DAS WYCOFF DISCUSSES TRADE AND INVESTMENT WITH

UNCLAS SECTION 01 OF 02 ADDIS ABABA 002878 SENSITIVE SIPDIS DEPARTMENT FOR EEB/IFD/OMA - JWINKLER AND EEB/CBA - DWINSTEAD USAID FOR AFR/EA HELLYER AND DALTON DEPT PASS TO USTR FOR PATRICK COLEMAN, CECILIA KLEIN, AND BARBARA GRYNIEWWICZ DEPT OF COMMERCE WASHDC FOR ITA MARIA RIVERO DEPT OF TREASURY WASHDC FOR REBECCA KLEIN E.O. 12958: N/A TAGS: EINV ETRD ECON ET SUBJECT: DAS WYCOFF DISCUSSES TRADE AND INVESTMENT WITH ETHIOPIAN OFFICIALS REF: A. ADDIS ABABA 2741 ¶B. ADDIS 2817 ¶C. ADDIS 2877 ADDIS ABAB 00002878 001.2 OF 002 ¶1. (SBU) Summary: Visiting DAS Karl Wycoff and CDA Meece hosted a luncheon on November 19 to discuss trade and investment issues with Government of Ethiopia (GoE) officials from the trade and finance ministries. All parties expressed an interest in moving forward with scheduling the second working party World Trade Organization (WTO) accession meetings. State Minister for Trade and Industry Ahmed Tusa agreed to clarify the source of legal advice to Trade Minister Girma to wait to schedule the next round of talks until a permanent working party chair for Ethiopia has been selected. When DAS Wycoff inquired about any additional liberalization plans, Finance Minister Sufian replied that most sectors are liberalized apart from telecom and mentioned that the GoE has issued a public tender for an international firm to overhaul the management operations of the state-owned telecom company. Further discussions involved the effects of the foreign exchange crunch on slowed construction progress and investment success stories in the flower and textile industries. End Summary. LUNCH ATTENDEES -------------- ¶2. (U) Lunch attendees included: DAS Karl Wycoff CDA Roger Meece A/DCM Kirk McBride Minister of Finance and Economic Development Sufian Ahmed State Minister of Trade and Industry Tadesse Haile State Minister of Trade and Industry Ahmed Tusa Econ/Comm Officer Kary Hintz-Tate (notetaker) MOVING WTO ACCESSION FORWARD -------------- ¶3. (SBU) CDA Meece led an extensive discussion on how to move forward with Ethiopia's second working party meetings without a designated chairperson. All expressed a desire to schedule the next meetings as soon as possible. CDA Meece reported that the U.S. Trade Representative (USTR) believes we can legally move forward with a temporary chairperson from the WTO Secretariat and schedule the next meeting. Trade Minister Girma informed USTR during his visit to Washington in early November that he was advised Ethiopia should not move forward until a permanent chairperson can be selected. State Minister Ahmed agreed to follow up with Minister Girma to determine if this advice came from within the Ministry of Trade and Industry or the WTO Secretariat. Once the source of the advice was identified, all parties agreed that we should put USTR in direct contact with the source to see if they can come to a mutual conclusion on how to proceed as quickly as possible. NO ADDITIONAL LIBERALIZATION PLANS -------------- ¶4. (U) DAS Wycoff inquired about Ethiopia's plan to take additional steps to liberalize its economy. Finance Minister Sufian replied that it is only the telecom sector that remains fully under state control, as sectors such as energy and banking are open to private investment. (Note: the banking sector is closed to foreign investment, but not local private investment. End Note.) He went on to say that the Ethiopian Telecommunications Corporation (ETC) has an open tender out soliciting international firms to revamp ADDIS ABAB 00002878 002.2 OF 002 its management operations (reftel). Minister Sufian also revealed that investors' main complaint about the banking industry is its bureaucracy. During the discussion, the point was made several times that the WTO process would inevitably involve further discussions on liberalization of the economy, including these specific fields. FOREX CRUNCH SLOWS BUILDING CONSTRUCTION -------------- ¶5. (U) A/DCM McBride raised the ongoing problem of the foreign exchange (forex) crunch and its effect on slowing many of the construction projects around Addis Ababa. Without forex, builders are unable to import necessary materials to complete construction. Specifically, it is most difficult to furnish the inside of buildings without imported goods. Minister Sufian recapped the genesis of the forex crunch, starting with the spike in fuel prices last year. He also explained that the GoE's tighter monetary policy, which restricted the lending limits of banks, has also put a damper on construction progress. INVESTMENT SUCCESS STORIES -------------- ¶6. (U) DAS Wycoff asked which sectors had experienced the most success as the result of private investment. Minister Sufian and State Minister Tadesse both commented that the flower and textile industries were good examples. Most foreign investors in the flower industry are from the Netherlands, India, and Israel, while the Turkish and Indians are active in the textile sector. State Minister Tadesse mentioned a desire to augment current successful private investment in agro-processing, shoe production, and sugar production. PROPOSED ECONOMIC WORKING GROUP -------------- ¶7. (U) CDA Meece proposed the idea of forming a bilateral "economic working group" to explore investment opportunities and impediments for U.S. companies in Ethiopia. The working group would be comprised of various mission components on our side and various ministries on the Ethiopian side. All positively responded to the suggestion. The State Ministers agreed to follow up on this issue with post's economic section. The point was made that this would be a concrete manifestation of our intent to follow up on the November 5th bilateral talks. ¶8. (U) This cable was cleared by DAS Karl Wycoff. MUSHINGI