The Econometrics of Diplomacy in Ethiopian Foreign Policy

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The Econometrics of Diplomacy in Ethiopian Foreign Policy

Econometrics, at the risk of oversimplification, is the use of mathematical methods (especially statistics) to describe economic systems.  Here, I want to use it to define the parameters of Ethiopia’s diplomacy: in a word, the econometrics of diplomacy. Ethiopia is one of the oldest of nations. It has a long and proud record of political and territorial independence, and as an independent political entity it has enjoyed a wide range of diplomatic relations. For most of its history, Ethiopia’s diplomacy has effectively served the survival of the nation. Edmond J. Keller in his “The Politics of State Survival: Change and continuity of Ethiopian Foreign Policy’’ describes the fundamental essence of Ethiopia’s foreign policy as something that has not changed over the past century despite changes in government. Even when the imperial regime was displaced by a military Afro-Marxist government the main focus of the country’s foreign policy continued to be the desire for the multi ethnic character of the nation-state to be internationally accepted as legitimate, coupled with defense of its territorial integrity. (Edmond J. Keller: 1987: 87).

The survival of the state has been the centerpiece of the current foreign policy just as it was during past regimes. The means might differ, but the end remained the same: the politics of state survival. In general, as the ends do not necessarily justify the means, it’s necessary to give due attention to the means if one wants to produce acceptable ends.  In fact, satisfactory means, citrus paribus, provide the quid pro quo for acceptable ends. No matter how good a policy is and no matter how good the intentions are, these can only be turned into reality by means as good as the policy and the intentions.  The problem is identifying the right means. It is not easy and it requires proper and intelligent analysis of the strengths, weaknesses and opportunities as well as of the possible dangers of the institutions, groups and individuals within the political, economic and socio-cultural environment of the state.

The current foreign policy is clear eyed in pointing out the country’s vulnerability and the dangers to its survival. It is axiomatic to stress that Ethiopia’s vulnerability is internal in nature. It is vulnerability that emanates from poverty and underdevelopment. The threat to Ethiopia’s survival is poverty, underdevelopment and lack of good governance and democracy. This means that development, defined in the wider sense of the term, provides the way forward.

In other words, foreign policy should serve a process of development driven by domestic policy, and the best way to do this is through economic diplomacy. The billion-dollar question, of course, is what exactly do we mean by economic diplomacy within the framework of Ethiopia’s foreign policy?  What are its fundamental elements? Are we doing it the right way?

I want here to look at some of the answers to these questions.

“Economic diplomacy is the use of government relations and government influence to stimulate international trade and investment and covers a broad range of semi-permanent international representations (embassies, consulates and other public sector business support facilities), domestic institutions (investment and export promotion offices), and diplomatic bilateral activities (trade and state visits)”.  (Selwyn J.V. Moons & Peter A.G. van Bergeijk, 2013:4).

Four indispensible reasons for the emergence and sustained relevance of economic diplomacy in international engagement have been identified. They are associated with culture, balance of power, political uncertainty and information asymmetry.

“Firstly, cultural factors may make it necessary for national governments to get involved in international transactions. This is especially the case now that former communist countries account for an increasing share of world trade. In these countries government is still regarded as a natural partner in the economy. Secondly, state enterprises may be the counterpart of a company operating in the international markets. This creates the necessity for entrepreneurs to seek cooperation with its national government to equalize the power balance and to improve its playing field. Thirdly, (political) uncertainty about international transactions must often be removed or reduced. Government involvement may signal that a transaction will not raise political resistance. Finally, the information needed for international transactions sometimes requires involvement of government officials.”(Ibid: 5).

These are the dominant reasons for the presence and relevance of economic diplomacy in international engagement, and this is exactly why economic diplomacy continues to be at the heart of Ethiopia’s foreign policy strategy. Economic diplomacy is a vital instrument to realize economic development, democratization, and peace and stability, which together make up the central elements of Ethiopia’s foreign policy goals.

Foreign and security policy is centred on development that benefits the people and creates conducive situations for such development. As the Ministry of Information stressed, Ethiopia’s national interests and security can only be guaranteed if rapid development is attained (Ministry Of Information, 2002:28). The main security threat remains the danger of widening poverty leading to collapse and the absence of democracy and good governance causing in bloodshed and destruction. This threat can be removed through overcoming poverty through development and economic initiatives. Indeed, it is only when we build a strong economy that we can effectively defend ourselves from external threats (ibid: 28&29). Ethiopia, of course, still has a fragile and dependent economy and rapid development remains critical for the protection of national interests and security. Policy makers in Ethiopia agree that a policy designed to create a favourable atmosphere to safeguard its national interests and security should be centred on the economy.

This is why economic diplomacy has a major role to play in Ethiopia’s overall diplomatic strategy. Indeed, Ethiopia’s relationships, friendly or otherwise, should be based first of all on economic matters. It should not enter into hostilities or friendship based on matters irrelevant to its development; external activities should focus on promoting business and investment opportunities and identifying sources of aid and credit. Foreign Service officers must realize that they are first of all development officers and that they need to acquire the requisite competence to accomplish this mission. Overall, the government should not view economic tasks as just one of many external activities, but rather place economic interests at the centre of foreign relations (ibid: ibid).

