Identifier
Created
Classification
Origin
06ADDISABABA1464
2006-05-25 05:58:00
UNCLASSIFIED
Embassy Addis Ababa
Cable title:  

SCENESETTER FOR CODEL INHOFE VISIT TO ETHIOPIA

Tags:  ECON ETRD EFIN PREL PGOV ET 
pdf how-to read a cable
VZCZCXYZ0001
OO RUEHWEB

DE RUEHDS #1464/01 1450558
ZNR UUUUU ZZH
O 250558Z MAY 06
FM AMEMBASSY ADDIS ABABA
TO SECSTATE WASHDC IMMEDIATE 0805
UNCLAS ADDIS ABABA 001464 

SIPDIS

SIPDIS

H FOR MARK SMITH

E.O. 12958: N/A
TAGS: ECON ETRD EFIN PREL PGOV ET
SUBJECT: SCENESETTER FOR CODEL INHOFE VISIT TO ETHIOPIA


UNCLAS ADDIS ABABA 001464

SIPDIS

SIPDIS

H FOR MARK SMITH

E.O. 12958: N/A
TAGS: ECON ETRD EFIN PREL PGOV ET
SUBJECT: SCENESETTER FOR CODEL INHOFE VISIT TO ETHIOPIA



1. Welcome to Addis Ababa! Your visit comes at a critical
time for Ethiopia as the country works to strengthen
democracy, promote economic reforms, and reduce poverty.
Ethiopia is a strong partner in the global war on terrorism.
The USG is currently leading diplomatic efforts to implement
the long-stalled Algiers Accords which brought an end to the
1998-2000 war between Ethiopia and Eritrea.

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DEMOCRACY AND HUMAN RIGHTS
--------------


2. The U.S. has been at the forefront of trying the rebuild
the democratic process in the wake the May 2005 elections and
the ensuing civil disturbances of June and November. Charge
Huddleston and European ambassadors facilitated an ongoing
political dialogue between the ruling party and leaders of
two opposition parties that chose to enter Parliament. Party
representatives, supported by comparative studies funded by
the U.S. and other donors, are discussing how to reform and
strengthen democratic institutions including Parliament, the
National Election Board and the media. After a de facto ban
of the party post-November, Coalition for Unity and Democracy
(CUD) moderates have re-registered their organization. The
U.S. strategy has been to press the opposition and government
alike to engage in a democratic process. Our commitment
encourages the opposition parties to work within the
democratic framework by taking their seats in Parliament,
participating in a dialogue with the ruling EPRDF party, and
forming a political party to represent the ex-CUD. The U.S.
has also called upon the Government of Ethiopia (GOE) to
protect human rights for all of its citizens and ensure a
fair and transparent trial for those members of the CUD
leadership who have been charged with capital crimes.

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BORDER DISPUTE
--------------


3. Eritrea and Ethiopia concluded a two-year border conflict
in 2000 with an Agreement on Cessation of Hostilities
(Algiers Agreements). The U.S. was a witness to the Algiers
Agreements. In April 2002, the Eritrea-Ethiopia Boundary
Commission (EEBC),established under the Algiers Agreements,

issued a final and binding decision delimiting the border.
According to the Algiers agreements, both parties were to
facilitate the demarcation of the border by the Commission,
but Ethiopia initially objected to the decision, then
accepted it "in principle" but under the condition that a
broad political dialogue take place to address root causes of
the conflict. Eritrea refused, stating that the border must
be demarcated "as is." After three years of little progress,
Eritrea imposed a series of restrictions on the UN's border
monitoring force (UNMEE),leading to an increase in military
deployments and tension along the border. In November 2005,
the UN Security Council passed a resolution urging a
resumption of demarcation efforts. The USG has taken the
diplomatic lead in support of the EEBC, which has convened
twice this year in London, with representatives of both
Ethiopia and Eritrea, to discuss steps necessary to resume
demarcation of the border. The parties, which continue to
have no formal diplomatic relations with each other, have
nevertheless agreed to meet again under the auspices of the
EEBC in June. The U.S. continues to work closely with the
parties to resume demarcation of the border and promote an
eventual normalization of relations.

--------------
ECONOMIC OVERVIEW
--------------


4. Since the early 1990's, Ethiopia has pursued a development
strategy based on a mixed economy of both state and private
enterprises. It has eliminated discriminatory tax, credit,
and foreign trade treatment of the private sector, and tried
to simplify bureaucratic regulations and procedures. However,
the state remains heavily involved in most economic sectors,
and parastatal and party affiliated companies continue to
dominate trade and industry, hampering full and free
competition for the emerging private sector. In addition,
increasingly frequent cycles of drought, high population
growth, and inefficient agricultural markets all put
significant pressure on Ethiopia's economy. Greater economic
liberalization and reforms are critical to reducing poverty
and increasing food security. Ethiopia's GDP for 2005 is
estimated at USD8.5 billion, with an annual per capita GDP of
USD100. The economy grew by 7.3 per cent in 2005, and the
inflation rate was 6.8 per cent. The economy is predominantly
agricultural, with agriculture contributing 42 per cent to
the GDP and employing 80 per cent of Ethiopia's 74 million
people. Almost all agricultural production is rainfed. Major
exports include coffee, oil seeds and pulses, and hides and
skins, though non-traditional exports such as floriculture
have increased significantly over the past few years and have
strong growth potential. In 2005, Ethiopia's exports grew by
over 30 percent, in part due to higher world coffee prices,
though exports increased even faster, resulting in a growing
trade deficit. With U.S. Government assistance, important
progress was made in 2004 and 2005 in reforming tax
administration and operations, reducing the number of days to
register a business, and land certification. There has also
been progress in the protection of intellectual property
rights, including a new copyright bill adopted in June 2004.
Ethiopia formally applied for WTO membership in January of
2003, and further reforms, particularly in the services
sector, are expected as a result of the accession process.
The USG, through USAID, is providing technical assistance on
WTO accession and strongly supports the process as a tool to
promote reforms and enhance food security.

