Wikileaks: Ethiopia seeks dramatic change in agricultural land use

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Viewing cable 09ADDISABABA2900, ETHIOPIA SEEKS DRAMATIC CHANGE IN AGRICULTURAL LAND USE

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Reference ID Created Released Classification Origin
09ADDISABABA2900 2009-12-10 07:07 2011-08-26 00:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Addis Ababa
	VZCZCXRO2154
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
Original_wl_hour_glass_small
	DE RUEHDS #2900/01 3440707
ZNR UUUUU ZZH
R 100707Z DEC 09
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC 7096
INFO RUEHZO/AFRICAN UNION COLLECTIVE
RUEPADJ/CJTF HOA
RUEAIIA/CIA WASHINGTON DC
RUEKDIA/DIA WASHINGTON DC
RUEWMFD/HQ USAFRICOM STUTTGART GE
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
	UNCLAS SECTION 01 OF 06 ADDIS ABABA 002900 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR AF/E JWIEGERT; AF/EPS - ABREITER AND GMALLORY; 
EEB/IFD/OMA - JWINKLER AND EEB/CBA - DWINSTEAD; EEB/TPP/BTA 
DEPARTMENT PASS TO USTR FOR PATRICK COLEMAN, BARBARA GRYNIEWWICZ 
DEPT OF COMMERCE FOR ITA MARIA RIVERO 
DEPT OF TREASURY FOR REBECCA KLEIN 
USAID FOR AFR/EA - HELLYER, DALTON, AFR/SD - MCURTIS, EGAT - 
JHESTER, JYASMAN AND GMYERS 
 
E.O. 12958: N/A 
TAGS: EAGR EINV ETRD ECON EFIN BEXP AF ET
SUBJECT: ETHIOPIA SEEKS DRAMATIC CHANGE IN AGRICULTURAL LAND USE 
 
REF: Addis Ababa 2809 
 
ADDIS ABAB 00002900  001.2 OF 006 
 
 
SENSITIVE BUT UNCLASSIFIED.  PROTECT ACCORDINGLY. 
SUMMARY. 
 
¶1. (SBU) SUMMARY.  All land in Ethiopia is owned by the government. 
Farmland is leased long-term to individuals (95 percent) and 
companies (5 percent).  Having determined that (1) vastly more 
acreage must be brought into agricultural production, (2) existing 
farmland must be made much more productive, and (3) the public 
sector cannot fully finance needed modernization, the Government of 
Ethiopia (GoE) is actively seeking domestic and foreign investment. 
 The GoE has especially sought recently to attract investors to 
develop large commercial farms in the belief that these farms have 
potential to dramatically boost total agricultural output, 
employment, technology transfer, and foreign exchange reserves.  A 
new directorate within the agriculture ministry (MoARD) has been 
charged with negotiating leases over two years to add at least 7.4 
million acres of land to an existing 45 million acres of cultivated 
land out of a total of 183 million arable acres (all figures are GoE 
estimates).  So far, the directorate has finalized only three deals 
involving a total of 42,000 acres and has other deals pending that 
would bring that total to 220,000 acres.  The directorate has served 
notice, however, that the pace of deals is about to rapidly 
accelerate.  This apparent rush to lease so much farmland, much or 
all of it to foreign interests, during a time of worsening food 
insecurity should raise concern within the donor community about GoE 
motivations and negotiating capacity.  It appears that historical 
patterns of agricultural production in Ethiopia are about to change 
dramatically.  What the effect this change will have on Ethiopia's 
capacity to feed its population and on its overall economic 
development is unclear.  USAID already has a well-established 
agricultural development program and plans to engage the new 
directorate to seek ways the USG can assist in line with the new 
Global Hunger and Food Security Initiative. END SUMMARY. 
 