Ethiopia’s foreign policy, in fact, maintains that economic diplomacy is an instrument of rapid economic growth, pivotal to build the capacity to withstand internal and external threats. Economic diplomacy, therefore, implies the removal of domestic and international handicaps to rapid development using diplomatic instruments such as representation, protection, communication, negotiations and political pressure.  Central to this is the importance of juxtaposing the rhetoric of policy with the praxis, the practical application, reviewing the performance of economic diplomacy in creating a conducive international environment for economic development.

Ethiopia’s economy is growing fast. It is becoming one of the top Foreign Direct Investment destinations in Africa. Its image is changing, with trade reaching more markets, and infrastructures being built through bilateral and multilateral cooperation. All of these improvements can be attributed to economic diplomacy. In 2015, the Ministry of Foreign Affairs facilitated and coordinated the visit of 1349 companies that were interested to invest in Ethiopia, and in 2008 E.C fiscal year (2015-2016????), it managed to facilitate and coordinate the visit of 1021 small and medium size companies and 68 larger anchor companies that were interested to invest. Of these, 372 are now in the pre-implementation, implementation and operation stages of investment.

Central elements in economic diplomacy are also trade-enhancing factors involving marketing intelligence and business dispute settlements. These have not been as effective for trade promotion for export as the efforts to encourage investment. The total amount of foreign currency earned from export in 2015 was less than 3 billion USD, which was far below the target. Economic diplomacy managed to settle amicably some 7 trade disputes out of 27 and 12 investment disputes out of 39; the result was still a considerable shortfall in achieving the required targets for export earnings.

Every investor coming to Ethiopia goes back to his country with a different image than they had previously, but we would hope all would go back to their own countries with a positive impression of Ethiopia. This is part of imaging, or branding, a country. In 2016, Ethiopia held more than 34 multi/bilateral business fora with an estimated 4451 foreign and domestic participants. If one participant manages to contact and do business with 100 people, and tells others about investment opportunities in Ethiopia, then these business fora will have an impact on thousands, and provides a substantial and valuable ripple effect. It means a lot in terms of branding and image building.

In fact, econometrically stipulated Ethiopian economic diplomacy is paying off more effectively than ever before.  For it to continue to play an appropriate role in foreign policy it must also identify the challenges and exploit the opportunities fully.  For it to continue to do so it needs intuitive economic diplomats. This means diplomats who understand and are well versed in the economic processes, challenges and opportunities of globalisation, including Ethiopia’s domestic priorities, its trade and investment strategies, the problems of export marketing and investment assistance, market analysis, and priority markets and indicators.

Challenges and opportunities of the Economic Diplomacy in Ethiopia

I want now to look briefly at the challenges and opportunities in the Ethiopian foreign policy and economic diplomacy. Internally, these are associated with internal socio-economic, geographic, ecological, demographic, cultural and political structures and the behaviour of the state. External opportunities and challenges fall in the international economic, political, legal and institutional domain.

The changing, the improving image of the country and the experience gathered on how to do business diplomacy, with increasing consensus on the mechanisms of doing and promoting economic diplomacy is one aspect of the opportunities. Others include the positive experience of already established companies, the relocation of emerging industries to Africa, a strong political will and the clear policy and strategy of the government, the expanding economy and its positive effects as well as the government’s continuous effort to improve the physical, infrastructural and institutional ease of doing business. It all amounts to bright prospects for economic diplomacy.

Challenges remain. There’s a lack of coordination among stakeholders, a shortage of competent and intuitive diplomats and professionals, and an over-stringent bureaucracy as well as the danger of saturation, and a decrease in the comparative advantage, such as labour costs increasing or land leases politically contentious. Competition from other African countries, increasing tension between political and economic priorities or even the recent political unrest remains constraints that the government must work out if economic diplomacy is to continue to play its proper role of ensuring the survival of Ethiopia as multi-national state.

In fact, overall the performance of Ethiopia’s economic diplomacy, qualitatively and quantitatively, has been and remains encouraging. Economic diplomacy’s success in facilitating hundreds of pre-investment visits by both small and medium sized and nearly seventy larger companies as swell as providing a platform for thousands of individual investors to discuss the opportunities and challenges of doing business in Ethiopia, is impressive. Equally, challenges do remain and the government still needs to work towards resolving the problems to ensure that economic diplomacy can continue play its critically important role in development.

References:

Brain Schmidt. (2008).Theories of US foreign policy .In Michael Cox (Eds), USA foreign policy (pp.8-22).Oxford University Press. Retrieved from www.polisci.ufl.edu/…/schmidt_foreign_policy_theories_2008.pdf  and retrieved on 3 December, 2013.

Keller, J. E. (1987). The Politics of State Survival: Continuity and Change in Ethiopian
Foreign
Policy. Annals of the American Academy of Political and Social Science, Vol. 489,
International Affairs in Africa (Jan., 1987), pp. 76-87.Sage Publications.

MFA. Annual Report of Business Diplomacy Directorate General. Addis Ababa, Ethiopia. (2016 & 2015).

Ministry of Information of FDRE. The Federal Democratic Republic of Ethiopia
foreign affairs and security policy and strategy
. Addis Ababa: press and audio visual
department. (2002).

Selwyn J.V. Moons & Peter A.G. van Bergeijk. (2013). Economic Diplomacy Works: A meta-analysis of its effect on international economic flows. Prepared for MAER Colloquium 2013.

Yohannes Gebeyehu

10/11/2016

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