Business and Fragility


Designed in Ethiopia; made in China 'a widening partnership'

30 Jul 2021 - 10:47
Bron: Addis Ababa, symbol of Chinafrique. Chinese builders are building everywhere and quickly in the Ethiopian capital © Reuters
The widening partnership brings both benefits and risks to the African country

This article has previously been published by fDi Intelligence.

The rise of China has affected trade policy and international relations in recent years, with its increasing role in information, communication and technology (ICT) and artificial intelligence (AI) causing concern. Next to economic considerations regarding the race for leadership in the sector, concerns over China’s illiberal governance translating into surveillance standards have been raised.

Chinese policy highlights digital connectivity and economic development potential through the Belt and Road Initiative (BRI) as an example of south–south co-operation, which captures trade and investment relations between developing countries. Yet, international analysts note potential risks, frequently viewing all Chinese activities along the BRI as an extension of power by the Chinese state, even if conducted purely by private companies.

The Chinese aim of pursuing an innovation-driven development agenda, including big data, cloud computing and smart cities, has raised many concerns. While such analyses may be grounded in valid ethical considerations, examinations of operations on the ground and viewpoints from recipient countries have been missing in this debate. As such, it is important to move beyond the politicised narrative and examine developments on the ground. 

Chinese involvement in Ethiopia

The Ethiopian–Chinese partnership has developed substantially over the past three decades. As Ethiopia lacked a comparative advantage in any economic sector, the country’s elite considered a strong state essential to guiding the private sector and preventing rent seeking. This led Ethiopia to base its developmental state model on Chinese experiences; China’s ability to back Ethiopia with foreign direct investment (FDI), and the ability to counterbalance demands from Western donors also proved appealing.

Collaboration deepened in 2005, when many Ethiopian elites viewed the disappointing election results as a consequence of too-rapid political liberalisation. They looked to China for a more authoritarian model favouring economic development over democratic reform, while partnering with the US to access high-tech surveillance.

In recent years, Ethiopia’s ICT sector has seen involvement from Huawei, ZTE and smaller firms. This improved connectivity, but profits were substantially repatriated to Chinese parent companies.

Barriers in the Ethiopian ICT sector, including technology, manufacturing, human resources and intellectual property rights, precluded significant FDI and development.

Perceptions of China vary among the Ethiopian population. Some see the country as a model for development, while others note low wages, environmental degradation and the economic impact of cheap Chinese products substituting domestically produced goods. However, through China’s international outreach, fully funded scholarships are available for African students to study in China, next to hackathons and collaboration spaces. Exchange programmes have influenced perceptions of China, familiarising students with production possibilities in Shenzhen’s ICT hub and developing connections between communities of ICT professionals.

Ethiopia has been importing hardware and designs that appear "designed for another world", local tech entrepreneur Hruy Tsegaye told US media organisation Quartz in 2020. The question is how solutions can be tailored to the African market. One example is the USB FM dongle overcoming poor internet connectivity in rural Ethiopia, which matches Chinese aims. Besides, finding partners in emerging markets is an interesting strategy for Chinese businesses, as rising labour costs and increasing competition in China are driving many to seek out underserved markets outside China.

Although the Ethiopian government does not appear to stimulate collaboration through policy, government buy-in is vital to access the foreign currency required to pay external partners. In China, the AI development plan seeks to encourage domestic AI companies to "go out [...] and provide conveniences and services to powerful AI enterprises conducting foreign mergers or acquisitions, share investment, start-up investment, establishing foreign research centres [...] and encourage foreign AI enterprises and research institutes to establish research and development centres in China", the country's New Generation Artificial Intelligence Development Plan published in 2017 reads. 

While this likely includes surveillance, it also targets AI applications for climate change and the sustainable development goals. Notable is the use of "public opinion guidance" training for policy-makers, in order to help them to "respond even better to social, theoretical, and legal challenges that may be brought about by the development of AI" the plan also reads. 

Consequences for Ethiopia

Chinese support for repressive capabilities in recipient states has partially proved a valid concern. Ethiopia’s telecommunications infrastructure, which includes surveillance software packages, was largely constructed by Chinese contractors. Notably, ZTE’s ZSmart tracks customers’ phone records while its deep package inspection tool (ZXMT) monitors data traffic.

While ZSmart is a customer management package with legitimate functions, such as billing customers, it is important to note that ZTE tends to bundle products in a single offer, including ZXMT. The surveillance-related components thus represent a relatively small part of a larger telecoms project, rather than a concerted push towards building Ethiopia’s surveillance capacity. No clear indications of more advanced technological surveillance collaboration are evident, in contrast to other BRI recipients, such as Zimbabwe and Ecuador. 

AI-related collaboration appears to be a bottom-up process with young entrepreneurs suggesting projects and technologies. This aligns with Chinese efforts to move up the value chain from its position as a low-cost supplier and assembler. Chinese suppliers are attempting to reduce their reliance on low-cost assembly of foreign-developed and produced components, and instead increase the use of domestically produced parts.

Collaboration with Shenzhen also poses a unique value proposal to Ethiopian developers: Shenzhen makes hardware development and open-source design is cheap and accessible. While the collaboration pushes products ‘designed in Ethiopia’, the country largely lacks Shenzhen’s production capacity. This increases demand for Chinese-produced components positioning China for expansion into the African market.

This does not mean there are no risks related to the expanding collaboration. A number of Ethiopian developers, ICT engineers and graduates from Chinese universities in other fields are exposed to Chinese cultural values. While this exposure may develop their skills, it may also socialise them in the Chinese value system

As China’s market share grows, so may its role in setting the standards that govern the use of ICT and AI. Of similar concern is training offered for engineers and public officials on so-called ‘public opinion guidance’, potentially proliferating a new concept of freedom of expression and advanced censorship. Since the Ethiopian government previously relied on Western partners for its surveillance needs, these capabilities acquired from China may be understood as a continuation of an ongoing trend. 

Chinese involvement in Ethiopia is significant, not only for Ethiopia, but also for the approach to south–south co-operation that China showcases in this regional diplomatic centre. There are no clear indications that China’s relations with Ethiopia is aimed at spreading an ideological interpretation or diffuse surveillance capabilities. Ethiopia’s partnership with China may be better understood as a continuation of an ongoing trend in Ethiopia’s surveillance model.

While there are risks associated with Chinese engagement in ICT in Ethiopia, the value generated through the partnerships and businesses it develops is tangible, domestically appreciated and frequently not a Chinese-centrally orchestrated push towards surveillance. Given the growing African market and wider developments in market leadership within the ICT sector, protectionist measures are not a productive approach on a business nor political level. Engagements not considering the real demand and development potential such collaboration taps into may be missing opportunities themselves.