VZCZCXRO8435
RR RUEHROV
DE RUEHDS #2434/01 2861153
ZNR UUUUU ZZH
R 131153Z OCT 09
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC 6455
INFO RUCNIAD/IGAD COLLECTIVE
RUEPADJ/CJTF HOA
RUEAIIA/CIA WASHINGTON DC
RUEKDIA/DIA WASHINGTON DC
RUEWMFD/HQ USAFRICOM STUTTGART GE
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SECTION 01 OF 09 ADDIS ABABA 002434 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR AF/EPS - ABREITER AND GMALLORY; EEB/IFD/OMA - 
JWINKLER AND EEB/CBA - DWINSTEAD 
DEPARTMENT PASS TO USTR FOR PATRICK COLEMAN AND BARBARA GRYNIEWWICZ 
 
DEPT OF COMMERCE FOR ITA MARIA RIVERO 
DEPT OF TREASURY FOR REBECCA KLEIN 
USAID FOR AFR/EA - HELLYER, DALTON 
AFR/SD - CURTIS 
 
E.O. 12958: N/A 
TAGS: ETRD ECON EFIN EINV BEXP AF ET
SUBJECT: ETHIOPIA AGOA COUNTRY ELIGIBILITY REVIEW 2009 
 
REF: STATE 97769 
 
ADDIS ABAB 00002434  001.2 OF 009 
 
 
THIS CABLE IS SENSITIVE BUT UNCLASSIFIED.  NOT FOR INTERNET 
DISTRIBUTION. 
 
BACKGROUND SUMMARY 
------------------ 
 
¶1. (U) After a difficult period of socialist dictatorship and civil 
war, the Government of Ethiopia (GoE) in the early 1990s began a 
transition towards a more open economic system.  While government 
and ruling party-affiliated enterprises continue to dominate the 
economy, the GoE has carved out some role for the private sector by 
liberalizing investment in some specific sectors, rationalizing 
foreign trade rules, and accelerating privatization.  There are no 
special barriers to U.S. trade and investment, although a number of 
sectors remain closed to foreign investment.  The GoE still 
maintains monopoly control over several key sectors, including 
telecommunications, power generation, and civil aviation.  Ruling 
party-owned enterprises also enjoy de facto preferences, including 
duopolies with state-owned enterprises.  There is no tangible 
indication that the GoE plans to open the state controlled sectors 
in the near future in spite of continued interest from private 
domestic and foreign investors and Ethiopia's interest in moving 
forward in the World Trade Organization (WTO) accession process. 
 
¶2. (U) On the political front, since 2005 the GoE has systematically 
closed political space by restricting the public expression of 
dissent of civil society, the press, and political opposition 
through legislation and intimidation.  Since the 2005 elections, the 
ruling party's engagement with the opposition has been mixed at 
best, oscillating between nominal concessions on power sharing and 
impediments to opposition leaders accessing their constituencies. 
Although the incarceration of journalists has ebbed, the GoE 
continues to retaliate against journalists in other ways for running 
unflattering stories, suppresses information, and restricts 
international journalists' access to the country.  The GoE actively 
jams international radio signals, including Voice of America, and 
internet sites that are critical of the GoE.  Harassment and 
intimidation of opposition leaders, supporters at a local level, and 
press continue to persist as the country prepares for the 2010 
national elections.  END SUMMARY. 
 
MARKET-BASED ECONOMY 
-------------------- 
 
¶A. Major Strengths Identified: 
 
¶3. (U) GDP growth:  The GoE has maintained double-digit Gross 
Domestic Product (GDP) growth for six consecutive years.  Reported 
Real GDP growth was 11.6 percent in 2007/08 and 10.1 percent in 
2008/09 [Note: Ethiopia's fiscal year runs from July 8 to July 7. 
End Note.]  The recent economic growth is primarily due to 
investment in infrastructure, manufacturing, and services.  In 
addition, local governments have made available large tracts of land 
for commercial farms to both foreign and local investors and the GoE 
offers many duty-free incentives to those planning to export goods. 
 
 
¶4. (U) GDP growth (cont.):  Given severe power outages, poor 
harvests, weak export performance, and the impact of the global 
financial crisis, many economists question the credibility of the 
GoE's growth figures this year.  The World Bank and the 
International Monetary Fund (IMF) estimate Ethiopia's 2008/09 real 
GDP growth at around 6.5 percent.  Even if the GoE's figures are 
disputed, real GDP growth of six to seven percent is still quite an 
achievement, especially given the current global climate. 
 
