Executive Summary

   A brutal seventeen-year communist dictatorship has ended, leaving Ethiopia devastated and in need of everything from sewers and power plants to staples and pasta.  U.S. and other Western aid programs will almost certainly be in the offing to help pay for the rebuilding.  The conquering EPRDF appears able to father a government based upon the principles of democracy and a free market economy, but whether it can keep the country intact and satisfy the Eritrean secessionists is a bit more problematical.  The prognosis for both is favorable, however, it behooves American businesses interested in taking advantage of future opportunities in Ethiopia to begin building bridges to the people who will be calling the shots when the dust finally settles. Many of these future leaders are presently in exile in the United States, and will soon be returning to Ethiopia with American values, business connections and financial backing. 

Introduction

   Ethiopia's former dictator, Mengistu Haile Mariam, has zipped off to Zimbabwe, tail between his legs, to spend his remaining years tending crops on a farm near Harare.

   Although there was general consensus among Ethiopia watchers that Mengistu's days were numbered, none ever really suspected his regime to end this way--with a whimper.  Virtually all expected he would go out feet first, assassinated during a coup born in Addis Ababa, bringing a violent end to a violent military dictatorship.  Mengistu's rise to power had been a bloody one, and he was able to maintain his grip on the country for seventeen years through the application of raw power, intimidation and fear.  He was to Ethiopia what "Papa-Doc" Duvalier was to Haiti.  People supposedly "in the know" had been predicting Mengistu's imminent demise since at least 1977, when he dumped Washington in favor of Moscow due to the U.S. Government's decision to back Somalia during the Ogaden Crisis.

   Then in May, 1989, with the military and economic situations at an all-time low, Mengistu succeeded in putting down what was to be the last of several coup attempts against him.  And in doing so he seemed to have effectively removed the last vestiges of high-level dissidents--he had 200 coup plotters either shot or arrested, including fourteen military field-grade officers. Subsequently, Mengistu emerged unscathed and seemingly as much in control as ever despite the mounting insurgencies surrounding him and virtual abandonment by his closest ally, the Soviet Union.

   No Ethiopia observer had ever confused the constant whining of Ethiopian citizens and exiles with serious efforts to overthrow Mengistu, and this was especially true after the May, 1989 fiasco.  Those with the courage and power to pull off a successful coup (mostly Amhara natives from around Addis Ababa) had for the most part been either eliminated or driven into exile.  And the highly vocal exile groups in the U.S. and the U.K. remained what they always were:  impotent propaganda machines with no viable support base in Addis Ababa.

The New Beginning

   And then the unexpected happened: the ever bickering--and sometimes belligerent insurgent groups began to get their act together and agreed to join forces under the banner of an umbrella group calling itself the Ethiopian People's Revolutionary Democratic Front (EPRDF).  Together in an advance on Addis Ababa that surprised even themselves, they managed to drive Mengistu from power and take control of the government.

   Now the last vestiges of communism have been removed.  The red flags, the larger-than-life posters of Marx, Lenin and Engels (and of course, Mengistu), even the Lenin statue that stood in front of the Hilton Hotel, are gone.  No more communism, no more dictator.

   But what is now in store for this once proud country whose talented and creative people were a thousand years ago carving churches out of solid rock while rest of Africa was lethargically struggling with the development of the four-man canoe?

   First, the economy will not improve significantly until all evidence of Soviet-style communal agriculture are removed and large infusions of foreign assistance arrive.  Progress is already being made in this regard.  The new rulers have left in place agricultural reforms implemented during the last days of Mengistu's rule that were specifically designed to win the approval of Western aid donors.  These reforms included the abolition of state price fixing which discouraged cultivation and a move away from the Soviet modeled communal farm concept.

   It is a little known fact that with proper agricultural equipment and techniques and capital assistance from the West, Ethiopia has the potential to produce enough food to feed not only itself but the rest of Africa as well.  And this would be possible without any production whatsoever from the drought-stricken parts of Eritrea and Tigre.  These burnt fields could remain fallow while the enormously fertile central highlands and the tropical areas of the south could easily produce sufficient surpluses.

