COUNTRY PROFILE 2002 Ethiopia

Transcription

1 COUNTRY PROFILE 2002 Ethiopia This Country Profile is a reference work, analysing the country s history, politics, infrastructure and economy. It is updated annually. The EIU s quarterly Country Reports analyse current trends and provide a two-year forecast The full publishing schedule for Country Profiles is now available on our website at The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom

2 The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through our digital portfolio, where our latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London The Economist Intelligence Unit 15 Regent St London SW1Y 4LR United Kingdom Tel: (44.20) Fax: (44.20) london@eiu.com Website: New York The Economist Intelligence Unit The Economist Building 111 West 57th Street New York NY 10019, US Tel: (1.212) Fax: (1.212) dantecantu@eiu.com Hong Kong The Economist Intelligence Unit 60/F, Central Plaza 18 Harbour Road Wanchai Hong Kong Tel: (852) Fax: (852) hongkong@eiu.com Electronic delivery This publication can be viewed by subscribing online at Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, on-line databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright 2002 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author's and the publisher's ability. However, the EIU does not accept responsibility for any loss arising from reliance on it. ISSN Symbols for tables n/a means not available; means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK.

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4 EIU Country Profile 2002 The Economist Intelligence Unit Limited 2002

5 1 Contents 3 Basic data 4 Politics 4 Political development 6 Constitution, institutions and administration 8 Political forces 11 International relations and defence 15 Resources and infrastructure 15 Population 16 Education and health 17 Natural resources and the environment 17 Transport and communications and the Internet 19 Energy provision 19 The economy 19 Economic structure 21 Economic policy 26 Economic performance 27 Regional trends 28 Economic sectors 28 Agriculture and forestry 30 Mining 30 Manufacturing 32 Construction 32 Financial services 33 Other services 34 The external sector 34 Trade in goods 36 Invisibles and the current account 36 Capital flows and foreign debt 39 Foreign reserves and the exchange rate 40 Appendices 40 Regional organisations 43 Sources of information 46 Reference tables 46 Population 46 Government finances 46 Money and credit 47 Interest rates 47 Gross domestic product at factor cost 47 Gross domestic product by expenditure 47 Gross domestic product by sector 48 Prices 48 Coffee production and exports, domestic figures 48 Exports 48 Imports 49 Main trading partners EIU Country Profile 2002 The Economist Intelligence Unit Limited 2002

6 2 49 Balance of payments, IMF estimates 50 Balance of payments, national estimates 50 External debt, World Bank estimates 51 Net official development assistance 51 Foreign reserves 51 Exchange rates EIU Country Profile 2002 The Economist Intelligence Unit Limited 2002

7 Ethiopia 3 Ethiopia Basic data Land area Population Main regions 1,098,000 sq km 63.5m (2000 mid-year estimate) Population in 000 (1999 official estimates) Oromo (Federal Region 4) 21,694 Amhara (Federal Region 3) 15,850 SNNPR 12,132 Somali (Federal Region 5) 3,602 Tigray (Federal Region 1) 3,593 Addis Ababa (capital) 2,424 Climate Weather in Addis Ababa (altitude 2,450 metres) Languages Measures Currency Time Public holidays Temperate on plateau, hot in lowlands Hottest months, April-May, C; coldest month, December, 5-23 C; driest month, December, 5 mm average rainfall; wettest month, August, 300 mm average rainfall Amharic, Orominya, Tigrinya, Afar, Somali and others. English and Amharic are mainly used in business Metric system; also 1 gasha=40 ha, 1 kend=0.5 metres, 1 frasoulla=17 kg The birr, previously the Ethiopian dollar=100 cents. The single, legal exchange rate is determined by a weekly auction. Average exchange rate in 2001: Birr8.33:US$1. Rate on March 25th 2002: Birr8.36:US$1 3 hours ahead of GMT January 7th (Christmas), January 19th (Epiphany), March 2nd (Battle of Adowa), May 6th (May Day), September 11th (New Year), September 12th, Good Friday, Easter, Eid el Fitr, Eid el Ahda, Maulid. The Ethiopian calendar has 13 months (see The economy) The Economist Intelligence Unit Limited 2002 EIU Country Profile 2002