¶5. (U) WTO accession:  Ethiopia's WTO accession process has been 
underway since 2003.  Ethiopia submitted a Memorandum of Foreign 
Trade Regime to the WTO in December 2006, sent replies to the first 
round of WTO member questions in January 2007, and held its first 
Working Party Meeting in May 2008.  Ethiopia has submitted all 
required documentation to date and is now waiting for the second 
 
ADDIS ABAB 00002434  002.2 OF 009 
 
 
Working Party meeting to be scheduled in winter 2009.  Ethiopia has 
made substantial progress in drafting new legislation and 
implementing capacity-building measures relevant to accession with 
the help of technical assistance from a number of donors, including 
the United States.  The USAID WTO Accession project continues to 
provide technical assistance to the Ministry of Trade and Industry 
as it prepares for the second Working Party meeting. 
 
¶6. (U) AGOA:  Ethiopia's exports under the African Growth and 
Opportunity Act (AGOA) were USD 18 million in 2008, doubling its 
2007 exports of USD 9 million.  For the first six months of 2009, 
Ethiopia's AGOA exports were slightly down from last year at USD 6.8 
million.  A significant part of Ethiopia's export growth under AGOA 
is due to USAID's AGOA+ program and its promotion of Ethiopian 
products.  The GoE has stated that the textile sector is one of the 
key investment areas for its Industrial Development Plan and will 
begin trials for Bt cotton (i.e., disease-resistant cotton) to raise 
production levels in support of the growing sector.  As a result of 
the GoE's push and AGOA benefits, the number of textile and apparel 
companies has increased to over 80 in 2009 from only 39 in 2007. 
Included in these numbers are several new foreign-based 
manufacturers (mainly Turkish). 
 
¶B. Major Issues and Problems Identified: 
 
¶7. (SBU) Government/ruling party companies:  Ethiopia's State Owned 
Enterprises (SOE) and ruling party-owned companies continue to 
receive preference by the GoE when it comes to rewarding contracts, 
accessing limited foreign exchange (forex) reserves, and securing 
favorable loan terms from state-owned banks.  These approximately 
200 entities dominate the market in nearly every sector in Ethiopia 
and continue to take on large amounts of debt from the Chinese and 
Indian governments as well as private entities.  For example, the 
Ethiopian Telecommunications Corporation (ETC) signed a USD 2.4 
billion vendor financing loan with Chinese-owned Zhong Xing 
Telecommunication Equipment Company Limited (ZTE).  The 
government-owned Maritime and Transit Services Enterprise controls 
the overwhelming majority of clearing and forwarding operations. 
Private competition to state-owned Ethiopian Airlines is prohibited 
by law for most domestic air transport.  While there is no limit in 
cargo flights, private competitors can only operate with planes up 
to 20 seats.  The financial records of these public entities are not 
publicly available.  While official GoE external debt stands at $2.7 
billion, external debt accumulated by SOEs raises the GoE's de facto 
external debt to an estimated $6 billion.  The USG granted Ethiopia 
a waiver from the transparency requirements of the Department of 
State, Foreign Operations, and Related Programs Appropriations Act 
in fiscal year 2009 in order to continue receiving USG assistance. 
 
 
¶8. (U) Investment climate:  The private sector in Ethiopia finds it 
increasingly difficult to operate given recent GoE policies aimed at 
combating high inflation, poor tax compliance, and the forex crisis. 
 GoE officials ramped up seizures of "excess" hard currency from 
departing air travelers and repeatedly approached businesses for tax 
payments they allegedly owed in an inconsistent manner.  The GoE 
also formally instructed all banks to no longer accept many 
duty-free imported goods as loan collateral and to cap all lending 
at current outstanding loan amounts.  Additionally, foreign 
companies face significant delay in their repatriation of profits, 
as the central bank is not allocating enough hard currency to this 
process.  These GoE actions are further obstacles to private sector 
growth in an already tough business climate featuring an acute forex 
shortage, an average annual inflation rate of 24 percent, and power 
outages several days per week.  The forex crisis has stalled 
business in both the private and public sectors and is hurting U.S. 
business interests in Ethiopia as they are unable to import inputs. 
While forex reserves more than doubled since a low of USD 700 
million in December 2008, the IMF now predicts the forex crunch to 
get worse once again. 
 
