Chinese and Indian investment in Ethiopia: infrastructure for ‘debt-trap diplomacy’ exchange and the land grabbing approach

Abstract

PurposeThe aim of this study is to examine the motive of China's and India's engagement in African countries particularly in Ethiopia and to address the land grabbing and debt-trap diplomacy between Ethiopia and the Asian drivers, which creates challenges across the diverse social, political, economic and ecological contexts.Design/methodology/approachThis study utilises both primary and secondary data. The available literature is also reviewed. The primary data were gathered through semi-structured interviews and discussions from (1) several authority offices in Ethiopia, sources close to authorities, information-rich informants, employees and (2) perspectives, perceptions and prospects from individual members of society.FindingsThe study unmasks the win-win cooperation strategy from the perspective of the members of society in Ethiopia, evaluates whether China and India have strings attached or land grabbing motives. The study also shows that whether China's and India's move was deliberate, the implications of debt-trap diplomacy and exploitation in Ethiopia are apparent. Additionally, this study investigated several considerable potential threats to Ethiopia that will persist unless significant measures are taken to control the relations with Asian drivers.Research limitations/implicationsSome of the limitations of this paper pertain to the primary data collection process from the Ethiopian Investment Commission (EIC) and other authorities, which was very challenging because people can be punished for talking to journalists or researchers. Furthermore, some investors were not willing to participate in discussions because they were engaged in areas that are not related to their licenses. Many interviewees were also not willing to disclose their names, and the data are not exhaustive in the number of investment projects covered.Originality/valueThis study provides new evidence on the influence of Chinese and Indian investment, aid and trade on Ethiopia's social, political and economic spheres. Additionally, this study contributes to the ongoing debate on land grabbing and debt-trap diplomacy in Ethiopia.

Exploring governments' role in mergers and acquisitions using IVIF MULTIMOORA-COPRAS technique

“…According to Mu (2011), the four obstacles that impede easy access to loans in China are the absence of collateral, lack of credit information, economies of scale of loans and high political risks. Currently, the debt finance options available to firms who plan to finance acquisitions are either to partner with banks or with private institutions (Addis et al , 2020). Partnering with banks and financing institutions has challenges ranging from these institutions' unwillingness to finance riskier ventures to lack of sufficient collateral by acquiring firms.…”

China, Africa and the International Aid System: A Challenge to (the Norms Underpinning) the Neoliberal World Order?

“…. and offers credit to commence the projects on onerous terms via its own EXIM Bank’ (Addis et al, 2020: 21). In Ethiopia, they argue that the loan conditions are opaque and are often conducted without the knowledge of the public.…”

“…and with fewer strings attached’ (Addis et al, 2020: 21). Furthermore, they claim that loans for projects such as the Addis Ababa double-track light railway (the loan for this was US$475 million from the EXIM Bank) and the Ethio-Djibouti electric standard-gauge international railway, of which 70% is financed through the EXIM Bank, is barely making any profit (Addis et al, 2020: 22). The Ethio-Djibouti railway is also stated to have ‘stopped its operation before beginning the repayment of its loan’ (Addis et al, 2020: 22).…”

“…Furthermore, they claim that loans for projects such as the Addis Ababa double-track light railway (the loan for this was US$475 million from the EXIM Bank) and the Ethio-Djibouti electric standard-gauge international railway, of which 70% is financed through the EXIM Bank, is barely making any profit (Addis et al, 2020: 22). The Ethio-Djibouti railway is also stated to have ‘stopped its operation before beginning the repayment of its loan’ (Addis et al, 2020: 22). As a result, Ethiopia is left without a functioning railway system and a burgeoning debt burden.…”

Evaluation and Comparison of Trade Relations Between Ethiopia–China and Ethiopia–India: Gravity Model

“…The effects of this growing aid, FDI, trade volumes as well as financial grants created various arguments, debates and discussions. The question that how far the Chinese and Indian investment, aid, macroeconomic and trade relations with Africa are altered the continent’s economy is still posing criticism and drawn considerable government, academic, and scholarly attention, and yet not found a final conclusion (Addis et al 2021). However, both China’s and India’s presence in the continent is considered positive in terms of impacts on the balance of investment, growth, aid, soft loans and government budget (Addis and Zuping 2019).…”