8 4 Ethiopia Politics The federal government of Ethiopia is dominated by the Ethiopian Peoples Revolutionary Democratic Front (EPRDF), which evolved from a coalition of Tigrayan-dominated rebel groups that defeated the previous government in 1991 after a protracted civil war. Following four years of transitional government, a federal republic was proclaimed after elections in mid The EPRDF suffered a serious internal schism in Political development The Ethiopian state War in Eritrea and imperial demise The Derg The Ethiopian state was created by Christian highland rulers, largely through a twin process of political subjugation and economic exploitation of outlying populations in the late 19th and early 20th centuries. The imperial crown prince, Haile Selassie, established ascendancy over regional feudal lords from 1916 to 1930, when he became emperor. He was driven into exile when the army of fascist Italy invaded and occupied Ethiopia between 1936 and 1941; Italy had already tried to capture the country in the 19th century, but was defeated by Ethiopian forces at Adowa in Nevertheless, it consolidated its holdings on the coast and the highland plateau to the north of the Tekeze river, creating the colony of Eritrea. The failure of the League of Nations to halt the Italian invasion, coupled with Italy s use of chemical weapons, generated widespread international sympathy for Ethiopia. Following the country s liberation by allied forces in 1941, Haile Selassie returned from Britain and ruled until his overthrow in Eritrea was federated with Ethiopia in 1952, after ten years under a British mandate and intense but inconclusive political debate over its status. Ethiopia s status as an independent African state allowed Haile Selassie to secure Addis Ababa as the headquarters for the newly created Organisation of African Unity (OAU) in In 1962 Ethiopia abrogated the UN-sponsored federation with Eritrea and unilaterally annexed the federal Eritrean state, provoking Eritrean separatists to launch a guerrilla war. One year later Ethiopia became embroiled in a war with newly independent Somalia over the eastern region of Ogaden. Peasant revolts followed, underlining the need for land reform. The discontent was fuelled by corruption among feudal officials, rampant inflation and unemployment. Unrest was brought to a head by revelations of government indifference towards the famine, which claimed an estimated 200,000 lives. In January 1974 a series of strikes and mutinies in the armed forces prompted the resignation of the prime minister of the previous 13 years. This event marked the beginning of what evolved into a coup by army officers. Civilian groups lacked the cohesion to mobilise support amid the unrest of 1974, and the embryonic Provisional Military Administrative Council (PMAC, or Derg in Amharic) filled the power vacuum, beginning 17 years of military rule. The deposal and murder of Haile Selassie in September 1974 marked the beginning of three years of conflict, both within the military and throughout EIU Country Profile 2002 The Economist Intelligence Unit Limited 2002

9 Ethiopia 5 the country. In Eritrea rival nationalist guerrilla movements made significant territorial gains, while the Derg was racked by internal power struggles. In November 1974 there was a purge of the new government, along with the execution of 57 senior officials of the old regime. The military government then proclaimed Ethiopia a socialist state. By November 1977, following a further series of purges, Colonel Mengistu Haile Mariam had established control of the Derg. The red terror Colonel Mengistu s rise to power was partly aided by civilian opposition to the old regime, and he used the Marxist-Leninist ideology of left-wing students to legitimise his rise to power. However, the civilian left was divided and some left Addis Ababa to launch a rural rebellion in the northern province of Tigray, forming the nucleus of the movement that was to win power in The military quickly tired of the student intellectuals, and vociferous debate degenerated into violence in ; leftist students launched an armed urban campaign, provoking the brutal eradication of all opposition. At a conservative estimate, 100,000 people were killed and several hundred thousand more fled to the US and western Europe, establishing a trend of youth emigration. The government extended its control over the population through a series of ambitious reforms. Land was nationalised and a network of peasant and urban dweller associations was established. Known as kebeles, these have been retained by the EPRDF. Following the Soviet model, a Workers Party of Ethiopia (WPE) was created in 1984, and in 1987 the People s Democratic Republic of Ethiopia was promulgated under a new constitution. As the Derg completed its metamorphosis of Ethiopia into a Marxist-Leninist state, Soviet support wavered and the integrity of the centralised state was challenged. Two years of military defeats in Eritrea and Tigray, a failed military coup in May 1989, and the gradual desertion of his Soviet allies fatally weakened Colonel Mengistu. Overthrow of Mengistu The EPRDF, a newly created coalition dominated by the Tigray People s Liberation Front (TPLF), pushed deep into Shoa province in July In February 1991 it launched a decisive assault through central and western provinces, while in the east Eritrean forces closed in on Assab and Asmara. By May 1991 Sub-Saharan Africa s largest army had been crushed and Colonel Mengistu fled to Zimbabwe. EPRDF forces took control of Addis Ababa where, in July 1991, they convened a conference to endorse a transitional charter and Eritrea s de facto independence. The charter became the legal basis of four years of interim rule under an EPRDF-dominated legislature, with an executive headed by the leader of the TPLF, Meles Zenawi. The transitional government implemented extensive economic reforms and a radical form of federal devolution to nine new regional states along predominantly ethnic lines. Devolution and the drafting of a new constitution were accompanied by a series of elections, and the Federal Democratic Republic of Ethiopia was proclaimed in August Yet in practice power is highly concentrated, the legacy of decades of centralised, hierarchical Marxist party structures operating within a broader authoritarian, closed political culture. Political turmoil between rival factions within the EPRDF during 2001 heightened centralisation and further eroded any separation of powers within the government. In The Economist Intelligence Unit Limited 2002 EIU Country Profile 2002

