Next year, the Ethiopian economy is projected to attain a GDP growth of more than 9 percent. This was disclosed by PM Abiy during his recent report to parliament. Attaining this growth figure may also look like an uphill task. We remember that at the pick of its growth, the economy had registered something like 10 percent GDP growth and this had placed the country one of the fastest growing in the world.
This figure could be achieved when the economy was enjoying macroeconomic stability, growing FDI inflow and the financial sector was more stable than it was now. Last but not least, the security situation was then more predictable and losses and damages were not done to public property as it has been done following the recent unrests.
It would be legitimate to ask at this point how can the economy grow at almost similar pace when all the above positive factors conducive for growth are almost absent if not seriously weekend at this stage. Macroeconomic stability at present is said to go through a difficult period. Inflation is rising and FDI inflow is not massive as it was expected.
The financial sector is in some disarray as loans are not easier to secure and hard currency crunch is not yet overcome. Ethnic-based violence and loss of public property has been rocking critical regions of the country like the Amhara and more recently the southern people regional state which is an important economic and tourist hub.
The fact that the economy is growing in the midst of all these challenges may be a good indicator that the boom years of the early 2000s had created a strong infrastructural and investment bases for sustaining the growth tempo even in the present difficult circumstances. The problem is that the developmental state model of growth has now exhausted itself and the need has arisen to reform or change this model by implementing strong market-oriented reforms.
The developmental state model of growth had finally lead to heavy indebtedness, rampant corruption, massive waste of resources, misallocation of resources, and the creation of a patronage system whereby economic benefits were distributed according to political loyalty and ethnic preferences. The developmental state model was short-lived or started to die before it was fully born.
We did not have a full-fledged developmental state. According to some sources, Botswana is the only African country that has built a successful developmental state growth model. In fact, we were largely talking about non-existing developmental state as we were talking about non-existing socialist system under the Derg regime.
As a result of the failure or crisis of the developmental state model that led to popular dissatisfaction and nationwide unrest, the present reformist administration of PM Abiy has issued policies for the partial or full privatization of the key sectors of the economy in order to undo the damages done by previous policies.
The developmental state model is thus on its way out and the neoliberal or market fundamentalist model is trying to replace it. There is actually a paradigm shift in priorities as focus on abstract GDP growth is going to be replaced by tangible gains in job creation and/or unemployment reduction as measurable and tangible indicator of growth.
The liberal model of market fundamentalist policies are not yet in full swing and the transition period is bound to be difficult as some economic gurus have predicted. In order to get out of the morass of economic dislocation the previous model has brought the country into, rectification measures are urgently needed.
The previous model of growth was based on massive borrowing from abroad to the extent that the country has become one of the most indebted countries in the world. Massive infrastructural public works and projects were financed through massive and long-term debts from China and other sources. Job creation was not a priority of this model.
It is to be recalled that the developmental state model focused on GDP growth as the main yardstick to measure economic development. This was largely nominal growth that came about by neglecting the long-term interests of the poor that formed 99% of the population.
It was a crisis situation similar to the one developed countries like the US had faced following the 2008 financial and banking crisis whereby the 1% of the population controlled 99% of the wealth created while 99% of Americans controlled only 1% of the wealth created. This had led to serious income inequalities and mass protests that brought into office a president who promised to make America great again.
That was why the Trump administration, and the Obama administration before it, focused on job creation to alleviate the growing inequalities in American society as it was brilliantly explained by Noble Prize winning economist Joseph Stiglitz in his book entitled “The Growth of Inequality”. President Trump’s economic success, despite reversals in other areas can only be measured by the number of jobs created in the last three years of his tenure.
It is therefore a sound approach to make job creation the fulcrum of Ethiopia’s growth scenario in the years to come. It is also a critical policy to balance wealth distribution among the various population groups and attenuate if not do away with social and economic inequalities. The Ethiopian population is roughly more than 70% young.
Youth unemployment is one of the highest in the world. More than 11 million youngsters of working age are unemployed. Hundreds of thousands of youngsters are graduating from colleges and universities and join the job market every year. Massive unemployment is not only a great problem by itself and in itself. It may also turn into a massive force of youth protest and instability as jobs become increasingly scarce and despair and anger set in.
The Ethiopian government’s job creation policy was largely ill-articulated and lacked strong commitment until recently. Job creation largely meant involving youths in cobblestone street building and in various public works that required unskilled labor. The times are now fast changing. The Ethiopian youth population is not as unskilled as it used to be ten years ago. It is becoming increasingly skilled and sophisticated as hundreds of thousands of youngsters have graduated from colleges and universities and joined the job market.
The labor structure is undergoing radical and deep transformations. Job demands are becoming more sophisticated and young people are looking forward for a better life for themselves. As the main instigators of the reform process now underway in the country, the youth in Ethiopia deserve a better future, better jobs, and a better life.
Past approaches to job creation were wrong for another reason. The government had allocated massive amounts of money, sometimes reaching 10 billion Birr, in order to provide jobs for the restless youths who have risen to demand their rights to work back in 2018.
This money was said to be allocated to youth job creation programs in the regions. However, the money has not provided the number jobs it could create partly due to lack of accountability, follow-up or rational utilization of the resources. In the context of the political unrests of the last two or three years, it was difficult to trace where the money has gone and what the results were.
The present administration looks more committed to creating jobs focused specifically on youths. It has put forward a clearer objective of creating more than one million jobs every year, the number reaching as high three million in the coming few years. However, the problem is how and where to create these jobs. Various alternatives are being explored in this area.
One recent suggestion is to mobilize the private sector and big businesses to contribute money for the promotion of the reforestation projects now under way in the country on a permanent basis. This can for instance done through the Ministry of agriculture by creating a department for forestry development; something like a ‘National Reforestation Enterprise’ that will hire tens of thousands of youngsters to engage in reforestation and follow-up programs throughout the country.
Similar grassroots initiatives could be promoted through consultations with youth groups that could come up with their own plans and hundreds of thousands of jobs could be created by providing them with land, capital and small-scale technology in accordance with their preferences and skills.
Agriculture could be a big youth employer because the country has vast arable lands and what is needed is to give land to the youths, introduce better small-scale farming technologies and provide them loans and credits so that they can be involved in agricultural modernization programs in rural areas.
Foreign investors in agricultural development projects can be persuaded to hire skilled or semi-skilled young farm workers instead of using heavy and expensive technology. This might stem the tide of youth migration from the countryside to the urban areas to join the army of the unemployed and help keep them on the land as producers under a system of fair land distribution and legal guarantees for property rights.
The fact that PM Abiy recently disclosed that job creation for unemployed youths would be a top priority of his economic growth agenda should be taken seriously and discussed by all stakeholders, and young people in particular, in order to create a wider consensus and a plan of action that would be urgently implemented before the problem of youth unemployment reaches a tipping point.
The Ethiopian Herald Sunday Edition 18 August 2019
BY MULUGTA GUDETA