CABLE GENESIS 
------------- 
 
¶2. (SBU) In order to investigate "agro-imperialism" claims made in 
recent Washington Post and New York Times articles, Econoff and 
local Economic and Commercial Specialists met with a variety of 
stakeholders on November 30 through December 2.  Contacts included: 
Bezualem Bekele, Agricultural Economist in MoARD's Agricultural 
Investment Support Directorate; Haileselassie Tekie, Director 
General, Ethiopian Horticulture Development Agency (EHDA); Mafa 
Chipeta, The United Nations Food and Agriculture Organization 
(UNFAO) Representative in Ethiopia; Achim Fock, Senior Economist for 
Agriculture and Rural Development, World Bank; Ram Karuturi, 
Managing Director of Karuturi Global Ltd.; Hussen Ahmed, Managing 
Director, Farm Organic International PLC; USAID officials and 
agricultural implementing partners; and U.S. investors in Ethiopia. 
 
ETHIOPIA'S AGRICULTURAL PROFILE ... 
----------------------------------- 
 
¶3. (SBU) All land in Ethiopia is government owned.  The 1994 
Constitution proclaims "Land is a common property of the Nations, 
Nationalities and Peoples of Ethiopia and shall not be subject to 
sale or to other means of exchange."  The transfer of land use 
rights is accomplished only through long-term lease arrangements (up 
to 99 years) between the GoE as lessor and individual or corporate 
licensees.  Agricultural investment has for many years been the 
cornerstone of the GoE's development policy, as agriculture 
comprises 45 percent of Gross Domestic Product, and 85 percent of 
Ethiopia's 80 million residents live in rural areas.  The GoE 
estimates Ethiopia's arable land at 183 million acres with 45 
million acres under cultivation of which 42.75 million acres is made 
up of small-scale domestic farms which yield negligible quantities 
of crops for export.  The remaining 2.25 million acres comprises 
larger-scale commercial farms with the majority of that acreage 
farmed by foreign investors.  Thirty million of the 45 million 
cultivated acres is devoted to cereals, which have been subject to a 
GoE export ban since 2007.  (COMMENT:  All GoE figures regarding 
agricultural production are suspect.  The above figures can be 
 
ADDIS ABAB 00002900  002.4 OF 006 
 
 
sourced to our contacts within the GoE and are reasonable estimates 
but are not robust.  It is safe to say that the GoE's traditional 
focus on small-scale farming has resulted in very little acreage 
producing crops for export.  END COMMENT.) 
 
... AND RAPIDLY EVOLVING POLICY 
------------------------------- 
 
¶4. (SBU) Prime Minister Meles Zenawi summarized GoE agricultural 
policy objectives in a December 2 television interview as:  1) 
increasing productivity of small-scale farms and 2) expanding 
large-scale commercial farming in order to increase overall 
production and generate sorely needed foreign exchange.  The GoE 
reports that arable but uncultivated lands most suitable for large 
commercial farms are primarily available in the less populated 
lowland regions of Beneshangul Gumuz, SNNPR, Gambela, Somali, and 
Afar but readily adds that these areas require significant 
investment to improve the infrastructure, develop irrigation 
schemes, and undertake research to identify suitable crops.  Many of 
these same land areas had been identified in the recent past as 
potential agricultural lands for implementing the GoE's resettlement 
program. 
 
¶5. (SBU) Agriculture Minister Tefera Deribew recently said publicly 
that GOE large-scale farm investment policy is focused on increasing 
productivity, boosting technology transfer, and creating jobs. 
Early in 2009, MoARD formed the Agricultural Investment Support 
Directorate and charged it with securing delegations of authority 
from regional government to administer land on their behalf, and 
negotiating with investors interested in large-scale operations of 
over 12,500 acres.  Prime Minister Meles stated in his December 2 
interview, "we were condemned for not doing this in the past" and 
the GoE is stepping in now due to a lack of capacity at the regional 
government level.  Meles went on to say the GoE will assist regional 
governments with capacity building and the regional governments will 
take over these large land allocations in the future.  The GoE 
tasked regional governments with verifying that land identified by 
MoARD mapping as physically suitable for large-scale farming was in 
fact unoccupied and otherwise available for development.  The 
directorate is to solicit investment proposals for land so vetted. 
MoARD Agricultural Economist Bezualem Bekele presented Econoff with 
a land request form checklist issued for use by potential investors. 
 Required checklist items include: destination market breakdown 
between domestic/foreign, expected employment numbers, articles of 
association, investment license, company profile, letter of interest 
to pay a one-year lease (companies must pay this up front), bank 
statements, land use plan, action plan of project, letter to conduct 
environmental audit report, work/resident permits. 
 