Rebel Philosophies and the Future

   Independently, even the Eritrean and Tigrean rebels have over the past few years moved away from their own brands of communism towards belief in a free market system and democratic pluralism.  There is certainly consensus among the new leaders that the new order of Ethiopia will include the philosophies of a free-market economy and some form of democratic government.  If these reforms continue, and every indication is that they will, the U.S. and other Western aid will most certainly be in the offing.

   Although the new government will certainly be a vast improvement over that of Mengistu's rule, the nagging question is:  Can the country remain united under one central government?  The old saying, "united we stand divided we fall," is particularly true for Ethiopia.  The elements of negotiation and compromise--the same elements that brought the rebels victory over Mengistu--are the same ingredients required now if Ethiopia is to survive intact.

   The real problem is that the major rebel groups (Eritreans and Tigreans) are essentially Marxist-oriented separatist movements.  The Eritrean People's Liberation Front (EPLF) has already proclaimed a separate administration in the north and the Tigrean People's Liberation Front (TPLF), which dominates the fighting force of the EPRDF, is arguing strongly for at least partial autonomy.  These problems must be resolved favorably or Ethiopia may very well end up being partitioned.

   If, for example, the EPLF were to stick to its secessionist position, Ethiopia would be divided and the southern part of the country, including Addis Ababa, would be cut off from the sea and its major port of Assab.  Recent accusations by Addis Ababa-that Eritreans are withholding oil supplies from the capital underline the danger.  A separate Eritrea without the fertile highlands of central Ethiopia would suffer equally with the rest of this landlocked nation.

   A division of this sort would not be in the best interests of Ethiopia, the United States or anyone else, including other African nations who would fear that a nasty precedent might be set in the redrawing of old colonial borders.  Add these political problems to the long-running shaky border situations with both the Somalis and the Sudanese and there is a potential for even more instability in the region.  The problem will most likely be resolved favorably by the new government, but it hears careful watching by investors.

Future Prospects

   Now that Mengistu is out of the way, members of the Amhara ruling elite in Addis Ababa and in exile groups in the U.S. and the U.K. will be anxious to fill the leadership void.  There is a particularly large pool of talent sitting in exile in the U.S.  America got Ethiopia's best and brightest during the seventeen-year "brain-drain"--our visa screening at the U.S. Embassy in Addis Ababa and our immigration policies saw to that.  Many of these people are now poised to return to their homeland, and they will take with them American ideas, values and financial backing.  The other ethnic groups will certainly be represented in the new government, but make no mistake about it, the Amhara will emerge in control.  They are the ones with the experience, education, money and political clout to rule again as they have in the past.  Private Western investment will be welcomed, encouraged and protected.  The new Ethiopia will almost certainly be very pro-American, more enlightened and more democratic.

   Talks on the formation of a transitional government began in Addis Ababa on July 1 and the prognosis for success is very favorable.  The EPRDF has already given the world evidence of its willingness to compromise and its leaders have proven themselves to be benevolent in their handling of the old regime.  The bloodbath expected when the "barbarians" from the north entered Addis never occurred.  Some 250 senior officials who were closely aligned to Mengistu were arrested and are now being held in relative comfort in a political education center.  The rest of the civil servants appear to have been excused as merely having accommodated the old regime in order to survive (absolutely true in most cases) and are now back at their posts providing essential services (albeit without salary until there is money back in the government coffers).

   Thus, there is a solid potential for progress in the post-Mengistu era, but only if--and again, this is a big if--the new EPRDF government led by Meles Zenawi can work things out with the Eritreans and the Tigreans who actually fought the major battles that won the day in Addis Ababa.

Summary and Conclusions

   The general prognosis for Ethiopia is good.  Chances are that these secessionist problems will be resolved equitably and Ethiopia will once again be ripe for foreign investment.  The interim government that emerges and any subsequent permanent government will almost certainly be receptive to foreign aid and investment; the U.S. and many other Western nations and their business interests will clearly become donors and private investors.

   The years of fighting and drought and communism have taken a terrible toll on the country.  It will have to be built from the ground up.  Essential services such as water and sewer systems and electrical power plants installed by the Italians long ago are literally being held together with bubble gum and bailing wire.  Transportation systems are a mess, as witnessed by food-aid distributors during famine relief efforts, and the agricultural system needs immediate modernization so the country can began feeding itself.

