In an effort to get his latest film offto the best possible start Ethiopian film producer Thomas Getachew hit on a novel idea. He decided to première Pendulum, his romantic comedy about a striving fashion designer, in Addis Ababa’s new Millennium Hall rather than go through one of the capital’s eight cinemas. In the event, 11,000 passionate filmgoers, who queue for hours to buy tickets and cheer and boo through the local films that chart the ups and downs of daily life, turned up. It was a revealing insight into Ethiopia’s pent-up consumer demand.

Ethiopia’s 80 million population is such a huge potential market it is considered a holy grail in the region. How to access it without basic power, transport and communication networks is the driving force behind much of today’s infrastructure investment in the country. The challenge is huge, with the World Bank estimating that Ethiopia, one of the poorest countries in the world, needs to spend $5.2bn (€3.6bn) every year for the next decade. And attracting investment is tough. Ethiopia lacks the natural resources of other African countries so hasn’t drawn the global investment community. Nor has the government set about courting private investors. Prime Minister Meles Zenawi, who has led the country for almost 20 years, has fashioned an interventionist and extended role for the state which has kept many investors at bay. Yet donor organisations, investment from China and the government’s own determined budget allocation – with the latest five-year Growth and Transformation Plan promising more money to power and railway projects – are slowly transforming the landscape in an effort to throw offthe yoke of poverty and famine.

Ethiopia’s smallholder farmers, who account for almost all agricultural production, still till their land behind oxen and haul their wares to market on the backs of donkeys. New infrastructure is starting to push subsistence farmers into the commercial economy and will be the main driver of the 11% economic growth the government ambitiously targets – the IMF expects it to be around 7%. The new Ethiopia Commodity Exchange (ECX), housed in a tall, glass-fronted building in the capital, has an open outcry trading pit where buyers and sellers bid on coffee, sesame, maize and wheat. Exchange infrastructure includes 60 warehouses throughout the country where farmers can store their crops until they decide to sell, and live price screens in regional towns – there are 31 so far, with another 150 awaiting cable infrastructure. An IVR system fields around 20,000 calls a day, updating farmers with the latest price news in what the ECX’s CEO, former World Bank economist Eleni Gabre-Madhin, calls a determined policy to flood the market with information.

Her passion is driven by a desire to help solve the challenge of food distribution and Ethiopia’s tendency for pockets of glut and deficit that led to the 1994 famine. More than a million died, she says, not because there wasn’t enough food (there was a surplus in fertile southern areas), but because people in the north couldn’t access that food. The exchange is already encouraging farmers to invest in production and more modern-day techniques. “We are seeing the effects of better price information,” she says. “A group of cooperative coffee growers in Oromia realised they were getting less in the local market than prices quoted on the exchange because of coffee’s different qualities and grades. They set about introducing post-harvest processing to get a higher price for their coffee. Overall there has been a tripling of volumes of higher-grade coffee.”

A more pertinent reason for stifled enterprise is government ownership of land. Since mass nationalisation in the 70s, all land is owned by the state and farmers are given the right to use it. It’s a system that has made it much easier for the government to set about boosting investment in another, radical fashion: doling out licences for large-scale farms. Bangalore-based Karuturi Global, the world’s largest grower of roses with operations in Ethiopia since 2004, is now leasing vast tracts in the Baka and Gambella regions where Karuturi tractors and well-digging rigs are transforming the pastoral landscape to harvest agricultural crops. “We have leased 300,000 hectares for cultivation of rice, maize, palm oil and sugar cane and plan to invest $350m (€240m) in phase one of the project, which will be complete by December 2012,” says CEO Ram Karuturi at the company’s Addis Ababa headquarters. “We will sell our product in Ethiopia and through the regional common market, Comesa.” In another move, Saudi Arabia’s Saudi Star Agricultural Development Corporation, owned by billionaire Sheikh Mohammed al- Amoudi, recently announced a $2.5bn investment through to 2020 in rice-farming projects in Gambella. Al-Amoudi is one of Ethiopia’s biggest investors through his Midroc Ethiopia group.

It is this kind of commercial agriculture that Zenawi believes will help get Ethiopia offfood aid in the next five years, in another ambitious pledge. Nearly 10% of the population relied on emergency food aid last year and donors believe Ethiopia is still in desperate need. The UK government has just pledged to increase aid to Ethiopia over the next four years to £1.3bn (€1.5bn) despite austerity back home. “Our programme in Ethiopia will help provide food for 1.2 million poor people facing hunger each year and enable more than 2 million children – half of them girls – to go to school by 2015,” says international development minister Stephen O’Brien.

