million people, a vast future market… It is to support this that my government signed last year a bilateral Investment Promotion and Protection Agreement and we are currently on the verge of concluding an agreement avoiding double taxation. These developments demonstrate that there is a firm effort to bring Indian entrepreneurs to Ethiopia in order to tap a growing market of a stable economy.
Capital: The India Africa Forum Summit produced the Delhi Declaration. What has been done as follow up by India and the various African governments?
Amb. Singh: Among the major announcements that were made were, for instance, the doubling of scholarships, which is already on the headway, enhancement of capacity building training slots has already been implemented, the duty free tariff preference scheme is enunciated and African states are signing up for notification. What follow is the nity- gritty details to start exemption procedures, whereas, some of the larger things, like lines of credit, capacity building construction and of institutions are awaiting a certain amount of consultation with the African Union and governments. However, our effort to provide lines of credit to African countries for selected projects continues; we will now start looking at a larger nature of projects to be funded in the future under this new scheme. So I would say that everything is well on track. We were given a period of one year in which to get various acts together with our interlocutors in Africa, and I think we are very much on schedule and going in the right direction.
Capital: With regards to the loan for Tendaho Sugar Project, a matter of interest to our readers, it has been said that the loan is blocked because of issues between two rival Indian companies. Please comment.
Amb. Singh: I understand that some Indian companies are in dispute, and they have taken the matter to the Indian courts, where it is being adjudicated. Therefore I will not comment on a matter that is presently under court jurisdiction. But I can say this: the line of credit that India extended to Ethiopia to develop the sugar sector is intended to support industrialization, particularly in its relation to agriculture of Ethiopia. The loan is intended to support the creation of additional employment, higher foreign exchange earnings and overall, to create a new capacity for project development and management in Ethiopia. I think that is the aim under which we work with the Ethiopian government and we will continue doing so. We have a commitment to provide 640 mln USD over a period of 5 years to support this project and that commitment is unwavering.
Capital: What mechanisms can be devised in order to forestall possible future hiccups in the details along the lines of the many agreements between our countries?
Amb. Singh: I think a greater clarity on the implementation procedures and more importantly, a better understanding would be required. I think what is basically happening is that there is an Ethiopian way of doing things and a standard financing mechanism and also there is the Indian way of doing things. So I think these three have to be brought together and I am sure a resolution will be found. After all every project is different, every country is different, and all we ask is for a general adherence to basic norms in the selection and handling of companies through the bidding processes. Beyond that we do not interfere with the domestic mechanisms of our recipient countries, since as I said earlier, every country has different laws and has to follow its own procedure. We prefer not to interfere with this.
Capital: You have said that one factor that has helped the surge of Indian investment in Ethiopia is that Ethiopia has also prepared the ground to make it as easy as possible for investors to come here. What are the major areas of concern for foreign investors? You mention banking and telecoms sectors…
Amb. Singh: This is a very interesting topic. Let me list the pros. There is a very conducive ambience created for the investor in Ethiopia by the investment agency, the ministries and the regional governments who treat them extremely well. Also, registration procedures are very swift. But if we look at the constraints, I think these can be broadly classified as of three kinds. One is that banking procedures in Ethiopia are fairly unique and a foreign investor has to come and study them to see how they work. Linked to this is the requirement of many investors, even for things they did not originally plan for, that they would have to spend foreign exchange to import them because there appears to be a foreign exchange shortage or a lack of its availability.