   The Ethiopian people are ready to put the misery of the past seventeen years behind them and to get on with the rebuilding of their country; the new government will support the anxious work force and Western governments and international organizations such as the World Bank, Export-Import Bank of the U.S. and the International Monetary Fund will be rushing to provide loans to help underwrite the rebuilding.  Now is not too early for American businesses to begin building bridges to the country's new leaders and bureaucrats, especially those in Addis Ababa and Washington, with an eye toward establishing personal and professional relationships which will help safeguard investments and assure trouble-free and profitable operations in the future.

   But extreme caution should be exercised when traveling and operating in Ethiopia at the present time while there is still uncertainty in the capital and fighting in the hinterland.  As recently as April 26, 1991, two Soviet geologists were killed in the Ogaden (near the Somali border) while on an oil exploration mission.  One was killed when his jeep hit an old 1977 vintage landmine and the second killed when he was caught in the crossfire between rival Somali insurgent groups while rushing to his friend's assistance.  Another Soviet geologist was taken hostage by one of the Somali groups, but released unharmed an hour later when he was able to prove his identity.

   The risks are real. The U.S. Department of State has also issued a travel advisory discouraging travel outside of Addis Ababa, and particularly to the Ogaden and southern provinces of Ethiopia.  In any case, all travelers to Ethiopia are strongly advised to check in with their respective embassy or diplomatic representative shortly after arrival and to stay close to the capital.

Useful Information for Foreign Travelers

   VISA REQUIREMENTS.  All travelers to Ethiopia are warned to expect difficulty in obtaining visas (the bureaucratic system is a mess), and to anticipate long delays at Bole Airport if the traveler arrives without a visa (a 72-hour transit visa used to be commonplace and easy to obtain at the airport).  Visas to Eritrea are a different matter entirely as Eritrea has declared itself a separate state and is now issuing its own visas.  The requirements to have an onward ticket and at least $500 in a hard currency still remain.

   HEALTH CONSIDERATIONS AND VACCINATIONS.  Yellow Fever and Cholera vaccinations are required and health certificates are examined.  Not having a record-of this could result in the traveler being provided these inoculations.  Given the substandard quality of medical services, it is suggested that all travelers be in good physical health, carry double the supply of prescribed medication, and carry some form of supplemental health and evacuation insurance.

   CURRENCY.  The unit of currency in Ethiopia is the Birr.  Normally, US$1 converts into Birr 4.  Currency is rigidly controlled with currency declaration upon arrival; attempting to conceal currency would be imprudent.  It is important to convert foreign currency to Birr at the airport as few hotels are set up to exchange money, even for their guests.  Birr currently cannot be exported but can be reconverted back into the traveler's currency less US$30 per day of the stay.  It is vital to ask for and keep receipts for all expenditures.

   LANGUAGE.  Amharic is the official language, although English, Italian, French, and Arabic are also widely spoken.

   ENTERING ETHIOPIA.  The only route of entering Ethiopia is by air through Addis Ababa.  The national airline is Ethiopian Airlines (considered dependable when compared to others in the region).  Other major carriers offering service to Addis include Aeroflot, Air India, Alitalia, CAAC, and Lufthansa.  Given the high costs in Addis, it is recommended that travelers not purchase tickets in Ethiopia or even change flights.

   WHERE TO STAY.  Business travelers are urged to stay at the Hilton Hotel which is the only hotel in Addis which has anything close to comparable international hotel service found elsewhere. Given its popularity, reservations should be made in advance.

   FOOD.  For health reasons, avoid all salads, dairy products, and local water.  Use bottled water only.  Local fruit is excellent if it is peeled by the consumer.  Ethiopian coffee is excellent and the country reportedly is the original home of the bean.  Local spirits and tea are interesting to try, but can be potent.

   PERSONAL PRODUCTS.  In view of the uncertain conditions in Ethiopia, travelers should be totally self-sufficient and assume that nothing is available.  Consequently, visitors should bring an ample supply of toiletries, medicines, batteries, etc. as selections are very limited.