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Cablegate: Commerce Visit Punctuated by Mixed Feelings About Doing

VZCZCXYZ0000
RR RUEHWEB

DE RUEHDS #2531/01 2591412
ZNR UUUUU ZZH
R 151412Z SEP 08
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC 2010
INFO RUCNIAD/IGAD COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS ADDIS ABABA 002531

STATE FOR AF/E
COMMERCE FOR BERKUL

SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD PREL ET

SUBJECT: COMMERCE VISIT PUNCTUATED BY MIXED FEELINGS ABOUT DOING
BUSINESS IN ETHIOPIA

SUMMARY:

1. (U) U.S. Department of Commerce Deputy Assistant Secretary (DAS)
Holly Vineyard's August 17-20 visit to Ethiopia highlighted an
economy offering significant opportunities as well as great
challenges. While the Ethiopian economy has shown significant growth
in recent years, business and development community interlocutors
questioned whether such growth can be continued in the absence of
broader structural reforms. Ethiopian Government (GoE) officials
made clear that Ethiopia 'is not ready to liberalize' its
telecommunications or financial services sector, but did note
potential openings for expanded protection and the reinforcement of
intellectual property rights (IPR). The visit highlighted the
importance of continued bilateral engagement to support Ethiopia's
accession to the World Trade Organization (WTO) and to secure
greater opportunities for U.S. businesses to invest in, and trade
with, Ethiopia.

BUSINESS COMMUNITY: ETHIOPIA IN NEED OF A 'MAKE-OVER'

2. (SBU) In a lively and wide-ranging meeting, DAS Vineyard and
Senior Economic Specialist Becky Erkul engaged founders of the
American Chamber of Commerce (ACCE) and a cross section of business
leaders in discussions on the climate, status, perceptions and
challenges of doing business in Ethiopia. In framing the groups
concerns, the Addis Ababa's Chamber of Commerce President
highlighted Ethiopia's challenges with WTO accession, IPR
protection, foreign exchange reserves, banking, financing,
inflation, land acquisition and expropriations. Ernst and Young's
Ethiopia Managing Partner asserted the need for Ethiopia to undergo
a 'business image makeover' and suggested that the USG promote
private equity investment in Ethiopia to signal that the country is
indeed 'open for investment.' The AmCit Manager also noted growing
concerns that USG support of Ethiopian business development is
predicated upon 'too many rules.' He cited local businesses having
difficulty accessing financial support via ExIm funding, causing the
United States to fall behind China in the international movement to
invest in Ethiopia.

3. (SBU) Members of the U.S. Mission-supported Women's Entrepreneurs
Group (WEG) asserted that their constricted access to working
capital stems in part from gender biases in the business community.
These biases serve to inhibit women's ability to secure and sustain
financial capital. While WEG members are heartened by the World
Bank's capacity building and training efforts, they remain hopeful
that ACCE can leverage U.S. contacts to help women-led businesses
access traditionally male-dominated industries. Throughout the
course of the meeting, the DAS asserted that better branding, a
gender-bias free climate, more liberal banking policies, and
heightened awareness of IPR and expropriation issues would serve to
enhance Ethiopia's capacity to do business within the international
community.

COMMERCIAL POLICY OPENINGS FOR CHANGE ARE DIFFICULT TO IDENTIFY:

4. (SBU) DAS Vineyard met with Ethiopian Intellectual Property
Office (EIPO) Acting Director General (ADG) Alemu Abebe, who early
in their discussion admitted to Ethiopia's clear need for education
on IPR issues. Abebe asserted his office's willingness to work with
the USG on IPR issues as DAS Vineyard highlighted USPTO training
opportunities for EIPO staff. With a staff of 53 (and hopes of a 40%
personnel increase in coming years), Abebe's EIPO team is currently
operating under capacity. DAS Vineyard highlighted Marriott's
concerns over the infringing "Mariot" and Abebe agreed to follow up
on the issue. DAS Vineyard queried the EIPO on the GoE's protection
of foreign copyrights and patents, as well as its decision to
implement a trademark (TM) versus certification mark (CM) for its
coffee brands. Characterizing his office's position on TM versus CM
as being 'open for debate,' the EIPO has studied, and is most
comfortable with, models that employ the TM option in other
developing countries. Abebe agreed to follow up the DAS's request
for additional details on GoE plans to introduce domestic enabling
legislation to bring the country into compliance with the TRIPS
agreement as it pursues WTO accession. The ADG noted that the EIPO,
the Ministry of Tourism, and the Ethiopian Embassy in Washington, DC
are co-organizing a tour for influential Ethiopian Diaspora business
people and other foreigners to visit coffee, leather and textile
sites in Ethiopia. This trip may present opportunities for
cross-coordination with ACCE's fall 2008 media launch in Addis
Ababa.

