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