10 6 Ethiopia practice there are neither checks on executive power, nor mechanisms for the smooth transfer of power. Eritrea Eritrea gained de jure independence in May Its status remains a prominent issue in Ethiopian politics, owing to historical links between the leaders of Tigray and Eritrea, which adopted a common stance on many regional issues after 1991, and the fact that secession is controversial among some Ethiopian opponents of the EPRDF. In May 1998, however, the alliance between Eritrea s and Ethiopia s Tigrinya-speaking leaderships ruptured. Tension over monetary and trade relations and a border dispute erupted into war. War had profound regional and domestic implications, being the catalyst for a serious split within the EPRDF. (See Political forces and International relations and defence for more information on the Ethiopian-Eritrean war and its consequences.) Important recent events August 1995: The constitution of the second republic is inaugurated; the Federal Democratic Republic of Ethiopia is created, with a bicameral legislature and ceremonial presidency. Meles Zenawi forms a new government. May 1998: Economic tensions and clashes on the border trigger war with Eritrea, with mass mobilisation and rearmament on both sides. February-June 1999: Debilitating fighting comes to stalemate. May 2000: Stalemate is broken by mass Ethiopian offensives. June 2000: Both sides sign an interim settlement brokered by the Organisation of African Unity. December 2000-April 2002: A formal peace agreement between Ethiopia and Eritrea is signed in Algiers on December 12th This enables the UN Mission for Ethiopia and Eritrea (UNMEE) to supervise the disengagement of forces, and establishes a 25-km deep Temporary Security Zone in April 2001, paving the way for a decision on border demarcation in April Constitution, institutions and administration Ethiopia s first constitution was drafted in A revised constitution was promulgated in 1955, incorporating limited reforms drawn from the more progressive constitution then operating in Eritrea, although the latter was abrogated along with the federation in In 1974 the constitution was suspended and replaced by a series of military decrees until the constitution of the People s Democratic Republic was promulgated in This was, in theory, accompanied by a limited form of regional autonomy. EIU Country Profile 2002 The Economist Intelligence Unit Limited 2002

11 Ethiopia 7 The second republic The judiciary and cabinet Key agencies Regional devolution The July 1991 transitional charter was supplemented by a series of decrees, notably on regional government. A Constituent Assembly was elected by universal suffrage in June The federal constitution, which had been drafted by a committee, was endorsed in December 1994 and came into effect in August 1995, creating the second republic, formally known as the Federal Democratic Republic of Ethiopia. Under this constitution, Ethiopia is a federation of nine states governed by two federal assemblies: the legislature, known as the Council of Peoples Representatives (CPR), and a smaller, supervisory senate, the Federal Council (FC). The constitution follows the EPRDF s blueprint for ethnic federalism, under which elections for 14 newly created regional assemblies were first held in July The number of regions was subsequently reduced; there are now nine autonomous regional state councils (municipal councils for Addis Ababa and Dire Dawa). The regions are distinguished primarily along linguistic lines, with five groups (Oromo, Amhara, Tigrayan, Somali and Afar) having designated regional states. Ethiopia s federal constitution allows for the secession of individual regions or linguistic groups, termed nationalities. The federal constitution provides for an independent judiciary. However, most judges serving under the Derg were sacked and, although in theory the regions have extensive judicial powers, devolution has tended to weaken judicial autonomy further. The cabinet, last restructured by the prime minister in October 2001, comprises 18 ministers. Ministries are loosely grouped under five umbrella super ministries such as the Ministry for Capacity Building and Co-operation and the Ministry for Infrastructure Development, and are headed by leading EPRDF loyalists. In keeping with the notion of ethnic federalism which underpins the constitution, the cabinet includes representatives from the country s principal nationalities. Yet important decisions, notably over economic policy and security, continue to be made by EPRDF staff outside the formal cabinet. Disagreements over accountability and corruption within the party were central to the EPRDF schism of Each of the nine regional state councils has a chairman and an executive bureau, in effect mirroring the federal cabinet structure in the regions. A powerful, central Security, Immigration and Refugee Authority (SIRA) was created in 1995; at the same time the functions of the interior ministry were devolved to the regions. SIRA, the domestic security service and the armed forces are controlled by senior EPRDF staff. A Federal Revenue Administration Board supervises regional finances, the head of the board holding the rank of minister. The Disaster Prevention and Preparedness Commission, formerly the Relief and Rehabilitation Commission, has the task of co-ordinating food security efforts, including famine early warning, the maintenance of food reserves and distribution of emergency food aid. Under the 1995 federal constitution the new regional authorities have, in theory at least, wide-ranging economic powers. Provisional legislation in 1992 created the administrative framework for a unique brand of ethnic federalism, under which 14 new regional states were created, largely according to linguistic criteria. Five south-western states were subsequently amalgamated, The Economist Intelligence Unit Limited 2002 EIU Country Profile 2002

12 8 Ethiopia leaving nine states, including the city-state of Harar, formally recognised in the constitution. Addis Ababa has a special autonomous status (although it is also the capital of Oromo region under its Oromo name of Finfine). Dire Dawa administers its own budget and is in effect a second metropolitan region. The new regional boundaries redraw the previous provincial divisions through which the highly centralised governments administered the country for much of the 20th century. The bulk of the population continues to use these historic, geographic provincial names Gonder, Shoa or Hararghe in preference to the new ethnic labels. The boundaries of subregional units, woreda, remain largely unaltered. Political forces The EPRDF The Ethiopian Peoples Revolutionary Democratic Front dominates all the formal institutions of the federal republic. It holds 90% of the seats in the Council of Peoples Representatives and its members control all the major regional state councils, giving it an easy majority in the Federal Council, the upper house, whose members are nominated indirectly by the regions. The May 2000 national elections coincided with military offensives against Eritrea and were therefore completely overshadowed and confirmed the EPRDF s electoral dominance. EIU Country Profile 2002 The Economist Intelligence Unit Limited 2002

