The year 2019 that has just ended could be described as one of the best years for Ethiopia in terms of foreign investment flow to the country. The amount of money secured in the form of aid, assistance and loans is also staggering according to some sources. The aggregate amount of the money that flowed into the country may not be adequately known at this stage. Yet, everyone agrees that Ethiopia has attracted the attention of the international aid and loan agencies as well as investors from different countries.
In the last ten years or so, Ethiopia has been described as the highest recipient of foreign aid or assistance in the sub-Saharan Africa. Foreign Direct investment too came in a big way and helped finance the country’s growth for the last ten years or so. The challenge now to overcome the problems of reforming the economy as well as secure enough investment in order to make the growth sustainable at least for the coming ten years until the country becomes wealthy enough to achieve self-sustaining growth.
Aid money is also indispensable to achieve the above objectives. Aid flow to the country can be traced back to the famine years of the early 1980s when the country massively benefitted from international humanitarian largesse, Hundreds of millions of dollars worth of aid poured into the country although some of the money allegedly landed on the laps of international aid activists or sank into a kind of black hole. A substantial amount of aid money was diverted by the international aid bureaucracy according to Graham Hancock’s highly celebrated accounts in his book entitled, “Lords of Poverty”.
Despite the massive flow of aid money, Ethiopia remained one of the poorest and most aid-addicted countries in the developing world as it fell into the abyss of aid dependency. Meanwhile, on the international arena, the rhetoric about humanitarian assistance to stem the tide of famines and their devastating consequences, was changed into what was known as development aid. However, development aid which was aiming at stopping aid dependency through investment in agricultural development, did not attain its objectives as the country remains hungry and poor to this very day. Then the fashionable words like “poverty alleviation” and “ending hunger ” or “agriculture-led industrialization” that supplanted development aid in turn proved to be hollow and wordplays that have similar connotations and consequences.
There are of course internal challenges that frustrated the country’s quest for ending hunger and poverty not through aid but through development assistance as some of the money disappeared in the corridors of power which is generally infested with corrupt, irresponsible, criminally selfish elements of the state bureaucracy. The political elites allegedly pocketed most of the money intended for national development and enriched themselves while the people went poorer, hungrier and hopeless.
The promised agricultural development proved a big illusion as most of the aid money was lost and the farm sector starved of modern inputs that could have boosted productivity and fed the people adequately. As a result of this, Ethiopia is still importing most of its foods from abroad. Hundreds of millions if not billions of birr is spent every year on importing wheat to feed the people while the country is endowed with vast and fertile lands suitable for food production. The money used for importing wheat could be used to develop agriculture. However, this was not so far possible because the transaction allegedly involved grand corruption that enriched those in power through kickbacks, and in the process of bidding and procurement of the imported foods.
Grand corruption went unchecked for so long and bled the country dry and the farmers were finally sick and tired of these abuses that they protested against the rent seeking behavior of some of the former EPRDF top officials and kicked them out of power at a moment they dreamt about perpetuating their plutocracy. What happened afterwards is already history.
When the EPRDF old guard lost its ill-acquired powers two years ago, the economic situation in the country was desperate. The national bank was depleted of its hard currency reserves. Factories were operating at below their capacity and local manufacturers faced serious difficulties as they lacked hard currency for importing raw materials and other components. This is something that is generally expected whenever regime change occurs in any country. However, what makes the situation more serious now is that the country is facing enormous financial challenges as far as implementing the liberal economic reform policies in virtually all sectors of the economy. There is a silver lining to every cloud as they say and the flip side of the story is that Ethiopia is still enjoying growing foreign investment, assistance and loans in the middle of all these difficulties.
What saved the situation, at least, in the short term perspective, was the favorable international response to the reforms and the generous donations the government received from various global financial institutions and donor agencies. It enjoyed debt cancellation, new loans with minimal interest rates from countries as diverse as China, the West, Russia, the US and many other quarters. It may be difficult to correctly estimate the volume of foreign capital that flowed into the country in the last two or so years. The amazing thing is that the money flow is still continuing as the country is marching towards what is expected to be its first truly democratic election in its history.
Yet, some estimates put the amount of money flowing into the country to billions of dollars that could be well spent with proper accounting and transparency that were not always the case in the past. As the new reformist government is faced with massive unemployment and food insecurity as well as payments for imports, and domestic food inflation in particular, all the available money must be spent in a more rational and cleaner manner.
According to some international agencies that are tracking down the flow of investment in selected African countries, Ethiopia is standing as the highest recipient of foreign investment in 2019 with a total flow reaching more than 7 billion dollars, the biggest in east Africa, according to the same sources. Kenya could not attract a little more than 4 billion dollars in foreign investment while the rest of the countries in the region fared even less. How all this money is spent is of course another story that should be given time to be investigated or evaluated.
Why donors proved so generous to Ethiopia as to give it all this money is also something that can be seen from different perspectives. Opinions vary on this score and they are expected to vary at this time when the political atmosphere is relatively more relaxed and people might not be accused of airing their views on this and other issues. However, most of the critics as well as supporters of the ongoing reforms might agree that that the new regime’s policy reversal from state-led to market-led changes have found many receptive ears in the international community.
If we exclude ideological considerations from the arguments on both sides of the divide, we may be certain that the international aid consortium is looking at Ethiopia’s political and economic reforms as the last chance or opportunity the country has found to come out of its age-old poverty and backwardness and hopelessness. One theory is that by pouring out massive amounts of investment or aid money into Ethiopia, donors might be expecting that the success of the country’s reforms might create opportunities to shake off its dependency and turn from a liability to an asset to the international aid agencies. It may be a kind of “help Ethiopia help itself” impulse that may be guiding the aid-providing community in its unprecedentedly generous drive. There may be other reason although it would be unfair to indulge into speculations at this stage.
We may realize that the view that it is time now to help Ethiopia help itself may be more palatable in view of the fact that the country just returned from the brink of the abyss and is enjoying a second life that deserves and to be supported and nurtured by all who have a stake in the country’s political and economic survival. This is particularly true when we realize that international assistance has not so far proved the desired alternative for ending the country’s dependency on foreign aid or assistance.
The international community is not only interested in Ethiopia’s economic revival. It is also interested in making Ethiopia safe for investment and less dependent on aid money by making its politics more open, and its politics less repressive by helping keep democratic process on track. To this end Western countries are making generous financial contributions to the success of the forthcoming elections although how the donations are spent may not be transparent to the public and all the stakeholders. The government has already earmarked an unprecedented amount of money for conducting the elections. Many Western countries have contributed tens of millions of dollars to the efforts that would make the forthcoming may 2020 national election fairer, more transparent and more credible and acceptable.
Anyway, Ethiopia is currently enjoying a period of unprecedented international sympathy that is being translated into generous international assistance, aid, donation, investment or whatever you may choose to call it. However the ultimate success of this international drive may depend on how the country and its leaders are using the money to promote their reform agendas.
Success in implementing the political and economic reforms may not ultimately depend on the volume of foreign money that is flowing into the country. The reforms ultimately depend on internal factors rather than external ones. They depend on how the internal political contradictions are resolved successfully. That is why the government is trying to inject a dose of self-reliance and self-motivation in its endeavors and calls its economic reform program something that is home-grown and not copied from abroad.
The Ethiopian Herald Sunday Edition 12 January 2020
BY MULUGETA GUDETA
