India’s Development Cooperation with Ethiopia in Sugar Production
| Author | Sushil Kumar |
| DOI | 10.1177/0020881717705926 |
| Date | 01 January 2016 |
| Published date | 01 January 2016 |
| Subject Matter | Articles |
India’s Development
Cooperation with
Ethiopia in Sugar
Production:
An Assessment
Sushil Kumar1
Abstract
Ethiopia is one of the few countries in Africa with whom India has enjoyed a
long-standing partnership in development cooperation. In 2006, India provided
a US$640 million Lines of Credit (LoC) to Ethiopia for the development of its
sugar industry. The article analyzes the impact of India’s LoC (2007–2012) on the
Ethiopian sugar industry. It is found that on completion of the ongoing projects,
Ethiopia should be able to produce 1.6 million tonnes of sugar per year. This
will lead Ethiopia towards self-reliance in sugar production. It is estimated that
economic gain from sugar and ethanol production in Ethiopia would be close
to US$961 million per year. Field visits explored several practical challenges to
India’s endeavour like absence of appropriate mechanisms for monitoring and
verification of the project. This leads to delays, information gaps and coordination
failures in project implementation. Indian engagement in Ethiopia’s sugar sector
signifies a major boost for the agriculture value chain in Ethiopia; and the ancillary
support for railways track building is likely to play an important role in facilitating
port connectivity and exports.
Keywords
Line of credit, development cooperation, sugar industry, India, Ethiopia
Article
International Studies
53(1) 59–79
2017 Jawaharlal Nehru University
SAGE Publications
sagepub.in/home.nav
DOI: 10.1177/0020881717705926
http://isq.sagepub.com
1 Consultant, Research and Information System for Developing Countries (RIS), New Delhi, India.
Corresponding author:
Sushil Kumar, Consultant, Research and Information System for Developing Countries (RIS), Core
4-B, IV Fllor, India Habitat Centre, Lodhi Road, New Delhi-110003, India.
E-mail: sushil.kumar@ris.org.in
60 International Studies 53(1)
Introduction
Ethiopia is one of the few countries in Africa with whom India has enjoyed a con-
sistently warm and high level of interaction. Area of cooperation has undergone a
major change but the spirit of partnership has remained strong across the past several
years, within the development compact1 framework. A specific sequence and
structure in the selection of area for cooperation may have been lacking but since
the 1950s cooperation has continued for capacity building, trade and investment,
military affairs, and infrastructure and the strengthening of education, in particular
the supply of trained teachers. Indian teachers have been part of Ethiopian education
system for several decades and their contribution is well acknowledged.
Initially, India supplemented its social initiative through the involvement of
local Indian community. The foundation stone for a maternity home in Addis
Ababa was laid in 1952 to mark the 60th birthday of the emperor of Ethiopia, for
which the Indian community contributed US$74,000 and the Indian government
US$2,000 (MEA, 1952). The emperor reciprocated by gifting 500 tonnes of wheat
to India (ibid.); later the maternity home was to emerge as an important public
hospital in the capital.
In recent years, Indian involvement has changed as new institutional arrange-
ments have emerged. In 2005, the Indian embassy in Addis Ababa supported the
establishment of a 130-member Indian Business Forum (IBF), aimed at encourag-
ing Indian investment in Ethiopia, creating a platform for dialogue and providing
an opportunity for networking within the Indian community. Several countries
(such as Israel) and the European Union (EU) have followed the model and have
now established similar business forums.
In the area of development finance, India provided major LoCs to Ethiopia in
2006 which changed the dynamics of cooperation. In line with Ethiopia’s identi-
fied priorities, India extended support for the growth of the sugar industry and its
related infrastructure to encourage expansion in associated trade.
Development of sugar industry in Ethiopia started with an agreement in 1951
between the Ethiopian government and Handels Vereniging Amsterdam (HVA),
Dutch company, for the establishment of a sugar factory in Wonji, Ethiopia. This
was the first sugar factory in the country with its own plantation. Subsequently, a
similar agreement was concluded between the government and the company for
the establishment of other sugar factories in Shoa and Metehara. The factors that
lead the company to establish sugar factories were: high domestic demand for
sugar in Ethiopia, the availability of natural and human resources together with
favourable a climate for cane production and prevalence of infrastructural facili-
ties within the Awash Valley.
The Government of Ethiopia had privatized cultivation of sugarcane, along with
cotton, palm oil and rubber and made it a priority area for foreign direct investment
(FDI). There were also official visit to countries like Brazil to attract investment.
However, results were not encouraging. Finally, the Government of Ethiopia
decided to promote the sector by establishing Ethiopian Sugar Corporation (ESC)
through investing public resources and assigning high-ranking officials to lead the
sugar corporation.2
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