13 Ethiopia 9 Main political figures Meles Zenawi: Prime minister and leader of the Tigray People s Liberation Front (TPLF). Seyoum Mesfin: Minister of foreign affairs; key power-broker within the TPLF and leading ally of Meles in 2001 internal party wrangles. Tewolde Wolde-Mariam: Vice-chairman of the TPLF and the Ethiopian People s Revolutionary Democratic Front (EPRDF); senior figure in the minority faction of the TPLF central committee suspended in March Neway Gebre-Ab: Economic adviser to the prime minister who has been heavily involved in multilateral issues and liberalisation. Kassu Illala: Since October 2001 he has been minister of infrastructure development. He oversees economic policy and is considered to favour a dirigiste approach. Teklewolde Atnafu: Governor of the National Bank of Ethiopia (the central bank); role has increased since investigations into corruption in state-run Commercial Bank of Ethiopia (CBE) in late Girma Wolde-Giorgis: Elderly, ceremonial president with limited powers. Friction within the EPRDF will continue to be the main determinant of policy. The TPLF is the core of the EPRDF. Formed by Marxist Tigrayan students who split from the civilian left during the revolution and launched a rural-based struggle against the state from Tigray, the TPLF mobilised non-tigrayan groups after several military victories, and in early 1990 it announced the creation of the EPRDF. Its junior ally, the Ethiopian People s Democratic Movement (EPDM), was later transformed into an explicitly Amhara group to match the country s new ethno-political template, and in most regions the EPRDF fostered surrogate people s democratic organisations (PDOs), the largest of which is the Oromo organisation, the OPDO. Tigrayan dominance of the EPRDF is overwhelming. Differences within the Tigrayan leadership over its relationship with the Eritrean People s Liberation Front (EPLF) contributed to the start of the war in May Divisions resurfaced over the terms of the peace deal signed with Eritrea in December 2000, rekindling deeper divergences over the significance of foreign economic assistance and policy conditionality. Both the TPLF split and the domestic regional equation are further complicated by the fact that during the 1990s the core Tigrayan and Oromo components of the EPRDF developed powerful commercial wings, interlocking investment and trading conglomerates with the political bodies. Dissention within the EPRDF In the most significant crisis to face the government since coming to power in 1991, rumbling discontent within the Tigrayan core of the EPRDF erupted into open rebellion in March 2001, when 11 of the 30 strong TPLF central committee were suspended. By October the faction headed by Meles and the The Economist Intelligence Unit Limited 2002 EIU Country Profile 2002

14 10 Ethiopia foreign affairs minister, Seyoum Mesfin, appeared to have quashed the rebellion, silencing the dissidents via imprisonment on corruption charges. The dissidents included the party s most senior figures in its home province of Tigray and the crisis dangerously undermined its reputation among both civilian and military supporters. The crisis also dented broader EPRDF strategy, as the leadership of the TPLF s surrogate Oromo ally was decimated by purges and corruption charges. The opposition Oromo Liberation Front Civilian opponents of the EPRDF are weak, divided and ineffectual. In late 1992 Addis-based opponents formed the Coalition of Alternative Forces for Peace and Democracy in Ethiopia (CAFPDE). CAFPDE lacks a clear policy agenda, has boycotted elections and has proved incapable of mobilising mass support. This is despite a number of factors in its favour, such as: widespread malaise among the educated, cosmopolitan urban classes; a fiercely antigovernment private press; clumsy repression of both press and urban opponents by the government; anti-eprdf sentiment among many exiles in the US; the desire of liberal donors to foster a loyal opposition; and the internal schisms within the EPRDF. Rural regional forces opposed to the EPRDF have continued to present a threat. The OPDO controls the state council of Oromo region, but a regionally based opposition force, the Oromo Liberation Front (OLF), operates from this region. In May 1991 the OLF initially allied with the EPRDF. However, its leadership quickly found itself outmanoeuvred and left the transitional government prior to regional elections in June Its exiled leadership, which rejects the legitimacy of the OPDO, is in disarray, although guerrillas loyal to the OLF have mounted sporadic attacks on government installations, notably in Hararghe, and by 1999 had established bases in neighbouring Somalia. Other smaller armed Oromo factions also operate. Similar rivalries over legitimacy exist in the numerically smaller Afar and Somali regions, where the EPRDF had difficulties promoting its own surrogate. The alienation of Ogadeni Somali clans has caused problems for the metropolitan region of Harar and the trading city of Dire Dawa, and has exacerbated friction with militia forces based in the Somali Republic. The administration of Ethiopia s Afar region is complicated by the fact that there are sizeable Afar populations in neighbouring Eritrea and Djibouti. Main political forces Government Ethiopian Peoples Revolutionary Democratic Front (EPRDF), formed in 1990 Main constituents of the EPRDF Tigray People s Liberation Front (TPLF; weakened by serious internal divisions since March 2001); Oromo People s Democratic Organisation (OPDO); Amhara National Democratic Movement (ANDM, formerly Ethiopian People s Democratic Movement). EIU Country Profile 2002 The Economist Intelligence Unit Limited 2002