¶6. (SBU) To date, the directorate has identified 7.4 million acres 
of presently uncultivated land that it plans to offer to large-scale 
commercial farm investors over the next two years.  The GoE has 
fully verified with the regional governments that 4.9 million acres 
is ready for investment and has identified an additional 2.5 million 
acres that regional authorities are continuing to review.  This land 
is located in the sparsely populated regions of Beneshangul Gumuz 
(about 2 million acres), Gambela (about 1.5 million acres), and 
SNNPR and is envisioned as ripe for cultivation of coffee, cotton, 
sesame, sugarcane, tea, and palm oil.  Bekele stated that populated 
regions like Oromia are still under review due to the complex issues 
faced in those areas.  He emphasized several times to Econoff that 
compensation payments were not needed to parcel off the verified 
land areas, as neither local citizens nor livestock were being 
displaced.   Bekele said that less than 200,000 acres had been 
assigned or were under active negotiation out of the newly 
identified 7.4 million acres and that only three agreements had been 
finalized to total 42,000 acres and another seven to ten agreements 
were under discussion. 
¶7. (SBU) Bekele told Econoff the GoE's expectation is that domestic 
and foreign agricultural investment in large-scale commercial farms 
will result in increased production for domestic consumption as well 
as export.  He said the GoE is not solely focused on export earnings 
but also concerned about domestic food security.  He said GoE 
strategy is to seek investment by making land available at 
attractive rental prices and offering incentives such as tax 
 
ADDIS ABAB 00002900  003.2 OF 006 
 
 
holidays, duty-free import of capital goods, and grace periods of up 
to seven years on land rents.  He conceded that outside investment 
is needed to boost agricultural development in part because 
Ethiopian law determines that government-owned land (i.e., all land) 
cannot be used as collateral for the financing of improvements to 
farmland. 
 
WHO IS INVESTING? 
----------------- 
 
¶8. (SBU) While the GoE has recently started an increased push for 
large-scale agricultural investment, this policy is not entirely 
new.  The GoE has granted 9,200 commercial farm investors licenses 
since 1996.  Of this number, 1,300 licenses were issued to 
foreigners.  According to data from the Ethiopian Investment Agency 
(EIA), foreign agricultural investment started to ramp up in 2006, 
jumping from USD 508 million in 2005 to USD 1.9 billion in 2006 
(using the current exchange rate of 12.6 Birr/USD).  The total stock 
of foreign agricultural investment from July 1992 through September 
30, 2009 was USD 7.1 billion, with over 87 percent of that 
investment coming since 2006.   Most of this investment has come 
from Asia/Middle East and Europe, comprising 57 percent and 18 
percent, respectively, of investment ranging from the 
pre-implementation stage to the operational stage.  India, Saudi 
Arabia, Israel, the United Arab Emirates, and Pakistan are the 
largest Asian and Middle East investors.  Germany, the Netherlands, 
and the UK are the largest European investors.  India is by far the 
leading investing country at about 30 percent of the total stock 
(USD 2.1 billion).  U.S. investment totals 9 percent (USD 651 
million) and edges out Saudi Arabian investment at 8 percent (USD 
540 million).  Much of the U.S. investment involves Ethiopian 
Diaspora investors. 
 