¶9. (U) Privatization:  The GoE's Privatization and Public Enterprise 
Supervising Agency has continued efforts to transfer SOEs to the 
private sector; however, most deals strongly favor the GoE and many 
 
ADDIS ABAB 00002434  003.2 OF 009 
 
 
businesses have to be relisted for sale due to the lack of interest 
in the businesses the GoE is willing to sell.  The GoE continues to 
dominate the telecommunications and financial services sectors.  ETC 
is a state-owned monopoly working in partnership with the 
Chinese-owned ZTE.  The financial services sector has opened up to 
some local private investment, but remains dominated by state-owned 
banks and is closed to foreign investment.  Currently, there are 14 
banks, three of which are state-owned.  State-owned Commercial Bank 
of Ethiopia maintained the dominate 46 percent share of total 
banking capital in 2008.  The GoE passed an amended banking and 
financial sector law in July 2008 giving more regulatory power to 
the central bank, still prohibiting foreign investment in the 
sector, putting a cap on individual share holders to a mere 5 
percent of the subscribed capital of a bank, and prohibiting 
individuals' ownership in more than one financial institution. 
 
¶10. (U) Privatization (cont.):  USAID is working within the banking 
sector to increase private sector investment in Ethiopia.  USAID 
signed a loan guarantee scheme (Development Credit Authority-DCA) 
amounting to USD 17.2 million with two local private banks in 
September 2008 in order to support and encourage Ethiopian Diaspora 
and women entrepreneurial investments.  In September 2009, USAID 
signed an additional DCA agreement with two local banks to expand 
credit guarantees of up to USD 6 million for loans to microfinance 
institutions and savings and credit cooperative organizations. 
 
 
¶11. (SBU) Trade deficit:  Ethiopia is experiencing a major balance 
of payments crisis, primarily due to its widening trade deficit. 
This crisis continues to exacerbate Ethiopia's forex crunch. 
Ethiopia registered a trade deficit of USD 5.3 billion in 2007/09 
and estimates peg the deficit at USD 6.2 billion in 2008/09.  The 
deficit is worsening due to flat growth in exports and Ethiopia's 
increasing reliance on imports such as fuel, machinery, and consumer 
goods.  Ethiopia's imports were USD 6.8 billion and USD 7.7 billion 
in 2007/08 and 2008/09, respectively, while exports were only USD 
1.5 billion each year.  Ethiopia's exports were previously growing 
around 20 percent per annum; however, coffee exports fell off 
considerably in the past year.  Coffee is Ethiopia's major export 
earner, but its exports dropped to an estimated USD 376 million in 
2008/09, down from USD 525 million in 2007/08.  The reduction in 
coffee exports appears to be tied to the decline in world prices as 
well as domestic problems associated with the new coffee marketing 
and control legislation and capacity constraints of the newly 
established Ethiopia Commodity Exchange (ECX). 
 
¶12. (U) Trade deficit (cont.):  USAID, in partnership with the GoE, 
is working to boost Ethiopia's exports through its USD 20 million, 
five-year Agribusiness Trade Expansion Program (ATEP) that was 
recently extended through 2011.  The project is a market-led effort 
to increase exports in four key GoE-identified sectors: 
horticulture; coffee; hides, skins and leather; and oilseeds and 
pulses.  Additionally, USAID launched a new phase of its Pastoral 
and Livestock Initiative (PLI II).  This year, the USD 12 million 
effort will expand earlier efforts assisting pastoralist communities 
and livestock producers through diversification of markets, animal 
health trainings, and other income diversification activities to 
raise total exports, increase incomes to livestock dependent 
communities, and elevate the level of healthy safe products in the 
domestic market. 
 
¶13. (SBU) Investment disputes:  Post has received several reports of 
threatened, or actual, property expropriation cases and business 
disputes involving foreign investors and the GoE in recent years. 
Foreign investors have complained of government threats to, and 
actual, seizure of property, land and assets without explanation or 
recourse and government agency impediments to the finalization of 
the return of previously expropriated properties.  Post has also 
heard complaints against the GoE by U.S. companies of unlawful 
contract termination and non-transparent tender award processes. 
Investors involved in disputes have expressed a lack of confidence 
in the judiciary to objectively assess and resolve disputes. 
 
