CHINA'S ENGAGEMENT IN ETHIOPIA

C O N F I D E N T I A L SECTION 01 OF 02 ADDIS ABABA 001197 SIPDIS SIPDIS STATE FOR AF/RSA EPSTEIN E.O. 12958: DECL: 04/30/2018 TAGS: PGOV PREL EAGR EFIN ET CH SUBJECT: CHINA'S ENGAGEMENT IN ETHIOPIA REF: A. STATE 41697 ¶B. ADDIS ABABA 699 ¶C. ADDIS ABABA 194 Classified By: Ambassador Donald Yamamoto. Reasons 1.4(b) and (d). Roads, Phones, Dams and Crops -------------- ¶1. (SBU) Per Ref A, the People's Republic of China (PRC) is active in Ethiopia in a number of sectors, most notably infrastructure development and telecommunications. They are also developing several model farms to introduce techniques to increase yield and improve food security in Ethiopia. PRC loans to Ethiopia over the past three years to support these activities total, at a minimum, in excess of USD 2 billion, including a USD 1.5 billion loan agreement between Chinese firm Zhong Xing Telecommunication Equipment Company Limited (ZTE) and the state-owned Ethiopian Telecommunications Company (ETC). Public sources state that Beijing gave at least USD 708 million in development loans to Ethiopia in 2007, including a USD 208 million line of credit to finance a new power station and expand a cement factory. Chinese firms dominate road construction, holding by one estimate more that 60 percent of the contracts. In addition, approximately 70 percent of tenders funded by the World Bank in Ethiopia are awarded to Chinese companies. ¶2. (SBU) According to the PRC Ambassador in Addis Ababa, Chinese contracted projects in Ethiopia totaled more than USD 1.7 billion as of 2007 (up from USD 800 million in 2005). A source in the PRC Embassy told Embassy Officers that China is invested in more than 360 different projects in Ethiopia. Bilateral PRC-Ethiopia trade totaled USD 860 million in 2007, a 20 percent year on year increase. In March, China announced that it would finance through its USD 5 billion China-Africa development fund (created at the 2006 Beijing Summit of the Forum for China-Africa Cooperation) the construction of a private industrial zone on the outskirts of Addis Ababa. The project cost is estimated to be in excess of USD 700 million and up to 80 Chinese firms involved in textiles, leather manufacturing and manufacturing of construction equipment are expected to participate. Areas For Cooperation -------------- ¶3. (SBU) U.S. Embassy Addis Ababa and the PRC Mission in Ethiopia frequently exchange views at both senior and working levels (refs B and C). PRC Ambassador Lin Lin will depart post this month, possibly for onward assignment as Director General for African Affairs (although this report is unconfirmed),but Ambassador Lin told us he fully expects his successor to continue PRC engagement with us. Per refs B and C, the U.S. Embassy Addis Ababa expects to exchange visits with PRC counterparts on demonstration farms and potentially to coordinate on volunteer-related events. We also continue to encourage the Chinese and our Ethiopian counterparts to open the telecommunications sector, where innovation is stifled by the dominant ZTE contract and tight ETC controls, to U.S. firms. Likewise, we would be interested in any opportunities for U.S. firms that might be created by the new Chinese special industrial zone. ¶4. (C) We are also interested in increasing coordination at the Embassy level on such issues as Sudan, Eritrea and Somalia. However, a source at the PRC Embassy told us that, with regard to Ethiopia and the Horn of Africa generally, China is likely to adhere vigorously to its policy not to get involved in "internal" African conflicts and therefore will distance itself from mediation efforts on such issues as the Ethiopia-Eritrea border dispute. Likewise, our source confirmed that Chinese contractors will not/not be going back to the Ogaden area of the Somali region, where a Chinese oil exploration site was attacked by insurgents in 2007, and will generally seek to avoid potential conflict areas in Ethiopia. However, our source noted, the PRC mission in Ethiopia is quite confident about Ethiopia's overall economic prospects and is not concerned that the closure of democratic space will adversely impact stability. ADDIS ABAB 00001197 002 OF 002 Comment -------------- ¶5. (C) The PRC MFA and Chinese scholars are heavily engaged in a project at present to try to "actualize China's 'harmonious world' principle and create a non-ideological foreign policy," our source added. This concept may be worth exploring during the Sub-dialogue as it may give some indication as to how the Chinese intend to manage inevitable friction brought about by increased presence in Africa as the result of their deeper economic penetration of the continent. End Comment. YAMAMOTO