¶9. (SBU) Indian firm Karuturi Global Ltd. and press reports cite 
Indian agricultural investment in Ethiopia at over USD 4 billion, 
which is double the figure provided by the EIA.  This investment is 
primarily in flowers, sugar, sesame, and cotton production. 
Karuturi Global runs one of the largest agricultural operations in 
Ethiopia.  The company has about 27,000 acres in Oromia and 741,000 
acres in Gambela on a 45-year lease.  Ram Karuturi, Managing 
Director, told Econoff he looked to invest in 247,000 acres three 
years ago, but the GoE encouraged him to take 741,000 acres. 
(COMMENT:  Comparing Karuturi's holdings to the estimated 2.25 
million total Ethiopian acres devoted to large-scale commercial 
farms (paragraph 4), it becomes evident that Katuturi may well be 
Ethiopia's largest commercial farming operation. END COMMENT.) 
Karuturi's farms are starting to grow maize, cereal crops, oilseeds, 
sugarcane, and palm oil on top of its already established flower 
business.  Apart from exported flowers, these crops are largely 
targeted at the Ethiopian and the Common Market for Eastern and 
Southern Africa (COMESA) market.  (Note: Karuturi recently ordered 
USD 24 million in U.S. equipment from John Deere and seeks to order 
about USD 100 million in additional equipment in the coming year. 
End Note.) 
 
¶10. (SBU) Saudi investors are primarily investing in rice and 
livestock feed (e.g., alfalfa) production according to Bekele. 
According to press reports, Sheikh Mohamed Al Amoudi's Saudi Star 
Agricultural Development has recently made a large investment in 
Ethiopia to begin rice production in Gambela.  It has started with 
25,000 acres, but plans to rapidly expand.  Although Saudi Star 
plans to export rice to Saudi Arabia, evidently assuming it can 
circumvent the cereals export ban, the company also plans to sell a 
variety of crops to the local market.  (NOTE:  Saudi Star recently 
paid USD 80 million for U.S. agricultural machinery and equipment 
from Caterpillar to develop its farming operations. END NOTE.) 
 
HOW WILL THIS INVESTMENT AFFECT FOOD SECURITY? 
--------------------------------------------- - 
 
¶11. (SBU) The United Nations Food and Agriculture Organization 
(UNFAO) Representative in Ethiopia Mafa Chipeta argued to  Econoff 
that three conditions were needed to ensure a stable and attractive 
domestic market: 1) predictable levels of food aid that gradually 
reduce over time; 2) established price floors to flatten out the 
 
ADDIS ABAB 00002900  004.2 OF 006 
 
 
fluctuations due to the seasonality of agricultural products (which 
the GoE is against); and 3) additional development and investment 
incentives for "middle ground" farmers and cooperatives mainly to 
facilitate the transfer of technology.  He also advocated a 
three-way partnerships to address food security, which would include 
Gulf state money, East African land, and the technology and 
management skills of another party such as the United States. 
 
CONCERNS GOING FORWARD 
---------------------- 
 
¶12. (SBU) While most private sector and international economists 
Post contacted agreed the GoE's overt push for large-scale 
commercial farm investment is a step forward, they voiced concerns: 
 
¶A. Saudis exempt from rules?  Questions remain about contract terms 
between the GoE and Saudi investors.  Sheikh Al Amoudi enjoys a 
special relationship with the GoE and reportedly deals directly with 
Prime Minister Meles.  On the surface, it appears basic rules, such 
as the ban on grain exports from Ethiopia, do not apply to the 
Saudis. 
 
¶B. Land lease rate changes.  Bekele told Econoff his Agricultural 
Investment Support Directorate is undertaking a study of land prices 
across the country.  The GoE's concern is that some investors are 
paying high prices for land (e.g., USD 321 per acre in Oromia) while 
others are paying low prices (e.g., USD 35 cents per acre in 
Amhara).  Bekele said prices will probably be set based on proximity 
to Addis Ababa and, after the study is complete, the GoE plans to 
introduce legislation to revise all land lease terms.  This 
legislation could be approved in the next three to six months 
according to Bekele.  When Econoff asked current investors about the 
possibility of the GoE increasing their lease rates, one investor 
said he would sue the GoE while the other said he would just leave 
the country. 
 
