Effect of the strong economic growth in Ethiopia on its neighborcountry relations

Term Paper 2016 11 Pages

Politics - International Politics - Region: Africa


How does the recent strong economic growth of Ethiopia affect its neighbor- country relations?


This essay analyses and interprets changes in foreign relations between Ethiopia and its neighbor states dependent on Ethiopia ’ s strong economic growth in recent years. The author bases his analysis on the rational-actor model of foreign policy analysis. Ethiopia ’ s economic growth is strongly tied to its investments in agriculture and electricity from hydropower, which not only creates opportunities for the region but also causes some negative externalities. The treat of water deficiency is particularly high for Egypt, which largely depends on the waters of the Nile, with its supply being threatened by the completion of the Grand Ethiopian Renaissance Dam (GERD) in 2017. Water politics with regards to foreign policy in addition to domestic conflict potentials are the most significant political challenges for Ethiopia today. The rational-choice model will help to identify these challenges in greater detail and country-specifically and will help to provide solutions for informed decision-making.


Ethiopia has historically always been a remarkable nation: it is the only African nation that has never been colonized and its existence as a nation can be traced back to biblical times, around the 9th century BC. Ethiopian legend claims the lineage of its empire, which formally existed until 1975, traces back to King Solomon and the Queen of Sheba, who apparently gave birth to the first Axumite emperor, Menelik I. With the fall of the Abessynian emperor Amha Selassie, the almost 3.000 year-old monarchy was replaced by the Socialist-inspired military dictatorship of Mengistu Haile Mariam, who earned infamy through various human rights violations and aggressions towards neighboring countries Eritrea and Somalia. The Mengistu’s Derg-regime was eventually defeated in 1991 by the Ethiopian People's Revolutionary Democratic Front (EPRDF), which since then represents the ruling government of the Federal Democratic Republic of Ethiopia. Ethiopia has since then become a federal parliamentary republic with its current ruling party being embedded in the political ideologies of revolutionary democracy and Maoism (Abbay, 2004). Interestingly, Ethiopia has managed to sustain a high economic growth with its GDP growth averaging 8.4% annually, between 2001 and 2010 (Ernst & Young, 2012 see appendix ‘Graph 1’). The growth of its GDP shows it is likely to increase further and it is expected to reach 100 billion USD by 2020 (statista.com, 2016).

Acemoglu & Robinson (2012) and North et al (2007) among other prominent authors in development economics, political sciences and their related fields, have studied the potential effects strong economic growth can have on limited-access orders (LAOs). The definition of LAOs, which encompasses most developing and underdeveloped economies, implies that economic and political sectors are strongly interlinked. It follows that economic power usually translates into political power and vice versa. Strong economic growth in LAOs often leads to the emergence of new economic elites who quickly gain political influence through their ability to acquire military capabilities. Therefore, strong economic growth in LAOs can lead to domestic conflict and even civil war. Unfortunately, not much literature has been published on the extent to which economic growth of a country influences political relations with its neighboring countries. This essay attempts to go beyond the domestic perspective and tries to analyze how Ethiopia’s recent economic growth has influenced foreign relations with its neighboring countries. Its neighboring countries Djibouti, Egypt, Eritrea, Somalia and Sudan will be examined on the basis of their relations with Ethiopia and theoretical explanations will be given to which extent Ethiopia’s strong economic growth impacts those relations.