15 Ethiopia 11 Allied to EPRDF Ethiopian Somali Democratic League (ESDL). Opposition Urban Coalition of Alternative Forces for Peace and Democracy in Ethiopia (CAFPDE). All Amhara People s Organisation (AAPO). Rural Oromo Liberation Front (OLF; uneasy alliance with EPRDF until 1992; now principal rural insurgency; inconclusive negotiations with EPRDF in 1997). Afar Revolutionary Democratic Unity Front (ARDUF; limited presence in Afar region). Ogaden National Liberation Front (ONLF; movement split in 1995, rump now allied to ESDL in Somali region administration). Islamic Front for the Liberation of Oromia (IFLO; a faction with alleged links to Islamic groups in Somali Republic, including Al-Ittihad. The EPRDF holds Al-Ittihad responsible for numerous violent acts within Ethiopia; since 1996 the EPRDF has conducted regular retaliatory raids against Al- Ittihad bases in Somalia which have effectively quashed the group). International relations and defence The dispute with Eritrea From allies to enemies After taking power in 1991 the EPRDF government assumed a leading role in regional relations. Several regional diplomatic initiatives were conducted in conjunction with the TPLF s erstwhile rebel allies, the EPLF. These included negotiations over the Sudanese and Somali conflicts, notably within the context of the regional Inter-governmental Authority on Development (IGAD; see Appendices: Regional organisations). However, Eritrea and Ethiopia s diplomatic alliance came to an abrupt end in May 1998, when a trade and border disagreement escalated precipitously into full-scale war. During the struggle to overthrow the regime of Ethiopia s former Marxist dictator, Colonel Mengistu, the rebels were led by the TPLF. Despite occasional disputes, the TPLF worked closely with the EPLF, who were fighting for the independence of the state of Eritrea, which was annexed by Haile Selassie in Both sets of leaders were from the same Tigrinya-speaking area which straddles Ethiopia and Eritrea. The two leaderships remained close after Eritrean independence in 1993, but this relationship became a source of resentment for many non-tigrayans in Ethiopia who were suspicious that their leaders Tigrayan allegiance was overriding their allegiance to Ethiopia. Eritrea introduced its own currency, the nakfa, in 1997, breaking the de facto currency union that had existed up to that time. Disagreement over Eritrea s exchange-rate regime and subsequent bilateral trade relations then contributed to mounting tension during early However, both the ferocity of the fighting that ensued and the vitriolic war of words reflect deep-seated notions of prestige and national pride, rather than material or territorial ambitions. The Economist Intelligence Unit Limited 2002 EIU Country Profile 2002

16 12 Ethiopia Chronology of the war with Eritrea May 6th 1998: Fighting breaks out around a disputed border post near Badme, and Eritrea occupies Badme and Shiraro. May-June 1998: Eritrea seizes Zala Ambassa and Tsorena in further fighting. June 1998-January 1999: Both sides build up their military capabilities. With US backing, the Organisation of African Unity (OAU) proposes an interim settlement which Ethiopia accepts. Mass expulsions from Ethiopia begin of people of Eritrean origin. February-March 1999: In renewed offensives Ethiopia recaptures Badme on February 9th; Eritrea then accepts the OAU peace plan. Subsequent battles on the Tsorena-Zala Ambassa front are inconclusive. May-June 2000: Following ten months of intensive but inconclusive international diplomacy, Ethiopia launches an offensive and recaptures all territory lost to Eritrea in mid Ethiopian troops occupy large areas of central and western Eritrea. Eritrea accepts an amended settlement agreement, allowing for a ceasefire and the insertion of an OAU-UN buffer force on Eritrean soil. December 2000-April 2001: A formal peace agreement is signed in Algiers on December 12th The UN oversees the withdrawal of troops from occupied territory and in April 2001 creates a 25-km demilitarised Temporary Security Zone under UN supervision. February-April 2002: Tensions rise as announcement of border commission is postponed and UN Security Council delegates visit region. Unstable peace between Eritrea and Ethiopia, Dec 2000 April 2002 A formal peace agreement between Ethiopia and Eritrea was signed in Algiers on December 12th By April 2001 a multi-national military interposition force, the UN Mission in Ethiopia and Eritrea (UNMEE) had secured the withdrawal of troops and established a 25-km Temporary Security Zone as a precondition of implementation of what were intended as three substantive aspects of the peace agreement. An investigation by an impartial body appointed by the secretary-general of the Organisation of African Unity (OAU) into the origins of the events of 6th May 1998 which were the catalyst for the slide to war over the subsequent week. The creation of a neutral boundary commission, based in The Hague. Each side appointed two non-national commissioners to the five-member body, with a fifth appointed by the UN. The commission is charged with delimiting and demarcating the disputed border, which is based on colonial treaties of 1900, 1902 and 1908, in accordance with international law. The commission concluded its hearings in December An initial announcement of its ruling, scheduled for mid-february 2002, was postponed for two months. EIU Country Profile 2002 The Economist Intelligence Unit Limited 2002

17 Ethiopia 13 The creation of a claims commission, also based in The Hague, to investigate claims arising from the destruction of civilian property during the war. This explicitly includes claims arising from deportations. The commission, like that investigating the boundary, is composed of five members with two non-nationals appointed by each side. It is mandated to decide via binding arbitration on all claims. By 2002 the investigation and claims commission had made little progress. The success of the agreement, as perceived by both governments and the UN, hangs largely on the outcome of the boundary commission. The commission s ruling in mid-april 2002 will jeopardise both the ceasefire and the UNMEE if it fails to decisively arbitrate between rival claims across both the Badme and the Zala Ambassa-Tsorena fronts. Ties with Djibouti increase in importance Terrorism spotlight on Sudan and Somalia The loss of access to Eritrea s ports made Ethiopia s relationship with tiny Djibouti critically important. Two-thirds of Ethiopia s merchandise trade transited through the Eritrean port of Assab before May Overnight, this trade including all of Ethiopia s petroleum imports switched to Djibouti s port. While political and economic ties are thus necessarily tight, significant tensions persist over both port transit regulations and fees, and broader policy towards Somalia. Ethiopia shares a vast southern border with Somalia. Ethiopia s sparsely populated Somali region is also inhabited by ethnic Somalis. Since 1996 The Economist Intelligence Unit Limited 2002 EIU Country Profile 2002

