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  • Hasen Awel Yunus

The Vital Role of the Ethiopian Diaspora in Driving Economic Development: Policies and Investments


Defining Diaspora

The word "diaspora" comes from the Greek words ‘sperio’ which literally means "a scattering" or "dispersion." In its original usage, it referred to the scattering of seeds or sowing seeds widely in agriculture. Over time, the term came to be used metaphorically to describe the dispersion or scattering of people from their homeland to various parts of the world. Its meaning evolved to describe the scattering of the Jewish population from Israel because of Babylonian oppression. Owing to the term’s origin with the scattered Jewish population, early usage tended to focus only on the forcefully displaced. As such, the word had a largely negative connotation for a long time. Modern researchers see the concept as a far more complex, diverse, and even positive one, encompassing all forms of migration. In the modern world, the word "Diaspora" refers to the dispersion or scattering of a people from their original homeland, often due to forced migration, voluntary migration, or other forms of displacement. The term is commonly used to describe the movement or settlement of a particular ethnic or cultural group to different parts of the world.

 


Ethiopia policies to encourage Diaspora

Ethiopia stands as one of several African nations spearheading a diaspora policy aimed at attracting members of its diaspora, which is estimated to comprise approximately two million individuals. Across the globe, Ethiopians have dispersed widely, with significant communities residing in countries such as the United States, Canada, Israel, Germany, the United Kingdom, and Saudi Arabia. The Ethiopian government's engagement with its diaspora community traces back to the mid-1990s, marked by the establishment of a dedicated General Directorate for Ethiopian Expatriate Affairs within the Ministry of Foreign Affairs (MOFA). Recognizing the potential of diaspora members as key contributors to national development, the Ethiopian government has adopted a proactive approach. It views diaspora engagement as integral to its developmental agenda and has thus implemented a series of legislative measures, policies, and institutional frameworks to facilitate collaboration. These efforts are geared towards harnessing the expertise, resources, and networks of the diaspora for the collective advancement of Ethiopia. In pursuit of this objective, the government has introduced various incentives and benefits, designed to incentivize diaspora involvement in business ventures, investment initiatives, and other developmental activities. Through these measures, Ethiopia endeavors to foster a mutually beneficial relationship with its diaspora, leveraging their talents and contributions to propel the nation towards sustainable growth and prosperity.



Proclamation No. 270/2002 introduced the issuance of a special identification card, known as the Yellow Card, for members of the Ethiopian diaspora and their immediate family members. The enactment of this proclamation in 2002 marked a significant shift in the Ethiopian government’s approach to diaspora affairs. Prior to this, Ethiopian diaspora members faced formidable obstacles, including stringent criteria for obtaining visas, work permits, access to investment land and credit, and renewal of residence licenses. The proclamation aimed to address two key objectives: meeting the growing desire of the diaspora to strengthen ties with their homeland, and advancing the Ethiopian government’s agenda to mobilize diaspora groups in efforts to enhance development and democratization. Since its implementation, diaspora members have benefited from various privileges, including tax exemptions on goods imported for private use, the ability to open foreign currency accounts in Ethiopian banks, and visa-free access to employment and entry into the country. In essence, the proclamation grants Ethiopian diaspora members most of the privileges enjoyed by Ethiopian citizens. In addition to the proclamation, the government has enacted several pieces of legislation aimed at the diaspora, making it one of the most proactive in sub-Saharan Africa in engaging with its diaspora community since 2002. However, certain restrictions apply; diaspora members are prohibited from involvement in political matters, operating banking services, participating as voters or candidates in electoral processes, or enrolling in the military and security services.



In 2011, the Ministry of Capacity Building was dissolved, and the Diaspora Coordinating Office was transferred to the Ministry of Interior. The primary objective of these governmental units remains to serve as a liaison between the Government of Ethiopia and Ethiopians abroad, aiming to mobilize the Ethiopian community to attract knowledge and capacity building to Ethiopia. This mission is largely carried out through Ethiopian consulates, with more than 20 of them now equipped with diaspora units. These offices play a central role in promoting privileges and enacting new legislation specifically tailored to the diaspora. Ethiopia developed a draft diaspora policy, which was presented to the diaspora in various locations worldwide in 2011 and early 2012. The Ethiopian Diaspora Policy (FDRE 2013), introduced in 2013, emphasized the role of Ethiopian diaspora members as catalysts for expediting ongoing political and socio-economic development schemes. The government expected that by proactively engaging the diaspora in knowledge and technology transfer and investments, bilateral relations between diaspora-hosting countries and the homeland would improve. Additionally, the policy established a national framework for coordinating the activities of federal and regional government departments dealing with diasporic participation.