¶14. (U) Land ownership:  All land is owned by the state and each 
 
ADDIS ABAB 00002434  004.2 OF 009 
 
 
regional administration governs its own land title certification 
systems and lease regulations.  Lease terms may extend up to 99 
years.  USAID is working with regional governments to improve land 
registration, which should increase land tenure security. 
 
¶15. (U) Intellectual property rights:  Ethiopia has yet to sign a 
number of major international intellectual property rights (IPR) 
treaties, such as: the Paris Convention for the Protection of 
Industrial Property; the World Intellectual Property Organization 
(WIPO) copyright treaty; the Berne Convention for Literary and 
Artistic Works; and the Patent Cooperation Treaty.  The Ethiopian 
Intellectual Property Rights Office (EIPO) has been tasked only to 
protect Ethiopian copyrighted materials and pirated software, 
foreign works are not considered part of their purview.  Generally, 
EIPO has weak capacity in terms of manpower and law enforcement.  In 
addition, a number of businesses operate in Ethiopia freely using 
well-known trademarked names without permission.  For example, the 
"Mariot" hotel, the new Intercontinental hotel, the Sally Beauty 
Supply store, and the "Olive's" Garden restaurant are all visible 
establishments in the capital city. 
 
POLITICAL REFORMS, RULE OF LAW, AND ANTI-CORRUPTION 
--------------------------------------------- ------ 
 
¶A. Major Strengths Identified: 
 
¶16. (U) Anti-corruption:  In 2008, Ethiopia originally improved its 
ranking in the annual Transparency International Corruption 
Perception Index from 138 to 126 out of the 180 countries.  The 
Anti-Corruption Commission has arrested many officials on charges of 
corruption, including managers from the GoE's privatization and 
customs agencies, the central bank, the Ministry of Mines and 
Energy, and the state-owned Commercial Bank of Ethiopia.  The Ethics 
Commission reported that it arrested and conducted investigations on 
203 corruption suspects from August 2008 to January 2009. 
 
¶B. Major Problems and Issues Identified: 
 
¶17. (U) Political space:  Following the unprecedented strong showing 
by the opposition parties in the 2005 national elections, the 
government and ruling party have significantly restricted political 
space.  Opposition party members and supporters in rural areas 
reported widespread harassment and intimidation by local security 
forces.  There were credible reports of politically motivated 
killings, disappearances, and arrests in 2009.  Most allegations of 
opposition party harassment and intimidation went un-pursued by 
electoral or law enforcement officials. 
 
¶18. (U) Political space (cont.):  Membership in the ruling Ethiopian 
Peoples' Revolutionary Democratic Front (EPRDF) coalition conferred 
preferential treatment in civil servant job assignment/promotion and 
student university assignment/post-graduation employment, and 
increased access to food assistance and subsidized seeds and 
fertilizers.   The EPRDF-controlled executive branch dominates the 
legislature, the judiciary and "watchdog" institutions like the 
Human Rights Commission and the Ombudsman's Institute. 
 
¶19. (U) Political space (cont.):  The GoE continues to impede 
opposition leaders from accessing their constituencies and 
opposition parties report that a requirement that all contributors 
to political parties be registered has had a chilling effect on 
fundraising.  The GoE has brought charges against private newspapers 
suspected of being pro-opposition, charging journalists, publishers, 
and editors for accurate reporting that highlights government and 
ruling party actions in a negative light. 
 
¶20. (U) Local elections:  In April 2008, the country conducted local 
elections for 3.6 million contested seats.  Intimidation and 
administrative impediments impeded opposition parties from 
registering more than sixteen thousand candidates.  Two major 
opposition political parties boycotted the election claiming 
harassment and intimidation by the ruling party and incomplete 
adherence to the electoral law.  The GoE did not allow the 
participation of international observers and the delayed release of 
 
ADDIS ABAB 00002434  005.2 OF 009 
 
 
regulations did not allow many local institutions to observe the 
election.  Of the 3.6 million contested seats, opposition parties 
won only three seats amid accusations of rampant voter and candidate 
intimidation. 
 
