Ethiopia’s membership in the BRICS (Brazil, Russia, India, China, and South Africa) bloc brings forth a multitude of advantages, particularly in terms of investment inflows and access to the New Development Bank (NDB) of BRICS. As one of Africa’s emerging economies, Ethiopia stands to benefit significantly from its inclusion in this influential group of emerging markets. By leveraging BRICS membership, Ethiopia can attract increased Foreign Direct Investment (FDI), gain access to development financing and foster sustainable economic growth and development.
Scholars of the field agree that membership in the BRICS would open doors to increased FDI inflows into Ethiopia. As an integral part of the group, Ethiopia would attract attention from investors looking for promising opportunities in Africa. BRICS’ nations collectively represent a considerable share of global FDI outflows, and Ethiopia’s inclusion would position it as an attractive destination for investment. Increased FDI would spur economic growth, create employment opportunities, and contribute to infrastructure development and industrialization in Ethiopia.
Approached by the Ethiopian Press Agency (EPA), an economist and policy advisor, Constantinos Berhetesfa (PhD) said that Ethiopia’s membership in BRICS will also pave the way to become a member of the NDB. It would indeed provide the country with additional financial support and potential debt reduction benefits.
As to him, Ethiopia, as a member of the NDB, would gain access to development financing from the bank. The NDB provides loans, grants, and other financial instruments to support infrastructure projects, sustainable development initiatives, and economic growth in member countries. Ethiopia could tap into these resources to fund crucial infrastructure projects, such as roads, railways, energy, and water supply systems, which are vital for economic development.
Furthermore, membership in the NDB would allow Ethiopia to diversify its sources of funding. Relying on a single source of financing can increase the vulnerability of a country’s economy. By accessing funds from the NDB, Ethiopia can diversify its debt portfolio, potentially reducing borrowing costs and improving debt sustainability.
He further mentioned that the NDB offers competitive interest rates and loan terms to its member countries. Ethiopia could benefit from these favorable conditions when accessing financing from the bank. Lower interest rates would reduce the burden of debt servicing, freeing up resources for other development priorities and investments in key sectors of the economy.
According to him, Ethiopia’s membership in the BRICS could provide opportunities to secure funding for projects aligned with its own sustainable development goals, such as renewable energy, climate change mitigation, and environmental conservation. Financing such projects not only contributes to Ethiopia’s sustainable development agenda but also enhances the country’s attractiveness to international investors and development partners.
Documents also revealed that becoming a member of the NDB, can leverage the bank’s financial resources, favorable loan terms, and expertise to reduce its debt burden, access additional funds for development projects, and promote sustainable development. This membership would contribute to Ethiopia’s efforts to achieving its economic growth objectives and addressing its developmental challenges.
In addition to this, the NDB also offers technical assistance and expertise to its member countries. He also emphasized that Ethiopia could benefit from capacity-building programs, knowledge sharing, and best practices in areas such as project management, infrastructure development, and sustainable finance. This support can strengthen Ethiopia’s institutional capacity, improve project implementation, and enhance its overall development effectiveness.
According to Surafel Getahun, Lecturer of Political Science and International Relations at Dire Dawa University, Ethiopia should view the BRICS bloc as an alternative economic coalition rather than just as a means to gain political influence.
He believes that the presence of BRICS will prompt financial institutions like the IMF and the World Bank to explore schemes for improving their operations that ultimately benefit Ethiopia and other member countries. To optimize its engagement with various international organizations such as the World Bank, IMF, and other BRICS members, Surafel suggested that Ethiopia should establish a platform to facilitate productive relations.
Joining BRICS offers Ethiopia the advantage of reducing its dependence on USD and, as the largest importer; it enables the nation to borrow in other currencies like RMB. This alleviates the burden of borrowing and repayment, which was previously limited to the Dollar, he perceived.
Moreover, joining BRICS would facilitate deeper trade relations between Ethiopia and the member countries. As an emerging economy, Ethiopia would gain access to larger markets, expanding its export potential. The existing trade ties between the BRICS’ nations would provide a platform for Ethiopia to diversify its export base and reduce its dependency on traditional markets. Additionally, membership in BRICS could lead to preferential trade agreements and reduce trade barriers, enabling Ethiopian business actors to access new markets and increase their competitiveness on a global scale, he noted.
