Ethiopia’s Quiet Revolution: From Revolutionary Developmentalism to Neoliberal Reform

By Yohannes Woldemariam

On June 5 this year in Addis Ababa, Abiy Ahmed, the new Prime Minister and head of the Ethiopian People’s Revolutionary Democratic Front (EPRDF), announced his plan for the privatization of key sectors of the economy and the unconditional implementation of the Ethiopia Eritrea Border Commission (EEBC) rulings with Eritrea after the war fought at the end of the last century. What spurred this dramatic departure from the long-standing and zealously guarded state developmentalist ideology of Revolutionary Democratic Developmentalism (RDD) and this sudden move to break the deadlock in Ethiopian-Eritrean relations, which have remained hostile since the 1998-2000 war between the two countries?

In short, the difficult history of the Tigray People’s Liberation Front (TPLF) and Eritrean People’s Liberation Front (EPLF) dating back to the armed struggle days has been the real cause for the impasse of the last twenty years. The border conflict was a pretext. So, it has taken an Oromo Prime Minister like Abiy, combined with the economic burden of sustaining an army on a war footing and the decline of different factions within the TPLF/EPRDF to enable the breakthrough. For roape.net I look at the background to the quiet revolution taking place inside Ethiopia.

The Ethiopian Economy

Ethiopia finds itself in economic difficulty, deeply in debt and under pressure from creditors despite reported average growth rates between 8 and 11 per cent since 2000, in part resulting from foreign investment – including loans from the People’s Republic of China – in the country’s agricultural and manufacturing sectors. Under the TPLF/EPRDF, RDD meant misuse of river waters and the ‘leasing’ of indigenous land to foreign capitalists. For example, Gambela, a region on the border with South Sudan, is the region worst affected by land leasing and resettlement. It was here that the TPLF earmarked almost half of the region for commercial farms, and since 2008, foreign companies have leased a total of 225,012 hectares in the region.

Increases in imported global food and fuel prices, rapid expansion of the money supply, and a large devaluation of its currency (the birr) have led to high inflation in recent years. Large and persistent government deficits, and the absence of virtually any stabilizing fiscal and monetary policies, have accelerated a downward economic spiral. In addition, theft from state enterprises and participation in the informal market is widespread.

Late in 2017 head of the IMF, Christine Lagarde, visited the country, no doubt concerned by the dire situation. Ethiopia is classified by the IMF as slipping from moderate to high-debt status. China has been propping up the TPLF/EPRDF with loans and economic aid and it is significant that US Secretary of State Rex Tillerson went to Ethiopia right before he was fired by Donald Trump and told the government about the pitfalls of Chinese ‘easy credit’ loans with their extremely high interest rates. The terms of Chinese loans are not transparent, so it is hard to cite exact figures but we do know that, as of 2009, China had surpassed the United States as a trading partner with African countries, with Ethiopia ranked sixth in importance.

Ethiopia has a population of about 106 million people, of whom 41 per cent is under the age of 15 and more than 28 per cent is aged between 15 and 29. Youth unemployment is estimated at nearly 27 percent. The challenge on the economic front is immense. One major concern must be the potential resistance to change from those within the TPLF with vested interests in the RDD.  

There has long been skepticism at the reported double-digit growth that the government claimed to have achieved for over a decade. Economies like Ethiopia inflate their GDP figures by fudging and redefining categories, by manipulating price estimations, and by introducing statistical assumptions in their estimation of growth that are gross misrepresentations. GDP is thus not a reliable indicator of the condition of the country’s economy.

More revealing economic indicators are capital outflow and currency exchange rates. Abiy and the TPLF/EPRDF will have been advised by the IMF and the US to implement austerity measures, if they want to overcome their foreign exchange crisis. In 2009 alone, illicit money leaving the Ethiopian economy totaled US$3.26 billion (which was double the amount in each of the two previous years). This was combined with rising domestic interest rates and import cost inflation. According to a study by the University of Massachusetts Political Economy Research Institute, Ethiopia lost $25 billion to capital flight from 1970 to 2010.

The foreign exchange crisis is so serious that the United Arab Emirates prince Shaikh Mohammad Bin Zayed Al Nahyan, recently deposited US$1 billion in the National Bank of Ethiopia to bolster the country’s fiscal and monetary policy, as well as to enhance the Bank’s liquidity and foreign exchange reserves. He also provided US$2 billion to stimulate the Ethiopian economy and to encourage joint investment.

Convincing the prince to deposit this money is one of the tangible diplomatic achievements of Abiy, along with the release of Ethiopian political prisoners jailed in Saudi Arabia, Sudan and Egypt. In return, it is reasonable to assume that the UAE is seeking Ethiopia’s diplomatic and political support in its rivalry with Qatar. Whatever direction these economic reforms take, it is clear that Ethiopia’s much lauded ‘revolutionary’ developmentalism has floundered (see Pádraig Carmody’s blogpost on roape.net).

