Expansion of industrial hubs in Ethiopia becomes byword for more displacements, poverty & inequality

11 Jul

By Keffyalew Gebremedhin, The Ethiopia Observatory (TEO)

World Bank President Jim Kim

There were fewer cheers in 2012, when President Obama nominated the Korean-American Dr.Jim Yong Kim to become the 12th President of the World Bank. Not only that Mr. Kim was just a dark-horse – unknown to the wider international development community. But also he was a candidate standing against the internationally recognized and praised Harvard hand Dr Ngozi Okonjo-Iweala.

Dr. Kim’s familiarity was within limited circles that acknowledge his development expertise attained with Harvard medicine in his belt and yet without being economist. On the contrary, the Nigerian executive – another Harvard hand – has been known as the most articulate, outspoken and committed developmentalist, tested as insider in both government and the World Bank itself, as she just does that: serving now her country as its finance minister.

Consequently, in the South different people, including officials, had cold reactions to Jim Yong Kim’s nomination and eventual appointment. This is partly also because of disappointments with the World Bank’s poor performances over the decades, for whom – it is said – transparency is a dirty word. Its fiction aside, many feel that right at this point the institution has little to proudly show off as its groundbreaking achievement anywhere in the world, although it has been funnelling high value cash here and there, especially to selected countries and governments more than others.

Dr. Ngozi Okonjo-Iweala

Dr. Ngozi Okonjo-Iweala

In the light of this, a contrarian view evolved in both the North and South regarding Mr. Kim’s candidacy – to no avail though. Thus, without personalizing their objections to his nominations, there was widespread calls for a different candidate. As it would be expected from leader of any regional group, South Africa’s Finance Minister Pravin Gordhan strongly endorsed Ngozi Okonjo-Iweala, pointing out in a more subtle, gentle and sincere manner, insinuating the obvious:

    We believe that the candidature of Minister Okonjo-Iweala enables those that are going to make this decision in Washington to have before them an eminently qualified individual, who can balance the needs of both developed and importantly, developing countries; [and] also provide a new vision and sense of mission to the World Bank and its relevance, particularly to developing countries [and] across the globe.

Taking an aspect of that was also Oxfam International’s view, which found groundswell of support for observing:

    The world deserved better than a selection process with a forgone conclusion. Poor and emerging countries are insisting the Bank be more accountable and open in how it does business. This sham process has damaged the institution, and sullied Dr. Kim’s appointment.

More surprising is The Economist‘s view, which because of its presumed establishment view would normally be expected to support the US picked candidate. Instead, as if speaking for everyone on the opposing side, in its March 31st 2012 issue The Economist stood by the candidate from the South. The magazine seemed to campaign hard for Ms. Okonjo-Iweala in taking a firm position and suggesting: “In appointing its next president, the bank’s board should reject the nominee of its most influential shareholder, America, and pick Nigeria’s Ngozi Okonjo-Iweala.”

In going back over two years in time in this article, I am only trying to emphasize how right they were those who disagreed with the nomination of Mr. Jim Yong Kim. Their concern that things would remain business as usual in the World Bank should not to be taken lightly.

Let me hasten to add here that I am not being oblivious of the reforms initiated by the winner president. It is only that the measures he has put in place have come across to many as scurrying to ensure perpetuation of the Bank’s control over developing countries and seemingly under benign guises, such as poverty reduction – who dares question motherhood?

Most of all, I am disappointed by what is in it, i.e., his ‘extreme poverty’ eradication measures and promotion of “shared prosperity”. Its bellowing from the minaret, so to say, sounds right and necessary, when one glances through what he has put together in A Common Vision for the World Bank Group. It recognizes “A healthy and stable social contract is needed to ensure that the less well-off not only enjoy the benefits of growth, but are an integral part of the process of creating prosperity.” Who would argue with this?

It also acknowledges “Social inclusion is consistent with the notion of promoting equitable access to opportunities, which is in turn critical for building a cohesive society that is able to achieve consensus on its development path.”

Nonetheless, if only one takes the case of my own country, Ethiopia – a darling of the World Bank – on the ground his office is seen rewarding its policies that openly undermine the building blocks of the 50 million poor that are supposed to be lifted out of poverty every year until 2030 – or a million every week – as set out in the president’s 2030 Vision as realistic for reduction of extreme poverty around the world.

The yardstick of success is again, as stated in the vision, the Bank’s capacity “to assess a country’s performance in shared prosperity”. In that regard, it states “To improve the welfare of the poor, low-and middle-income countries require high and sustained rates of growth in the incomes of the bottom 40 percent.”

How could this be consistent in countries such as Ethiopia, with stringent limits set on popular participation, with top-down command politics and policies, land grab and sudden dislocation – for that matter without any compensation – of urban and rural people from their homes and farms and the well documented massive human rights violations and denial of human rights?

