Tag Archives: Addis Fortune

Abiy’s reform agenda neither homegrown nor pathway to prosperity

3 Oct

Posted by The Ethiopia Observatory (TEO)

by Zinabu Samaro (PhD)

The economic reform plan the government unveiled recently shares an eerie resemblance to the infamous and disastrous reform package known as structural adjustment programmes (SAPs), argues Zinabu Samaro (PhD) (zinabu.samaro@gmail.com) a development economist whose research has appeared in peer-reviewed academic journals such as Cambridge Journal of Economics and Structural Change and Economic Dynamics.

“The plan looks like a repackaged and rebranded version of the debunked and disastrous neoliberal “Washington Consensus” agenda aimed mainly to attract foreign investment, credit and approval from the major donors and multilateral creditors and to temporarily relax the forex shortage on the import-hungry economy rather than to forge a path toward broad-based and sustainable prosperity.”

The administration of Prime Minister Abiy Ahmed (PhD) inherited an economy with many serious problems. These included high levels of unemployment, high rates of inflation, stagnant, declining export earnings and shortages of forex.

It is only natural that his administration took office with promises of economic reform alongside political reforms. However, it had been criticised for not issuing a comprehensive reform package – a road map outlining what the administration intends to do to address economic challenges.

For keen observers of economic ideology and policy, the direction of the economic reform was very clear from the outset based on the statements and priorities that were declared – even in the absence of an official road map. The road taken has been unmistakably neoliberal through and through.

Soon after taking office, major economic reforms were announced in areas that were previously considered “off limits” by the EPRDF regime including telecoms, electricity and banking, marking a landmark shift in the country’s development model. Terms and concepts such as “austerity,” “tightening the belt,” “living within one’s means,” “balancing the budget” and “managing macroeconomic imbalances” have been commonplace in the statements of the Prime Minister, his subordinates and advisors.

They are drawn from the dictionary of a right-wing economic ideology, which confuses the management of public finances with that of household finances. It justifies inequality in society as just and necessary. It readily sacrifices long-term economic prospects for short-term efficiency; glorifies the market and abhors the role of the state in the economy (unless the role is to promote and protect the interest of the haves against the have nots).  Most of all, it puts the interest of finance capital – particularly foreign capital – above the interest of everyone else.

The administration has announced details of its economic road map and baptised it as, “A Homegrown Economic Reform Agenda: A Pathway to Prosperity”. However, the reform agenda is neither homegrown nor a pathway to broad-based prosperity.

The reform plan shares an eerie resemblance to the infamous and disastrous reform packages known as structural adjustment programmes (SAP). These were neoliberal economic packages imposed in the early 1980s on most African countries by international economic institutions such as the World Bank and IMF and their Western backers as a precondition for lightening the weight of external debt and financial support to address economic malaises that were affecting the economies. The SAPs had five key components: fiscal austerity; liberalisation of external trade, investment and finance; deregulation; devaluation and privatisation of state-owned enterprises.

The consensus of critical literature on the impacts of SAP-induced reforms in Africa is that the most liberalised, “adjusted’’ and “reformed” economies ended up with economic stagnation, premature de-industrialisation and agricultural decline. Poverty, inequality and balance of payments problems got worse. The technological, productivity and skill-structure of the economies went backwards.

Like its Sub-Saharan African peers, the post-Dergue government of Ethiopia was also forced by circumstances to adopt a strong dose of SAP in the early 1990s imposed on it by the same global forces. The package contained the standard fare: trade liberalisation, devaluation of the Birr, privatisation of state-owned enterprises and deregulation of prices.

The privatisation initiative was extensive even if most of the state enterprises did not attract the interest of foreign investors. Where there have been strong and persistent external pushes and interest from foreign companies and governments is in the areas of finance and telecoms, which the EPRDF government had, until recently, considered strategic and reserved for government or the domestic private sector. Therefore, the current drive to liberalise these sectors for foreign competition is a thinly disguised attempt to complete the “reform” and “adjustment” programme that was initiated decades ago but stalled due to the resistance of the late Prime Minister Meles Zenawi’s administration. In this sense, the “new” economic reform package is not new. Nor is it homegrown.