The Border Conflict

In addition to his plans for the reform of the economy, Abiy has reiterated his intention to settle the border conflict with Eritrea by abandoning the previous rejectionist policies of the TPLF/EPRDF and, by ‘accepting the Algiers Agreement unconditionally’, to demarcate the border with Eritrea according to the EEBC decision. This has received a mixed reception, even though initially the TPLF/EPRDF accepted the ‘final and binding’ nature of the verdict from the EEBC.

When questioned in parliament as to why he had announced this change without consulting parliament, Abiy reminded members that they had decided 16 years before to accept the Algiers Agreement (a peace agreement signed in 2000 by the Ethiopian and Eritrean governments in the Algerian capital). He said he has seen signed documents to that effect in his office. He argued there is nothing new in his statements reviving the physical demarcation and delimitation of the 1000-kilometer border between the two countries. The more reasonable question that he raised was why the decision hasn’t been implemented.

He also reminded his parliament that Ethiopia has unresolved border disputes not only with Eritrea but also with Sudan, South Sudan and Somalia – not to mention the on-going internal conflict over regional boundaries, such as Wolkite and the Ogaden border with Oromia. In an effort to demystify the ‘borders’, he gave examples of how artificial African borders really are. Recently he cited how the Oromo in Borenna in Ethiopia have more in common with the Oromo in Kenya than with the Oromo in Hararghe or Wollega in Ethiopia. Colonialism drew the borders of Sudan, South Sudan, Somalia, Djibouti, Eritrea and Ethiopia, with no regard for the indigenous peoples and their territories, he argued.

Abiy urged Ethiopians to think beyond borders and look to economic integration and the benefits of coordination between different countries in creating economies of scale. He also urged reflection on the cost of the Ethiopian/Eritrean standoff and the suffering of both peoples, reminding them that the 1998-2000 war between Eritrea and Ethiopia was arguably ‘the worst inter-state war in Africa.’

Reactions and Responses

Initially, Abiy’s announcement on ‘the border question’ was met with a mixed reception both in Ethiopia and in Eritrea, and provoked intense debate. The announcement also created confusion in Ethiopia because within 24 hours another broadcast by the TPLF stipulated the need for ‘discussion’ regarding the border issue and chastised Abiy for announcing his proposals without consultation with ‘the people.’ This TPLF statement temporarily dampened the widespread euphoria, leaving close observers wondering if the TPLF was even in agreement with Abiy’s initiative. When it comes to the border issue, Eritreans have come to expect only obfuscation from the political class.

Eritrea responded to Abiy’s initiative on 20 June 2018, by proposing a delegation to Addis Ababa to meet him and to ‘gauge developments in Ethiopia.’ The delegation arrived in Addis Ababa five days later to a warm welcome. Abiy flew to Eritrea within two weeks to an unprecedented reception. President Isaias Afeworki of Eritrea is scheduled to visit Addis Ababa in return.

Many Eritreans welcomed the proposals, because the on-going conflict over the border has entrenched the militarization of the entire society and undermined the economic development of the country. Forced recruitment into the armed forces is a major cause of Eritrean migration abroad, for which the country is now regularly in the headlines of the international media. Hopes are building that the resolution of the border issue with agreed demarcation can bring an end to the indefinite military service in Eritrea.

The reduction of migration from Eritrea could be achieved by scrapping the mandatory indefinite military service that has been maintained by the government since the war with Ethiopia. The challenge for the Eritrean government then would be providing employment and rehabilitation into civilian life for the hundreds of thousands serving in the armed forces. Yet, the unintended consequences of opening up Eritrea could pose a threat to Isaias Afeworki’s tight control over the regime, possibly leading to political reform and the end of big man rule.

International and Regional Actors

There are speculations that the visit to Eritrea, Djibouti and Ethiopia in April by the US Deputy Assistant Secretary of State, Donald Yamamoto, may have been part of an effort to break the long stalemate by nudging Ethiopia to accept the Algiers Agreement. The ‘guarantors’ of the Algiers Agreement were the United States, the European Union and the African Union. For sixteen years, dereliction of duty on the part of these so-called guarantors enabled Ethiopia to flout the agreement with impunity. Ethiopia waged a ‘no war no peace’ strategy intended to bring Eritrea to its knees.

Why might the US be changing its policy toward the Eritrean regime by actively seeking a resolution? One probable reason is the changing regional and geopolitical reality. Saudi Arabia and the UAE are now actively working with the Eritrean president Isaias Afeworki in effect helping him break his isolation. The fear that a political vacuum may enable radical Islamist groups, like al-Shabab in Somalia, to gain a foothold in an unstable Eritrea or Ethiopia, is perhaps another reason.

The Trump administration may also have decided to break with the unconditional backing Ethiopia enjoyed from the Clinton and Obama administrations as part of their policy of isolating the Eritrean regime and maintaining security in the region. But this arrangement was always problematic, not least because al-Shabab had emerged as a result of US-backed Ethiopian intervention in Somalia in the first place.

