Ethiopia to develop through infrastructure investment Extract 1: Ethiopia economic overview With 99.4 million people, Ethiopia has the second largest population in Sub-Saharan Africa. Its annual population growth rate was 2.5% in 2015. It is also one of the world's poorest countries. The country's per capita income of US$590 is substantially lower than the regional average. In 2011, 33.5% of the population lived in extreme poverty. The economy has experienced strong and broad-based growth over the past decade, averaging 10.8% per year between 2003 and 2015 compared to the regional average of 5.4% per year. Private consumption and public investment have been the main drivers of aggregate demand in recent years. In 2017, the government was implementing the second phase of its Growth and Transformation Plan (GTP II), due to run from 2015 to 2020. Its aim was to continue improvements in physical infrastructure through public investment, transforming the country into a manufacturing hub. The goal was to reduce poverty in Ethiopia by 2025. Developments in the balance of payments in Ethiopia have been largely driven by the implementation of major infrastructure projects in the country that contributed to higher current account deficits, balanced by growing foreign direct investment (FDI) and long-term foreign borrowings. Source: World Bank, April 2017 Extract 2: Ethiopia plans US$90 million infrastructure spending spree Despite Ethiopia being a landlocked country, the vast majority of its imports and exports are conveyed by sea. The ports in neighbouring country Djibouti are crucial to Ethiopia because they are used for 90% of its trade. In January 2017, a US$4 billion railway project was officially completed linking Ethiopia's capital, Addis Ababa, to the main port in Djibouti, cutting the travel time along the route from three days to just 12 hours. It was expected to cut the cost of transporting freight by a third, having a huge impact on trade flow and the lives of Ethiopians. The project was partially built and funded by Chinese companies with the assistance of the Chinese government. China Railway Group and the China Civil Engineering Construction Corporation built the railway line, while China loaned Ethiopia US$2.49 billion to build the new railway. Contracts were awarded to Chinese firms to build various sections of the railway. Chinese investment in Ethiopia's infrastructure provides opportunities for Chinese steel and construction industries. China has an overcapacity in steel and needs to find markets for its excess supply. China also has the technical expertise and companies available to assist in major foreign infrastructure projects. Chinese infrastructure investment in Ethiopia is not just limited to the railway network. Chinese firms are also building more than 65% of the new roads in Ethiopia including the prominent Addis Ababa ring road. As part of its policy of investing in infrastructure, the Ethiopian government is spending US$89 million of its own revenue upgrading the national road network. Source: Neil Ford, African Business, 21 March 2017 Table 1.1: Ethiopia's current account of the balance of payments, 2015 Balance of trade in goods and services (US$ million) -14275 Current account balance (US$ million) -7427 Table 1.2: Ethiopia's Foreign Direct Investment inflows, 2012–2015 (US$ millions) Year | 2012 | 2013 | 2014 | 2015 ---- | ---- | ---- | ---- | ---- | 279 | 1281 | 2132 | 2168 Source for tables: IMF World Economic Outlook, October 2016