¶21. (U) Media law:  Parliament endorsed a new law on Mass Media and 
Freedom of Information in July 2008.  International and local media 
activists expressed their concern over the restrictive nature of the 
law.  The law defines the defamation of government officials as a 
prosecutable offense of state.  A law also restricts private 
ownership in more than one publication and a GoE regulation 
prohibits owners of media outlets from serving on the editorial 
staff.  Three prominent journalists whose media companies were 
dissolved by the GoE in 2007, but who were acquitted of all charges 
again themselves, have continued to be denied the opportunity to 
open new media outlets.  The GoE continued to exercise its monopoly 
printing press to raise the costs of printing newspapers over five 
times in the past three years. 
 
¶22. (U) Civil society law:  A Civil Society Organizations (CSO) law, 
adopted in February 2009, prohibits CSOs that receive more than 10 
percent of their funding from foreign sources from engaging in 
activities that promote human rights and democracy; the rights of 
children and the disabled; equality among nations, nationalities, 
people, gender and religion; or conflict resolution or 
reconciliation.  The GoE has stated the law aims to increase the 
transparency and accountability of CSOs to stakeholders and restrict 
foreign involvement in purely domestic advocacy, but critics of the 
law have expressed concern that it will prevent the capacity 
development of civil society and undermine CSOs' watchdog role. 
 
¶23. (U) Antiterrorism proclamation:  In 2009, the GoE passed an 
Antiterrorism Proclamation granting executive branch-controlled 
security services virtually unlimited authority to take unilateral 
action to disrupt suspected terrorist activities.  The proclamation 
does not require judicial review of such activities, but does give 
the courts the option, ex post, to review past events.  The 
Proclamation authorizes hearsay testimony as adequate in judicial 
proceedings. 
 
¶24. (U) Judiciary system:  The judiciary is weak and overburdened 
and remains subject to influence by the executive branch.  Lengthy 
pretrial detention is common, closed court proceedings occur, and 
detainees are sometimes denied access to legal counsel and visits 
from family members.  The federal police continue to detain 
thousands of citizens without adequate grounds; of the 45,000 cases 
brought to the courts on criminal charges, 65 percent were dismissed 
for an absence of evidence.  The freedom of information provisions 
in the Media Law enacted in 2008 provides for public access to 
government information, but defers implementation for two years. 
Access to government information remains largely restricted in 
practice. 
 
POVERTY REDUCTION 
----------------- 
 
¶A. Major Strengths Identified: 
 
¶25. (U) Productive Safety Net:  As a key intervention to decrease 
Ethiopia's dependency on food aid, protect household assets and 
improve food security of the most vulnerable populations, the GoE 
developed, in harmony with donors, a Productive Safety Net Program 
(PSNP) that is working to strengthen household and community 
resilience to moderate shocks and protect household assets in lean 
times.  With the support of  nine international donors, the GoE 
provides predictable transfers of food and cash to eight million 
people living in 262 of the most chronically food insecure districts 
for up to six months a year.  This program started in January 2005 
and incorporates payments in exchange for labor contributing to 
public works activities and direct transfers to households with no 
excess labor.  Public works are conducted according to the district 
development plan and community based watershed management approach 
emphasizing soil and water conservation, environmental protection 
and reclamation efforts.  Examples include the construction or 
 
ADDIS ABAB 00002434  006.2 OF 009 
 
 
refurbishing of medical clinics, schools, and farmer to market 
roads.  These public works projects have the commitment of the local 
officials and the community for sustainability.  While the ultimate 
goal is to graduate people from food insecurity, emergency relief 
will continue to be required in years of severe shocks.  The next 
phase of the redesigned PSNP has GOE commitment and donor support 
through 2014.  The revised program includes a Household Asset 
Building Program to link the PSNP farmers to markets and micro 
credit to diversify income sources and increasing the productive 
asset base of the family. 
 
¶26. (U) Social services spending:  The GoE policy since the end of 
the 1998-2000 war with Eritrea has been to reduce the share of the 
budget devoted to the military and to use the 'peace dividend' for 
poverty alleviation, food security, and capacity building programs. 
The share of government expenditure on social services is now 
growing at about 30 percent a year according to the World Bank.  The 
GoE is currently implementing its second Poverty Reduction Strategy 
Paper (PRSP), known as the Plan for Accelerated and Sustained 
Development to End Poverty (PASDEP).  This is a five-year 
(2005-2010) framework for aligning donor support for the achievement 
of the Millennium Development Goals.  The first PRSP--the 
Sustainable Development Poverty Reduction Program (SDPRP)--covered 
the three-year period 2002-2005.  Ethiopia completed a three-year 
Poverty Reduction and Growth Facility (PRGF) with the IMF in 2004 
and signed a $241 million Exogenous Shocks Facility (ESF) IMF loan 
agreement in August 2009.  The GoE has targeted food security, 
agriculture-led industrialization, health, education, fiscal 
decentralization, infrastructure development, and capacity building 
down to the district level as development and poverty reduction 
priorities. 
 
