BY TEKLEBIRHAN GEBREMICHAEL
Let us see if we can derive a meaningful picture of the current state of the Ethiopian economy by piecing together bits of economic news reported in the domestic print media over the last few weeks (this particular article is based on such information taken from “Reporter”, Amharic, Nov8, 2020).
Here we go with our first piece of economic news: some twenty two institutions and installations, including an airport, fuel depots, power distribution infrastructure, telecom, etc., have been violently attacked by TPLF armed groups in Tigray.
The implications of these attacks for economic activity and infrastructure in Tigray and elsewhere in Ethiopia are expected to be serious in terms of production, the free movement of labour, goods and services, capital and employment.
Ethiopia’s 600 million USD annual edible oil import bill is expected to be reduced substantially as a result of import substitution made possible by the establishment of additional edible oil–producing factories in Debremarkos, Bure, Adama and Diredawa.
This is a great piece of economic news, but the gains from import- substitution should be reckoned on a net basis as the new cooking oil factories need foreign exchange for inputs and machinery and equipment repair and maintenance, etc.
Ethiopia’s import of fertilizer is expected to total 1.8 million metric tons in 2020/21 showing a considerable increase (a reported 24 percent). Fertilizer is imported from countries such as Saudi Arabia, China, South Africa, Dubai, Morocco, etc. at an annual cost of about 650 million USD.
Costs are reported to have been slashed significantly by effecting purchases directly from producers on a bulk basis. Fertilizer production should be a prime target for import substitution as increased fertilize use is a major indicator of agricultural transformation.
All industrial parks established over the last several years are being plagued by problems ranging from Covid -19 to voluntary worker departures. Over the last three months alone, some 11,000 workers have terminated their employment contracts voluntarily owing to poor pay and housing accommodation. Currently the total number of workers in all operating industrial parks is over 68,000.
Foreign exchange earnings over the last three months have been puny (only about 48 million USD compared to a planned annual total of 340 million USD). Foreign direct investment in all industrial parks was planned to reach an annual total of 5 bln USD, but the three- month total reached was only about 500 million USD, indicating an annual total of only about 2 bln USD.
It has been reported that the Japanese Tobac International, which bought the former state–owned Ethiopian Tobacco Company at a cost of one billion dollars, is now being accused of interference in the execution of the internationally agreed tobacco control regulations through direct and indirect influence including a say in the issuance of government regulations on tobacco and the levying of excise taxes on the harmful product. The index of interference alleged in a relevant study is estimated at 42 percent which is considered to be very high.
On the other hand, civil unrest following the death of the Oromo music icon Hachalu Hundessa has caused a loss of 37 million birr in tax revenue from hotels in Shasemene alone. This is indicative of the many problems that have exerted a negative compact on Ethiopia’s fragile economy.
On the brighter side of the news, the long–standing idea of using algae (anthrospirafusiformis) as a food supplement to combat physical and mental stunting seems to have come to fruition as production at a lab level has started at the Ethiopian Biotechnology Institute. Various studies have indicated that physical stunting and retardation of mental development is a serious problem in the Ethiopian population.
On the other hand, as a demonstration of the impact of identity-based politics which was once spurned by the Amhara people, it is now threatening to become a staple of their local politics with the establishment of an Amhara Bank which will soon hold its founding shareholders’ meeting.
As the multifarious consequences of Covid-19 unfold, schools, which were to open on Nov 9,2020, have now been ordered to stay closed until further notice (with the exception of 8th and 12th grades).
Let us now try to weave the foregoing pieces of economic news and information into some sort of an intelligible macroeconomic picture. We can observe that the Ethiopian economy is being buffeted by quite a few shocks and problems. The major ones may be identified as follows:
– Internal conflicts
– Covid -19
– Poor performance by industrial parks;
– Undernutrition and its devastating impact;
– School disruptions;
– Internal displacement;
– The negative effects of identity –based politics;
– Poor economic management, particularly as regards land policy, credit policy and monetary and fiscal policies.
The conflict in Tigray region should never have occurred. It is well–known that the culprit is the TPLF leadership, not the people of Tigray. The TPLF leadership should never have been allowed to build its local militia and Special Forces and should have been brought before a court of justice for numerous human rights violations and high treason some two years ago. Instead, it was given a cause to unconstitutionally strengthen its own military capabilities.
Now that the conflict has broken out, the only thing we can hope for is a speedy conclusion by neutralizing the TPLF leadership as opposed to the people of Tigray and even to the fighting forces which may later on be integrated into the Ethiopian military.
The internal displacement, refugee problem, humanitarian crises and economic disruption that may occur particularly in Tigray and neighboring regions as a result of the internal conflict may be very serious indeed unless a speedy conclusion to the partial civil war is somehow found. It is disheartening to note that Ethiopian politics which emerged as a struggle against an archaic feudalistic monarchism, has degenerated into an even more primitive and primordial form of tribalism.
What is immensely frightening is that tribalism is being used as a cover for a rapacious, predatory ruling class which has plundered the country by state capture, using land resources and directed credit as the main instruments of economic exploitation and pillage.
Similarly, the poor performance of the industrial parks may be blamed on Covid-19 but we cannot deny the fact that the projects had structural problems from day one and that they were set up without stringent project study and analysis. Over all, I believe that it is time to assemble our most brilliant minds around a table, of course, under the chairmanship of Ethiopia’s charismatic Prime Minister Dr. Abiy Ahmed and work out the best political framework for the realization of the time –honored and common objective of rapid economic, scientific and technological development for our beloved country !
Here are some of the major political and economic issues
* Ending identity- based politics by changing the current constitution!
* Restructuring internal administrative units accordingly
* Strengthening and modernizing the Ethiopian military by integrating the existing regional militias and special forces into the Ethiopian military ;
* Holding free and fair elections towards a genuine democratic transition;
* Forming a technocratic government to effect drastic land, monetary and fiscal policy reforms.
In the absence of accurate and reliable aggregate economic data and information, one way to cross –check the veracity of such data is to piece together bits of economic news officially reported in the media and try to derive an overall economic picture. The picture so derived is not very encouraging.
The Ethiopian Herald December 8/2020
