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Cablegate: Foreign Investors Grab Up More Land in Ethiopia

VZCZCXRO8589
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHDS #0247/01 0390620
ZNR UUUUU ZZH
R 080620Z FEB 10
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC 7672
INFO RUEHZO/AFRICAN UNION 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 02 ADDIS ABABA 000247

SENSITIVE
SIPDIS

DEPARTMENT FOR AF/E JWIEGERT; AF/EPS - ABREITER AND GMALLORY; EEB/IFD/OMA - JWINKLER AND EEB/CBA - DWINSTEAD; EEB/TPP/BTA DEPARTMENT PASS TO USTR FOR PATRICK COLEMAN, BARBARA GRYNIEWWICZ
DEPT OF COMMERCE FOR ITA MARIA RIVERO
DEPT OF TREASURY FOR REBECCA KLEIN
USAID FOR AFR/EA - HELLYER, DALTON, AFR/SD - CURTIS; EGAT - JHESTER,
JYASMAN AND GMYERS

E.O. 12958: N/A
TAGS: EAGR EINV ETRD ECON EFIN BEXP AF ET
SUBJECT: FOREIGN INVESTORS GRAB UP MORE LAND IN ETHIOPIA

REF: 09 ADDIS ABABA 2900

ADDIS ABAB 00000247 001.2 OF 002


SENSITIVE BUT UNCLASSIFIED. NOT FOR INTERNET DISTRIBUTION.

1. (SBU) SUMMARY: The Government of Ethiopia's (GoE) recent high
profile land deals and shift in agricultural policy (reftel) have
attracted additional foreign investors to the agricultural and
tourism sectors. In January, Egyptian Prime Minster Dr. Ahmed Nazif
led a large delegation to Ethiopia to announce the National Bank of
Egypt's lease of 49,400 acres of land to grow cereals. Press
reports indicated that these cereals are headed for export to Egypt.
Former Nigerian President Olusegun Obasanjo and Djiboutian
President Ismael Omar Guelleh separately leased land plots to build
hotels outside of Addis Ababa, while Guelleh already leases a 7,400
acre farm that started exporting wheat back to Djibouti last year.
Finally, the South African private equity investment fund Agri-Vie
invested USD 3.5 million in a company that is growing and processing
various fruits to manufacture juice products. These juice products
will primarily target the European and the Middle Eastern markets as
reported by the company to Econoff. Despite the benefits of
increased foreign investment, political opposition members and
international critics remain skeptical about the GoE's motives and
the land policy's affect on poor, rural Ethiopians. End Summary.


Egyptians Eye Investment Opportunities
--------------------------------------

2. (U) The Egyptian Prime Minister, Dr. Ahmed Nazif, led the latest
charge of foreign agricultural investment during a January visit to
Ethiopia. Nazif, alongside his delegation of several cabinet
ministers and 26 agricultural companies, announced that the
state-owned National Bank of Egypt plans to invest USD 40 million in
the lease of 49,400 acres of land in the Afar region to grow
cereals. Press reports stated that these cereals would be exported
to Egypt despite the GoE's 2007 "temporary" export ban on all
cereals that has never been formally lifted. (Note: It appears
Saudi, Djiboutian, and now Egyptian investors have somehow bypassed this ban, while other investors informed Econoff that they have not been allowed to export cereal grains (reftel). End Note.) The bank is also poised to open an office in Ethiopia to serve existing and
new Egyptian projects and plans to offer credit of USD 14.6 million
to six Ethiopian banks according to local press reports. (Note: the
domestic banking sector is closed to foreign banks; however, other
foreign banks such as Germany's Commerzbank do have offices in
Ethiopia to facilitate relations with Ethiopian banks. It is
unclear how the National Bank of Egypt could offer credit in
Ethiopia in evident violation of banking and financial regulations.
End Note.) Beyond the focus on agriculture, Nazif signed a
memorandum of understanding with GoE Prime Minister Meles Zenawi to form an Ethio-Egypt Council of Commerce. Meles said during the
signing ceremony that relations between Ethiopia and Egypt had
evolved from distrust towards friendly cooperation. Other areas of
Egyptian business interest included livestock, drug manufacturing,
and hydroelectric power.

Former Nigerian President and Djiboutian President Also Invest
--------------------------------------------- ------

3. (U) Another foreign VIP seen around town and looking for land was
the former president of Nigeria, Olusegun Obasanjo. Obasanjo
recently leased about five acres of land near Debrezeit, Oromia
region (about 50 kilometers east of Addis Ababa) to develop a hotel
and tourist destination. In addition, current Djiboutian President
Ismael Omar Guelleh recently acquired the right to develop about 2.5
acres of lakeside land in Debrezeit to build a hotel. This
acquisition added to the 7,400 acres of farmland Guelleh leased last
year in Bale, Oromia region. According to post's conversations with
local agricultural business investors and press reports, this farm
has already harvested wheat and other cereals for export to
Djibouti.

Private Equity Fund Invests in Fruit Juice Farm
--------------------------------------------- --


ADDIS ABAB 00000247 002.2 OF 002


4. (U) South African private equity fund Agri-Vie has also chosen to
invest in Ethiopia's agricultural sector. The fund invested USD 3.5
million in africaJUICE, a company already in the process of
establishing fruit production and processing operations when Econoff
visited its 3,000 acre operation last year. The Dutch and British
company representatives reported to Econoff that it plans to target
the juice markets in Europe and the Middle East. The company
purchased this farm (not the land) from the GoE and converted it to
produce yellow passion fruit, mango, and papaya.

Critics Concerned About Rural Population
----------------------------------------

5. (U) As more reports of foreign land leases in Ethiopia surface,
the GoE continues to insist local farmers will not be adversely
affected by its land deals. Regarding agricultural investment, the
GoE views foreign investor involvement as key to the country's move
from subsistence to commercial farming (reftel). On top of any
potential damage to local farmers, international and political
opposition party critics cite concerns over exporting food from a
country that relies so heavily on imported food aid and the
perceived low wages that foreign investors pay its employees.
Merara Gudina, Chairman of the Ethiopian Federal Democratic Unity
Forum (a coalition of political opposition parties), accused the GoE
of using its land "giveaway" policy to hold on to power and to buy
diplomatic support. U.S.-based GoE opposition movement Ginbot 7
stated in a January editorial that the GoE needs to change its
communist land policy and empower local farmers, who have the
potential to produce a marketable surplus. The editorial further
noted that any land deal that has not been agreed to by the
Ethiopian people will not be honored by future elected governments.


Comment
-------

6. (SBU) The GoE clearly needed to shift its agricultural policy in
order to make effective use of its vast amounts of fertile land, and
the agricultural policy mix being implemented is viewed by most
experts as a step in the right direction. However, that evolving
policy is a long way from proving its worth as a vehicle for
achieving the GoE's stated goals of modernizing the sector,
generating foreign exchange reserves, and increasing the domestic
food supply. End Comment.

YATES

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