In recent years, the government has implemented policies to facilitate diaspora investments across various sectors of the economy, including real estate, agriculture, manufacturing, and services. These policies include incentives such as tax breaks, streamlined bureaucratic processes, and access to land for investment purposes. Moreover, the Ethiopian government has established institutions like the Ethiopian Diaspora Agency to facilitate diaspora engagement and investment. This agency acts as a one-stop-shop for diaspora investors, providing information, support, and guidance throughout the investment process. In addition to formal government initiatives, various grassroots organizations and networks within the Ethiopian diaspora community facilitate investment and entrepreneurship. These include diaspora chambers of commerce, investment clubs, and online platforms connecting diaspora investors with business opportunities in Ethiopia. Remittances from the Ethiopian diaspora also play a significant role in the country's economy, providing a steady flow of foreign exchange and supporting the livelihoods of millions of Ethiopians. The government has taken steps to harness these remittances for development purposes, including promoting diaspora bonds and investment funds targeted at diaspora investors. Overall, the Ethiopian diaspora is increasingly recognized as a vital resource for the country's development, particularly in terms of investment and entrepreneurship. By implementing supportive policies and fostering a conducive environment for diaspora engagement, Ethiopia stands to benefit significantly from the skills, capital, and networks of its diaspora community.

 


Ethiopian Diaspora Engagement in Investment and Economic Development

Diasporas hold significant potential in contributing to the economic development of their countries of origin. Assessing the impact of diaspora engagement presents challenges due to complexities in distinguishing causation from correlation and quantifying the effects of intangible assets such as skills and knowledge transfers. Each diaspora comprises individuals whose cultural ties to their homeland remain strong, even as their influence extends globally. This influence can manifest economically through channels such as remittances, foreign direct investment, and international trade. Additionally, diaspora engagement can have political implications when diaspora communities advocate for policy changes in either their host country or their country of origin. Diaspora populations serve as valuable economic resources, particularly for developing nations. To harness this potential effectively, specific actions are needed, including setting clear goals, mapping diaspora locations and skill sets, fostering trust with diaspora communities, maintaining effective communication channels, and encouraging diaspora contributions to national development. Governmental entities in countries of origin that focus on diaspora affairs must adopt a dual role: facilitating diaspora contributions to the homeland while also providing support and services to diaspora communities. By nurturing a mutually beneficial relationship between the homeland and its diaspora, governments can leverage diaspora resources for sustainable economic growth and development.


With the ascent of the Ethiopian People's Revolutionary Democratic Front (EPRDF) government in 1991, its agenda aimed at propelling accelerated growth emerged as a pivotal objective. This marked a significant turning point in Ethiopia's development trajectory. Central to this endeavor is the active involvement of the Ethiopian diaspora, both those residing permanently or semi-permanently abroad, as well as Ethiopian nationals engaged in temporary labor migration streams. Their consistent remittance transfers back to their homeland have become a vital source of financial inflow. During the fiscal year of 2007-2008, remittances to Ethiopia reached a substantial sum, totaling approximately US $1.2 billion. This influx of funds plays a crucial role in bolstering the country's economy, fueling various sectors and contributing to overall growth. A report by the World Bank sheds light on the evolving landscape of diaspora remittances, indicating a notable increase in 2010, with Ethiopian diaspora members sending back about $387 million to their homeland. By 2012, this figure had risen significantly to approximately $624 million, constituting a noteworthy 1.4% of Ethiopia’s Gross Domestic Product (GDP). In a broader global context, remittances have emerged as a significant economic driver, particularly for low- and lower-middle-income countries. In 2013, on average, remittances accounted for nearly 5% of GDP in such nations, underscoring their substantial impact on economic stability and development. Despite experiencing a gradual decline in comparison to the levels observed in 2007-2008, Ethiopia witnessed a remarkable resurgence in remittance inflows in 2020, a testament to the resilience of its diaspora community. Despite the prevailing global economic crisis, Ethiopia received a staggering $3.7 billion in remittances during that year, amounting to approximately five percent of the country’s GDP. This surge underscores the enduring commitment of the Ethiopian diaspora to their homeland and their unwavering support for its progress and prosperity. Recognizing the immense potential and motivational force behind these significant remittance flows, the Ethiopian government has identified them as a key instrument in achieving its development objectives. Leveraging the resources and networks of the diaspora, coupled with strategic policies and initiatives, holds the promise of unlocking new avenues for sustainable growth, poverty reduction, and socio-economic advancement in Ethiopia.