Two features of the recently released economic reform package strengthen this argument. The first is the similarity of both the language and approach to that advocated by the World Bank and the IMF for many years. The World Bank has published numerous reports which acknowledge the past success of the Ethiopian government in achieving high rates of GDP growth and improvements in social sectors such as education and then go on to advocate more liberal, private sector-oriented models. The recently released economic reform package follows the same approach.

Secondly, the government and the US Embassy in Addis Abeba announced a flagship initiative aimed at supporting Ethiopia’s economic reform. Tellingly, the initiative is spearheaded by Ricardo Hausmann (Prof.) who was the leader of a right-wing team that designed and oversaw one of the most regressive and devastating economic reforms in Venezuela between 1989-1992.

The new reform plan laments that past economic success has not led to structural transformation. But it does not relate this to the unbalanced focus of the EPRDF government on social sectors like education at the expense of structural transformation, development of industry and other modern economic activities. Until a few years ago, modern urban economic activities and industry have been overshadowed by the obsessive focus of the EPRDF government on rural development, poverty reduction and global agendas such as the Millennium Development Goals, which treat symptoms of underdevelopment rather than its root causes.

When discussing the external debt of the country, the reform plan does not mention the fact that one-third of the debt consists of loans by the World Bank Group (IDA). This includes loans extended toward food security, the safety net and public sector reform programmes – programmes that are never meant to address issues of structural transformation and programmes that could have been easily financed by making use of “the power of the public purse” if necessary.

The reform plan glosses over some important issues to arrive at ideologically motivated conclusions. For instance, it is a well-known fact that episodes of high inflation in Ethiopia have been highly correlated with external factors like global petroleum price hikes and major currency devaluations. However, the plan resorts to simple average to gloss over the inflationary spikes to arrive at conclusions such as high inflation leading to real exchange rate appreciation which purportedly erodes competitiveness. This is the same overly simplistic and faulty economic logic that was used by the Ethiopian government when it devalued the Birr by 15pc in 2017 arguing that it would discourage imports and encourage exports thereby improving hard currency reserves of the country. Instead, it had a significant inflationary impact without achieving its goals, because the structure and trends of imports and exports have deep-rooted structural and technological determinants. There are no shortcuts via devaluation to achieve external competitiveness without addressing the structural and technological bottlenecks in the economy.

The plan’s underlying analysis of the perennial problem of forex shortages and external imbalances is shallow and misdiagnoses the problem. While it argues that high demand for imports and poor export performance resulted in large current account deficits and significant forex shortages, the plan does not delve into how rapid liberalisation of external trade in the early 1990s under the original liberal reform programme directly led to a rapid and persistent expansion of Ethiopia’s trade deficits, which have been amplified during episodes of rapid GDP growth.

The plan fails to consider the demand side of the forex equation. There is no discussion about what the hard-earned dollars are being spent on. A simple look at the import statistics would have shown how the economy has been throwing away precious forex left and right for non-essential products, which can be domestically substituted easily with a well-executed “carrot-and-stick” approach.

While it also jumps into an ideologically motivated conclusion that forex regulations are one of the constraints to doing business in the country, it does not look at why non-value adding businesses such as second-hand car importers have much easier access to forex, while value-adding and employment creating businesses such as factories face a dire shortage. For instance, it makes sense under the current Ethiopian context to propose strategies aimed at easing access to forex for the import of apple seedlings, which produce ten times the locally available varieties and easily available in Holland compared to those who import apple fruits from New Zealand and California. Instead, one of the proposals aimed at improving agricultural production in the current reform plan is to increase private sector investment in agricultural research and development, as if this is needed and relevant to the Ethiopian context.