¶27. (U) CAADP Compact:  With the August 2009 signing of Ethiopia's 
Comprehensive Africa Agriculture Development Program (CAADP) 
Compact, the GoE has reconfirmed strong commitment to poverty 
reduction through agriculture development.  The CAADP is an African 
Union/New Partnership for Africa's Development (AU/NEPAD) initiative 
endorsed by heads of state as a vision for restoration of 
agricultural growth, food security, and rural development.  During 
the CAADP Ethiopia process, the GoE and development partners 
evaluated existing agriculture development policies and provided 
recommendations to accelerate Ethiopia's agriculture growth.  The 
GoE accepted all recommendations, including harmonizing Ethiopia's 
seed policy with regional countries, accelerating the land 
registration process, and placing more focus on the livestock 
sector.  To support the CAADP Ethiopia Compact, the GoE and 
development partners are collaborating through the Rural Economic 
Development and Food Security (RED&FS) Working Group.  Under RED&FS, 
the three focus programs are food security, agriculture Growth and 
sustainable land management.  In the coming months, both development 
partners and the GoE will develop a Policy Investment Framework 
based on the CAADP Ethiopia Compact.  The CAADP will effectively 
become the agriculture/food security component of the next iteration 
of the PASDEP, set to begin in 2010. 
 
¶28. (U) Targeted aid flows:  After some direct budget support from 
donors was briefly put on hold after the 2005 election, a new 
mechanism for aid flows was established.  The system changed from 
one of direct budgetary support to providing funds to local 
government entities through a new program, the Protection of Basic 
Services (PBS) grant.  Under PBS, aid funds are targeted, tightly 
monitored, and directed at the regional and district levels. 
 
¶B. Major Problems and Issues Identified: 
 
¶29. (U) Food security:  Ethiopia ranks among the poorest and most 
vulnerable countries in the world.  Any major shock, natural or 
economic, can push millions of people into destitution very quickly. 
 In 2008, Ethiopia experienced a complex food security shock where 
consecutive failed rains were compounded by rising global food and 
oil prices.  In some areas, significant portions of the year's 
harvest was lost, and at the same time staple food prices doubled 
over last year's levels.  This complex emergency proved to be a 
severe shock, strong enough to have the GoE call for emergency 
 
ADDIS ABAB 00002434  007.2 OF 009 
 
 
assistance from the international community.  PSNP donors strongly 
believe that if the PSNP were not in place, and functioning, the 
impact of this year's drought and price increase would have been 
more devastating to many chronically food insecure communities. 
 
 
¶30. (U) Food security (cont.):  The drought and high food prices 
have continued into 2009 with 4.9 million people receiving emergency 
food assistance.  In July 2009, after a much below normal first 
season harvest and a dismal outlook that El Nino will severely 
reduce production in the main cropping season (to be harvested in 
November and December), the GoE recognized that up to 6.2 million 
people would need emergency assistance through the end of the year 
and into 2010.  This figure does not include the 5.4 million PSNP 
beneficiaries who are also in need of an additional one to two 
months of assistance.  Despite the clearly poor agricultural 
performance in 2008 and 2009, the GoE released exaggerated harvest 
figures and GDP growth figures, which minimized the extent of the 
genuine need for humanitarian assistance and inflated per capita 
income figures.  Anecdotal reporting from the 2009 review of the 
largely-failed Belg rains (shorter first season rains) suggests that 
the GoE is under-reporting the extent of humanitarian needs in areas 
which have traditionally favored the political opposition. 
 