Arguably, the Bush, Clinton and Obama administrations made things more difficult by interfering with the verdict of the EEBC. Former US Assistant Secretary of State, Jendayi Frazer, aided Condoleezza Rice in this regard, while President Obama’s national security advisor, Susan Rice, waged a vendetta against the Eritrean president, thus reinforcing the impasse. Ironically the only US official who stood firmly behind the EEBC decision was the right-wing maverick John Bolton, who was US Permanent Representative to the UN and is currently National Security Advisor to Donald Trump. Settling the border conflict would mean a profound change in the geopolitics of the region.

In addition, the rich petrodollar countries of the Middle East are exploiting the conflicts in the Horn of Africa to increase their influence. Saudi Arabia and the UAE have established military bases in Assab (an Eritrean port) for their bombing campaigns in Yemen. The Saudi and UAE military presence in Eritrea is not particularly pleasant for Ethiopia. These countries may have leaned on Ethiopia and Eritrea to settle their dispute, hoping to secure their investments in a more stable Horn of Africa. In the context of Nile hydro politics, a growing alliance between Egypt and Eritrea is a threat to Ethiopia.

The rivalry of Saudi Arabia and the UAE with Qatar, Iran and Turkey is also being played out in the Horn of Africa. The UAE has established port facilities in Somaliland much to the chagrin of Somalia. Turkey is leasing land in Suakin in Sudan to establish a naval dock. Having good access to ports with road infrastructure already in place is also critical to Ethiopia. Abiy emphasized this in a speech he gave to parliament and admitted that he had travelled to Saudi Arabia to request space for Ethiopian cargo in Saudi ports. Eritrea could also benefit from Ethiopia’s use of its ports and perhaps even from the operations of Africa’s successful Ethiopian Airlines.

There is also the matter of Djibouti. Ethiopia is a landlocked country dependent for access on Djibouti’s ports for 95 per cent of its imports and exports. If a genuine settlement is achieved between Eritrea and Ethiopia, among the peace dividends for both countries would be the utilization of Eritrean ports for Ethiopian exports and imports, decreasing Ethiopia’s dependence on the costly Djibouti ports. Djibouti is a crowded place with foreign troops from the US, China, France, Japan, Italy and Saudi Arabia stationed in the tiny city-state.

Abiy’s Internal Challenges

Ethnic conflict in the south and southwest of the country, in the Moyale area, has deteriorated (after a brief hiatus) following the ascent of Abiy to the leadership. The Special Forces, in the service of TPLF generals involved in illicit activities in the Ogaden region in the Southeast, continue to be a menace. Amharas are being evicted and displaced from different parts of Oromia. So, there is still some danger that a faction of the TPLF which is regrouping in Tigray with its intelligence tentacles throughout Ethiopia may sabotage Abiy’s programme.  

Anarchy, crime and vigilante ethnic killings are increasing, which suggests that things could spiral out of control. Millions are internally displaced and desperate. The TPLF authority at the federal level is seriously damaged, but it can still play a spoiler role in the Somali region – where the Chinese have begun to extract oil in the area contiguous to Oromia – by backing the notorious human rights violator, Abdi Mohamud Omar (known as Abdi Illey).

Abiy is pushing for an ‘all-Ethiopian nationalism’ pledging that the government of Ethiopia will cease to be the prerogative of a minority and will in future represent and embrace all Ethiopians. The allure of his message is steeped in the language of reconciliation and love. In building his support base, he has cobbled together a motley group of allies, some with contradictory visions. How he will manage these competing interests remains to be seen. 

Another of his challenges will be to convince foreign investors that Ethiopia remains ‘open for business’, in the face of the continuing ethnic violence. Some foreign owned businesses have been torched by protesters.  So, for example, Deep Kamra, country manager of the Dangote Cement factory, owned by Africa’s richest man, was recently murdered by unidentified assailants along with his secretary and driver. The extensive publicity given to the violence and the state of emergency has made it harder for Abiy to make the country seem attractive to investors – a key element in any neoliberal project.

Where now?

A big question remains whether Abiy can be the agent or midwife for transformative change, for genuine democracy in Ethiopia and whether his ‘quiet revolution’ can break the power of ruling cliques and their power bases in the country. Although he has promised term limits, Abiy himself is a contradiction, as a selected and not an elected leader. What many argue is urgently needed is a transitional government leading to constitutional rule and elections. Yet, he also urgently needs to tackle corruption. What will he do to try to retrieve the money stolen by corrupt officials which is estimated at over thirty billion dollars from US aid alone?

It remains unclear if Abiy can overcome the obstacles he is facing and consolidate the forces of integration, reconciliation and national unity that he claims to promote. His achievements in the first months of his leadership have been surprising by any measure but can there really be a shift from personal rule to deep structural transformation and sustainable democratic institutions that Ethiopia’s poor desperately need and deserve?  

Yohannes Woldemariam is a political economist who has taught and worked in universities and research centers in Europe, Costa Rica, Africa and the United States. Currently, he is a visiting professor at the National University in Costa Rica and working on a book comparing and contrasting the Costa Rican and Eritrean experiences. He can be emailed at ywoldem@gmu.edu

Featured Photograph: President Isaias Afewerki and Prime Minister Abiy Ahmed sign the Joint Declaration of Peace and Friendship between Eritrea and Ethiopia on 9 July 2018.