The year that has just elapsed was not a good time for the
Ethiopian economy. Recent forecasts from international financial institutions
such as the World Bank put growth prospect for 2020 to 7%. However double digit
inflation is still rising, earnings from exports are declining and agriculture
and manufacturing are not doing well. The growth forecast for 2020 is based on
the massive capital flows that have materialized in 2019 although hard currency
shortage is expected to continue to be one of the greatest challenges.
The Ethiopian economy showed its greatest expansion in the ten years roughly in the ten years between 2008 and 2018. That was a period of growth in almost all sectors like construction, telecom, agriculture and services. On the contrary, the last three years have witnessed substantial shrinking of the economy due to the political upheavals that shook the country and led to the present reforms.
During the ten years between 2010 and 2018 the major focus of policy makers was on the economy and politics assumed less importance because there was relative stability based not on democratic governance but on a repressive state machinery that enforced total conformity to the one-party system that dictated things from above and also got things done because of the atmosphere of the fear rather than sympathy or support that prevailed at that time. Nowadays, politics has taken the upper hand while the economy is relatively getting less attention among policy makers as well as the pundits and politicians in government as well as in opposition.
Politics is an unavoidable reality as they say and in this election year, politics has become the concern of almost all parties across the political spectrum. Passions have been running high and there were dangerous moments when they overflowed and led to many losses of lives and displacements of millions of innocent people who have no say in political matters. The coming seven months before the sixth nationwide elections, passions are expected to cool down as politicians will undoubtedly prepare themselves for the practical phase of election 2020. This is election year and the main political agendas around which all parties will be contesting are taking shape progressively. But economic issues are largely ignored at least thus far. Opposition parties spend more time hammering on their specific politics. They seldom criticize one another’s ideas or programs. They do not produce a comprehensive critique of the economics of the government which is calling them to come up with better ideas.
Ethiopia has managed to attract a record number of investors last year with a record amount of Foreign Direct Investment (FDI), according to official sources. Ethiopia is the top FDI destination in East Africa according to another source. The government may not be clear on how to make optimal use of this opportunity or how to use the hard currency it is earning from donors or lenders. The IMF has agreed to grant Ethiopia 700 times more in this fiscal year. It has secured a 10 billion dollar grant package from European countries. How will government going use this much money? It needs smart ideas and feasible fiscal strategies to make optimal use of all this money. Priorities will have to be set. Ethiopia is facing two kinds of formidable enemies: hunger and joblessness. How can government use this money to create jobs and produce enough food instead of spending billions on importing wheat every year? all these things require creative ideas to materialize. Otherwise the decision by one man or by a small group of government insiders might lead to corruption as it was the case in the past.
Seasoned economists and political leaders are expected to come up with new and systematic ideas and advise the government on how best to conduct the economic symphony. Unfortunately there are not many of them and no meaningful debate is taking place in academia as well as in opposition politics that is fixated with ethnic politicking driven by too much nationalist fervor. You can stir passions with nationalism but you cannot provide food or jobs to the people with it. Ethiopian politics thus needs to be steered away from loudmouthed ethnic politicking that has wrongly become the hallmark erudition to many politicians.
Privatization is a big issue in the country’s economic reform program but no one has so far come up with constructive criticism or support for the program in a learned and informed way. Too much emotional politicking is preventing the intellectual and political elites from sitting back and thinking soberly about the issues that matter most for the electorate. However, the hope is that they may realize their shortcoming and work hard to make up for the time lost in empty talks about national pride and ethnic division.
From the nature and shape of the debates that are taking place informally during political meetings and on other occasions, political issues related to the elections take precedence over economic and social issues. The economy is still one overlooked area where ideas are in short supply and there is a serious lack of concern on the part of politicians. The government is struggling to implement what many observers and analysts call its ambitious economic reform agenda that has not yet started to materialize and less bear fruits. Fresh ideas are in short supply and no significant debate is taking place as to the prospects and constraints the economic reform process is facing.
The fact that the government recently issued an invitation to hire politically neutral, competent and patriotic professionals in their capacity as members of an advisory council to the Prime Minister’s office, may show that new ideas are indeed highly sought in order to make the economic reform process as much based on domestic intellectual and creative potentials as possible. This is a fresh approach to economic management. In the past, all the ideas for economic change came from economic theories that have not been tested by objective reality and thus lacked domestic inputs and as a result, fell short of expectations.
That was perhaps one of the reasons why the economic growth momentum could not be maintained for a longer time. The Chinese could achieve what amounts to an economic miracle within the span of 30 years while we in Ethiopia lost the growth compass in a mere 10 years or so and the economy lost steam and almost stopped to move forward. The cooling down of the growth process is not something unique to the Ethiopian economy.
The Chinese economy recorded double digit growth for the last 30 years and registered its lowest growth rate in 2019 with an annual growth estimated at 7 per cent. Judging by international standards of GDP growth both Ethiopia and China are doing fine although the main challenge comes right now and in the coming few years. Ethiopia’s GDP growth prospect for 2020 is put at 7% and this is not a bad forecast if it is backed by practical results. Many developed economies usually register an annual GDP growth rates that do not exceed 2%. This is also why international financial institutions as well as foreign government are showing growing interest in assisting the Ethiopian economy stay on the right track despite the unpredictability of the outcome of the reform process now in full swing.
The future direction of the Ethiopian economy might be largely unknown territory at this stage and this is why the government is seeking advice and new ideas from all the stakeholders.
The present reform program is dictated by the need to restart the economic momentum and change track so that the challenges could give way to new opportunities. This is in fact a task more difficult than the previous one that was mainly concerned with achieving growth without for seeking its long-term consequences. And that is also why the government is seeking the services of independent thinkers and academics with the tools to fix the economy.
The forthcoming August election and the debates preceding it should therefore create opportunities for political parties to think hard and fast on the challenges and come up with constructive ideas that might push the reforms forward or help fix some of its damaged parts. The country is now making the difficult transition from a state-controlled and centralized economic system to a free market and liberal one through a process of privatization or liberalization of key industries that were built during the growth period.
The
struggle now is between the statist and market-oriented growth strategies and
this should occasion serious debates or discussions as to the merits and
shortcomings of the two strategies. Unfortunately, politics is dominating
public discussions although the people complain about such problems as rising
inflation, shortages of basic necessities or the absence of job opportunities
for rising
numbers of young people in towns and the rural backyards. A huge amount of foreign capital flow is now a reality and the issue of how to effectively allocate the hard currency thus secured for optimal impact on the economy should be a big talking point among specialists as well as among the general public that is directly affected by these changes.
Political parties that are working hard and contesting for political offices should also be concerned with the above issues and come up with effective solutions that would enlighten not only the public but also help them reach many followers and voters. The government and the private business sector too would gain a great deal with this kind of debates that would take place around urgent economic issues. Economic inequality is said to be growing in the country, workers’ rights are allegedly trampled by local as well as foreign investors, the average wage is said to be so low that it cannot provide adequate living for workers, farmers are complaining about land shortage and ownership rights…etc.
All these issues need to be addressed by the forthcoming election and in the period preceding it. Political parties contesting the elections are expected to launch the debates around economic issues because these are the main concerns of the electorate. Politics without economic benefits would remain hollow and unattractive to the voters. Thus every party contesting the election should come up with a kind of economic roadmap to revive the economy and benefit the voters. As many observers say, one cannot eat politics and in the final analysis the economy should remain the determining factor that would shape the political chances of the contesting parties.
The Ethiopian Herald Sunday February 2/2020
BY MULUGETA GUDETA
