OUT OF THE ABYSS

Africa's youngest leader is shifting the continent's second most-populous nation to middle-income status by 2025.

Leo Varadkar, Ireland's Prime Minister and his Ethiopian counterpart Abiy Ahmed stand for the national anthem during his official visit to Addis Ababa, Ethiopia, January 9, 2019. REUTERS/Tiksa Negeri


Ethiopia's ambitious 42-year-old Prime Minister Abiy Ahmed, who took office in a peaceful transfer of power in April 2018, has released 60,000 political prisoners and legalized countless political opposition groups over the past year.

He's also agreed to finally implement the terms of the 2000 Algiers Agreement, which ended hostilities between Ethiopia and Eritrea (1998-2000).

This includes handing land back to Eritrea, after bitter fighting in the late 1990s.

In addition to lifting censorship and appointing women to half his cabinet, Ahmed is also promising to privatize the country's telecoms sector and renegotiate better loan terms with the Chinese.

Proudly telling Western media in late February that his “model is capitalism," he is clearly not afraid to rock the boat.

Nor is he afraid of ratcheting up expectations.

With plans to make Ethiopia a middle-income country by 2025 (the World Bank defines lower middle income as GNI per capita of USD1,026-4,035 and upper middle as USD4,036-12,476), he's also toying with the idea of reforming the country's 'democratic centralist' constitutional model of governance.

After surviving an assassination attempt last June, in October he pulled off the political survival stunt-of-the-year by diffusing the wrath of hundreds of armed soldiers who had stormed the presidential palace to demand higher wages (almost certainly with the connivance of senior military figures).

Ordering them to drop and give him 10 for entering the palace armed, he then cheerfully joined them in the exercise—a far cry from how previous African leaders have responded to such encroachments.

Revolution or reform?

The handsome progeny of a Christian mother and Muslim father, many saw Abiy Ahmed's arrival as a godsend to lead his multiethnic, post-imperial nation-state past the middle-income post.

But in the process he will have to unite them, inextricably bind them, or at least peaceably minimize their differences—a task not even the Soviet-backed Derg could do at the height of the Cold War.

With over 1.2 million people displaced in the first half of 2018 alone, Ahmed's three-fold task of ethnic reconciliation, political and economic liberalization, and growth are likely to either complement each other, or cancel one another out.

This is because while his predecessors' political record is nothing to write home about—the Tigray-dominated EPRDF was notoriously repressive—it was economically very successful.

With over 10% growth from 2006-2017, compared to a 5.3% average in the region according to the World Bank, Ethiopia's economy increased by an extraordinary 1,000% from 2000 to 2017, from USD8 billion to more than USD80 billion.

Though per capita income remains low, at USD783, the share of those living in extreme poverty (under USD1.90/day) fell from 45% when Meles Zenawi overthrew the Derg to 30% by his death in 2012.

It has since fallen to 24%.

The country has seen similarly impressive achievements in life expectancy and primary education. The former, a paltry 47.5 years when the EPRDF took power in 1991, has risen to 65.5 today, while primary school enrollment has nearly tripled from 29% to 85%, according to the World Bank.

Lone horseman

Traditionally receiving more aid from China than the IMF and World Bank combined, Ethiopia has longstanding bilateral ties. Ahmed plans to fund his ambitious (but unspecified) health, education, and infrastructure projects with a series of multibillion-dollar sell-offs to overseas investors.

Starting with a 49% stake in the continent's largest telecoms market, Ethio Telecom, a firm with more than 60 million customers, he has plans to privatize the energy, shipping, and sugar industries next.

Meanwhile, though the Chinese are said to be cooling on Ethiopia after investing USD13 billion there from 2006-2015, help from the Gulf is picking up the slack.

Last June alone, the UAE pledged USD3 billion in loans and investments, with USD1 billion going to the Central Bank to help ease a severe foreign currency shortage and the other two slated for investment in undisclosed tourism, renewable energy, and agriculture projects, Reuters reported.

Hosting an investment dinner later this month for which tickets are being sold at USD175,000 a pop, Ahmed is hoping to raise USD1 billion for infrastructure projects in Addis Ababa alone.

Conclusion

The former intelligence officer's plans to make Ethiopia a middle-income country by 2025 are far-fetched, but hardly impossible. Though comparisons are haphazard, South Korean GDP catapulted from USD830 in 1976 to USD4,680 in 1988, but one slice of an economic miracle (1953-1996) whose brightest decades were sustained by very similar rates of growth (9%).

There is no reason to think that improvements to Ethiopia's livestock sector, which the government hopes will boost meat, milk, and egg production by 58%, 83%, and 828% from 2012 to 2020, could not nudge the country into the World Bank's lower threshold for lower-middle income countries (USD1,026) in the next six years.

All that requires is a compound annual growth rate of 3.94%, less than half its growth last year.

Combine this with some much-needed investment in infrastructure (which have already seen the country's road network increase from 19,000km in 1991 to over 100,000km in 2015), the 'peace dividend' with Eritrea, and expanded maritime access to Djibouti, and we can see that Ethiopia is nearly on track to double its GNI per capita by 2025 (which entails a compound annual growth rate of 10.5%).