It also fails to consider how and why the past focus of the government on micro-enterprises – an approach which has never worked anywhere in the world – has failed and fails to stress the need for shifting focus and resources toward small and medium local enterprises that have much better potential for growth, creation of employment and adding value.

A truly homegrown privatisation agenda would draw lessons from what went right and what went wrong in the previous efforts to privatise state-owned enterprises. For instance, it would assess why domestic consumption-oriented enterprises such as breweries attracted significant foreign investment while most others did not.

Instead of rushing to sell-off state monopolies such as Ethio telecom to foreign capital, a truly homegrown reform agenda would first assess the causes of any inefficiencies in such companies and try to address them. If the assessment concludes that private ownership and competition are the best way forward, the first reasonable proposal should have been to look at ways of privatisation to domestic investors and liberalisation of the telecom market for domestic competition rather than to a foreign one.

A truly homegrown economic reform agenda would also try to learn lessons from other countries that privatised public utilities such as electricity generation and distribution before rushing to partially or wholly sell off state utilities. Unless the plan is intentionally blind to evidence, recent years have witnessed a rising tide across the world against privatisation of public utilities and toward renationalisation.

Moreover, if the reform plan were truly meant to serve as a pathway to prosperity, it would have done an in-depth stocktaking exercise on the previous development models, approaches, strategies, policies and programmes of the EPRDF government.

The plan looks like a repackaged and rebranded version of the debunked and disastrous neoliberal “Washington Consensus” agenda aimed mainly to attract foreign investment, credit and approval from the major donors and multilateral creditors and to temporarily relax the forex shortage on the import-hungry economy rather than to forge a path toward broad-based and sustainable prosperity.

If it were to usher in long-term prosperity, the reform plan would have focused on addressing the obvious weaknesses, mistakes and shortcomings of the previous development models – such as Agricultural Development-led Industrialization and the so-called developmental state model. It would also prioritise addressing issues such as state capture, rampant corruption, an unholy union between state and party and destruction of meritocracy in public service and public enterprises.

 

/Addis Fortune

 

 

 

Abiy Ahmed’s ODP Administration Needs to Focus, Set Its Priorities

6 Mar

Posted by The Ethiopia Observatory (TEO)

/Addis Fortune’s March 2, 2019 Editorial

“Abiy would do himself good to acknowledge this as a Herculean task. Even then, doing so could be a thankless job in a nation where constituents have widely varying and more so conflicting priorities and interests. His analogy of the state with a room that has been accumulating rubbish is not far removed from the historical processes that gave way to a country without strong institutions, democratic culture, shared values and accountable power.

Informed by the past and steered by grievances, the public would have hardly any reason to develop an interest in the fancy projects of scene and decoration. Many want to see their leader focus more on optimum gains from the transition that will help the nation move to a peaceful, orderly and just future. With a lack of clarity of purpose, confusion and unpredictability in the driver’s seat, there is much more appetite to see a series of political reforms, despite their significant consequences for the slow, methodical building of institutions.

…The delicacy and disorganisation within the nation demand that Prime Minister Abiy set his priorities right. It will be consequential if he chooses his legacy to be defined by his effort in painting the house with new colours, while its foundation is cracking up.”

—O—

Talk that Prime Minister Abiy Ahmed (PhD) will let the nouveau riche in the country spend five million Birr for a ticket to sit at a dinner in his company grabbed international headlines last week. But the irony was not lost on many Ethiopians who are struggling to make ends meet.

If they see cynicism in the whole affair, they should not be blamed. The funds were raised to finance a project for the rehabilitation of Addis Abeba’s river banks, estimated to cost one billion dollars. What would cost a businessman in search of patronage from the power that be can build no less than 30 water wells for desperate citizens in rural Ethiopia, if not three well-equipped clinics?

From renovating his office to restoring the grounds of Menelik II Palace, Abiy appears to be excited with matters that have more of a symbolic value. His attention and energy seem to be spent in mobilising funds from members of the public here and in the diaspora, giving the impression that he may end up forming a “Go-Fund-Me Administration”. The irony is that he reigns over a country that has far too many essential needs to sustain life and a government with as many crises to handle.

