“In the early decades of post-colonial times, the relationship between African states and South Korea was minimal,” stated Dr. Messay Mulugeta, Associate Professor of Socioeconomic Development Planning and Environment at College of Development Studies of Addis Ababa University on World Economy Brief, recently.
In fact, immediately after the 1950-53’s devastative war between the Koreans, South Korea was busy working in re-constructing the country in economic and military aspects, remaining largely unengaged in most parts of the world, including Africa. Actually, the most notable development in 20th century Africa-South Korea contact was the establishment of formal diplomatic ties.
But things have changed as of recent. Particularly in the past two decade, South Korea and Africa have been increasingly recognizing each other as viable diplomatic and economic partners. The establishment of the Korea-Africa Economic Cooperation (KOAFEC) initiative in 2006, as a major platform to drive Korea’s development initiatives in Africa, is a vital indicator of this fact.
It is widely acclaimed that KOAFEC aims to deliver tangible outcomes through six main cooperation areas: energy and infrastructure, information communications technology (ICT), human resources development, agricultural development, support for climate change adaptation and/or mitigation endeavors, and sharing of Korea’s development experiences to African nations.
In fact, South Korea has been hugely contributing to the development of Africa, through its Korea International Cooperation Agency (KOICA), established in 1991 as a governmental organization for Official Development Assistance (ODA) to enhance the effectiveness of its grant aid programs.
KOICA has formulated and put in place Country’s Development Strategy (CPS) with 7 priority partner countries in Africa such as Ethiopia, Ghana, Mozambique, Uganda, Rwanda, Senegal and Tanzania. Specific to Ethiopia, data from the National Planning Commission (NPC) and Ministry of Finance (MoF) of Ethiopia show that the support of the government of South Korea through its KOAFEC and KOICA is of the essence to Ethiopian economic transformation, particularly for the current transformative leadership under PM Abiy Ahmed.
In addition to the fundamental roles the government of South Korea is playing in Ethiopia in aid/assistance aspects, currently South Korean investors are showing excellent performance in several sectors. South Korean investors commenced a good number of investment projects in Ethiopia in the early 1990s. According to the data obtained from Ethiopian Investment Commission (EIC), 56 projects are already operational, 14 are at implementation stage and the remaining six projects are at pre-implementation stage, Dr. Messay noted.
According to NPC (Ethiopia), in addition to its current huge contribution in various aspects, the presence of South Korea in Ethiopia performs an enormous role in promoting Ethiopia as one of the favorable investment destination countries in the world.
In view of the above supporting fact, Ethiopia is gaining a large amount of FDI as a result of its economic ties with South Korea.
FDI inflows from wholly South Korean and Ethiopia-South Korean joint ventures between 1992 and 2017 in Ethiopia amounted to about 112,879,130 USD.
Looking at the spatiotemporal circumstances of the Ethiopia’s international trade, the Ethiopia-South Korea import-export trade started shooting up in the 1990s. As a key component of the Ethiopia-South Korea economic relationship, the import-export trade between the two countries plays a vital role for economic transformation in Ethiopia in that it enhances competitiveness of Ethiopian commodities by reducing the cost of inputs and increasing the value adding technologies to move up the global value chain, as of Dr. Messay.
In view of these realities, the rising import-export trade between Ethiopia and South Korea certainly contributes tremendously to the Ethiopian economy and to South Korea as well. It enables both countries access new markets for their raw materials and/or finished/semi-finished goods and may open up new production possibilities and technologies for both countries.
It certainly encourages export diversification for Ethiopia which, in turn, contributes greatly to job creation and balance of payment for the Ethiopian economy. In the same way, it has an immense role in enhancing the financial capacity of the local enterprises and producers in Ethiopia and again enables the Ethiopian people to consume cheaper South Korean products compared to the costly European and North American items, stated Dr. Messay.
In addition to aid and investment flow, the economic ties between the two countries are strengthened with loan agreements. The recently signed loan agreements between Ministry of Finance of Ethiopia and Korea Export Import Bank at the Ministry’s office are indicators for the strong relation of the two countries.
On the signing occasion, Ahmed Shide, Minister, Ministry of Finance, said that the financial loan assistance amounting to 264 million USD which is equivalent to 7.6 billion Birr enables Ethiopia finalize different projects.
Regarding the first project amounting 170 million USD, Ahmed said, “Considering Ethiopian government’s effort to expand its energy production capacity by improving the power sector goal of providing reliable, affordable, and universal electricity, the first project signed today aims at: supplying power in the South Western part of Ethiopia; providing stable power to the Omo Kuraz Sugar Factory currently under construction, the Arba Minch Industrial Park to be built in the future and residents in the area; and contributing to the export –oriented manufacturing infrastructure, balanced regional development and quality of life in the southern region.”
Adding he said that the second project loan amounting 94 million USD has main objectives of contributing to sustainable increase in agricultural production; to construct the stable irrigation infrastructure ; and to increase farm household incomes and to alleviate the absolute poverty in Ada’a-Becho plain, Oromia state.
The project has a unique nature of creating synergy between ground water irrigation development and rural development. It considers the importance of agricultural value chain to increase production and income, and to boost the region’s economic growth. It follows the integrated approaches to rural development, which incorporates agricultural infrastructure, technical assistance and training programs, he added.
Shin Deog-Yong, Senior Executive Director, EXIM Bank of Korea for his part said that Ethiopia is one of the most important partner countries for Korea and it leads the development of Africa
based on its development potential and strong governance. Starting with the first power project in 2011, Korea EXIM Bank has steadily increased its financing support to the socio-economic infrastructure necessary for economic development goal in Growth and Transformation Plan II.
“I strongly believe that today’s signing ceremony will serve as the momentum for the enhanced mutual cooperation between two countries. Especially, considering its major role of energy infrastructure in national economic development, ‘Southern Extension of National Electricity Grid Power Transmission Project’ will tremendously help stabilize power shortage in the South Nations Nationalities and Peoples state including the new industrial park area, and boost the Ethiopia’s economic progress,”
Adding he said that as for ‘Ground Water Irrigation Development and Rural Development Project’, given that the agriculture is the primary sector of Ethiopia’s economy, developing tube well, irrigation infrastructure and rural development the project will carry a great benefit to the Oromia state where local farmers have suffered from lack of water supply among others.
According to Dr. Messay the impact of the loan agreements is multidimensional. “On one hand,” he said “financial dearth is among our many problems and the loan agreements help our country lessen its financial and hard currency deficit as the loan comes in foreign exchange. Technology transfer is also expected along with the finance.
“The other is, these countries have blood tied relation and Koreans also acknowledge it. Ethiopia contributed its soldiers under UN when their country was in devastative war.” Therefore, the impact of the loan agreements is social, political and economical, he noted.
It is learnt from history that Ethiopia-South Korea relation goes back over 6 decades ago. During Korea war (1950-53) over 6,000 Ethiopian soldiers fought for South Korea and Ethiopia was a friend in need at that time.
The Ethiopian Herald April 30/2019
BY BACHA ZEWDIE