There are numerous theories in political sciences that can be used as a theoretical basis to assess Ethiopia’s relations with its neighboring countries. This essay will rely on the rational-actor model. Rationality assumption is a powerful explanatory principle as it can account for a large number of empirical facts about human decision-making (Allison & Zelikow, 1999). As the rational-actor model assumes that all state actors to act according to the maxim of expected utility maximization, the model can be applied in the same fashion to all states, although dependent on economic growth. Despite each state being different in specific factor conditions, political ideologies or government types, it is still reasonable to assume that each actor is committed to maximize their expected utility rather than the opposite. Undoubtedly there is no such thing as perfect rationality, as human emotions and ideologies, imperfect information and information asymmetry among other factors are limitations to that principle. However, one strength of the rational-actor model is its flexibility to account for limitations and integrating the aforementioned factors - i.e. meaning that even (perceived) ‘irrational’ behavior of states can be rationalized. Hill (0000) argues that despite there is always being a degree of irrationality in real-life decision- making, the rational-choice model provides a clear view on how decisions should be made, particularly in procedural terms. Interestingly, the Ethiopian government stated in their 2002 paper on ‘Foreign Affairs and National Security, Policy and Strategy’ that among the biggest mistakes the preceding Derg regime committed was its commitment to be guided by ideological thought and a type of ‘siege mentality’ (the belief to be surrounded by enemies) in foreign policy decision-making. The paper concluded that it was irrationality guided by ideology that led the Derg regime to engage in costly wars with its neighbors Somalia and Eritrea, which had devastating effects on the Ethiopian society and economy alike. Moreover, the paper stated that the primary goal of the EPRDF government with regards to foreign policy decision-making, are ensuring national security and national survival as well as advancing economic development and the democratization of Ethiopia.

The rational-choice approach that the argument this essay is primarily based on is further supplemented by the small state/big state logic that was developed i.a. by Duval & Thompson (1980) and Keohane (1969). It needs to be mentioned however, that from the point of the author the small state/big state logic essentially has the rational-choice model at its core. The reason being that the small state/big state logic recommends different strategies depending on the size/power of a state in its foreign relations endeavors, with expected utility maximization being the aim of those endeavors.

Ethiopia’s status quo in economic development and neighbor relations:

Ethiopia’s direct neighbors at the Horn of Africa are: Djibouti, Eritrea, Kenya, Somalia, South Sudan and Sudan. Ethiopia shares long standing links with these countries, in areas such as language, culture, history and natural resources. As a result, changes in Ethiopia directly affect these countries, while changes within these countries are likely to affect Ethiopia.

Although Ethiopia is landlocked, its neighboring countries have ports that can provide services. There are also rivers connecting countries in the Horn of Africa with Ethiopia that have a direct bearing on Ethiopia’s development. This is particularly true of South Sudan, Sudan, Somalia, Kenya and most importantly Egypt up north. Unfortunately, there have been particularly heated arguments between Ethiopia, Sudan and Egypt regarding the use of the waters of the Nile River, particularly in recent years. This will be discussed further, later in this essay. Since Ethiopia has had a history of both friendship and hostility with the countries in the Horn of Africa, this could lead to emotional aspects influencing foreign policy decision-making that all actors need to consider and should be wary of. With regards to the economic perspective, the Horn countries are short of capital and finance and cannot be considered as sources of investment and development finance in the short- to mid-term.

Ethiopia is a multi-ethnic state inhabiting around 80 different ethnic groups and after a Christian majority it is home to a large Muslim minority counting around 34% of the total population (Central Statistical Agency, 2007). Moreover there exists also a small Jewish community as well followers of African polytheist religions. Until recent times there has always been minor and major conflicts between the central government and various ethnic groups as well amongst ethnic groups themselves. The Ethiopian government fears that external powers could exploit this vulnerability and therefore escalate existing conflict potentials. This vulnerability is partially owed to the culturally imperialist tendencies of the Amhara, that have not only been the most dominant ethnic group historically (all but one Ethiopian emperor have been Amhara), but also continue to dominate within the EPRDF, leading to a perceived favoritism of the Amhara and propagation of the Amharic language as the primary official language in Ethiopia (Abbay, 2004). The centripetal forces of the long-term assimilationist policies have sparked ethno-nationalist centrifugal forces particularly among the Oromo, Somali and Gambela people. These conflict potentials could not have been exploited recently, since political entrepreneurs were lacking in order to stir up ethnic uprising. Nevertheless these are tendencies that could be exploited from outside forces that would have an interest in political instability in Ethiopia.

