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Cablegate: Ethiopia Agoa Country Eligibility Review 2009

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

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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

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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

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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

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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

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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

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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

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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

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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

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