Under these conditions, the whole 3 percent poverty threshold by 2030 sounds like the moment’s bandaid to a global problem that requires carefully calibrated measures, instead of something aiming to prove the president’s grab. I fear, this may eventually force reliance on the witchdoctors to carefully treat the numbers as the world gets closer to the deadline.

Help in that regard may be closeby, since the World Bank has not long ago jumped in to help the Ethiopian Central Statistical Agency (CSA), where the IMF has long jumped out washing its hand, after several unsuccessful attempts at capacity building and several training programs and funding for equipment.
 

Why are people caught on this?

The World Bank is one of the richest organizations, with its country assistance budget (developing and transition countries) being a hefty $30 billion a year. This is the power behind its muscle and the magic behind its importance for many poor countries around the world. The tragedy is that the Bank’s impact and transformative capacities is more negligible today than before.

This is not because of its lack of skills; but its ‘realpolitik’ that has made it to focus as tool in the service and the likes of interests alien to the countries requiring its assistance, there is also donors’ influences and efforts solely focussing on protecting regimes dictators, such as Ethiopia’s that citizens love to hate.

One simple evidence, pointing to the failure of the World Bank in the developing world, is Ethiopia itself. This is a client, for instance, which against the Bank’s objective of poverty eradication, is forcibly displacing urban and rural residents into poverty because of its policy of land grab. Such anomaly has been happening in Ethiopia for more than a decade now, with the World Bank as it underwriter in various ways. Perhaps if it did not directly contribute funds, at least, it showed a great deal of disinterest to stand for principle and facilitate respect for fundamental human rights.

In fact, in one instance the Bank’s Inspection Panel requested the board of directors and the Bank’s president to intervene regarding the displacement of the rural population in Gambella, Ethiopia, and the accompanying state violence. The Panel requested the institution to undertake a look into the situation. Not surprisingly, their findings have disappeared in the thin air, while Ethiopia openly stated that it would not cooperate in the investigation.

The case is closed there. Because of this, Ethiopia continues violating the human rights of rural and urban populations who are pushed off their lands, with no adequate compensations at all. The Bank also has dutifully increased its financing of Ethiopian projects. This has often left me wondering whether the Bank truly believes in any of the fundamental principles of human and property rights and accountability of state actors as basis of good governance.

Surprise, surprise, following Ethiopia’s rejection of the request for cooperation in the investigation the World Bank turned around and rewarded the Addis Abeba regime with huge funds. In fact, last week the regime’s media announced that in 2014 Ethiopia has received record funding from the World Bank.

The reason I am discussing this here is because, if the World Bank has the right kind of leadership, it would not have been possible for the Ethiopian regime to violate human rights and carry out land grab in clear view of international community and enjoy the benefits of coordinated aid and in facilitating the flow of foreign investments. Yet they know it it is happening with the regime at will seizing properties and dismantling the livelihoods of people without any compensation.

Dr. Kim has been Bank president for over two years – a period he has called moment of reforms. He bet too many gongs about his commitment to poverty eradication within a generation, pointing officially to significant achievement by 2030. At least, it is better than the African Union’s (AU) 2063! IN the case of the Bank we do not need to wait for another 50 years!

In the IMF-World Bank Spring Meeting in 2014, President Jim Kim observed in that regard:

    To end extreme poverty by 2030, the vast rolls of the poorest — those earning less than $1.25 a day — will have to decrease by 50 million people each year. Think about that number. To reach our goal, one million people each week will have to lift themselves out of poverty — that is each week for the next 16 years.

Certainly, economic growth helps reduce the size of poor population in any country, provided that the growth is broad based. If its focus, however, is few people getting rich, while others sink, it means that such growth is sanctioned to promote inequality. Sadly in the above-mentioned speech, the World Bank president has narrower definition of inequality, which gives escape route to insensitive and corrupt regimes.

While the impact of economic growth making dents in poverty reduction Ethiopia is over-rated, there have been several skeptics, who kept eagle eyes on the cooked numbers and strongly disagreed. Luckily, the numbers the UNDP human development index (HDI) – released in 2013 and not long ago – the Oxford Poverty & Human Development Initiative (OPHI) (which did the consulting for UNDP) released its 2014 report and stated that 58.1 percent of Ethiopians live in destitution. This presented Ethiopia, as did the UNDP report before it , the second poorest in Sub-Saharan Africa, after Niger.

These show that poverty reduction is far too slow than claimed by the government, the Bank and its allies. The amazing thing about Ethiopia’s poverty reduction, its most significant achievements were made at a time of double-digit inflation ranging in the 60s and 80 percent.

Moreover, under normal circumstances, poverty may be reduced on one side; but in Ethiopia it has found backdoor, among others, because of persistent land grab. This is caused by failure of the state to respect the fundamental human rights of the people. On a daily basis, people are being pushed off their lands and are fast becoming poorer and homeless and women forced into prostitution.

I cannot understand why the Bank could not see that every addition to the ranks of the poor and disempowered by dictatorial regimes is against its objective reducing poverty by 2030.