--------------
U.S.-ETHIOPIAN TRADE RELATIONSHIP
--------------


5. U.S.-Ethiopian bilateral trade totaled approximately
USD575 million in 2005, with U.S. exports concentrated in
aircraft and related parts. In August 2005, Boeing concluded
a US$ 1.3 billion deal with Ethiopian Airlines for the sale
of 10 Boeing 787 aircrafts. Ethiopia's exports to the United
States were USD61.8 million in 2005, an increase of 50 per
cent over 2004. There are no special barriers to U.S. trade
and investment, though a limited number of sectors, including
banking, continue to remain closed to foreign investment.
Ethiopia's exports under AGOA, including GSP provisions,
totaled approximately USD5 million in 2005. Though Ethiopia's
exports under AGOA remain small compared with other eligible
countries, strong potential exists in several key sectors,
including garments/apparel, floriculture/horticulture,
handicrafts, and leather products. The U.S. Government is
actively working to support Ethiopia's participation in AGOA
through both outreach/promotion efforts and technical
assistance, and continues to actively engage the Government
through the public-private sector AGOA Technical Committee
established in late 2004.

--------------
POVERTY REDUCTION
--------------


6. Ethiopia remains one of the poorest countries in the
world. Poverty alleviation and food security remain
priorities for the government. The 2005/06 government budget
allocations reflect poverty reduction priorities. The
government has decreased military spending from 13 per cent
of GDP in 1999/2000, during the border war with Eritrea, to
4.0 per cent of GDP in 2004/05, and is redirecting the
savings to poverty reduction and capacity building efforts.
In coordination with donors, the GOE is finalizing its
2006-2010 Plan for Accelerated and Sustainable Development to
End Poverty in Ethiopia (PASDEP). In addition to continuing
poverty reduction strategies in areas such as human
development, rural development, capacity building, and food
security, the new PASDEP will increase efforts in
commercialization of agriculture, greater private sector
participation in the economy, and scaling-up efforts to
achieve the Millennium Development Goals. Ethiopia is
participating in the enhanced Highly Indebted Poor Countries
(HIPC) initiative and G8 Multilateral Debt Relief Initiative.
The U.S. and Ethiopia signed a bilateral debt agreement in
2004 that provided 100 percent cancellation of Ethiopia's
debt to the United States.


7. The United States provides both developmental and
humanitarian assistance to Ethiopia, though we do not provide
direct budget support (DBS). Last year we provided USD700
million for health, education and governance. USD 642 million
was from USAID, which included approximately USD 465 million
in food aid. Our objective is to help the Ethiopian
government and people construct safety nets so that they will
be less vulnerable to drought, disease and famine. As a
result of post-election events in Ethiopia, donors providing
direct budget support, including, among others, the World
Bank, European Commission, the UK, and Canada, agreed to
suspend DBS. These funds will be reprogrammed through a new
program, the Protection of Basic Services Grant, which
includes more targeted, tightly monitored aid at the regional
and district level.

--------------
AFRICAN UNION/DARFUR
--------------


8. The African Union (AU) and U.S.-AU relations have come a
long way since the official emergence of the AU from the OAU
in July 2002. While the EU is currently the AU's largest
donor and political partner, the AU looks to the U.S. for
political support and engagement on key issues such as
continental peace and security, terrorism, health challenges,
trade and UN reform. The U.S. will be the first non-African
country to have a separate mission to the AU. The AU looks
to the USG for political support and dialogue. Regularizing
policy planning talks with the AU and playing a lead role in
new Addis-based AU coordination structures would enable us to
achieve our shared goals with Africa. Building closer
relationships with AU member state missions in Addis would
also provide the USG with greater insight into AU
decision-making processes and ensure U.S. views are
considered.


9. AU engagement in Darfur through the African Mission in
Sudan (AMIS) has been seen as a test of the new
organization's political will, and of its ability to work
with Western partners. Recent decisions of the AU Peace and
Security Council endorsed the May 5 Darfur Peace Agreement
(DPA) and also urged the AU Commission to work with partner
countries to plan for the transition of the AU-led AMIS
operation to a UN-led peacekeeping operation. U.S. policy
goals include pressing non-signatories (such as the JEM and
Abdulwahid faction of the SLM/A) to endorse the DPA prior to
May 31, while providing tangible support to those parties
that did sign (such as the Minni Minawi faction of the
SLM/A). In addition to supporting DPA implementation, the
United States is also working closely with other partners
(such as NATO, the European Union, Canada, and the UK) to
enhance the capabilities of the current AMIS peacekeeping
operation in Sudan, as well as to facilitate the transition
to a UN peacekeeping operation. Resistance by the Government
of Sudan (GOS) to allow a joint AU-UN assessment team to
enter Sudan and begin planning has delayed the likely
transition to a more robust UN operation. U.S. officials
will participate in a UN Security Council visit to Sudan and
Addis Ababa next week (June 5) to push these objectives.
HUDDLESTON