VZCZCXRO6269
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHROV
RUEHTRO
DE RUEHDS #2936/01 3490921
ZNR UUUUU ZZH
R 150921Z DEC 09
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC 7155
INFO RUEHZO/AFRICAN UNION COLLECTIVE
RUCNIAD/IGAD COLLECTIVE
RUEPADJ/CJTF HOA
RUEAIIA/CIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEKDIA/DIA WASHINGTON DC
RUEWMFD/HQ USAFRICOM STUTTGART GE
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP
RHEHAAA/NSC WASHDC

UNCLAS SECTION 01 OF 03 ADDIS ABABA 002936 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EEB/IFD/OMA - JWINKLER AND EEB/CBA - 
DWINSTEAD 
USAID FOR AFR/EA HELLYER AND DALTON 
DEPT PASS TO USTR FOR PATRICK COLEMAN, CECILIA KLEIN, AND 
BARBARA 
GRYNIEWWICZ 
DEPT OF COMMERCE WASHDC FOR ITA MARIA RIVERO 
DEPT OF TREASURY WASHDC FOR REBECCA KLEIN 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD EAGR EAIR ET
SUBJECT: DASD HUDDLESTON DISCUSSES ETHIOPIAN ECONOMY WITH 
FINANCE MINISTER 
 
ADDIS ABAB 00002936  001.2 OF 003 
 
 
SUMMARY 
------- 
 
¶1. (SBU) Government of Ethiopia (GoE) Minister of Finance and 
Economic Development Sufian Ahmed reviewed local economic 
conditions with visiting Deputy Assistant Secretary of 
Defense for African Affairs Vicki Huddleston during a 
December 10 meeting.  DASD Huddleston congratulated the GoE 
on strong economic growth and controlling inflation. 
Minister Sufian stated Ethiopia has weathered the global 
financial crisis relatively well, but that he still has 
concerns regarding the urban economy and the widening trade 
deficit.  He thought increased foreign investment in 
agriculture would prove to be a "win-win" for both Ethiopia 
and investors and cited high transport costs and security 
concerns as barriers to additional foreign investment. 
Minister Sufian expressed commitment to Ethiopia's World 
Trade Organization (WTO) accession process, but believes that 
the government still needs to play a temporary role in 
certain sectors.  He also commented on the welcome support of 
Ethiopian Diaspora remittances, but lamented the loss of 
entrepreneurial skills from emigrating Ethiopians.  Finally, 
Minister Sufian voiced his concerns about potential problems 
with Citibank's financing of Ethiopian Airlines' Boeing 
aircraft purchases.  CDA Mushingi responded by saying the 
Embassy will investigate this matter accordingly.  END 
SUMMARY. 
 
MEETING ATTENDEES 
----------------- 
 
¶2. (U) December 10 meeting attendees included: 
- Ambassador Vicki Huddleston, DASD of Defense for African 
Affairs 
- H.E. Sufian Ahmed, Minister of Finance and Economic 
Development, GoE 
- Dr. Tulinabo Mushingi, Charge d'Affaires, US Embassy 
- Brigadier General Wallace Farris, USAF 
- Mr. Jim DeLoach, A/GSO, US Embassy (notetaker) 
- Mr. Hailemichael Kinfu, Ministry of Finance and Economic 
Development (notetaker) 
 
STATE OF THE ETHIOPIAN ECONOMY 
------------------------------ 
 
¶3. (SBU) DASD Huddleston congratulated Minister Sufian on 
Ethiopia's strong economic growth while clamping down on 
inflation.  Minister Sufian responded by stating the GoE has 
successfully managed the global economic crisis, food price 
increases, and oil price increases.  He claimed the Ethiopian 
economy is growing 10 percent annually, due to a strong rural 
agricultural sector largely decoupled from the international 
economy.  Minister Sufian said the rural economy is strong, 
but that "there are some pockets which are struggling due to 
poor rain, but associated food issues will be easily 
managed."  Currently, Minister Sufian's main concern lies 
with the urban economy.  To help in the urban areas, the GoE 
is importing and selling wheat at subsidized prices and 
reducing taxes on food items.  Minister Sufian's stated 
economic goals for the next five years were to strengthen the 
manufacturing base, expand agricultural processing, expand 
the service sector, and increase technology transfer.  He 
also reiterated that foreign investment is critical to 
meeting these goals. 
 