The second aspect is in infrastructure, be it telecoms, power or roads, and whether these reach all the areas that Indian investors are trying to invest in. So, you may find that there is a grouping of investment in and around Addis Ababa and in Oromia but as we try and diversify, and take them to other areas, you find that these issues now become more important, because the reach of roads, power and certainly the coverage of telecom services is not uniform. It is a work in progress. So between our efforts to have a greater de-grouping of industry and agriculture into different regions, there is also this constraint of limited availability of infrastructure everywhere. So the issue is there and the breach has to be filled. Some Indian investors, let’s say in large agricultural investment, find that they need to build short roads of 25 to 50 kms and sometimes they say they will build it into the project cost; but sometimes you may not be able to build larger issues into project cost - like power, telecom and such… so those issues depend on the nature and size of the project and its location. Certainly, I would say the perception that foreign exchange availability is not free, the banking system being unique, infrastructure is largely in working progress and all regional states do not have the same kind of investment promotion policies, as among the issues which we look at. Then of course, there are unique issues such as tax holidays. Now a tax holiday for a manufacturing company and for an agricultural company are different – they are different in years, two years and five years - the general norm even in African countries seems to be 10 years. The next step is that this tax holiday seems to start from the date you sign up rather than the date you start manufacturing; so these require adjustments and these kinds of things are often not known when an investor first arrives. It is actually learnt from the experience of investors who have been here for a couple of years. Through the Indian Investment Forum therefore, we are bringing together Indian investors to come up with these issues in a manner of constructive engagement with the respective agencies and ministries of the government of Ethiopia. I must say that since these refer to specific cases and some are generic issues, we are finding solutions for the case by case issues and helping investors to succeed.
Capital: Has this business forum been convening every year?
Amb. Singh: The Indian Business Forum is one of the first tasks I conducted in Ethiopia. We set up the forum in October 2005, about a month after I arrived. Now, we are trying to make it more regular and focused into issues. Earlier, it was more promotional in nature. Today, we are making it issue based in order to examine what kind of issues affect Indian entrepreneurs in selected areas. We have meetings group by group and come up with issues and then we try to interact with the concerned parties, be it banks, the government or Ethiopian investment authorities.
We hold an annual dinner, or when dignitaries visit, but we also meet in smaller groups of the embassy and the stakeholders of that sector, or sectoral groups under the Indian Business Forum. We often meet and discuss these issues and try see how the embassy can facilitate their interaction with the government to resolve them.
Capital: Moving to the international arena, the latest UN General Assembly convened recently. What are your views on Secretary General Ban Ki Moon’s reform programs for the Security Council and especially, India’s request for a permanent seat on the Security Council?
Amb. Singh: We have shared with the government of Ethiopia, our views on all the issues that will come up in this session of the United Nations. These include reform of the United Nations Security Council, terrorism, high world food prices, shaky international finances; all these are of prime concern to us. We believe that the world today, is tending to become more unequal, whether it is on responsibilities on climate change, impacts of the world food and oil crises, which consistently has an impact on international financing systems, and certainly we believe that the inequitable nature in which the United Nations Organization has assisted for the last six decades is not making it easier for the world body to respond to many of these crises. India certainly believes that it can play a role in this and therefore, we consider ourselves clearly competent to take a permanent seat on the UN Security Council along with an expansion which will include other nations, including African countries. We believe that this opportunity now is not to be wasted on more obfuscatory work but we should look at how to take the various reports and discussions that have taken place in the United Nations on more reform, forward. A dedicated approach is needed by all concerned to react positively to what the Secretary General has targeted and take the process forward and not let it meander here and there as has been happening in the last few years. On why there is an international requirement of clarity, I think all other people who have a stake or views on this also need to get clearer and move from, let us say, abiding positions into positions which are more conducive to a solution. We sincerely hope that this would happen because we believe that this is an important procedural change which is required for the United Nations to become all effective in dealing with international issues which impact all developing countries. I think we need to transform the system and that we all stop being its victims and begin to be partners of it.
Capital: Mahatma Gandhi’s birthday 139 birth year has just been marked on Oct 2, 2008. Why is it important that we celebrate his birthday?
Amb. Singh: Since last year Mahatma Gandhi’s birthday has been declared as the International Day of Non-violence by the United Nations. This is the second time we are celebrating International Day of Non-Violence in tandem with Mahatma Gandhi’s birthday.