In rural Ethiopia, people traipse for miles to reach the nearest paved road. Helping farmers get their produce to market lies behind steady investment in the country’s road networks. Funds have mostly come from multilateral banks and the government has also funnelled 3% of GDP into road-building, putting in place reforms such as a road fund to pay for maintenance. Much of the construction is going to Chinese firms that see offrivals in the bidding process with their access to cheaper, long-term capital and low-cost skilled labour. “These firms are using Ethiopia as a commercial launch pad to cut their teeth,” says Ato Gedion Gamora at the UN Economic Commission for Africa in Addis Ababa, observing what he calls the emergence of the next generation of multinational companies. “Addis is strategically significant in Africa and construction projects like roads, and symbolic buildings like the African Union conference centre, give China a chance to showcase its infrastructure to the rest of the world.” More recently China has also been funding infrastructure through soft loans that go hand-in-hand with procurement, requiring projects to use Chinese companies and equipment suppliers. China’s ExIm Bank is funding construction of the 12m-wide, 79km highway between Addis Ababa and Adama, a business hub in the east, which China Road and Bridge Corporation (CRBC) is due to complete by 2014. The government is also trying to improve coverage and services in its state-run telecom sector. Ethio Telecom is the sole operator and mobile penetration, at just 5%, is one of the lowest in Africa. In 2008, Chinese telecoms equipment-maker ZTE bagged a contract to build a next-generation national network covering 14 cities. Prices are already coming down; a sim card costs 60 birr (€2.40) today compared to 400 in 2007. Zenawi has refused to liberalise the market like other African countries where private operators have rolled out infrastructure and prices have tumbled, arguing with enthusiasm and a characteristic attention to history that it was only after they had built their telecoms backbone that developed countries dismantled their own state monopolies. His supporters point to signs of change too.

The management of Ethio Telecom has been taken over by France Telecom in a two-year deal worth €30m to modernise and improve the company and help it straighten out its books.

Tourism infrastructure is improving as Addis Ababa’s diplomatic importance brings the conference circuit. Luxury hotel options in the capital are about to triple; it used to just be the Sheraton but now a Hilton and a Radisson are opening soon. Investment in hotels outside the capital is being led by Al-Amoudi’s Midroc Ethiopia, the group behind the Sheraton in Addis, building new hotels on Lake Tana and in the towns of Debre Zeit and Arba Minch. Most hotels are being built by wealthy Ethiopians rather than foreign investors. Olympic marathon runner Haile Gebrselassie - who is also one of the country’s most successful businessmen - has opened the Haile Resort in Hawassa.

Sketchy government figures say tourism accounts for 2.5% of GDP. Ethiopia’s mainstream appeal has never been in doubt, with ancient religious sites such as Lalibela’s fabled rock-hewn churches, nomadic desert tribes and a vital culture that has never experienced colonialism. It is a uniqueness government officials will sell in the first UK-Ethiopia Tourism Forum in London this month. But existing infrastructure and fragile environments like Lalibela can’t cope with mass tourism. Ethiopia should model itself on Botswana or Zambia and develop a controlled, upmarket niche. “Most of the people who come here are older. They are curious about Ethiopian history and culture rather than seeking a family holiday,” says British hotelier Nick Crane, who opened a lodge in the Simien Mountains three years ago.

In an effort to solve Ethiopia’s energy crunch, where only 10% of the population has access to electricity, the government is pushing ahead with ambitious hydropower projects. It plans to spend $12bn over the next 25 years to kick-start a hydro economy that can feed local demand as well as export power to the wider region, harnessing Ethiopia’s 45GW hydro potential. There are already seven dams but over the next 10 years the government plans further cascades that will increase power production from 2GW today to 10GW. But securing finance for the more ambitious projects is proving tough. Financing of the €1.4bn, 1,8000MW Gibe III on the Omo river has stalled since construction began in 2006 because of an international campaign on the project’s environmental viability. The government’s latest pledge to build another dam in the Nile river basin near the Sudanese border has the potential to be even more controversial. With the capacity to generate more than 5GW of electricity, the $4.76bn (€3.25bn) project has provoked fears in downstream Nile basin countries Sudan and Egypt, with the latter lobbying strongly against developments in arguments informed by centuries of conflict.

Selling the power could quickly recoup the cost of the project but the need for a regional approach and a guaranteed market beyond Ethiopia’s own, still limited, demand through power-purchase agreements with other countries is essential to make it attractive for investors. Development banks and Chinese investors will be cautious of lending to the project until the impact on Sudan and Egypt of any dam is clear. “The international community will only fully engage in this project when there is harmony between the different countries,” says Richard Taylor from the International Hydropower Association, advising on the different projects. It could force Ethiopia to look at funding alternatives, including selling government bonds.

Poverty-stricken Ethiopia is a county of contradictions. Boundless wealth lies in its hydro resources, fertile agricultural land and the size of its market, yet most of these opportunities remain frustratingly out of reach. New and revitalised infrastructure is the key to unlocking its potential – a process that has already begun. The piled heaps of Chinese shoes, manufactured from exported Ethiopian leather, for sale in Addis Ababa’s chaotic Merkato market put China ahead of the pack when it comes to tapping consumer demand. Along with Thomas Getachew and his film Pendulum.