¶31. (U) Reliance on donor funding:  Achieving the Millennium 
Development Goal of cutting poverty in half by 2015 will require 
higher rates of economic growth, substantial improvements in 
productivity, increased foreign aid, greater private sector 
involvement and a more investment in infrastructure.  Domestic 
sources of financing are inadequate for current levels of spending 
growth, and so the current budget calls for a sharp increase in 
planned external assistance.  Foreign donors have indicated they 
will provide substantial additional aid, but Ethiopia is clearly 
increasingly vulnerable to donor good will, and is likely to remain 
heavily dependent on high levels of donor funding for some time to 
come.  GoE progress on governance concerns will be essential in 
order to assure adequate levels of external assistance. 
 
WORKERS' RIGHTS, CHILD LABOR, AND HUMAN RIGHTS 
--------------------------------------------- - 
 
¶A. Major Strengths Identified: 
 
¶32. (U) Workers' rights:  The right to form labor associations and 
engage in collective bargaining is constitutionally guaranteed for 
many workers, but excludes managerial employees, teachers, and civil 
servants.  Most International Labor Organization (ILO) core labor 
standards have been enacted into law.  All eight core ILO labor 
standards have been ratified, including Conventions 182 and 138 on 
the Worst Forms of Child Labor and minimum working-age requirements. 
 Ethiopian law provides for a 48-hour legal workweek (with a 24-hour 
rest period), premium pay for overtime, and prohibition of excessive 
compulsory overtime.  The government, industry, and unions negotiate 
occupational health and safety standards and guidelines. 
 
¶33. (U) Child labor:  The law prohibits forced or compulsory labor 
of both adults and children.  Children under age 14 are prohibited 
from being employed, and there are strict laws regulating the scope 
of work and work environment of children ages 14 to 18; however, 
these laws are often not enforced.  There is no particular policy in 
Ethiopia designed to ensure the effective abolition of child labor 
or to increase the minimum working age progressively, but there are 
various economic and social policies that have indirectly addressed 
the issue.  For example, the GoE initiated an education and training 
policy aimed at achieving universal enrollment in primary school by 
¶2015. 
 
¶34. (U) Human rights:  In 2009, the GoE submitted all overdue 
reports to United Nations (UN) human rights treaty bodies.  It also 
submitted its Universal Periodic Review report to the UN during the 
year.  The GoE signed the UN convention on the rights of persons 
with disabilities in 2009, and is currently considering 
ratification.  Two laws that prohibit discrimination against persons 
with physical and mental disabilities in employment and access to 
 
ADDIS ABAB 00002434  008.2 OF 009 
 
 
buildings were passed in 2008 and 2009.  Overall, the GoE respects 
religious freedom. 
 
¶35. (U) Trafficking in persons:  The GOE acknowledges that human 
trafficking is a problem in-country.  In May 2005, Ethiopia enacted 
a penal code criminalizing most forms of human trafficking.  The GoE 
monitors its borders for trafficking within the context of its 
limited capacity.  Border control points have been set up in Metema, 
Dewele, Galafi, Dire Dawa (at the center of town), and Moyale. 
Border guards also seek to verify that migrant workers have proper 
employment contracts and have completed the Ministry of Labor and 
Social Affairs' (MOLSA) parallel authorizing process.  MOLSA 
counselors host pre-departure orientation sessions to streamline 
labor migration and enhance migration management activities. 
 
¶B. Major Problems and Issues Identified: 
 
¶36. (U) Human rights:  Freedom House's Freedom in the World Index 
ranking for Ethiopia again this year was "Partly Free." GoE 
officials and members of the security forces harassed individuals 
and their families to prevent them from joining or remaining in 
opposition parties.  The GoE also harassed some individuals who 
worked for domestic human rights organizations.  Authorities 
regularly arrested individuals and entered private residences 
without warrants.  Security forces detained family members of 
persons sought for questions by the government.  Significant 
restrictions on political and civil liberties remained, including 
the right of assembly and the right of association.  The GoE 
continued to arrest and detain persons arbitrarily, particularly 
those suspected of sympathizing with or being members of the Oromo 
Liberation Front (OLF).  Several hundred suspects remained in 
detention without charge, and lengthy pretrial detention continued 
to be a problem.  There were also numerous reports of human rights 
abuses in connection with the conflict between government and 
insurgent forces in the Ogaden area of the Somali Region.  Abuses 
reported include extrajudicial killings, torture, rape, abductions, 
and arbitrary arrest.  The government partially restricted 
deliveries of food and medicine to the Ogaden region. 
 