This year we celebrated it jointly with the UN Economic Commission for Africa (UNECA). It is most historically important to know that 60 years ago when India and Ethiopia established diplomatic relations this was a precise period when the Indian goodwill delegation visited Ethiopia. In fact, they arrived on the 30th September and stayed until 15th of October. Among their engagement in Ethiopia was the commemoration of Mahatma Gandhi’s birthday. I firmly believe that if we were to set an event on which India and Ethiopia really came together, October 2 would be one of the most important dates.
But to your question of why it is important to celebrate Gandhi today, I think Gandhi gave us ideas of changing systems which are unfair; creating new equations of power and having a strong model of individualism to help achieve change in both. I think these three messages are very important to us today, because, we do live in an unequal world which is not getting any more equal. Today the developing countries and the poor are being asked to shoulder greater burdens than what we carried last year. At the same time, terms of power don’t seem to change and we need to find new ways, a new paradigm of power.
And of course, the fact that it is an International Day of Non-Violence should remind us all of the violence that we have in cities, in homes, in our neighborhood, regions, etc, and how we must learn to deal with it effectively. I think it is the kind of recollection of what Gandhi’s ideas are and how we must refocus to attain them. Hence, since this is the 60th anniversary of the diplomatic relations, we have a large number of events, including the Mahatma Gandhi Memorial Lecture, and Exhibition on 2nd of October. We will also have special dance troupe, which will come from the vibrant state of Gujarat. They will arrive for Diwali which is our great festival of lights at the end of October, to perform in Addis Ababa, Dire Dawa, Adama and Bahir Dar. And in order to link these and what I’ve said earlier about business ties, the embassy would take a business delegation to Bahir Dar to study opportunities in Amhara Region in conjunction with the regional government. A 60th anniversary symposium and celebration is set in Bahir Dar for the 21st of October, and then of course, an important business delegation led by our Minister of Commerce and Power should be visiting us in October. In addition my embassy is launching for the first time ever an Amharic book on India. So there are many things to come but I’m not going to announce all of them yet.
Capital: You have stated that the developing world has to assume a role in the world arena today, but wouldn’t one say that beggars can not be choosers since the developing world is getting poorer and poorer over the last three years compared. What meaningful role can such challenged countries play?
Amb. Singh: I don’t really agree with the notion that beggars can’t be choosers. Because, today I think in this post Cold War globalizing world, if there is one thing which has quietly but surely progressed, it is South-South cooperation. So I think the South can work together to change the terms of power but of course; this change is not reflected in international institutions, whether it is at the United Nations, or other. You can see it in the WTO, the developing world is standing up, not letting the deal be concluded on terms adverse to us. So you can say that things are happening. Secondly, the close cooperation between India and Ethiopia, between India and Africa, between India Africa and Latin America, all these are steps which are again trying to change the terms of power. The South shall also expand and diversify its own relations. If you look at the major issues in the world today, whether it is climate change, the high cost of food, high oil prices, the developing countries can play a much bigger role. A - growing more food and providing it to other developing countries, and B - in bringing oil in to focal because most of the oil producers are after all, developing countries. So opportunities exist. Where climate change is concerned, I think we need to achieve a better understanding and realize that while on one hand we should not accept the fault of the past, largely by the industrialized countries, at the same time we must take our own actions to prevent contributing to it in a manner that becomes unsustainable. This is not to say that we don’t have the right to progress and adapt ourselves while not accepting the burden of responsibilities thrust upon us. All these show that today, while the pressures on our existence are becoming more difficult, at the same time opportunities for us taking grasp of the elements of power which affect us, are also increasing.
Capital: Any concluding comments?
Amb. Singh: I would say I’m very positive on the relationship between India and Ethiopia. I think that the 60th anniversary that we are now celebrating is tribute to many of the ideals - South-South Cooperation, how developing countries can stand for each other and develop new ideas. We are creating a paradigm of new partnerships and taking advantage of globalization. This is not to say that the problems will go away, but let us say we are trying to find some solutions to those problems which affect all of us by simply not knocking on the doors of the industrialized, but by reaching out to our friends in the South. I think that is the message of the 60th anniversary of India’s diplomatic relations with Ethiopia.