The fact that the survival of a nation and its people depends on its economic strength is not debatable. When the economy is strong, unemployment will decrease, disease and poverty will disappear, and prosperity will reign. Conversely, when the economy is weak, public life is also at risk. Unemployment grows, poverty worsens, migration appears, hunger strikes, peace, and freedom are lost, national and public dignity falls into the hands of others; in short, sovereignty is violated.
Just as developed economies cite the root causes of their rise, poor countries also organize many excuses for living in extreme poverty for years. Among the excuses, they note as the main causes are inconvenient geographical location of the country and lack of natural resources.
In the view of economists, however, the reasons for the declined growth and slow development of countries do not seem to be valued. People who live in an environment that is more agricultural friendly and where there are sufficient natural resources, with no doubt will have better economic development than any other population. Of course, this is not to say that natural resources alone will boost the economy.
If natural resources were the only source of growth, countries like the Democratic Republic of Congo would not be poor, and countries without natural resources, such as Israel, would not be economically advanced. Experts underline that the universal capacity of economic institutions is crucial for a country’s growth or poverty.
“The main reason for the current economic development of the most economically developed countries is to build a successful and accountable institution. Developing countries that focus on attracting foreign investment and share from the profit, in particular, should recognize this properly and realize the potential of institutional capacity,” experts say.
The book titled; “Why Nations Fail” written by the famous economists Darron Asemoglu and James Robinson, 2012 explained that one of the main reasons why countries are poor is that political and economic institutions’ situations created by people. The book explains that some countries that have not been able to grow economically, especially African countries, have failed to build strong economically viable institutions.
New York University’s Professor of Economics, Brew Pakashpol, in his book “Why Institutions are so important for Growth,” emphasizes the importance of the institutional capacity for the universal development of a country. To justify this, he quotes Cote d’Ivoire and Mexico, which were in the same economic position as the late 1970s. The author points to the fact that the two countries’ history is a part of yesterday’s scenario, and that the main reason that they are now at different stages of development is that not only is the understanding of the role of institutions in
the African country but also because it is not able to develop them to the needed standard.
On the other hand, some experts agree that the role of institutions is important for the overall development of countries, but also emphasizes the importance of focusing on and distinguishing more crucial institutions.
In this context, financial, education, justice, and public administration institutions play a vital role in promoting economic growth in a country and transforming people’s lives.
Leam Brandt, an associate economist at the University of Lisbon, however, disqualifies this notion in the research “Which institutions matter for economic growth?” He says “It is difficult to explain in simple words which institution is most important in creating capacity through the universal structure of political, legal and economic as well as social institutions defines a nation’s economic growth.”
Experts have indicated that countries have free will to set up institutions that they say will help to enhance their performance in order to better their economy. If they encounter challenges to identify the most valuable institutions, experts explain that their only option is to explore the institutional and structural integrity of others, especially those that are embedded in the tower of economic growth.
Almost all experts say that the capacity of economic institutions is the foundation of a nation’s economy. If this is the case, what kind of perspective will it give when exploring the potential of Ethiopia and its economy?
Among the experts who shared their views to Addis Zemen Daily on the subject, Kibur
Genna, Chief Executive Officer, and Chief Economist is the notable one. He, who believes that institutions have strong ties to economic growth, does not dare to say various institutions in Ethiopia have created enough capacity to generate better ideas, especially for the country’s economy. He also indicated that he has not observed the capacity building of the institutions has been undertaken in a systematic and consistent manner that decides the destination.
The Economist explains that unlike the one practiced in other countries; Ethiopian institutions do not periodically test complement of requirements including hiring human resources by setting a program that generates new ideas.
Beyond this, “Other countries are open to receiving input and support from inside and outside to enable their institutions to achieve the desired change.” He said that the existence of this experience is almost no to Ethiopia.
One of the basic critics regarding institutions that Ethiopia claims to have those built with great resources is that their interrelation is loosen and weak. Beyond that, they would not even talk about the issues they commonly involved in. Kibur Genna said: “The projects underway by one institution should be open to the other to know, to discuss and work closely together, but this is not noticed, which is one of the main reasons why institutions are not strong.”
Kibiru Genna, while pointing out the roadmap that is viable to the nation’s economy and bring prosperity he emphasized the need to create opportunities for viewing other countries’ experiences, as well as bringing experienced consultants, to empower the institutions through planning and research, organizing with educated and trained manpower. He believes that institutional leaders can make a difference in this process.
Berhanu Dennu, Assistant Professor and Economics instructor at the University of Addis Ababa, for his part, explains that the role of institutions in the economy of a country should be constantly evolving and strengthening, which is relevant to the economy.
Dr. Berhanu pointed out that institutional capacity building and improvements have been seen in helping to save the economy in Ethiopia. Specifically, over the past year, it has been able to close down corrupt institutions, and some bureaucratic and economic management controls have been modified, especially for the private sector. Adding a reference, he said that the improvement in the efficiency of investment licensing also makes a positive difference in the economy.
This does not mean, however, institutional capacity building and organization are effective and in good health, the assistant professor emphasized. He noted that the institutions are not organized in the way fitting the country’s economy yet.
The scholar commented that the limitations are highlighted in human resources, which is
one of the most important in the organization of institutional capacity. However, in hiring human resources, family-led hierarchy is observed rather than market-led, competence, and competitiveness.
The assistant professor also noted that higher education institutions are among the most important institutions for the prosperity of a country. They have a lot to do in terms of producing adequate and entrepreneur citizens in quality and quantity that are needed in the market and the economy, especially in the industry.
He also stressed that financial institutions should travel and strengthen in line with the country’s economy, especially in terms of the country’s tax collection. It should be modernized in the way of reducing citizens’ fatigue.
The message of this article proofs in general that the global secrecy and technological advancement have reached the point where the economic growth and quality of the land is inadequate. This is why scholars have proposed that the foundations of development are the commitment of the trained human resources and technology that should be associated with institutional capacity.
On this scale, the scholar’s view tells us that “much remains to be done” when evaluating the institutional capacity of Ethiopia. Accordingly, officials assigned at the institutions the country identified as key to growth, are key elements of hope and strength in making the difference. The scholars believe that the Institutions’ crosschecking work plays lion’s share in building modern human resource management.
Dr. Tekie Alemu, a lecturer in the Department of Economics at the University of Addis Ababa, agrees that the capacity of economic institutions is the foundation of a nation’s economy. However, he does not believe that it is possible to create an institution that can fit the country’s economy with foreign organ’s pressure.
The doctor points out that while the institutions have their own criteria for achieving the mission and goal they are given by proclamation, external oversight and monitoring alone may not enhance their capacity.
“Institutions need to be changed not from external pressure or direction but from their own originality.” Adding, he said that when they plan to change, evolve, and grow, they need to prepare themselves first and walk with the current environment.
He pointed out the most important tasks that must be done to create institutions that are relevant to the country’s economy and emphasized that institutions should be led by knowledgeable and competent professionals.
“This does not mean that they are led by highly educated doctors and professors, but that the general capacity, starting from the institutional vision, should be guided by those who know best practices,” he said.
The Ethiopian Herald April 28/2020
BY BACHA ZEWDIE
