The Ethiopian diaspora are among the most vibrant and expansive in Africa. It is estimated that more than 2 million Ethiopian diaspora are residing in Europe, North America, Australia, the Middle East and Africa. They sent remittances to Ethiopia in the amount of USD four billion in 2015, compared to only USD 400 million in 2009 The sharpest increases have come in the last three years as a direct response to Ethiopia’s adoption of a formal Diaspora Policy encouraging diaspora participation and investment in Ethiopia. Ethiopian diaspora have heeded their dutiful call to invest in their homeland, despite the existence of various social, ethical, political and financial dilemmas that drove them from their homeland in the first place.
Aside from pure domestic economic stimulation through remittances, having a policy that embraces and engages the diaspora has proven time and time again to be extremely beneficial to a developing nation such as Ethiopia. According to a working paper prepared by Alan Galmen, the following advantages are all common to countries with very open diaspora policies: an increased remittance capture, a diaspora network, and diaspora integration.
Remittance capture encompasses not only increasing the volume and productivity of remittances, but also incentivizes more complex investment that will stimulate the Ethiopian financial sector itself, including but not limited to remittance-backed bonds, foreign currency accounts, investment tax breaks, exemption from import tariffs on capital goods, and duty-free shopping bonuses.
The network access provided by diaspora, specifically in areas with innovation and emerging technologies, provides an avenue for Ethiopia to capture the cutting edge in innovation and connect with potential corporate partners. Foreign investment tied to a nation’s diaspora is unique in the sense that it comes with the intent of long-term development of the nation; the result being that foreign entities and powers will thus have a long-term vested interest in protecting Ethiopia and their investments. This international trade and its resultant support are vital for Ethiopia who is sandwiched between comparatively unstable nations in one of the most volatile socio-economic regions of the world—the Horn of Africa.
Notwithstanding the positive contributions of the Ethiopian diaspora to the Ethiopian economy, the Ethiopian government has recently started taking some measures that would limit the involvement of the diaspora in the country’s socio-economic development. For example, the government initiated a forced sale of foreign national bank shares at par value. One can speculate that the motive behind such measure could be to limit the influence of foreign actors, especially in the banking industry. But it is important to consider the benefits of incentivizing and promoting diaspora involvement in Ethiopia.
Allowing diaspora to openly engage in the Ethiopian development effort is an effective means to integrate and unite the Ethiopian people, establishing and maintaining a sense of duty and service for the Ethiopian homeland. Many countries have also seen many diaspora return to their homeland and bring with them the education and resources they gained abroad. With USD four billion remitted annually already, it only makes sense for the Ethiopian government to build on this pure cash flow and amplify the value it adds to Ethiopia rather than fight the interest and engagement of Ethiopians abroad.
There are many successful examples of home countries benefitting from an open diaspora policy, one of the best experiences being that of India. Indian diaspora are only limited from running for public office and voting rights; otherwise, they can be treated fully like citizens. The results have been astonishing. In India, diaspora who returned to the homeland invested in and singlehandedly established its USD 102 billion IT industry, six percent of the Indian GDP. Diaspora remittances themselves are USD 70 billion, or four percent of the GDP. Economists argue that in the absence of such a policy, employed Indians would make 10 percent less annually per year. The difference in unemployment would be devastating; with many experts indicating that far more Indian talent would be forced to leave in the absence of open diaspora policies, and would probably not return.
Consequently, non-resident Indians have contributed back to their home country and been involved in its growth. In fact, open diaspora policies facilitate a bond between non-resident Indians and their homeland.
The benefits of open diaspora policy are not realized only by the corporate sector, but by governments as well. The Economist points out that some 500,000 Chinese students have studied abroad and returned, mostly in the past decade. They dominate the think-tanks that advise the government, and are moving up the ranks of the Communist Party. Cheng Li of the Brookings Institution, an American think-tank, predicts that they will be 15-17 percent of its Central Committee by 2012, up from six percent in 2002. Very few of these Chinese returnees, if any, have tried to institute radical changes in or overthrow the Communist government. But they have seen how capitalism works in practice, and they are trying to implement only the improvements in their home country.
In fact, the Economist article ends neatly by stating:
“As for the old world, its desire to close its borders is understandable but dangerous. Migration brings youth to ageing countries, and allows ideas to circulate in millions of mobile minds. That is good both for those who arrive with suitcases and dreams and for those who should welcome them.”
Clearly, Ethiopia needs to learn from the experiences of India and China and implement similar diaspora policy. An open diaspora policy is its best way to connect with the world and maintain a sense of Ethiopian duty among its talent, both local and abroad.
Ed.’s Note: Samuel Alemu, Esq is a partner at the ILBSG, LLP. He is a graduate of Harvard Law School, University of Wisconsin-Madison Law School, and Addis Ababa University. Samuel has been admitted to the bar associations of New York State, United States Tax Court, and the United States Court of International Trade. He can be reached at [email protected].
Contributed by Samuel Alemu