¶37. (U) Human rights (cont.):  The GoE continued to prevent 
International Committee of the Red Cross representatives from 
visiting police stations and federal prisons throughout the country, 
including those where opposition, civil society, and media leaders 
were held.  There were numerous credible reports that security 
officials tortured, beat, or mistreated detainees.  Prison and 
pretrial detention center conditions remained harsh and in some 
cases life threatening due to severe overcrowding, water shortages, 
lack of appropriate sanitary facilities, and lack of adequate 
medical care. 
 
¶38. (U) Trafficking in persons:  According to the USG's 2009 
Trafficking in Persons report, Ethiopia is ranked as a Tier II 
country.  Ethiopia lacks the capacity to investigate and prosecute 
trafficking crimes.  Interagency coordination to combat trafficking 
is poor; the GoE's inter-ministerial council on trafficking last met 
over two years ago.  Trafficking reported in 2009 was primarily 
labor-related.  Primarily young women, particularly those ages 
16-30, were trafficked to "work" in Middle Eastern countries as 
domestic employees.  A small number of children were also reportedly 
trafficked internationally.  Internal trafficking of children and 
adults continues to be a serious problem.  The GoE has not seriously 
addressed this issue, and did not prosecute any cases of internal 
trafficking in 2008. 
 
¶39. (U) Press freedom:  Press freedom was restricted in the wake of 
November 2005 post-election violence.  Relations, though marginally 
improved during 2006, worsened in 2007, 2008, and 2009 with 
journalists being harassed, detained, and given jail terms.  While 
there are independent voices in the print media, a high degree of 
self-censorship is practiced.  The broadcast media, radio and 
television, are government controlled and only infrequently air 
opposition voices.  International media, including Voice of America, 
and internet sites are often jammed or blocked by the GoE if 
perceived as being pro-opposition or anti-ruling party. 
 
ADDIS ABAB 00002434  009.2 OF 009 
 
 
 
¶40. (U) Workers' rights:  Although the law provides for workers' 
rights, unions have reported that employers frequently terminate 
workers for union activities.  Anti-union discrimination is 
prevalent in the workplace and workers have found it difficult to 
conduct strikes.  The ruling party tightly controls the leadership 
of the Confederation of Labor Unions and often influences union 
elections.  Unemployment is high and poses major challenges to the 
organization of labor.  There is no national minimum wage standard 
and many workers find it difficult to attain a decent standard of 
living. 
 
¶41. (U) Child labor:  Child labor remained a serious problem, both 
in urban and rural settings.  Children as young as five are working. 
 Rape remains a problem for underage domestic workers.  Commercial 
sexual exploitation of children is also a growing problem.  Girls as 
young as 11 work in brothels and as prostitutes in bars, hotels, 
resort towns, and rural truck stops.  Forced adult and child labor 
involved in factory production is poorly documented, but appears to 
be a serious problem.  Social welfare activists and civic organizers 
agree that forced child labor is pervasive in agrarian production 
(tea, coffee, sugarcane, and cotton), weaving, and gold mining. 
 
¶42. (U) Working conditions:  MOLSA's safety and health 
administration lacks the capacity to conduct systematic inspections. 
 A lack of detailed, sector specific health and safety guidelines 
also inhibits enforcement.  In theory, workers have the right to 
remove themselves from dangerous situations without jeopardizing 
their employment; however, in practice, most workers fear losing 
their jobs in doing so.  The GoE asserts that it is coordinating 
closely across NGO stakeholder groups and ministries to assess and 
address gaps in labor policies; however, evidence of these efforts 
is limited. 
 
INTERNATIONAL TERRORISM AND U.S. NATIONAL SECURITY 
--------------------------------------------- ----- 
 
¶A. Major Strengths Identified: 
 
¶43. (U) Security cooperation:  Ethiopia has been a strong supporter 
of mutual security and counterterrorism initiatives.  There is 
cooperation on military, intelligence and security issues when they 
explicitly advance GoE or ruling party interests. 
 
¶B. Major Problems and Issues Identified: 
 
¶44. (U) Border vulnerabilities:  Ethiopia's long, remote, and porous 
border with Somalia is an insufficient barrier to extremists 
affiliated with transnational terrorism entering Ethiopian 
territory, particularly in the remote Somali region.  A series of 
unclaimed, random, deadly bombings around the capital city and rural 
towns poses a potential security risk to individuals in country. 
 
MUSHINGI