 



The Prime Minister oversees a highly polarised nation where passionate debates, which could use more civility over administrative demarcations, jurisdictions, statehood and federalism, are bitterly held. These can be indicative of the elevated political activism currently evident as long as violence is not employed as a means of advancing political agendas.

The attention and energy expended on symbolic matters could have better use in steering dialogue between the political opposition and the incumbent. It is now rocky, narrow and seems to wane in significance given the overarching socio-political and economic changes currently taking place. It is also not a platform for charting a shared destiny or common values, for these require more than mere party leaders meeting up in a hall.

Abiy would do himself good to acknowledge this as a Herculean task. Even then, doing so could be a thankless job in a nation where constituents have widely varying and more so conflicting priorities and interests. His analogy of the state with a room that has been accumulating rubbish is not far removed from the historical processes that gave way to a country without strong institutions, democratic culture, shared values and accountable power.

Informed by the past and steered by grievances, the public would have hardly any reason to develop an interest in the fancy projects of scene and decoration. Many want to see their leader focus more on optimum gains from the transition that will help the nation move to a peaceful, orderly and just future. With a lack of clarity of purpose, confusion and unpredictability in the driver’s seat, there is much more appetite to see a series of political reforms, despite their significant consequences for the slow, methodical building of institutions.

Every political transition has been an opportunity for some segment in society, party or group to assert its position, ideology or reading of history on the state. Without a grand bargain out of which shared goals could be forged, even when it comes to symbolic matters such as a national flag, colour preferences, movements and revolutions have been born to challenge the structure and systems of the state.

Political transitions in Ethiopia are examples of the failure of the various representatives of society to come together to chart a shared destiny. They have missed opportunities that have, in time, been counter-productive for there never were the diverse legislative bodies, an independent judiciary and strong democratic institutions to back them up. It would thus be a tragedy to fail to take stock of the lessons of history and focus where it matters most.

Discourses and debates around politically hot-button issues abound. Citizens should continue to voice their concerns. It is only characteristic of individuals’ rights to demand change and answers from the government and their representatives.

The public’s emotionally-rooted political activism should serve as fuel in the practice of constituent politics, but parties should find the courage to exercise forbearance as does Abiy’s administration. Meeting such demands requires a sober, fair and quantitative implementation that can only be provided by independent democratic institutions and diverse legislative bodies.

Beyond the impartiality of the process and the decisions that are arrived at in the end, it is also crucial for the state to be able to bear the socio-political impacts of the reforms.

Without such a prudent approach in addressing grievances as they relate to the systems and structure of the state, this opportunity would be yet another episode that gives rise to a new round of instability. It will be driven by public discontent like all the rest were, and the nucleus of the opposition would be the disenfranchised section of the society.

The nation’s elites across the many divides have their work cut out for them. The most critical piece of task on the table is rebuilding the institutions into ones that the public can trust. It is a task that has already begun even if the input from opposition parties leaves a lot to be desired.

Realising the upcoming national elections with a process and results credible in the eyes of the voting public should be the most fundamental task ahead for the Prime Minister. Only credible elections held in a timely manner will be able to ensure the legitimacy of the legislative bodies whose contributions to any major changes to the structure of the state will be acceptable.

The heaviest burden lies on Abiy`s administration, which possesses the de facto transitional mandate. It has the duty to focus its resources and attention on institutionalising power to realise a legitimate election, ensure law and order and reverse the macroeconomic slowdown that will have consequences in the political realm.

The conduct and exercise of power by this administration will set precedents for the years to come. Failure to be wary and cautious in the exercise of power, and the use of state resources to influence public attitudes, will only serve to delegitimize the elections before they even begin.

The absence of credible elections and a grand bargain by elites on the organisation of democratic institutions will no doubt drive the nation deeper into uncertainty. It is only after such homework is done that the government can move towards instituting changes that address demands made by the various social and political groups across the country.