Being a Limited Access Order (LAO) the Ethiopian government is not fully capable of establishing a monopoly of violence in all areas of the country, giving rebel groups and terrorists the possibility to emerge and grow. Emergence of Islamist groups in Sudan and Somalia, as well as the propagation of Salafi ideology by the states of the Arabian Gulf poses an additional security threat to Ethiopia.

Regarding the topic of economic growth, the term itself is first and foremost an abstract concept that if it not investigated more deeply has little meaning. Economic growth can be achieved through numerous ways, with Ethiopia being traditionally strong in the agricultural sector. Ethiopia is the 5th largest producer of coffee worldwide (worldatlas, 2016) and coffee trade makes up a large part of the Ethiopian economy. Overall, agriculture accounts for 46.3% of the GDP, 60 % of exports and 80% of total employment. Nevertheless, Ethiopia has stayed below its capabilities in the agricultural sector, due to lack of good governance, absence of knowledge and expertise. The Ethiopian government is dedicated to build its national competitive advantage in the agricultural sector, particularly by utilizing its 9 major rivers and 12 lakes more effectively for irrigation purposes (The Federal Democratic Republic of Ethiopia, 2002). Furthermore Ethiopia plans to become Africa’s largest provider of electricity, of which current output is already 90% sourced from hydropower. In order to advance further in the sector of electricity Ethiopia plans to increase the number of dams across its major rivers with the Grand Ethiopian Renaissance Dam (GERD), being the largest, said to be completed in late 2017.

Dealing with the Horn countries:

The Horn countries are likely to benefit from increase in port services to Ethiopia and increased trade with it. Djibouti’s GDP for instance already depends largely on providing port services to Ethiopia (The Federal Democratic Republic of Ethiopia, 2002). Moreover the Horn countries are likely to be the beneficiaries of Ethiopia’s hydropower investments, as Ethiopia plans to sell their electricity to neighboring countries as well (The Federal Democratic Republic of Ethiopia, 2002). On the negative side it is possible that Ethiopian dam projects lead to further dehydration in its neighboring countries that are in a region frequently struck by drought. For example, Kenyan farmers and fisherman living in the area of Lake Turkana have reported that since the completion of the Omo River dam the water-level has decreased significantly - despite complaints to their local government the Kenyan government has not yet approached Ethiopia on that matter (NewsLook.com, 2012). Ismail Serageldin, who was the vice president of the World Bank in 1995 is often quoted to have said that the wars of the 20th century were fought over oil, whereas the wars of the 21st century will be fought over water. This prediction has been repeated in 2009 by UN Secretary-General Ban Ki-moon, saying that risk of water scarcity may transform peaceful competition into violence. One may ask whether these dark predictions are realistic and if yes, whether they apply to the situation between Ethiopia and its neighbors of the Horn region? On a global average, each person drinks one cubic meter of water per year and uses 100 cubic meters water for washing and cleaning per year. On average each person also accounts for 1,000 cubic meters annually for the food consumed (Barnaby, 2009).The potential negative externalities the Horn countries may suffer due to Ethiopia’s dam projects, could be solved by trade negotiations that legally compels Ethiopia to deliver food and agriculture products as well as electricity to neighboring nations. The concept of trading food for water has been largely developed by Allan (2000) and has been often referred to as the concept of ‘virtual water’. ‘Virtual’ in the sense that in arid regions where people depend on irrigation, imported food can be a substitute to fulfill theses needs as it saves on the water required to cultivate crops.

The rational-choice matrix of Table 1 (see appendix) displays the effects and rational decisions the governments of the Horn countries would likely exhibit as a response to Ethiopian economic growth and its specific implementation strategies. The matrix also includes the likely responses of the Ethiopian government to the actions of its neighbors. Overall, the Horn countries benefit from Ethiopia’s economic growth, especially through the increased opportunity to offer port services and the potential to receive electricity.



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University Witten/Herdecke – Wirtschaftswissenschaften
Politik Internationale Beziehungen Foreign Relations International Relations Ethiopia Ostafrika Äthiopien




Title: Effect of the strong economic growth in Ethiopia on its neighborcountry relations