5. (SBU) The DAS spoke at length with the Minister of Trade Girma
Birru regarding Ethiopia's WTO Accession, IPR protections,
import/export barriers, and the investment climate. The DAS
complimented MoTI's signal of interest in opening its markets to the
international community by working to become a member of the World
Trade Organization. Birru agreed that while Ethiopia's forward

movement with accession planning has proven difficult, the country
has made positive steps with respect to increasing awareness of IPR
protection and enforcement. The DAS highlighted U.S. companies that
have approached the USG, such as Marriott's concerns about trademark
infringement, and Caterpillar's concerns about burdensome
import/export requirements, and limited supplier credit. Birru
indicated that the GoE is examining the possibility of relaxing
supplier credit regulations to enable companies to increase their
trade volumes. He also acknowledged that while these shared
challenges may have impeded U.S. businesses and investments in the
past, his Ministry is committed to taking corrective action on cases
cited by American firms. In like-fashion to Minister Birru, Ministry
of Foreign Affairs' Acting Director General for Economic Cooperation
and Business Affairs, Girma Temesgen, offered his office's
assistance in the investigation of AmCit land and investment
expropriation cases, foreign exchange and supplier credit disputes.
While Temesgen promised to investigate and facilitate such cases, he
also made explicit that Ethiopia 'is not ready to liberalize' its
financial services sector.

6. (SBU) Recognizing that ACCE is only the fourth American Chamber
in Sub-Saharan Africa, the Minister heralded this milestone and
apologized for delays in the registration process. The Minister
expressed deep appreciation of Ethiopia's AGOA increases, and
USAID's agribusiness expansion program. Birru remains interested in
increased USG assistance to attract FDI to Ethiopia and appreciated
the DAS's keen interest and support. The DAS welcomed further
collaboration between the Commerce Department and MoTI on ACCE and
IPR enforcement, with particular emphasis on assisting American
companies to receive full protection for their brands.

ETC, AN EXERCISE IN AVOIDANCE:

7. (SBU) While national telecommunications operator Ethiopian
Telecommunications Corporation (ETC) CEO Mr. Amare Amsalu graciously
received the DAS on short notice, he avoided questions regarding WTO
expansion in Ethiopia, citing WTO issues as 'outside his area of
expertise.' Praising the Chinese for their 'economies of scale,'
Amsalu suggested that American and multi-national ICT firms (such as
Oracle) model themselves after their Chinese counterparts. According
to Amsalu, Chinese bidders are better accustomed to Ethiopian price
sensitivities, and ways of doing business. Amsalu cited the length
of time traditionally needed for U.S. ICT firms to vet deals with
ETC (six months or more) as 'prohibitive to doing business with
American firms.' When asked about the status of the media law,
freedom of information act, and internet censorship, Amsalu waxed
profoundly about how the internet 'relaxes borders,' 'maximizes
globalization,' and 'promotes the freedom of information.' When
PolEconOff pushed further on the issue of internet censorship,
Amsalu asserted that ETC has no role in 'blocking information.'
Amsalu punted the DAS's questions on the media law and freedom of
information act to the Ministry of Communications and Transport, a
meeting that Post, after considerable effort, was unable to secure.


SITE VISTS AND SUCCESS STORIES:

8. (SBU) While in-country, DAS Vineyard visited several companies
benefitting from AGOA and USAID capacity building efforts: Taytu
Leathers PLC, Jobera Flower Farm, NovaStar Garment Factory and Muya
Ethiopia PLC. The DAS was encouraged by niche sales strategies
exhibited by all the companies and in several cases breakthroughs
within high-end U.S. retail markets by Taytu Leathers PLC and Muya
Ethiopia PLC. (Note: Taytu retails finished leather goods to Barneys
New York). In total these companies employ and train more than 2,000
workers, most of whom were unemployed before the businesses opened.
These companies are currently exporting many of their products to
the United States, Canada, Western Europe and Israel. Managers and
owners of the four sites visited were particularly appreciative of
USAID's overall approach to market driven diplomacy, linkages to
clients, and U.S. trade fair opportunities.

COMMENT:

9. (SBU) Commerce DAS Vineyard's visit highlighted persistent
challenges and some opportunities. Given the GoE's human capital,
financial, and technological limitations, sectoral monopolies will
continue to stunt severely Ethiopia's prolonged economic growth and
could delay its accession to the WTO. Efforts to convince the GoE to
open itself for private investment should continue such that
additional technological, financial and managerial know-how can flow
into the country. The GoE's openness to expand international IPR
protections presents an opportunity for positive USG engagement with
the GoE to protect U.S. commercial interests and support Ethiopia's
WTO accession efforts. The DAS's visit also re-emphasized Ethiopia's
need for further engagement on WTO accession requirements while well
highlighting the current risks and benefits to U.S. firms doing

business in Ethiopia.

YAMAMOTO

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