The delicacy and disorganisation within the nation demand that Prime Minister Abiy set his priorities right. It will be consequential if he chooses his legacy to be defined by his effort in painting the house with new colours, while its foundation is cracking up.

 

Tempering Ethiopian expectations about political changes they want in the face of unkind reality

26 Dec

Editor’s Note:

    Thank you Addis Fortune for reading my mind. Your admonition is welcome. It pleads, urging us “a reality check is in order”!

    Not that I am aware of differences of views with those I had appealed to during the last week on the same matter. This includes my two reactions both on my Facebook and TEO, to the so-called latest information from within TPLF/EPRDF.

    Basically, I was stressing the need for circumspection. Even if some individuals with access to the EPRDF meetings had provided some in the diaspora good information, I was constrained by a concern that riding on it could be detrimental to attaining the overall goal, especially the change we all badly seek for our country.

    True, to the mentality issues we suffer in Ethiopia on the question of information monopoly, either exaggeration of its importance, or the holder considering it power over others, I have been truly troubled by it. This has all the more made worry about the future of our country, although nobody anymore should easily surrender to pretenders.
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የኤርሚያስ አመልጋ እሥርና የአክሰስ ጉዳይ ሕወሃትን ትዕዝብት ላይ ቢጥለውም፣ የባሰው ግን ‘ወንጀለኛ ባለሥልጣኖች ለምን አይታሠሩም?’ የሚለው 25 ዓመታት ያስቆጠረው ጥያቄ ነው!

3 Feb

በከፍያለው ገብረመድኅን – The Ethiopia Observatory (TEO)

በዚህ ሣምንት Addis Fortune Access’ Drama Continues (Feb 1/2016) በሚል ርዕስ ያወጣው ጽሁፍ ወደኋላ መለስ ብዬ ሰለአቶ ኤርምያስ አመልጋ አንዳንድ ነገሮችን እንዳስታውስ አድርጎኛል።
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‘Progress, Not Victory’: Gates Foundation evaluation of Ethiopia

19 Jun

Posted by The Ethiopia Observatory (TEO)

    Haddis: “In the agricultural sector, there has been some progress, but we still have a long way to go. Ethiopia is now becoming a very important country, globally, for various reasons. But I think that until you get to being a completely food-secure country, I am not sure you can say progress has been made. Again, it is too early to claim victory but I think we are in the right path and we need to be smarter about our investments.”

 
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The Eagle Bade Its Moment To End 2 Major Challenges to Ruling Party With 1 Bullet: NEBE’s Controversial Decisions on Party Splits in Ethiopia

2 Feb

The men history would harshly judge as agents of counter-democracy in Ethiopia: Abebaw Mehari (left) Merga Bekana (Centre) and Tigistu Awelu (Credit: Addis Fortune)

They are among the many individuals history would harshly judge as agents of counter-democracy and counter-revolution in Ethiopia: Abebaw Mehari (left) Merga Bekana (Centre) and Tigistu Awelu (Credit: Addis Fortune)


 
Posted by The Ethiopia Observatory (TEO)

The UDJ could be considered a strong party as it published two newspapers a week using its own printing press. It had also asked for a plot of land for the construction of a headquarters, according to one of the officials in the group that has lost as a result of the decision of the National Electoral Board of Ethiopia (NEBE).
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Is it merely the ineffectual reform of Ethiopia’s foreign policy, or Dr. Tedros Adhanom for the top post?

30 Apr
    Editor’s Note:This note is a reaction to Addis Fortune’s editorial Ethiopian Foreign Missions Need Urgent Restructuring.

    Over the weekend, it seemed that all the news on government media in Ethiopia and TPLF owned webpages was Dr. Tedros tedros adhanomAdhanom. The way the stories were staggered since April 25 gave the impression that he was everywhere and in everything, as if he were in a no miss electoral campaign.
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