18 14 Ethiopia Ethiopian troops have repeatedly entered Somalia in pursuit of Ethiopian- Somali and Oromo groups hostile to the EPRDF. US concerns over the possible use of Somalia by Islamic militants post September 2001 enhanced Ethiopian surveillance of, and intervention across, its Somali border. Ethiopia is effectively opposed to the current transitional national government in Somalia, supporting opposition groups, some Somali warlords and the seceded Somaliland region. There is speculation that Ethiopia can better maintain its dominance in the Horn of Africa if Somalia is in continual chaos. Egypt also has a significant stake in regional affairs. In recent years Ethiopia s relations with Egypt have been strained by disagreements over Ethiopia s right to use the waters of the Blue Nile for irrigation and hydroelectric projects. Since 1991 Ethiopia has established closer economic ties with the states of the Arabian peninsula, while maintaining relations with Israel. Relations with Sudan deteriorated following allegations of Sudanese complicity in a failed assassination attempt against the Egyptian president, Hosni Mubarak, in Addis Ababa in June 1995, after which Ethiopia secured limited UN sanctions against Sudan. However, in late 1998 links with the regime in Khartoum were swiftly restored in an attempt to isolate Eritrea. US-Ethiopia ties enhanced in wake of terror attacks The war has led to mass mobilisation US military and intelligence co-operation with Ethiopia were boosted by the US desire to combat transnational Islamist links after September 2001; Ethiopia helping facilitate US surveillance of neighbouring Somalia. This included the monitoring of coastal movements by the German navy based out of Djibouti. Such US concerns helped reverse the impact of the 1998 Ethiopian-Eritrean dispute, which significantly undermined US regional policy, loosely referred to as the Greater Horn of Africa Initiative. On a tour of Africa in March 1998 the then US president, Bill Clinton, referred to the Ethiopian and Eritrean leaderships as being part of a move towards new, more enlightened African governments. However, the war with Eritrea placed strains on US-Ethiopian relations, not least because the hostility of the EPRDF to the Islamist administration in Sudan was reversed by the war. (See Appendices for information on those regional organisations of which Ethiopia is a member.) Many troops from the Ethiopian army were re-employed in during the border war; the EPRDF doubled the size of its armed forces, mobilising an estimated 250,000 men against Eritrea. Casualty figures began to be issued only in March Unconfirmed but plausible Ethiopian press estimates suggest that 123,000 Ethiopians were killed, principally in the two major assaults of Feb-June 1999 and May-June In 1991 Ethiopia s army was estimated to be Sub-Saharan Africa s largest at 450,000 under the Derg. Military forces a Army 250,000 Air force 2,500 Total 252,500 a Ethiopia s navy, berthed in Djibouti from 1991, was auctioned off in 1996 to an unknown buyer. Source: International Institute for Strategic Studies, The Military Balance, 2001/02. EIU Country Profile 2002 The Economist Intelligence Unit Limited 2002

19 Ethiopia 15 Resources and infrastructure Population In mid-2000 UN population figures suggested that Ethiopia s population stood at 62.9m, making Ethiopia Sub-Saharan Africa s second most populous nation (after Nigeria). National and IMF International Financial Statistics figures suggest a population of around 63.5m in mid With a projected growth rate of % per year between 2000 and 2025, Ethiopia s population is projected to reach 113m by 2025, although the impact of AIDS an estimated 10.6% of the population were HIV-positive at the end of 1999, according to UNAIDS is likely to reduce the population growth rate. The population is still overwhelmingly rural, with only 15% of the population living in towns and only Addis Ababa and Dire Dawa having populations over 1m. (See Reference table 1 for historical population data.) While data on migration is non-existent, outward migration to both Arabian and OECD countries, largely of the educated middle class, is significant. Several hundred thousand Ethiopians have settled in the US over the past two decades, concentrated largely around Washington and Los Angeles. Significant numbers also live in the EU. Population structure, 2000 m % of total Male Female years years years Total Source: UN. Ethnic and linguistic identity has been given explicit political significance under the current federal constitution. This recognises nine nationalities, which provide the framework for the federal state. However, none of the regions are totally ethnically homogeneous; Ethiopia contains a large number of distinct peoples with vastly differing concepts of identity. The transitional legislature formally recognises 64 major ethnic groups, although scholars have identified more than 250 distinct languages in Ethiopia. Of these, Oromo speakers are the largest single group, spread throughout the central and southern areas, followed by the speakers of Amharic and Tigrinya. Other significant groups include Somalis, Afars and Gurages. Amharic and English remain the de facto languages of state, although greater emphasis is now being placed on regional languages in schools and the official media. Regions are free to choose their own language of administration, although in practice several have retained Amharic for convenience. Despite the state s traditional association with Orthodox Christianity, the Ethiopian population is split fairly evenly between Christians and Muslims. The post-1991 administration The Economist Intelligence Unit Limited 2002 EIU Country Profile 2002