The Reuters story hereunder shows that the TPLF regime in Addis Abeba is determined to displace more people in rural and urban areas of Ethiopia. This time the project is called the expansion of industrial zone. These require swathes of land not far away from Addis Abeba.

Lands are not industrially produced. They have to be snatched from the farmers and urban dwellers. The regime’s calculus does not give a damn, what happens to the displaced people. They are forced off the lands. For any protests, the state’s response is beatings by the police and not infrequently they also use lethal firearms. Ethiopia’s has become a regime struggling against human dignity!

Viewing land as strictly state property since 2012, the disenfranchisement of the people is fast accelerating, and the regime has proved efficient in increasing the number of the poor, people thrown to the streets.

Read the following Reuters’ story to see how much more lands the state has planned to acquire after September 2014 onwards to expand industrial zones throughout the surrounding areas of Addis Abeba. If the past is any guide, the state knows the thousands of hectares it requires. It would not have the time or political will to work on reasonable compensations find accommodations for those that either buts of guns would push away or bullets to silence, if people dared to defend their properties.

Bitter as this fate is, it is a replay of the classic ‘Sophie’s Choice’ for these people, with no means to fight back.
 

    Ethiopia says expanding zones to become industrial hub

    ADDIS ABABA (Reuters) – Ethiopia will start setting up a new industrial park in September and will expand another at a total cost of $250 million, an official said, part of efforts to shift away from farming and become a hub for textiles and other industries.

    The Horn of Africa nation aims to attract investors who are moving some manufacturing from China and other Asian markets, where costs are rising. Ethiopia offers cheap labour and fast improving power supply, transport and other infrastructure.

    Luring new industry is seen as vital to maintaining high growth rates in Ethiopia’s still largely agrarian economy. The economy has expanded annually by double digits in the past decade and is forecast to grow by 8 percent or more this year.

    Yaregal Meskir, deputy director general of the Ethiopian Industrial Development Zones Corporation, said plans were being finalised to expand the existing Bole Lemi Industrial Zone, on the southern outskirts of the capital, while a new industrial hub was planned at Kilinto, 30 km (20 miles) further south.

    “We have witnessed many investors have come to acquire sheds and land and there is a long queue,” he told Reuters in an interview on Friday. “We prefer labour-based industries like garment manufacturing and shoe manufacturing for exports.”

    After selecting a designer, he said building Bole Lemi phase two and the Kilinto Industrial Zone would start in September.

    A third of the 156-hectare Bole Lemi site was developed at a cost of 2.5 billion birr (74.3 million pounds), financed by the state, in the first phase and has attracted Korean garment-maker Myungsung Textile Company and Taiwan’s George Shoe Corporation.

    The Kilinto zone will cover 243 hectares.

    Both the expansion work and new site would be financed by a $250 million World Bank loan, Yaregal told Reuters.

    The industrial parks are central to Ethiopia’s plans to build an industrial base, with textiles and garments seen as a key sector, in part because the country benefits from the U.S. AGOA trade pact allowing duty-free exports to the U.S. market.

    The industrial zones offer land for factories at $1 per square metre a month, tax holidays for up to seven years and customs and other services on site for those investing in the nation of about 90 million people, officials say.

    New Hubs planned

    “Ethiopia has developed a strategy that gives priority to certain industries,” Taddese Haile, State Minister of Industry, told Reuters. “The aim is to see Ethiopia as a globally-known cluster for textiles and garment products.”

    Another three manufacturing hubs are planned across the country in the next decade, including a Special Economic Zone in the eastern town of Dire Dawa of 3,000 to 20,000 hectares. Details of the Special Economic Zone are still under study.

    Ethiopia faces tough competition from other African countries seeking to benefit from increased interest among foreign investors in a continent with a fast-growing middle class with rising disposable incomes.

    In countries like Ghana, for example, small, prefabricated ‘pop-up’ factories are providing low-cost, low-risk ways to churn out consumer goods for global markets by circumventing onerous local regulations and corruption.

    Ethiopia, once ruled by communists, has driven up its economic growth rates with strong state intervention as well as rising farm output. Industry accounted for just 10 percent of economic output last year, official figures showed.

    The International Monetary Fund forecasts economic growth of 8 percent to 8.5 percent for fiscal 2013/14 and 2014/15 but has also said the state must avoid squeezing out private firms.

    Strong growth has helped fuel projects that include hydro-electric dams and other power projects to offer cheap electricity and a growing network of roads and railways. The capital will soon have its own urban metro, a rarity in Africa.

    In a bid to encourage investment, the government is allowing private firms to build their own industrial hubs. One such enterprise is the Eastern Industrial Zone, whose shareholders included China’s Jiangsu Qiyuan Group.

    Firms operating in that zone include Huajian Group, which produces around 300,000 pairs of shoes and sandals a month for Western markets. The firm is planning its own industrial park.

 

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