Citing Ethiopia’s strategic geopolitical location, rapidly growing economy, and large population as key factors behind the country’s admittance into the BRICS alliance, Surafel added that BRICS’ nations have made significant strides in various sectors, including technology and innovation. Accordingly, Ethiopia’s membership in BRICS would foster technological cooperation and knowledge transfer, allowing Ethiopia to benefit from the expertise and experiences of the member countries.
Collaboration in areas such as renewable energy, agriculture, manufacturing, and information technology could accelerate Ethiopia’s technological advancement and promote sustainable development. The exchange of best practices and expertise would contribute to capacity building and human resource development in Ethiopia, he added.
As to him, BRICS membership would enhance Ethiopia’s reputation as an attractive investment destination. Being part of a prominent group of emerging economies signals stability, economic potential, and growth prospects. This increased investor confidence would attract more Foreign Direct Investment (FDI) into Ethiopia, as investors seek opportunities in countries with strong market potential and favorable investment climates.
By the same token, BRICS countries have established investment funds, such as the BRICS New Development Bank (NDB) and the BRICS Contingent Reserve Arrangement (CRA). As a member country, Ethiopia would have access to these funds, which can provide financial support for infrastructure development projects, industrialization initiatives, and other priority sectors. This access to BRICS investment funds would augment Ethiopia’s own efforts to attract investment and promote economic development.
Surafel further explained that BRICS membership would facilitate networking and collaboration with investors from member countries. Ethiopia would have
the opportunity to engage with BRICS counterparts through various platforms, such as investment forums, business conferences, and trade delegations. This expanded investment network would enable Ethiopian businesses and government entities to connect with potential investors, explore partnerships, and access new sources of capital.
Scholars also agree that BRICS countries possess advanced technological capabilities in several sectors, including manufacturing, infrastructure, renewable energy, and information technology. Ethiopia’s membership in BRICS would create avenues for technology transfer and knowledge exchange, enabling Ethiopia to benefit from the expertise and experiences of the member countries. This transfer of technology would enhance Ethiopia’s industrialization efforts, increase productivity, and improve competitiveness, attracting more investment in high-value sectors.
As to them, the membership would facilitate collaboration and investment in priority sectors identified by the Ethiopian government. The country’s development plans emphasize sectors such as agriculture, manufacturing, energy, infrastructure, and digital technology. BRICS member countries’ expertise and investment in these sectors can complement Ethiopia’s development objectives, leading to joint ventures, technology partnerships, and increased investment flows in areas aligned with Ethiopia’s growth strategy.
This membership can also aid Ethiopia’s regional integration efforts. The BRICS group has been actively involved in regional economic initiatives such as the Belt and Road Initiative and the African Continental Free Trade Area (AfCFTA). Ethiopia’s participation in BRICS would strengthen its position within these initiatives, fostering regional trade expansion, market access, and investment opportunities.
Overall, BRICS membership would enhance Ethiopia’s investment climate, attract more FDI, facilitate technology transfer, and expand its investment network. These advantages would contribute to Ethiopia’s economic development, industrialization, and job creation, ultimately driving sustainable growth and prosperity. Through leveraging these trade-related advantages, Ethiopia’s membership in BRICS could significantly enhance trade relations, expand export markets, and attract investment, thereby boosting Ethiopia’s economic growth and development.
Ethiopia’s potential membership in BRICS holds promising economic benefits for the country. Enhanced FDI, expanded trade relations, technological cooperation, and infrastructure development are among the advantages that Ethiopia’s membership in BRICS could bring. By leveraging the platform provided by BRICS, Ethiopia can accelerate its economic growth, attract investment, and foster sustainable development. It is crucial for Ethiopia to continue engaging with BRICS nations and pursue its membership aspirations to harness the full potential of this influential group.
BY HIZKEL HAILU
THE ETHIOPIAN HERALD THURSDAY 31 AUGUST 2023
