- Experts warn Ethiopia risks damaging diaspora ties with controversial asset recovery expansion
Ethiopia's large diaspora community of millions worldwide provides billions in remittances annually but investment lags due to challenges. Diaspora retain strong ties and most want to contribute through jobs and opportunities in Ethiopia. However, political instability, bureaucratic hurdles, limited rural development, and inadequate infrastructure beyond major cities have deterred meaningful participation. Agriculture and tourism show potential if barriers are addressed. While the government recognizes diaspora's importance, a new bill enabling property seizures without trial for vague 'economic crimes' threatens to undermine reform efforts by stoking more uncertainty and lack of confidence among diaspora investors crucial to Ethiopia's economic aspirations, as BirrMetrics’ Mihret Alem reports.
Ethiopia's large and globally dispersed diaspora community represents an untapped resource that could power economic growth and development if properly engaged. Numbering in the millions worldwide, the Ethiopian diaspora collectively sends billions of dollars home each year in remittances that support families and communities. Yet their participation in direct investment that could transform the economy remains limited due to persistent challenges on the ground. As the country works to strengthen governance, diversity its economy, and take full advantage of its demographic dividend, unlocking greater diaspora investment appears crucial - but substantial barriers must still be overcome.
"Every Ethiopian I meet wants to see their country succeed and be part of that progress," notes Melese Tesfaye,” a diaspora who is a businessperson based in Germany after leaving Addis Ababa over a decade ago. "There is huge goodwill towards investing and using our skills and resources abroad for Ethiopia's benefit." Melese's observation rings true across the global Ethiopian diaspora, whose members retain strong cultural and familial ties to their homeland despite relocating overseas for varied reasons over past generations.
From professionals in North America and Europe to semi-skilled laborers in the Gulf, the community remains overwhelmingly invested in Ethiopia's development, with many eager to participate more substantively. "Most of us feel an obligation and personal motivation to give back through investment that can create jobs and opportunities at home," explains Engida Haile, who lives in Toronto, Canada who has tried starting ventures in Ethiopia before. However, she and others emphasize ongoing obstacles to realizing diaspora's full potential, even as the government aims to better harness their contributions.
Chief among these discouraging factors are Ethiopia's uncertain political and security climate. "As someone used to stability in Canada, it's very difficult considering a lengthy-term move to work amidst the risks in Ethiopia," notes Engida, echoing widespread diaspora concerns about instability especially since 2015. Investment expert Milkyas Tilahun similarly flags political tensions and unrest as undermining confidence - "diaspora expect problems to be addressed before dedicating themselves long-term."
This instability manifests alongside other logistical challenges. Obtaining necessary permits and navigating bureaucracy tends to prove trying without personal connections, as Melese outlines regarding "less support for smaller diaspora businesses compared to larger ventures." Bureaucratic complications extend to transferring funds into Ethiopia as well.
Limited infrastructure development beyond major cities further deters diaspora hoping to foster regional growth through investment. As consultant Milkyas notes, "lack of roads, electricity, and other basics restrict possibilities outside Addis and a few areas." Even sectors like agriculture face barriers from underdeveloped rural finances, markets, and value chains.
Such constraints stem both from bureaucratic inefficiencies and Ethiopia's level of development. Yet they collectively diminish the appetite for risk amongst diaspora eyeing meaningful participation through starting businesses or projects at home. As Engida explains, "Unless conditions generally improve and specific problems get addressed, stable investment remains difficult to seriously consider long-term."
Despite a discouraging overall climate, certain sectors do exhibit potential if the right policy tools better incentivize diaspora. According to experts, agriculture and tourism appear primed for expanded diaspora involvement with targeted support.
"Many diaspora have skills and resources that could boost productivity if agriculture sees infrastructure upgrades and support systems developed," says Milkyas. Melese echoes this view - diaspora agricultural investment could range from commercial farms to outgrowing arrangements depending on the enabling environment.