International investment often faces significant language and information barriers, leading to high transaction costs. Diaspora networks have the potential to mitigate these barriers between nations, thereby facilitating increased volumes of foreign direct investment (FDI) for both sending and receiving countries. The Ethiopian government recognizes the valuable contributions that diaspora populations make to development efforts and is actively exploring avenues to amplify the human capital and financial resources that emigrants and their descendants bring to the country. Beyond the remittances they provide, diaspora members play a crucial developmental role in their countries of origin. They serve as major investors in critical and emerging industries, act as pioneers in the growth of important sectors such as tourism, and contribute to the development of human capital.

 


Data provided by Ethiopia’s Investment Agency (EIA) in 2014 reveals a noteworthy trend spanning the decade from 2003 to 2013: the active involvement of the Ethiopian diaspora in investment projects within the country. During this period, a total of 1,906 projects were initiated by members of the diaspora, reflecting their strong interest and commitment to contributing to Ethiopia's economic development. These projects collectively mobilized an impressive investment capital of 19,816,874,000 Ethiopian Birr, which translates to over $1.92 billion USD. This substantial investment underscores the diaspora's dedication to fostering growth and prosperity in their homeland. In contrast, the total foreign investments in Ethiopia during the same timeframe amounted to 275,564,825,000 Ethiopian Birr, distributed across 4,114 projects (as reported by the Ethiopian Investment Agency, 2014). This significant comparison highlights the considerable impact of diaspora investments on Ethiopia's economy, despite the relatively smaller number of projects initiated by diaspora members. It's crucial to note that the diaspora community comprises an estimated 2.5 to 3 million individuals residing abroad. However, only a fraction, ranging from 3,000 to 4,000, have actively engaged in investment ventures within Ethiopia. This suggests that there remains a vast untapped potential for diaspora involvement in driving economic growth and development in the country. The diaspora represents a valuable resource for Ethiopia, possessing not only financial capital but also valuable expertise, skills, and networks. With access to knowledge and technology gained from their experiences abroad, diaspora members can bring innovative ideas and practices to the Ethiopian business landscape. While direct investment contributions from the diaspora may currently be limited in scale, the Ethiopian government's commitment to harnessing this potential is evident. The establishment of institutional frameworks and the implementation of targeted policies aim to facilitate and incentivize diaspora engagement in economic activities within Ethiopia. Ethiopia's developmental state recognizes the significance of diaspora involvement in achieving sustainable economic growth and reducing poverty. By fostering an enabling environment for diaspora investment and entrepreneurship, Ethiopia aims to leverage the diaspora's collective efforts to address developmental challenges and promote social progress.

 

In conclusion, the diaspora's active participation in economic development initiatives presents a promising opportunity for Ethiopia. Effective policies and initiatives that tap into the diaspora's potential can amplify their contributions, leading to inclusive and sustainable economic growth for the benefit of all Ethiopians.

 

References

John A. Arthur 2010. African Diaspora Identities: Negotiating Culture in Transnational Migration. 1st ed. United Kingdom ISBN 978-0-7391-4639-2.

Zeleza, P. T. (2010). African Diasporas: Toward a Global History. African Studies Review 53:1, 1-19.

Ministry of Foreign Affairs. (2011). Basic Information for Ethiopians in the Diaspora. Addis Ababa: Ministry of Foreign Affairs, Diaspora Engagement Affairs General Directorate.

Ethiopian Investment Agency. (2014). Summary of Licensed Investment Foreign (Pure and Domestic) Projects. Addis Ababa: Ethiopian Investment Agency.

 

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