20 16 Ethiopia made progress in establishing official parity of esteem and recognition between Christians and Muslims. Education and health With around 30m people under 16 years of age and based overwhelmingly in the countryside, the provision of education is a major challenge. Government spending on education and health, in part funded by cuts in military expenditure, increased considerably after 1991, and accounted for 13% of total spending in 1996/97 (fiscal year beginning July 8th). However, as military spending on the war with Eritrea increased, education expenditure was squeezed during , and school facilities and enrolment rates are still well below those of other least-developed countries. UN statistics suggest that only 52% of children are enrolled in primary school and that only 12% attend secondary school. Secondary education is mostly only obtainable in urban centres. The transitional government began education reforms, which are now being implemented. These altered the structure of secondary and higher education, encouraging students to take vocational rather than narrow academic training, and boosting regional technical colleges. Education statistics (% of population) Adult literacy rate Male 44 Female 33 Primary school enrolment (gross) Male 52 Female 52 Primary school enrolment (net) Male 43 Female 28 Secondary school enrolment (gross) Male 14 Female 10 Source: UNICEF. HIV/AIDS With the second highest number of HIV infections and deaths from AIDS in Africa (after South Africa), the pandemic is a significant threat to the country s future. In mid-2001 the Ministry of Health put at 3m the number of people who are HIV positive, estimating that 1.7m people will have died from AIDS related causes by The biggest strain is currently at the household level, where loss of work combined with treatment costs are proving an excessive burden for average people. Without an extensive healthcare system, healthy family members must often take care of the sick, therefore increasing the economic burden on the family. EIU Country Profile 2002 The Economist Intelligence Unit Limited 2002

21 Ethiopia 17 Comparative social indicators, 1998 Sub-Saharan Ethiopia Uganda Kenya Nigeria Africa Population (m) Life expectancy at birth (years) a Female illiteracy rate (%) a Malnutrition (% of under-five-year olds; ) a Infant mortality (per 1,000 births) a a Regional average. Source: World Bank, World Development Indicators. Natural resources and the environment Ethiopia has abundant natural resources, but much agricultural land is unproductive, water shortages are endemic and major rivers are prone to seasonal flooding. Agricultural land in densely populated areas of the highlands has been deteriorating steadily in recent decades. Accelerated deforestation has led to severe soil erosion in regions where people are dependent on marginal, rainfed agriculture. This has spurred a series of environmental initiatives by the government, including a National Conservation Action Plan, with measures for selective reforestation. An Environmental Protection Agency has also been created, and Ethiopia is taking tentative steps towards establishing a biodiversity strategy. Aside from agriculture, livestock and forestry, Ethiopia has undeveloped mineral resources. In the past six years private foreign interest in the mining of gold and other precious metals, and oil and gas exploration, has increased (see The economy). Transport and communications and the Internet Ethiopia s inadequate and unreliable transport infrastructure remains a significant barrier to economic growth. The rehabilitation of the road infrastructure has been established as a core element of the country s economic reform programme, with more than 20% of the capital budget allocated to road construction and repairs in recent years. The spindly network of poorly maintained roads radiating out from Addis Ababa to the provinces is largely a legacy of the Italian occupation of the 1930s. The two main roads going north through the highlands have suffered from decades of neglect and heavy wear from military and food convoys. Major roads are now being resurfaced and upgraded, and a network of local feeder-roads is being constructed, facilitating both market access for farmers and swifter distribution of food aid in times of shortage. The border war had a paradoxical effect, spurring new road construction north to Tigray and Djibouti, while eroding highways via extensive use. Road congestion in and around Addis Ababa was eased by the 2002 opening of a metropolitan ring road. The Economist Intelligence Unit Limited 2002 EIU Country Profile 2002

22 18 Ethiopia Djibouti replaces Assab as key port The Eritrean port of Assab was the principal port of entry and exit for Ethiopian trade until May 1998, when the border conflict resulted in the diversion of all Ethiopian cargo to Djibouti, whose port authorities responded swiftly to the crisis. Nevertheless, port-handling equipment and warehousing facilities need upgrading to cope with the greatly increased flows of goods. Investment in the road linking Djibouti to Ethiopia via Galafi is also required if the volumes of general merchandise and petroleum trucked to Ethiopia are to be sustained. Despite the loss of sovereignty over its home berths in 1991, Ethiopian Shipping Lines (ESL) continues to thrive and expand, operating from Djibouti. Like the national carrier, Ethiopian Airlines (EAL), it is managed efficiently. Ethiopia s only railway, the 850-km link via the southern market centre of Dire Dawa to Djibouti, is in urgent need of rehabilitation to improve capacity, reliability and safety. Although EU and French funding has been made available, progress on agreeing and implementing improvements has been slow. Growing air traffic The government tries to control the press Telecommunications are rudimentary Addis Ababa is a major regional hub for air traffic. Its pivotal location between Asia, the Middle East and Africa has been central to the wide range of services and sound reputation built up by EAL. The gradual expansion of EAL s passenger and cargo services in recent years is accompanied by an upgrading of Bole airport in Addis Ababa, scheduled for opening in There are other international airports at Dire Dawa and Bahir Dar. The Civil Aviation Authority has embarked on a programme to upgrade the extensive network of small regional airports. Air transport has long played an important role in internal travel because of Ethiopia s mountainous terrain, and until 1998 passenger volumes were rising rapidly because of demand from foreign tourists. Despite economic liberalisation, television and radio remain under government control. As part of its policy for devolution the government is encouraging broadcasting in local languages and the formation of regional radio stations; the first private radio station was scheduled for licensing in The print media reach only a small fraction of the population, which is unsurprising given the levels of poverty, low literacy rates and the fact that newspaper distribution barely extends beyond the capital. The numerous official government and party newspapers espouse predictably anodyne views. Private weekly and monthly newspapers and magazines have flourished since Most are in the Amharic language, and their sales are concentrated overwhelmingly in the capital. Although the government has harassed and imprisoned scores of independent journalists and editors, the expanding scope, variety and circulation of private publications testify to the sector s vibrancy. Ethiopia s telecommunications networks remain basic; there were an estimated three main lines per 1,000 people in The Ethiopian Telecommunications Corporation (ETC), in partnership with Sweden s Eriksson, launched a mobile phone service in 1999 for Addis Ababa and its environs. While the ETC has a monopoly over Internet provision, which is both expensive and underdeveloped in Ethiopia, communication with the large diaspora and support EIU Country Profile 2002 The Economist Intelligence Unit Limited 2002