¶C. No such thing as virgin land.  Both UNFAO and World Bank 
officials told Econoff there is no completely unused land in 
Ethiopia.  Almost all "unutilized" land that is not fenced off is 
used for livestock grazing, so the impact on livestock could be 
substantial.  Ethiopia is dependent on livestock not only for milk, 
meat, and byproducts, but also for animal traction for plowing and 
transport.  Livestock populations are already showing stress from 
being excluded from dry season pasture and water along the Awash 
river in the Afar region due to huge GoE farm irrigation schemes to 
grow sugar, cotton, and sesame.  If livestock are negatively 
affected by becoming increasingly susceptible to drought and other 
environmental shocks, this would have a potentially huge impact on 
agricultural production in the dryer highland areas as well as loss 
of livelihoods in the pastoralist areas.  Another challenge in this 
area is that many populations are semi-nomadic and shift their 
farming operations every couple of years.  The GoE claims it is 
factoring these patterns into its land verification, but this 
traditional lifestyle could present investors with a compensation 
claim issue a few years down the road. 
 
¶D.  Lack of infrastructure.  The regions of Beneshangul Gumuz, 
SNNPR, and Gambela have poor roads, electricity, and communication 
resources.  Bekele told Econoff the Directorate is working with the 
Ethiopian Roads Authority to try to develop some the infrastructure 
in these areas.  Karuturi has built his own infrastructure; however, 
most other investors do not have the capital to take on these large 
projects. 
 
¶E. Regional backlash.  A United Nations Development Programme (UNDP) 
official told Econoff she feared retribution by regional governments 
against the envisioned influx of commercial farm interests.  UNDP 
works in a number of these regions and stated the regional 
governments are quite resentful of the federal government for taking 
over land allocation issues.  In addition, on December 2, the Oromo 
Liberation Front issued a statement calling upon the Oromo people to 
stand up against the ruling party's new land deals with foreign 
investors. 
 
¶F.  Incomplete studies.  One local agricultural investor told 
 
ADDIS ABAB 00002900  005.2 OF 006 
 
 
Econoff land across the country is not well studied in terms of its 
condition and suitability for specific crops.  He also expressed 
concern about the sustainability of this influx of investment and 
the potential environmental damage.  Bekele also noted the 
Directorate is discovering new information each day as the GoE's 
initial studies were based on 2006 satellite imagery and conditions 
have changed since that time. 
 
POTENTIAL FOR U.S. INVESTMENT AND ASSISTANCE 
-------------------------------------------- 
 
¶13. (SBU) U.S. investors are active in the market and this new 
policy opens the door for additional U.S. investment.  Robani 
Agricultural Enterprise has been operating a 1,200 acre farm for 
four years to grow wheat, corn, and vegetables.  Morrell Industries 
is leasing 25,000 acres of land to experiment with dryland wheat 
farming to produce seed for the local market.  In a potential 
investment coup for Ethiopia, U.S. giant ConAgra Foods is planning a 
trip to the country in December to evaluate its conditions for a 
large-scale tomato farm and processing plant. 
 
¶14. (SBU) The U.S. government is currently assisting in various land 
policy efforts, and this new policy focus suggests additional 
assistance targets.  USAID's Ethiopia Land Administration Project 
(ELAP) supports the GoE's land use and administration programs, 
assisting MoARD and six regional governments.  ELAP is working to 
establish a land registration and certification system, and 
providing technical assistance in land valuation at the regional 
level.  Beyond ELAP, USAID manages a portfolio of agricultural 
development and food security initiatives focused on helping 
Ethiopia achieve market-led, agriculturally-centered economic growth 
and to improve the food security status and resiliency of farmers 
and pastoralists.  One program, USAID's Agribusiness and Trade 
Expansion Program (ATEP), is assisting the GoE with its draft code 
of conduct for the horticulture industry. 
 