In tourism too, diaspora capacity could play an important role according to Milkyas. He highlights opportunities around hotels, tours, cultural activities and more nationwide if stability increases and connectivity within Ethiopia further improves. With its rich history, landscapes, and religious sites, Ethiopia possesses vast untapped tourism potential.
However, these sectors likewise face hurdles absent appropriate attention. Agriculture requires capital intensive rural investments that public spending alone may not achieve. Tourism development nationwide could founder on inadequate roads, services and basic utilities outside areas like Lalibela and Aksum without diaspora partnerships. Strong coordination between stakeholders is key to maximizing opportunities.
“Unless realistically solving problems through policy,” Milkyas cautions, “the talk of utilizing diaspora will remain just that – talk.” Targeted action is needed to unlock diaspora support for strategic industries.
Signs indicate the Ethiopian government recognizes diaspora’s importance and seeks facilitating their greater participation through tangible reforms. From establishing the Ministry of Diaspora Affairs to launching initiatives welcoming skills and talent transfers, Ethiopia’s leadership increasingly views diaspora as development partners.
However, more diligence remains necessary to strengthen enabling conditions on the ground. As Melese argues, “meaningfully reducing corruption could go far in encouraging small business formation by reducing red tape.” Reducing red tape across the board through digitizing services like visa applications and investment permits could streamline participation.
Similarly, experts widely agree political and economic stability must receive utmost priority if diaspora investment especially is to take off. As Engida emphasizes, "no level of incentives can replace addressing the core issue of uncertainty still pervasive in Ethiopia today." Finding durable solutions to conflicts and broader governance deficits stands paramount in this respect.
Concerted support for infrastructure expansion away from cities forms another priority accelerant. While costly, boosted connectivity pays dividends through access to markets, resources and surrounding opportunities. “Rural electrification, all-season roads, basic services – these shape what sectors diaspora view as viable,” notes Milkyas.
Tailoring banking and capital market reforms with diaspora circumstances in mind represents an additionally vital policy lever. Establishing special fund or credit facilities, enabling transfer and remittance of funds while residing abroad - such specialized initiatives can help address chronic investment capital constraints hampering greater participation, according to experts.
As Melese explains, “Diaspora want to see inclusive development, not just incentives for elites. Addressing challenges faced by all creates the conditions where diaspora investment and skills attain maximum impact.” With vision and diligence, Ethiopia’s leadership and people can work as one to realize this shared goal, he suggests.
But a controversial new proposed law risks undoing such efforts by deepening uncertainty and concern overseas. Ethiopia’s Council of Ministers recently approved the ‘Asset Recovery Bill’ enabling property confiscation without court oversight linked to undefined ‘economic crimes’.
While framed by officials as targeting illicit activities, the broad scope and retroactive application of the bill up to a decade have triggered alarm. Its three paths for asset seizure - including based on mere suspicion of criminality - mean even legally earned assets could become vulnerable to expropriation absent due process. Such overreach contradicts international standards and rule of law principles crucial for stable investment climates.
Coming at a sensitive time of economic turbulence partly blamed on currency shortages said to stem from diaspora remittance channels, the bill fuels suspicions of political targeting beyond its stated aims. On social media, Ethiopians see it as threatening opposition or dissenting diaspora perceived to back rebels at home.
The climate of insecurity casts a pall even over law-abiding investors. As one diaspora businesswoman explains, “I stopped real estate plans through relatives in Ethiopia due to transfer risks, as the parallel market ensures 100% more valuable remittances officials don’t take”. Whether political or not, such sentiments reveal damage done to confidence through opaque policies overshadowing reform rhetoric.
With economic challenges mounting and diaspora crucial to addressing them, progress demands actions aligning with talk of partnership. Officials argue the bill aims to curb illicit wealth, yet its overly broad nature risks the opposite - curbing legitimate capital through new disincentives conflicting with rule of law.
Greater balance and transparency appear necessary to avoid inflaming a crisis of confidence as the bill faces parliamentary review. If reworked with input from independent experts and a more tailored approach, it could complement governance improvement. But its current form appears poised instead to significantly compound constraints on diaspora participation just when Ethiopia’s development demands their fuller engagement.