23 Ethiopia 19 from foreign donors are acting as catalysts for increased Internet use in both the capital and provincial towns. Energy provision Ethiopia has poorly developed energy resources. Its greatest potential for energy generation, from hydroelectric sources along the Awash and Nile valleys, remains largely untapped. The African Development Bank is financing feasibility studies into the construction of hydroelectric installations along the Blue Nile, although these plans have caused controversy with Ethiopia s downstream neighbours, Sudan and Egypt. Once operational, such dams could produce sufficient electricity for the north of the country and potentially allow for exports. Petroleum imports were estimated at more than 1.1m tonnes in 2000, and crude oil and petroleum products account for about 15% of the country s total import bill. Fuel subsidies have been gradually reduced, leading to sharp increases in the price of kerosene, which is used by many in urban areas for cooking. Primary energy balance, 2001 (m tonnes oil equivalent) Oil Electricity Other Total Production a Imports Exports Primary supply a Transformation output b Losses & transfers Final consumption c a Input equivalents on an assumed generating efficiency of 33%. b Transformation input and output, plus energy industry fuel losses. c Output basis. Source: Energy Data Associates. The vast majority of energy needs are met from natural sources. Firewood cutting has denuded vast tracts of highland woodlands in the course of one generation, greatly exacerbating soil erosion. Around Addis Ababa and other towns particularly, firewood and charcoal are relatively scarce and expensive for the bulk of the urban poor. The economy Economic structure An agriculturally dependent economy The Ethiopian economy is highly dependent on agriculture, which accounts for almost 45% of GDP. An estimated 85% of the population gain their livelihood directly or indirectly from agricultural production. Coffee exports account for 50-60% of foreign-exchange earnings, although regional sales of chat, the second main foreign-exchange earner, have increased. The Economist Intelligence Unit Limited 2002 EIU Country Profile 2002

24 20 Ethiopia Following growth in the 1990s, services accounted for a larger portion of economic activity than agriculture for the first time in The composition of services earnings has shifted gradually in response to economic liberalisation, with limited growth in the building, transport and tourism sectors. Agricultural activity is uneven in geographical distribution. A grain surplus is produced largely in the central and western regions, while the northern highlands are far more vulnerable to variations in rainfall. Coffee production is prominent in central and southern areas. Pastoralism predominates in the east and south-east lowlands, notably among Afar and Somali peoples. Geographical barriers to inter-regional trade are accentuated by the fact that all major roads converge on the capital, and agricultural distribution and marketing are predominantly focused on Addis Ababa. Current road-building programmes are designed to facilitate inter-regional transfers of grains and other produce. Main economic indicators, 2001 a GDP growth (%) Consumer price inflation (%) Current-account balance (US$ m) Merchandise exports fob (US$ m) Merchandise imports fob (US$ m) Exchange rate (av; Birr:US$) Population (m) 7.5 b 7.8 b 300 c 502 c 1,300 c 8.33 d 65 c a Fiscal year ending July 7th. b Official estimate. c EIU estimate. d Actual. Source: Economist Intelligence Unit. Counting time: the Gregorian and Ethiopian calendars Ethiopia uses a calendar in which the year begins in mid-september and contains 12 months of 30 days plus a 13th month of five or six days. The Ethiopian calendar (EC) is roughly seven years and eight months behind Western Gregorian calendars; 2001/2002 is thus 1994 EC, while 1995 EC will begin in September However, the Ethiopian fiscal year begins on July 8th and all domestic economic statistics are produced on an annual July 8th-July 7th basis; 1994 EC in National Bank of Ethiopia statistics therefore refers to July 8th 2001-July 7th Hourly time in Ethiopia is conventionally expressed as beginning at 6 am; 1 am is thus equivalent to 7 am in the West, 6 am to 12 noon etc. However, all businesses and ministries use the conventional 24-hour clock. Origins of gross domestic product, 1999/2000 a (% of total) Agriculture & forestry 43.2 Industry 11.5 Services 45.3 GDP at factor cost a Fiscal year ending July 7th; provisional figures. Source: National Bank of Ethiopia, Annual Report. EIU Country Profile 2002 The Economist Intelligence Unit Limited 2002