¶15. (SBU) Based on information from the GoE and international 
economists, it appears the MoARD Directorate is poised for donor 
assistance.  Any assistance discussions, however, would have to be 
approached in a delicate fashion.  Prime Minister Meles admitted in 
his recent television interview that there are weaknesses in terms 
of large-scale land allocation capacity at the federal level (as 
well as the regional level).  Kebede, the Director of the new MoARD 
Directorate, also confirmed this fact privately to a USAID official 
in early December.  FAO Representative Chipeta told Econoff 
Ethiopia's land deals need adequate safeguards and that the 
investment levels discussed dwarf the GoE's agricultural management 
capacity.  He also said any donor would need to be positive in their 
approach to the GoE, not critical, so that the GoE will not "clam 
up" and shy away from discussions.  World Bank Senior Economist for 
Agriculture and Rural Development Achim Fock echoed this sentiment 
to Econoff, stating the GoE is quite sensitive about large-scale 
commercial farming deals and it may not openly welcome donor 
assistance in these contract negotiations.  Fock told Econoff the 
Bank would continue its assistance with smallholder farmers in the 
highland areas, as he believes they can have the most impact with 
them. 
COMMENT 
------- 
 
¶16. (SBU) Most every stakeholder Econoff spoke to agreed that the 
GOE's increased policy focus on large scale commercial farm 
development is good overall.  Economists, including the UNFAO, have 
called for growth of commercial farms in Ethiopia for years in order 
to boost productivity and food security.  Whether these new 
contractual arrangements produce a win/win result for the Ethiopian 
people and the investors depends on the implementation details. 
Valid concerns loom over the desired end goals of productivity, 
employment creation, displacement of farmers and pastoralists, 
technology transfer, and foreign exchange inflows.  In the end, 
overall food security should improve as food production increases 
significantly and job creation will allow more families to feed 
themselves.  Food donors such as the U.S. have reason to watch 
closely these developments to ensure assistance is not serving 
merely to backfill production lost to export. 
 
ADDIS ABAB 00002900  006.2 OF 006 
 
 
 
¶17. (SBU) Prime Minister Meles and the GoE have historically proven 
to be crafty negotiators.  So much so that investors have often 
walked away or do not even bid on privatization tenders offered by 
the government.  Therefore, it is reasonable to assume the GoE is 
not "giving away the farm" during these investment negotiations and 
has a reasonable overall plan.  That being said, the GoE does seem 
to be struggling with capacity issues at the new MoARD Directorate 
and could benefit from USG guidance.  Given the USG's current 
relationship with MoARD on land issues and agricultural development, 
and prospects for increasing assistance to MoARD under the new 
Global Hunger and Food Security Initiative, the USG is well placed 
to play a role in helping the GoE to ensure current and future 
efforts to improve land management--including land leases--leads to 
positive and sustainable economic, social, and environmental 
outcomes.  END COMMENT.
Original source: Wikileaks
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1 Comments


  1. Oppressed1
    01 Sep 2011

    Meles Zenawi changed the land laws when he took power by the barrel of the gun and he has clung on to power by the same method. He has now been in power for 20 years, his ethnic politics and oppressive tactics are highly unpopular, inflation which is officially at ~40% for the year is taking food out of the public's mouth, Ethiopia has a large unemployed youth population and most of all there are revolutions going on in North Africa which the public is aware off. Given this dynamics only a fool will get in bed with this regime and throw their money down the drain. Meles' days are numbered and we have all seen how the mighty fall. His widely unpopular land policy that is dispossessing the rural public of their ancestral land will be overhauled and guess who will be left holding the bag!

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