¶4. (SBU) Minister Sufian remarked that inflation is steadily 
decreasing, and that November's moving average inflation 
figure was ten percent for food components.  He claimed this 
coincided with the International Monetary Fund (IMF) 
estimate, which predicted single-digit inflation by December 
¶2009.  Despite the recent recovery of Ethiopia's foreign 
 
ADDIS ABAB 00002936  002.2 OF 003 
 
 
currency reserves, Minister Sufian believed Ethiopia's 
balance of payments deficit was a major concern.  Ethiopia's 
trade deficit remained significant, despite strong historical 
export growth.  He believed fuel cost increases, which 
accounted for 20 percent of imports, were a key reason for 
this. 
 
FOREIGN INVESTMENT AND PRIVATIZATION 
------------------------------------ 
 
¶5. (SBU) DASD Huddleston inquired about foreign investment in 
agriculture in light of the recent New York Times article on 
"agro-imperialism."  Minister Sufian opined that foreign 
agricultural investment is a "win-win" situation for Ethiopia 
and the investors.  He cited the example of cotton 
production, where he claims there is an extreme shortage of 
labor for harvest.  Foreign investment should enable 
increased mechanization to compensate for the lack of labor. 
Minister Sufian singled out Saudi investors as being 
particularly involved in the new agricultural investment. 
 
¶6. (SBU) Minister Sufian stated that high transport costs -- 
both in terms of money spent and time -- caused by poor 
transportation infrastructure was a barrier to foreign 
investment.  He believes there is no real alternative to the 
Port of Djibouti at this time.  Minister Sufian also said 
perceptions about the security of the region were a barrier 
to foreign investment. 
 
¶7. (SBU) Minister Sufian agreed increased sector 
privatization was a good goal, but Ethiopia's is faced with 
unique circumstances which do not make this a viable option 
in all areas.  He believed government must continue to play a 
temporary role in certain sectors.  Minister Sufian did 
emphasize the banking sector is open to domestic competition 
now, and cited the recent market entry of ten new 
locally-owned private banks.  He also stated that, "we are 
ready and committed" to the WTO accession process, which will 
determine the role of international banks in the future. 
 
ROLE OF THE ETHIOPIAN DIASPORA 
------------------------------ 
 
¶8. (SBU) Minister Sufian expressed concern about the loss of 
key skills and the entrepreneurial spirit of departing 
Ethiopians, but was also encouraged by the benefits the 
Diaspora provide to the economy.  Minister Sufian affirmed 
Ethiopia receives about 60 percent of its Diaspora 
remittances from North America and 30 percent from the Middle 
East.  He emphasized Ethiopia's presence in the Middle East 
is growing, citing the fact that there are 25,000 Ethiopians 
in Kuwait alone. 
 
ETHIOPIAN AIRLINES FINANCING CONCERNS FOR BOEING PURCHASES 
--------------------------------------------- ------------- 
 
¶9. (SBU) Minister Sufian raised the issue of potential 
problems with Citibank's financing support of Boeing aircraft 
purchases by Ethiopian Airlines.  He cited a 50-year history 
of Boeing purchases with U.S. bank involvement and emphasized 
that "it would be unfortunate if U.S. banks were not involved 
in the financing of upcoming Boeing aircraft purchases." 
Minister Sufian went on to say U.S. business could "lose 
other opportunities" if financing could not be provided for 
the Boeing deal.  He said he did not know if the source of 
the problem was with Citibank or another party.  CDA Mushingi 
responded saying that the Embassy would follow-up on this 
issue to determine the source of the problem.  (Comment: 
Boeing Sales Director for the Middle East and Africa 
indicated to PolEconOff that this financing issue was not a 
major problem and should be resolved soon.  EconOff will 
 
ADDIS ABAB 00002936  003.2 OF 003 
 
 
investigate this issue further with Boeing representatives 
and the U.S. Export-Import Bank (which is involved in 
Boeing-Ethiopian Airlines financing deals).  End Comment.) 
 
¶10. (U) This cable was cleared by DASD Huddleston. 
MUSHINGI